##### 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, 2005
 Commission file number 2-76735
 TDK KABUSHIKI KAISHA
(Exact name of Registrant as specified in its charter)
 TDK CORPORATION
  Japan
 13-1, Nihonbashi 1-chome, Chuo-ku, Tokyo 103-8272, Japan
  Title of each class
    
    Name of each exchange on which registeredAmerican Depositary Shares
    
    New York Stock ExchangeCommon stock
    
    New York Stock Exchange
  
   
     þ o
 þ o




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PART 1Item 1. Identity of Directors, Senior Management and AdvisersItem 2. Offer Statistics and Expected TimetableItem 3. Key InformationItem 4. Information on the CompanyItem 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 StatementsReport of
Independent Registered Public Accounting FirmConsolidated Financial StatementsNotes to Consolidated Financial StatementsSchedule II  Valuation and Qualifying AccountsItem 18. Financial StatementsItem 19. ExhibitsEX-1.1 Articles of Incorporation (English translation)EX-1.2 Share Handling Regulations (English translation)EX-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
 - 2 -




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PART 1
 
 Item 1 . Identity of Directors, Senior Management and Advisers
       
 Item 2 . Offer Statistics and Expected Timetable
     - 4 -




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Item 3 . Key Information
  Thousands ofU.S. dollars,except pershareMillions of yen, except per share amounts
    
    
    amounts (1)2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2005Net sales
    
    ¥
    657,853
    
    
    ¥
    655,792
    
    
    ¥
    604,865
    
    
    ¥
    564,286
    
    
    ¥
    665,867
    
    
    $
    6,148,159Cost of sales
    
    
    484,323
    
    
    
    476,407
    
    
    
    459,552
    
    
    
    463,331
    
    
    
    493,068
    
    
    
    4,526,383Gross profit
    
    
    173,530
    
    
    
    179,385
    
    
    
    145,313
    
    
    
    100,955
    
    
    
    172,799
    
    
    
    1,621,776Selling, general and
administrative expenses
    
    
    119,886
    
    
    
    122,875
    
    
    
    115,569
    
    
    
    115,696
    
    
    
    123,965
    
    
    
    1,120,430Transfer to the government
of the substitutional portion
of Employees Pension Fund:Subsidy from the government
    
    
    (33,533
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (313,392
    )Loss on settlement
    
    
    27,347
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    255,579Restructuring cost
    
    
    
    
    
    
    
    
    
    
    5,197
    
    
    
    25,489
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    59,830
    
    
    
    56,510
    
    
    
    24,547
    
    
    
    (40,230
    )
    
    
    48,834
    
    
    
    559,159Income (loss) from continuing operations before
income taxes
    
    
    60,728
    
    
    
    55,847
    
    
    
    20,552
    
    
    
    (40,230
    )
    
    
    61,223
    
    
    
    567,551Income (loss) from continuing
operations
    
    
    36,965
    
    
    
    43,355
    
    
    
    13,593
    
    
    
    (23,619
    )
    
    
    42,214
    
    
    
    345,467Loss (income) from discontinued
operations
    
    
    3,665
    
    
    
    1,254
    
    
    
    1,574
    
    
    
    2,152
    
    
    
    (1,769
    )
    
    
    34,252Net income (loss)
    
    
    33,300
    
    
    
    42,101
    
    
    
    12,019
    
    
    
    (25,771
    )
    
    
    43,983
    
    
    
    311,215Per Common Share:Income
(loss) from continuing
operations per share:Basic
    
    ¥
    279.41
    
    
    ¥
    327.27
    
    
    ¥
    102.42
    
    
    ¥
    (177.72
    )
    
    ¥
    317.25
    
    
    $
    2.61Diluted
    
    
    279.25
    
    
    
    327.15
    
    
    
    102.42
    
    
    
    (177.72
    )
    
    
    317.25
    
    
    
    2.61Loss
(income) from discontinued
operations per share:Basic
    
    ¥
    (27.70
    )
    
    ¥
    (9.47
    )
    
    ¥
    (11.86
    )
    
    ¥
    (16.19
    )
    
    ¥
    13.29
    
    
    $
    (0.26
    )Diluted
    
    
    (27.69
    )
    
    
    (9.46
    )
    
    
    (11.86
    )
    
    
    (16.19
    )
    
    
    13.29
    
    
    
    (0.26
    )Net income
(loss) per share:Basic
    
    ¥
    251.71
    
    
    ¥
    317.80
    
    
    ¥
    90.56
    
    
    ¥
    (193.91
    )
    
    ¥
    330.54
    
    
    $
    2.35Diluted
    
    
    251.56
    
    
    
    317.69
    
    
    
    90.56
    
    
    
    (193.91
    )
    
    
    330.54
    
    
    
    2.35Cash dividends
    
    
    60.00
    
    
    
    50.00
    
    
    
    45.00
    
    
    
    60.00
    
    
    
    60.00U.S. Dollar equivalents (2)
    
    $
    0.56
    
    
    $
    0.47
    
    
    $
    0.38
    
    
    $
    0.45
    
    
    $
    0.55
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Millions of yen, except per share amounts
    
    
    Thousands ofU.S. dollars (1)and exchange rate for yen2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2005Net working capital (3)
    
    ¥
    379,746
    
    
    ¥
    360,555
    
    
    ¥
    315,948
    
    
    ¥
    288,865
    
    
    ¥
    306,771
    
    
    $
    3,549,027Total assets
    
    
    808,001
    
    
    
    770,319
    
    
    
    747,337
    
    
    
    749,910
    
    
    
    820,177
    
    
    
    7,551,411Short-term indebtedness
    
    
    103
    
    
    
    416
    
    
    
    1,919
    
    
    
    2,312
    
    
    
    5,879
    
    
    
    963Long-term indebtedness
    
    
    81
    
    
    
    27
    
    
    
    94
    
    
    
    459
    
    
    
    1,004
    
    
    
    757Retirement and severance
benefits
    
    
    28,839
    
    
    
    73,521
    
    
    
    84,971
    
    
    
    49,992
    
    
    
    31,755
    
    
    
    269,523Stockholders equity
    
    
    639,067
    
    
    
    576,219
    
    
    
    553,885
    
    
    
    583,927
    
    
    
    637,749
    
    
    
    5,972,589Number of shares outstanding
(in thousands)
    
    
    132,245
    
    
    
    132,409
    
    
    
    132,625
    
    
    
    132,860
    
    
    
    133,019
 Yen exchange rates per U.S. dollar (4)
    
    Average
    
    
    Term end
    
    
    High
    
    
    LowYear ended March 31:2001
    
    
    111.64
    
    
    
    125.54
    
    
    
    125.54
    
    
    
    104.192002
    
    
    125.64
    
    
    
    132.70
    
    
    
    134.77
    
    
    
    115.892003
    
    
    121.10
    
    
    
    118.07
    
    
    
    133.40
    
    
    
    115.712004
    
    
    112.75
    
    
    
    104.18
    
    
    
    120.55
    
    
    
    104.182005
    
    
    107.28
    
    
    
    107.22
    
    
    
    114.30
    
    
    
    102.262006 (through July 31, 2005)
    
    
    108.94
    
    
    
    112.25
    
    
    
    113.42
    
    
    
    104.41February, 2005
    
    
    
    
    
    
    
    
    
    
    105.84
    
    
    
    103.70March, 2005
    
    
    
    
    
    
    
    
    
    
    107.49
    
    
    
    103.87April, 2005
    
    
    
    
    
    
    
    
    
    
    108.67
    
    
    
    104.64May, 2005
    
    
    
    
    
    
    
    
    
    
    108.17
    
    
    
    104.41June, 2005
    
    
    
    
    
    
    
    
    
    
    110.91
    
    
    
    106.64July, 2005
    
    
    
    
    
    
    
    
    
    
    113.42
    
    
    
    110.47
  
 (1)
    
    Translated, except for cash dividend amounts, for convenience of the reader
into U.S. dollars at the rate of ¥107 = $1, the approximate rate on the
Tokyo Foreign Exchange Market on March 31, 2005.(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.(5)
    
    In accordance with SFAS No. 144, Accounting for the Impairment or Disposal
of Long-Lived Assets, certain amounts in the segment information do not
reflect discontinued operations, previous fiscal years segment information
has been reclassified to conform to the fiscal 2005 presentation.     - 6 -




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Our business is exposed to fluctuations in economic conditions that may adversely affect our
business results.
  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.
   - 7 -




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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.
   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.
   - 8 -




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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.
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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.
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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.
   
 Item 4 . Information on the Company
  History
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Sales by product category
  2005
    
    
    2004
    
    
    2003
    
    
    2005(millions

    

    
    
    

    

    
    (millionsof yen)(%)
    
    
    
    
    
    
    of U.S.dollars)Electronic Materials and
Components:Electronic materials

    ¥
    
    174,800
    

    ¥
    
    166,818
    

    ¥
    
    168,949
    

    $
    
    1,633.7(26.6
    )
    
    
    (25.4
    )
    
    
    (27.9
    )Electronic devices
    
    
    116,387
    
    
    
    107,999
    
    
    
    112,729
    
    
    
    1,087.7(17.7
    )
    
    
    (16.5
    )
    
    
    (18.7
    )Recording devices
    
    
    234,578
    
    
    
    230,105
    
    
    
    175,986
    
    
    
    2,192.3(35.7
    )
    
    
    (35.1
    )
    
    
    (29.1
    )Semiconductors
and others
    
    
    19,449
    
    
    
    14,870
    
    
    
    10,850
    
    
    
    181.8(2.9
    )
    
    
    (2.3
    )
    
    
    (1.8
    )Sub total
    
    
    545,214
    
    
    
    519,792
    
    
    
    468,514
    
    
    
    5,095.5(82.9
    )
    
    
    (79.3
    )
    
    
    (77.5
    )Recording Media and Systems
    
    
    112,639
    
    
    
    136,000
    
    
    
    136,351
    
    
    
    1,052.7(17.1
    )
    
    
    (20.7
    )
    
    
    (22.5
    )Total

    ¥
    
    657,853
    

    ¥
    
    655,792
    

    ¥
    
    604,865
    
    $
    
    6,148.2(100.0
    )
    
    
    (100.0
    )
    
    
    (100.0
    )
  
 (1)
    
    In accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, certain amounts in the segment
information do not reflect discontinued operations, previous fiscal
years segment information has been reclassified to conform to the
fiscal 2005 presentation.(2)
    
    The business segment information is required by the Japanese
Securities Exchange Law. Segment information is unaudited. - 12 -




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Electronic Materials and Components
 (i) Electronic materials
   (ii) Electronic devices
   (iii) Recording devices
   (iv) Semiconductors and others
  - 13 -




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Recording Media and Systems
    Marketing channels in Japan
   Operations outside Japan
  China
    
    -
    
    GMR heads, inductors, ferrite cores, capacitors,
transformer, power supplies and ferrite magnetsUnited States
    
    -
    
    GMR heads, capacitors and ferrite magnetsLuxembourg
    
    -
    
    Videotapes, CD-Rs and DVDsTaiwan
    
    -
    
    Capacitors, ferrite cores and power suppliesPhilippines
    
    -
    
    GMR headsThailand
    
    -
    
    Audiotapes and rare-earth metal magnetsMalaysia
    
    -
    
    Capacitors and high-frequency componentsKorea
    
    -
    
    Capacitors and inductorsHungary
    
    -
    
    Capacitors and ferrite coresHong Kong
    
    -
    
    Ferrite cores
  - 14 -




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2005
    
    
    2004
    
    
    2003
    
    
    2005(millions of yen)(%)
    
    
    
    
    
    
    
    
    
    
    (millions of U.S.dollars)Japan

    ¥
    
    159,487
    
    
    
    (24.2
    )

    ¥
    
    161,607
    
    
    
    (24.6
    )

    ¥
    
    172,818
    
    
    
    (28.6
    )
    
    

    $1,490.5North America
    
    
    58,850
    
    
    
    (9.0
    )
    
    
    71,224
    
    
    
    (10.9
    )
    
    
    78,777
    
    
    
    (13.0
    )
    
    
    550.0Europe
    
    
    71,085
    
    
    
    (10.8
    )
    
    
    80,233
    
    
    
    (12.2
    )
    
    
    77,191
    
    
    
    (12.8
    )
    
    
    664.4Asia and others
    
    
    368,431
    
    
    
    (56.0
    )
    
    
    342,728
    
    
    
    (52.3
    )
    
    
    276,079
    
    
    
    (45.6
    )
    
    
    3,443.3Total

    ¥
    
    657,853
    
    
    
    (100.0
    )

    ¥
    
    655,792
    
    
    
    (100.0
    )

    ¥
    
    604,865
    
    
    
    (100.0
    )

    
    
    $6,148.2
  
 (1)
    
    In accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, certain amounts in the segment
information do not reflect discontinued operations, previous fiscal
years segment information has been reclassified to conform to the
fiscal 2005 presentation.(2)
    
    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
   - 16 -




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Name of company
    

Head office location
    

Function
    
    Percentage ownedSAE Magnetics (H.K.)
Ltd.
    
    Hong Kong
    
    Production of electronic
materials and components
    
    
    100.0
    %TDK Taiwan Corporation
    
    Taipei, Taiwan
    
    Production of electronic
materials and components
    
    
    83.8
    %TDK Hong Kong Co., Ltd.
    
    Hong Kong
    
    Production of electronic
materials and components
    
    
    100.0
    %TDK Xiamen Co., Ltd.
    
    Xiamen, China
    
    Production of electronic
materials and components
    
    
    100.0
    %Headway Technologies, Inc.
    
    California, U.S.A.
    
    Production of electronic
materials and components
    
    
    100.0
    %TDK Fujitsu Philippines
Corporation
    
    Laguna, Philippines
    
    Production of electronic
materials and components
    
    
    65.8
    %Allied Focus Industry Ltd.
    
    Hong Kong
    
    Production of electronic
materials and components
    
    
    100.0
    %TDK (Malaysia) Sdn. Bhd.
    
    Negeri Sambian, Malaysia
    
    Production of electronic
materials and components
    
    
    100.0
    %TDK Components U.S.A., Inc.
    
    Georgia, U.S.A.
    
    Production of electronic
materials and components
    
    
    100.0
    %TDK Dalian Corporation
    
    Dalian, China
    
    Production of electronic
materials and components
    
    
    100.0
    %TDK Corporation of America
    
    Illinois, U.S.A.
    
    Sale of electronic
materials and components
    
    
    100.0
    %TDK Electronics Europe GmbH
    
    Düsseldorf, Germany
    
    Sale of electronic
materials and components
    
    
    100.0
    %TDK Singapore (Pte) Ltd.
    
    Singapore
    
    Sale of electronic materials and
components and recording media &
systems
    
    
    100.0
    %TDK Marketing Europe GmbH
    
    Ratingen, Germany
    
    Sale of recording media & systems
    
    
    100.0
    %TDK Electronics Corporation
    
    New York, U.S.A.
    
    Sale of recording media & systems
    
    
    100.0
    %TDK Recording Media Europe
S.A.
    
    Luxembourg
    
    Production of recording
media & systems
    
    
    100.0
    %TDK U.S.A. Corporation
    
    New York, U.S.A.
    
    Others
    
    
    100.0
    %TDK Europe S.A.
    
    Luxembourg
    
    Others
    
    
    100.0
    %TDK-MCC Corporation
    
    Akita, Japan
    
    Production of electronic
materials and components
    
    
    100.0
    %TDK Shonai Manufacturing
Corporation
    
    Yamagata, Japan
    
    Production of electronic
materials and components
    
    
    100.0
    %TDK Akita Manufacturing
Corporation
    
    Akita, Japan
    
    Production of electronic
materials and components
    
    
    100.0
    %Media Technology Corporation
    
    Yamanashi, Japan
    
    Production of recording
media & systems
    
    
    70.0
    %TDK Marketing Corporation
    
    Tokyo, Japan
    
    Sale of recording media &
systems
    
    
    100.0
    %TDK Core Co., Ltd.
    
    Tokyo, Japan
    
    Others
    
    
    100.0
    %TDK Service Corporation
    
    Tokyo, Japan
    
    Others
    
    
    100.0
    %
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Number of
    
    Floor spaceprincipal
    
    (thousands ofLocation
    
    factories
    
    square feet)
    
    Principal products manufacturedJapanAkita
    
    
    16
    
    
    
    2,110
    
    
    Capacitors, ferrite cores,
inductors and high-frequency
componentsNagano
    
    
    4
    
    
    
    1,146
    
    
    GMR heads and optical disksChiba
    
    
    1
    
    
    
    663
    
    
    Rare-earth metal magnets,
ferrite cores and power
suppliesYamanashi
    
    
    3
    
    
    
    603
    
    
    GMR heads and data storage tapesOita
    
    
    1
    
    
    
    471
    
    
    VideotapesShizuoka
    
    
    2
    
    
    
    427
    
    
    Ferrite magnetsYamagata
    
    
    3
    
    
    
    311
    
    
    InductorsIwate
    
    
    1
    
    
    
    298
    
    
    CapacitorsIbaraki
    
    
    2
    
    
    
    112
    
    
    DisplayOverseasChina
    
    
    7
    
    
    
    2,669
    
    
    GMR heads, inductors, ferrite cores,
capacitors, transformer, power
supplies and ferrite magnetsUnited States of
America
    6
    
    
    
    901
    
    

    GMR heads, capacitors and ferrite
magnetsLuxembourg
    
    
    1
    
    
    
    494
    
    
    Videotapes, CD-Rs and DVDsTaiwan
    
    
    1
    
    
    
    345
    
    
    Capacitors, ferrite cores and power
suppliesPhilippines
    
    
    1
    
    
    
    344
    
    
    GMR headsThailand
    
    
    1
    
    
    
    285
    
    
    Audiotapes and rare-earth metal magnetsMalaysia
    
    
    1
    
    
    
    211
    
    
    Capacitors and high-frequency
componentsKorea
    
    
    1
    
    
    
    164
    
    
    Capacitors and inductorsHungary
    
    
    1
    
    
    
    160
    
    
    Capacitors and ferrite coresHong Kong
    
    
    1
    
    
    
    41
    
    
    Ferrite coresTotal
    
    
    54
    
    
    
    11,755
    - 18 -




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##### Table of Contents



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




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##### Table of Contents



Results of Operations
 Years ended March 312005
    
    2004
    
    2003
    
    2005(millions of yen)
    
    
    
    
    
    (millions(%)
    
    
    
    
    
    of dollars)Net sales
    
    ¥
    657,853
    
    
    ¥
    655,792
    
    
    ¥
    604,865
    
    
    $
    6,148.2(100.0
    )
    
    
    (100.0
    )
    
    
    (100.0
    )Cost of sales
    
    
    484,323
    
    
    
    476,407
    
    
    
    459,552
    
    
    
    4,526.4(73.6
    )
    
    
    (72.6
    )
    
    
    (76.0
    )Gross profit
    
    
    173,530
    
    
    
    179,385
    
    
    
    145,313
    
    
    
    1,621.8(26.4
    )
    
    
    (27.4
    )
    
    
    (24.0
    )Selling, general
    
    
    119,886
    
    
    
    122,875
    
    
    
    115,569
    
    
    
    1,120.4and administrative expenses
    
    
    (18.2
    )
    
    
    (18.8
    )
    
    
    (19.1
    )Transfer to the government of the
substitutional portion of
Employees Pension Fund:Subsidy from the government
    
    
    (33,533
    )
    
    
    
    
    
    
    
    
    
    
    (313.4
    )(-5.1
    )
    
    
    
    
    
    
    Loss on settlement
    
    
    27,347
    
    
    
    
    
    
    
    
    
    
    
    255.6(4.2
    )
    
    
    
    
    
    
    Restructuring costs

    
    
    
    
    
    
    
    
    
    
    5,197
    
    
    
    
    
    
    
    
    
    
    
    (0.9
    )Operating income
    
    
    59,830
    
    
    
    56,510
    
    
    
    24,547
    
    
    
    559.2(9.1
    )
    
    
    (8.6
    )
    
    
    (4.0
    )Other income (other deductions)
    
    
    898
    
    
    
    (663
    )
    
    
    (3,995
    )
    
    
    8.4(0.1
    )
    
    
    (-0.1
    )
    
    
    (-0.7
    )Income taxes and minority interests
    
    
    23,763
    
    
    
    12,492
    
    
    
    6,959
    
    
    
    222.1(3.6
    )
    
    
    (1.9
    )
    
    
    (1.1
    )Loss from discontinued operations
    
    
    3,665
    
    
    
    1,254
    
    
    
    1,574
    
    
    
    34.3(0.5
    )
    
    
    (0.2
    )
    
    
    (0.2
    )Net income
    
    ¥
    33,300
    
    
    ¥
    42,101
    
    
    ¥
    12,019
    
    
    $
    311.2(5.1
    )
    
    
    (6.4
    )
    
    
    (2.0
    )
 Sales by Region
 Years ended March 312005
    
    2004
    
    2003
    
    2005(millions of yen)
    
    
    
    
    
    (millions(%)
    
    
    
    
    
    of dollars)Japan
    
    ¥
    184,025
    
    
    ¥
    168,623
    
    
    ¥
    165,484
    
    
    $
    1,719.9(28.0
    )
    
    
    (25.7
    )
    
    
    (27.4
    )Americas
    
    
    77,813
    
    
    
    88,734
    
    
    
    104,134
    
    
    
    727.2(11.8
    )
    
    
    (13.5
    )
    
    
    (17.2
    )Europe
    
    
    71,702
    
    
    
    80,710
    
    
    
    77,713
    
    
    
    670.1(10.9
    )
    
    
    (12.3
    )
    
    
    (12.9
    )Asia (excluding Japan) and Oceania
    
    
    321,612
    
    
    
    314,875
    
    
    
    254,925
    
    
    
    3,005.7(48.9
    )
    
    
    (48.0
    )
    
    
    (42.1
    )Middle East and Africa
    
    
    2,701
    
    
    
    2,850
    
    
    
    2,609
    
    
    
    25.3(0.4
    )
    
    
    (0.5
    )
    
    
    (0.4
    )Net sales
    
    ¥
    657,853
    
    
    ¥
    655,792
    
    
    ¥
    604,865
    
    
    $
    6,148.2(100.0
    )
    
    
    (100.0
    )
    
    
    (100.0
    )
  - 20 -




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##### Table of Contents



Segment Information
   Years ended March 312005
    
    2004
    
    2003
    
    2005(millions of yen)
    
    
    
    
    
    (thousandsof dollars)ELECTRONIC MATERIALS AND COMPONENTSNet salesUnaffiliated customers
    
    ¥
    545,214
    
    
    ¥
    519,792
    
    
    ¥
    468,514
    
    
    $
    5,095,458Intersegment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total revenue
    
    
    545,214
    
    
    
    519,792
    
    
    
    468,514
    
    
    
    5,095,458(100.0
    %)
    
    
    (100.0
    %)
    
    
    (100.0
    %)
    
    
    (100.0
    %)Operating expenses
    
    
    477,694
    
    
    
    461,077
    
    
    
    445,511
    
    
    
    4,464,430(87.6
    %)
    
    
    (88.7
    %)
    
    
    (95.1
    %)
    
    
    (87.6
    %)Operating income
    
    ¥
    67,520
    
    
    ¥
    58,715
    
    
    ¥
    23,003
    
    
    $
    631,028(12.4
    %)
    
    
    (11.3
    %)
    
    
    (4.9
    %)
    
    
    (12.4
    %)Identifiable assets
    
    
    537,593
    
    
    
    505,178
    
    
    
    495,144
    
    
    
    5,024,233Depreciation and amortization
    
    
    47,409
    
    
    
    46,293
    
    
    
    52,358
    
    
    
    443,075Capital expenditures
    
    
    57,192
    
    
    
    40,084
    
    
    
    38,457
    
    
    
    534,505RECORDING MEDIA AND SYSTEMSNet salesUnaffiliated customers
    
    ¥
    112,639
    
    
    ¥
    136,000
    
    
    ¥
    136,351
    
    
    $
    1,052,701Intersegment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total revenue
    
    
    112,639
    
    
    
    136,000
    
    
    
    136,351
    
    
    
    1,052,701(100.0
    %)
    
    
    (100.0
    %)
    
    
    (100.0
    %)
    
    
    (100.0
    %)Operating expenses
    
    
    120,329
    
    
    
    138,205
    
    
    
    134,807
    
    
    
    1,124,570(106.8
    %)
    
    
    (101.6
    %)
    
    
    (98.9
    %)
    
    
    (106.8
    %)Operating income (loss)
    
    ¥
    (7,690
    )
    
    ¥
    (2,205
    )
    
    ¥
    1,544
    
    
    $
    (71,869
    )(-6.8
    %)
    
    
    (-1.6
    %)
    
    
    (1.1
    %)
    
    
    (-6.8
    %)Identifiable assets
    
    
    84,160
    
    
    
    97,186
    
    
    
    96,761
    
    
    
    786,542Depreciation and amortization
    
    
    5,397
    
    
    
    4,433
    
    
    
    4,774
    
    
    
    50,439Capital expenditures
    
    
    3,813
    
    
    
    4,387
    
    
    
    2,569
    
    
    
    35,635ELIMINATIONS AND CORPORATECorporate assets
    
    ¥
    186,248
    
    
    ¥
    167,955
    
    
    ¥
    155,432
    
    
    $
    1,740,636TOTALNet salesUnaffiliated customers
    
    ¥
    657,853
    
    
    ¥
    655,792
    
    
    ¥
    604,865
    
    
    $
    6,148,159Intersegment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total revenue
    
    
    657,853
    
    
    
    655,792
    
    
    
    604,865
    
    
    
    6,148,159(100.0
    %)
    
    
    (100.0
    %)
    
    
    (100.0
    %)
    
    
    (100.0
    %)Operating expenses
    
    
    598,023
    
    
    
    599,282
    
    
    
    580,318
    
    
    
    5,589,000(90.9
    %)
    
    
    (91.4
    %)
    
    
    (95.9
    %)
    
    
    (90.9
    %)Operating income
    
    ¥
    59,830
    
    
    ¥
    56,510
    
    
    ¥
    24,547
    
    
    $
    559,159(9.1
    %)
    
    
    (8.6
    %)
    
    
    (4.1
    %)
    
    
    (9.1
    %)Identifiable and corporate assets
    
    
    808,001
    
    
    
    770,319
    
    
    
    747,337
    
    
    
    7,551,411Depreciation and amortization
    
    
    52,806
    
    
    
    50,726
    
    
    
    57,132
    
    
    
    493,514Capital expenditures
    
    
    61,005
    
    
    
    44,471
    
    
    
    41,026
    
    
    
    570,140
   - 21 -




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##### Table of Contents



Years ended March 312005
    
    
    2004
    
    
    2003
    
    
    2005(millions of yen)
    
    
    
    
    
    
    (thousandsof dollars)JAPANNet sales
    
    ¥
    339,493
    
    
    ¥
    329,782
    
    
    ¥
    334,882
    
    
    $
    3,172,832Operating income
    
    
    26,382
    
    
    
    8,538
    
    
    
    5,193
    
    
    
    246,561Identifiable assets
    
    
    305,717
    
    
    
    316,695
    
    
    
    326,128
    
    
    
    2,857,168AMERICASNet sales
    
    
    87,594
    
    
    
    100,971
    
    
    
    97,424
    
    
    
    818,636Operating income
    
    
    5,496
    
    
    
    4,985
    
    
    
    1,439
    
    
    
    51,364Identifiable assets
    
    
    70,844
    
    
    
    65,584
    
    
    
    73,845
    
    
    
    662,093EUROPENet sales
    
    
    71,682
    
    
    
    80,641
    
    
    
    78,462
    
    
    
    669,925Operating income (loss)
    
    
    (5,125
    )
    
    
    (115
    )
    
    
    (3,547
    )
    
    
    (47,897
    )Identifiable assets
    
    
    44,961
    
    
    
    51,797
    
    
    
    48,108
    
    
    
    420,196ASIA AND OTHERSNet sales
    
    
    400,866
    
    
    
    380,781
    
    
    
    314,918
    
    
    
    3,746,411Operating income
    
    
    33,551
    
    
    
    42,912
    
    
    
    20,640
    
    
    
    313,561Identifiable assets
    
    
    263,621
    
    
    
    228,058
    
    
    
    193,637
    
    
    
    2,463,748ELIMINATIONS AND CORPORATENet sales
    
    
    241,782
    
    
    
    236,383
    
    
    
    220,821
    
    
    
    2,259,645Operating income (loss)
    
    
    474
    
    
    
    (190
    )
    
    
    (822
    )
    
    
    4,430Identifiable assets
    
    
    122,858
    
    
    
    108,185
    
    
    
    105,619
    
    
    
    1,148,206TOTALNet sales
    
    ¥
    657,853
    
    
    ¥
    655,792
    
    
    ¥
    604,865
    
    
    $
    6,148,159Operating income
    
    
    59,830
    
    
    
    56,510
    
    
    
    24,547
    
    
    
    559,159Identifiable and corporate assets
    
    
    808,001
    
    
    
    770,319
    
    
    
    747,337
    
    
    
    7,551,411OVERSEAS SALESAmericas
    
    ¥
    77,813
    
    
    ¥
    88,734
    
    
    ¥
    104,134
    
    
    $
    727,224Europe
    
    
    71,702
    
    
    
    80,710
    
    
    
    77,713
    
    
    
    670,112Asia and others
    
    
    324,313
    
    
    
    317,725
    
    
    
    257,534
    
    
    
    3,030,963Overseas sales total
    
    ¥
    473,828
    
    
    ¥
    487,169
    
    
    ¥
    439,381
    
    
    $
    4,428,299Percentage of consolidated sales
    
    
    72.0
    %
    
    
    74.3
    %
    
    
    72.6
    %
    
    
    72.0
    %
  (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.(3)
    
    In accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, certain amounts in the segment
information do not reflect discontinued operations, previous years
segment information has been reclassified to conform to the fiscal
2005 presentation.
 - 22 -




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Sales
        - 23 -




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- 24 -




---



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Effect of foreign exchange movements
     Cost and expenses
  - 25 -




---



##### Table of Contents



Other income and deductions
  Income taxes and minority interests
  Net income
  - 26 -




---



##### Table of Contents



Sales
        - 27 -




---



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*
     - 28 -




---



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Effect of foreign exchange movements
     Cost and expenses
  - 29 -




---



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Other income and deductions
  Income taxes and minority interests
  Net income
   - 30 -




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Discontinued Operations
  U.S. DollarsYen (Millions)
    
    (Thousands)2005
    
    2004
    
    2003
    
    2005Net sales
    
    ¥
    2,242
    
    
    
    3,070
    
    
    
    4,015
    
    
    $
    20,953Loss from operations before
income taxes (including loss on
disposal of ¥454 million in
2005)
    
    
    3,509
    
    
    
    244
    
    
    
    2,471
    
    
    
    32,794Income tax expense (benefit)
    
    
    156
    
    
    
    1,010
    
    
    
    (897
    )
    
    
    1,458Loss from discontinued operations
    
    ¥
    3,665
    
    
    
    1,254
    
    
    
    1,574
    
    
    $
    34,252Loss from discontinued operations
per share:Basic
    
    ¥
    (27.70
    )
    
    
    (9.47
    )
    
    
    (11.86
    )
    
    $
    (0.26
    )Diluted
    
    
    (27.69
    )
    
    
    (9.46
    )
    
    
    (11.86
    )
    
    
    (0.26
    )
  - 31 -




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Operating capital requirements
  Capital Expenditures
           - 32 -




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##### Table of Contents



Financial Management
   Years ended March 312005
    
    2004
    
    2003
    
    2005(millions of yen)
    
    (millionsof dollars)Income from continuing operations
    
    ¥
    36,965
    
    
    ¥
    43,355
    
    
    ¥
    13,593
    
    
    $
    345.5Adjustments to reconcile net income to
net cash provided by operating
activities
    
    
    56,617
    
    
    
    70,465
    
    
    
    92,323
    
    
    
    529.1Net cash provided by operating activities
    
    
    93,582
    
    
    
    113,820
    
    
    
    105,916
    
    
    
    874.6Net cash used in investing activities
    
    
    (60,863
    )
    
    
    (37,647
    )
    
    
    (46,220
    )
    
    
    (568.8
    )Net cash used in financing activities
    
    
    (9,458
    )
    
    
    (9,661
    )
    
    
    (7,925
    )
    
    
    (88.4
    )Net cash provided by (used in)
discontinued operations
    
    
    (1,625
    )
    
    
    761
    
    
    
    (1,983
    )
    
    
    (15.2
    )Effect of exchange rate changes on cash
and cash equivalents
    
    
    2,717
    
    
    
    (10,669
    )
    
    
    (4,998
    )
    
    
    25.4Net change in cash and cash equivalents
    
    ¥
    24,353
    
    
    ¥
    56,604
    
    
    ¥
    44,790
    
    
    $
    227.6
    - 33 -




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- 34 -




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Years ended March 312005
    
    2004
    
    2003
    
    2005(millions of yen)
    
    (millions(%)
    
    
    
    
    
    of dollars)Short-term debt
    
    ¥
    
    
    
    ¥
    315
    
    
    ¥
    1,431
    
    
    $
    (
    )
    
    
    (0.1
    )
    
    
    (0.3
    )Current installments of long term debt
    
    
    103
    
    
    
    101
    
    
    
    488
    
    
    
    1.0(0.0
    )
    
    
    (0.0
    )
    
    
    (0.1
    )Long-term
debt, excluding current installments
    
    
    81
    
    
    
    27
    
    
    
    94
    
    
    
    0.7(0.0
    )
    
    
    (0.0
    )
    
    
    (0.0
    )Stockholders equity
    
    
    639,067
    
    
    
    576,219
    
    
    
    553,885
    
    
    
    5,972.6(100.0
    )
    
    
    (99.9
    )
    
    
    (99.6
    )Total capital
    
    ¥
    639,251
    
    
    ¥
    576,662
    
    
    ¥
    555,898
    
    
    $
    5,974.3(100.0
    )
    
    
    (100.0
    )
    
    
    (100.0
    )
        - 35 -




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- 36 -




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Economic environment
   Critical accounting policies
   - 37 -




---



##### Table of Contents



Impairment of long-lived assets
   Valuation of inventories
   Goodwill and other intangible assets
  - 38 -




---



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Pension benefit costs
     Deferred tax assets
  - 39 -




---



##### Table of Contents



New accounting pronouncements
 New
Accounting Standards
         - 40 -




---



##### Table of Contents



Payments Due by Period (Yen in millions)Less than
    
    1 to 3
    
    3 to 5
    
    After 5Total
    
    1 year
    
    years
    

    years
    

    yearsContractual obligations:Long-term debt
    
    ¥
    184
    
    
    
    103
    
    
    
    74
    
    
    
    7
    
    
    
    Operating leases
    
    
    6,808
    
    
    
    2,355
    
    
    
    2,830
    
    
    
    900
    
    
    
    723Purchase commitment
of raw materials
    
    
    3,841
    
    
    
    3,247
    
    
    
    291
    
    
    
    177
    
    
    
    126Purchase commitment
of property, plant and
equipment
    
    
    12,292
    
    
    
    12,292
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    23,125
    
    
    
    17,997
    
    
    
    3,195
    
    
    
    1,084
    
    
    
    849
     - 41 -




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##### Table of Contents



Item 6 . Directors, Senior Management and Employees
   Directors
 Name (Date of birth)
    
    Position, responsibility and brief personal recordHajime Sawabe
    
    Representative Director, President and CEO  since June 1998(Jan. 9, 1942)
    
    - Director of TDK since June 1996Jiro Iwasaki
    
    Director, Senior Vice President  since June 2002(Dec. 6, 1945)
    
    In charge of General Manager of Administration Group and Environment- Director of TDK since June 1996- General Manager of Administration Group and Environment since June 2002Shinji Yoko
    
    Director, Senior Vice President  since June 2002(Jan. 2, 1948)
    
    In charge of General Manager of Electronic Components Sales
and Marketing Group- Director of TDK since June 1998- Appointed Deputy General Manager of Electronic Components
Business Group, General Manager of High Frequency Devices
Division in April 2000- General Manager of Electronic Components Sales and Marketing Group since June 2002Takeshi Nomura
    
    Director, Senior Vice President  since June 2002(Mar. 8, 1952)
    
    In charge of General Manager of Ferrite and Magnet Products
Business Group- Director of TDK since 1998- Appointed General Manager of 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 Technology Group, General
Manager of Intellectual Properties Center and Technology in
January 2004- Appointed General Manager of Technology Group, General
Manager of Intellectual Properties Center, General Manager of
Devices Development Center and Technology in July 2004- General Manager of Ferrite and Magnet Products Business Group since April 2005Yasuhiro 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
 - 42 -




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##### Table of Contents



Name (Date of birth)
    
    Position, responsibility and brief personal recordTakehiro Kamigama
    
    Director, Executive Vice President  since June 2004(Jan. 12, 1958)
    
    In charge of General Manager of Data Storage and Thin
Film Technology Components Business Group- Appointed General Manager of Data Storage Components
Business Group in October 2001- Corporate Officer of TDK since June 2002- General Manager of Data Storage and Thin Film
Technology Components Business Group since April 2003- Appointed Senior Vice President of TDK in June 2003Seiji Enami
    
    Director and CFO since June 2005(Sep. 14, 1947)
    
    In charge of General Manager of Finance and Accounting
Department- Appointed General Manager of Recording Media and
Systems Business Group Industrial Sales Department in
April 2000- General Manager of Finance and Accounting Department
since April 2001- CFO of TDK since June 2004
 Corporate Officers
 Name (Date of birth)
    
    Position, responsibility and brief personal recordKiyoshi Ito
    
    Corporate Officer, Executive Vice President  since June 2004(May 28, 1944)
    
    In charge of General Manager of SCM Group and Production- Appointed General Manager of Electronic Components
Business Group Capacitors Division in March 1999- Appointed Director of TDK in June 2000- Appointed General Manager of Circuit Devices Business
Group in October 2001- Appointed Corporate Officer, Senior Vice President of TDK
in June 2002- Appointed General Manager of Circuit Devices Business
Group, General Manager of Ceramic Material Products Division
in June 2002- General Manager of SCM Group and Production since April
2005Takaya Ishigaki
    
    Corporate Officer, Senior Vice President  since June 2005(Apr. 10, 1953)
    
    In charge of General Manager of Circuit Devices Business
Group, Capacitor Group Senior Manager- 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- General Manager of Circuit Devices Business Group,
Capacitor Group Senior Manager since April 2005
 - 43 -




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##### Table of Contents



Name (Date of birth)
    
    Position, responsibility and brief personal recordMinoru Takahashi
    
    Corporate Officer, Senior Vice President  since June 2005(Feb. 12, 1948)
    
    In charge of General Manager of Technology Group, General
Manager of Devices Development Center and Technology,
Intellectual Properties- Appointed General Manager of Sensors and Actuators
Business Division, General Manager of Business Promotions
Department in April 2002- Corporate Officer of TDK since June 2003- Appointed General Manager of Sensors and Actuators
Business Group in November 2004- General Manager of Technology Group, General Manager of
Devices Development Center and Technology, Intellectual
Properties since April 2005Yukio Hirokawa
    
    Corporate Officer  since June 2002(Feb. 19, 1947)
    
    In charge of General Manager of Network Devices Business
Group- Appointed Associate Director, Electronic Components
Sales and Marketing Group East Japan Sales Department
Senior Manager in June 2000- Appointed Associate Director, CRM Group Strategic Sales
Department Senior Manager in April 2001- Appointed Associate Director, Deputy General Manager of
Network Devices Business Group in October 2001- General Manager of Network Devices Business Group since
January 2002Masatoshi Shikanai
    
    Corporate Officer  since June 2002(Oct. 3, 1949)
    
    In charge of General Manager of Recording Media and
Solutions Business Group- Appointed General Manager of Recording Media and
Systems Business Group Europe Division in April 2000- Appointed Deputy General Manager of Recording Media and
Systems Business Group in February 2001- General Manager of Recording Media and Solutions
Business Group since October 2001Michinori Katayama
    
    Corporate Officer  since June 2002(Dec. 9, 1946)
    
    In charge of General Manager of Corporate Communications
Department- General Manager of Corporate Communications Department
since January 1999Kenryo Namba
    
    Corporate Officer  since June 2002(Jan. 6, 1947)
    
    In charge of Deputy General Manager of Technology Group,
General Manager of Material Analysis Center and Organic
Materials- Appointed General Manager of Corporate Research and
Development Center in April 2001- Appointed Deputy General Manager of Technology Group,
General Manager of Devices Development Center, General
Manager of Material Analysis Center in January 2004- Deputy General Manager of Technology Group, General
Manager of Material Analysis Center and Organic Materials
since July 2004
 - 44 -




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Name (Date of birth)
    
    Position, responsibility and brief personal recordRaymond Leung
    
    Corporate Officer  since June 2004(Apr. 18, 1956)
    
    In charge of General Manager of China Operation Group, Vice
Chairman of SAE Magnetics (H.K.) Ltd.- Appointed President of SAE Magnetics (H.K.) Ltd. in
October 2000- Appointed Deputy General Manager of Data Storage and Thin
Film Technology Components Business Group in June 2004- General Manager of China Operation Group, Vice Chairman of
SAE Magnetics (H.K.) Ltd. since April 2005Shunji Itakura
    
    Corporate Officer  since June 2005(Nov. 15, 1947)
    
    In charge of General Manager of Display Business Department- Appointed President of TDK (Malaysia) Sdn. Bhd. in January
1999- General Manager of Display Business Department since April
2001Shiro Nomi
    
    Corporate Officer  since June 2005(May 8, 1949)
    
    In charge of General Manager of Corporate Strategy Corporate
Planning Department- Appointed General Manager of Corporate Planning Department
in October 2000- General Manager of Corporate Strategy Corporate Planning
Department since October 2001Shinichi Araya
    
    Corporate Officer  since June 2005(Mar. 7, 1952)
    
    In charge of Deputy General Manager of Circuit Devices
Business Group, Inductor Group Senior Manager- Appointed General Manager of Mechatronics Division in
January 1999- Appointed General Manager of Mechatronics Division,
General Manager of Production Engineering Development
Department in April 2000- Appointed Deputy General Manager of Production Engineering
Development Center in April 2001- Appointed General Manager of Production Engineering
Development Department in October 2001- Deputy General Manager of Circuit Devices Business Group,
Inductor Group Senior Manager since April 2002
 - 45 -




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Corporate
Auditors
 Name (Date of birth)
    
    Position, responsibility and brief personal recordTakuma Otsuka
(Feb. 23, 1944)
    
    Corporate Auditor  since June 2000
- Appointed Director of TDK in June 1998Masaaki Miyoshi
(Sep. 3, 1947)
    
    Corporate Auditor  since June 2003
- Appointed President of Korea TDK Co., Ltd. in July 2000Kazutaka Kubota
(Oct. 11, 1942)
    
    Corporate Auditor*  since June 2003
- Appointed Vice President of Asahi Bank, Ltd. in June 2000
- Appointed President of Asahigin Research Institute, Ltd.
  and Corporate Auditor of Saitama Railway Corporation in June
2002Kaoru Matsumoto
(Dec. 8, 1947)
    
    Corporate Auditor*  since June 2003
- Registration as a Certified Public Accountant in March 1976
- Establishment of Kaoru Matsumoto & Co. since November 1977Ryoichi Ohno
(Nov. 3, 1958)
    
    Corporate Auditor*  since June 2004
- Registration as a U.S. Certified Public Accountant in
  November 1988
- Senior Vice President and Chief Financial Officer of The
  Gibraltar Life Insurance Co., Ltd. and Finance Vice President
  of Prudential Financial Inc. since September 2001
 Notes(*)
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##### Table of Contents



(1)
    
    The aggregate direct remuneration, including bonuses but excluding retirement allowances,
paid by TDK during the years ended March 31, 2005 and 2004 to all Directors and Corporate
Auditors of TDK who served during each of those years was approximately ¥254 million ($2,374
thousand) and ¥326 million, respectively. During fiscal 2005, TDKs Directors and Corporate
Officers as of June 29, 2005 received 662 and 461 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
regulations.
 Number of stock acquisition rights wereName
    
    Position
    
    granted individually during fiscal 2005DirectorsHajime Sawabe
    
    Representative Director, President
and CEO
    
    
    187Jiro Iwasaki
    
    Director, Senior Vice President
    
    
    99Shinji Yoko
    
    Director, Senior Vice President
    
    
    92Takeshi Nomura
    
    Director, Senior Vice President
    
    
    92Yasuhiro Hagihara
    
    Director (outside)
    
    
    10Takehiro Kamigama
    
    Director, Executive Vice President
    
    
    137Seiji Enami
    
    Director and CFO
    
    
    45662Corporate OfficersKiyoshi Ito
    
    Corporate Officer, Executive
Vice President
    
    
    129Takaya Ishigaki
    
    Corporate Officer, Senior
Vice President
    
    
    59Minoru Takahashi
    
    Corporate Officer, Senior
Vice President
    
    
    52Yukio Hirokawa
    
    Corporate Officer
    
    
    45Masatoshi Shikanai
    
    Corporate Officer
    
    
    45Michinori Katayama
    
    Corporate Officer
    
    
    52Kenryo Namba
    
    Corporate Officer
    
    
    45Raymond Leung
    
    Corporate Officer
    
    
    10Shunji Itakura
    
    Corporate Officer
    
    
    8Shiro Nomi
    
    Corporate Officer
    
    
    8Shinichi Araya
    
    Corporate Officer
    
    
    8461
 - 47 -




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##### Table of Contents



(2)
    
    When a Director or Corporate Auditor retires, a proposal to pay a lump sum retirement allowance
is submitted to the general meeting of shareholders for approval. After shareholder approval is
obtained, the amount of the retirement allowance for a Director or Corporate Auditor is
determined in the case of the Director by the Board of Directors, and in the case of the
Corporate Auditor by the Corporate Auditors, and generally reflects his/her prior positions, the
length of his/her service as a Director or Corporate Auditor and his/her contribution to TDKs
performance. The aggregate amount set aside as lump sum retirement allowance by TDK during
fiscal 2005 and fiscal 2004 for Directors and Corporate Auditors of
TDK totaled approximately ¥14
million ($131 thousand) and ¥13 million, respectively. In addition, TDK introduced a Corporate
Officer system in June 2002 to improve management efficiency and expedite decision-making. With
introduction of a Corporate Officer system (See Item 6.C. Board practices), the remuneration
system at large was reviewed and a lump sum retirement allowance for Directors was abolished. As
decided by the Directors in office at the meeting of shareholders held on June 27, 2002, the
conventional retirement reserve fund has been frozen, and all payments from the fund will require
the consent of a general meeting of shareholders, which vote shall take place at the time of the
Directors retirement.
         - 48 -




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Significant differences in corporate governance practices between TDK and U.S. listed
companies on the New York Stock Exchange
  kansayaku Kabushiki-Kaisha
 director(s)
       - 49 -




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- 50 -




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(i)
    
    TDK has a board of corporate auditors (kansayaku-kai) established and selected
pursuant to the Code and the Special Audit Law expressly permitting such a board;(ii)
    
    The Code prohibits a corporate auditor from concurrently serving as a director
of the company and thus the Code requires the board of corporate auditors to be
separate from the board of directors;(iii)
    
    The corporate auditors are elected by the shareholders at a shareholders
meeting under the Code and not by the management of TDK. The Code prohibits a
corporate auditor from concurrently serving as a manager or other employee of the
company, and therefore no executive officer of TDK is a member of the board of
corporate auditors;(iv)
    
    The Code prohibits a corporate auditor from serving as a director, manager or
other employee of the company or any of its subsidiaries, or as an executive officer of
any subsidiary of the company. The Special Audit Law prohibits a corporate auditor of
a Large Company from concurrently serving as a director, executive officer, manager or
other employee of any of its consolidated subsidiaries. The Special Audit Law requires
a Large Company to have three or more corporate auditors, at least half or more of whom
must be a person who has not been a director, executive officer, manager or other
employee of such Large Company or any of its subsidiaries at any time before their
assumption of office as corporate auditor. As such, the Code and the Special Audit Law
provide for the standards for independence of the board of corporate auditors from the
management of TDK;
 - 51 -




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(v)
    
    The Special Audit 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, by resolution, demand that the directors include the
appointment of an accounting auditor in the agenda of a shareholders meeting or demand
that the directors submit a proposal concerning the appointment of a certain accounting
auditor who is recommended by the board of corporate auditors. The Special Audit Law
provides that the board of corporate auditors may, by resolution, dismiss an accounting
auditor for causes enumerated in the Special Audit Law such as breach of his or her
duties. The Special Audit Law also provides that in order to submit a proposal
concerning a dismissal 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, by resolution, demand that the directors include the dismissal of
a certain accounting auditor in the agenda of a shareholders meeting. The board of
corporate auditors may audit in their own right if it believes that the manner or result
of an audit by the accounting auditors is not reasonable. To this end, a corporate
auditor may, if necessary for the performance of his/her duties, request the accounting
auditors to provide a report on their duties. Further, it is also provided that the
accounting auditors must submit an audit report directly to the board of corporate
auditors and the corporate auditors may demand the accounting auditors to provide an
explanation with respect to their audit report. As such, in accordance with the Special
Audit 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 the 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. 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. Each corporate auditor may require TDK to pay
any and all expenses necessary for carrying out of his/her duties, including
compensation of any advisers employed by him/her and ordinary administrative expenses.
        - 52 -




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New Corporation Code
 Kaisha-ho Yugen-Kaisha Kabushiki-Kaisha Significant differences in corporate
governance practices between TDK and U.S. listed companies on the New York Stock Exchange
 - 53 -




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As of March 31, 2005
    
    Japan
    
    
    Overseas
    
    
    TotalElectronic materials and components
    
    
    6,938
    
    
    
    26,112
    
    
    
    33,050Recording media and systems
    
    
    1,128
    
    
    
    1,465
    
    
    
    2,593Corporate
    
    
    1,436
    
    
    
    36
    
    
    
    1,472Total
    
    
    9,502
    
    
    
    27,613
    
    
    
    37,115
 As of March 31, 2004
    
    Japan
    
    
    Overseas
    
    
    TotalElectronic materials and components
    
    
    7,147
    
    
    
    25,204
    
    
    
    32,351Recording media and systems
    
    
    1,173
    
    
    
    1,734
    
    
    
    2,907Corporate
    
    
    1,524
    
    
    
    22
    
    
    
    1,546Total
    
    
    9,844
    
    
    
    26,960
    
    
    
    36,804
 As of March 31, 2003
    
    Japan
    
    
    Overseas
    
    
    TotalElectronic materials and components
    
    
    7,341
    
    
    
    19,781
    
    
    
    27,122Recording media and systems
    
    
    1,212
    
    
    
    1,867
    
    
    
    3,079Corporate
    
    
    1,477
    
    
    
    27
    
    
    
    1,504Total
    
    
    10,030
    
    
    
    21,675
    
    
    
    31,705
  ZENKIN RENGO ZENKIN RENGO
  - 54 -




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Number of
    
    Number of shares underlyingName
    
    Position
    
    shares
    
stock acquisition rightsHajime Sawabe
    
    Representative Director,
President and CEO
    
    
    8,000
    
    
    
    71,900Jiro Iwasaki
    
    Director, Senior Vice President
    
    
    2,000
    
    
    
    35,700Shinji Yoko
    
    Director, Senior Vice President
    
    
    1,000
    
    
    
    37,800Takeshi Nomura
    
    Director, Senior Vice President
    
    
    1,000
    
    
    
    37,800Yasuhiro Hagihara
    
    Director (outside)
    
    
    0
    
    
    
    3,500Takehiro Kamigama
    
    Director, Executive Vice President
    
    
    800
    
    
    
    32,000Seiji Enami
    
    Director and CFO
    
    
    1,100
    
    
    
    7,100Kiyoshi Ito
    
    Corporate Officer, Executive Vice President
    
    
    1,000
    
    
    
    34,100Takaya Ishigaki
    
    Corporate Officer, Senior Vice President
    
    
    300
    
    
    
    12,200Minoru Takahashi
    
    Corporate Officer, Senior Vice President
    
    
    200
    
    
    
    12,600Yukio Hirokawa
    
    Corporate Officer
    
    
    1,300
    
    
    
    16,800Masatoshi Shikanai
    
    Corporate Officer
    
    
    300
    
    
    
    14,900Michinori Katayama
    
    Corporate Officer
    
    
    500
    
    
    
    14,300Kenryo Namba
    
    Corporate Officer
    
    
    2,000
    
    
    
    16,100Raymond Leung
    
    Corporate Officer
    
    
    0
    
    
    
    1,000Shunji Itakura
    
    Corporate Officer
    
    
    0
    
    
    
    3,700Shiro Nomi
    
    Corporate Officer
    
    
    0
    
    
    
    3,200Shinichi Araya
    
    Corporate Officer
    
    
    0
    
    
    
    3,200Takuma Otsuka
    
    Full-time Corporate Auditor
    
    
    1,000
    
    
    
    Masaaki Miyoshi
    
    Full-time Corporate Auditor
    
    
    1,000
    
    
    
    2,400Kazutaka Kubota
    
    Corporate Auditor (outside)
    
    
    0
    
    
    
    Kaoru Matsumoto
    
    Corporate Auditor (outside)
    
    
    0
    
    
    
    Ryoichi Ohno
    
    Corporate Auditor (outside)
    
    
    0
    
    
    
    Total
    
    
    
    
    21,500
    
    
    
    360,300
 - 55 -




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Stock option plans
    - 56 -




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Title of class
    
    Identity of person or group
    
    Amount owned
    
    Percent of classCommon stock
    
    TDK Employees Shareholding Association
    
    501,005 shares
    
    0.38 %
 - 58 -




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Item 7 . Major Shareholders and Related Party Transaction
   Shares ownedName of major shareholder
    
    (in thousands)
    
    
    PercentageThe Master Trust Bank of Japan, Ltd. (Trust account)
    
    
    17,271
    
    
    
    12.96
    %Japan Trustee Services Bank, Ltd. (Trust account)
    
    
    13,869
    
    
    
    10.41
    %
         - 59 -




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Item 8 . Financial Information
  Consolidated financial statements
   Export sales
  Legal proceedings
  Dividend policy
    - 60 -




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Item 9 . The Offer and Listing
    U.S. marketYen per share of
    
    
    price per AmericanCommon stock (1)
    
    
    Depositary Share (2)High
    
    
    Low
    
    
    High
    
    
    LowAnnual highs and lowsYear ended March 31, 2001
    
    
    17,200
    
    
    
    6,600
    
    
    
    157.50
    
    
    
    54.00Year ended March 31, 2002
    
    
    8,670
    
    
    
    4,800
    
    
    
    69.00
    
    
    
    40.00Year 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
    
    
    
    61.40Quarterly highs and lowsYear ended March 31, 20041st quarter
    
    
    6,020
    
    
    
    3,810
    
    
    
    49.80
    
    
    
    32.402nd quarter
    
    
    7,890
    
    
    
    5,860
    
    
    
    67.75
    
    
    
    51.293rd quarter
    
    
    7,800
    
    
    
    6,470
    
    
    
    72.20
    
    
    
    60.404th quarter
    
    
    8,350
    
    
    
    7,020
    
    
    
    77.86
    
    
    
    66.01Year ended March 31, 20051st quarter
    
    
    8,630
    
    
    
    7,130
    
    
    
    80.10
    
    
    
    64.502nd quarter
    
    
    8,390
    
    
    
    6,790
    
    
    
    77.05
    
    
    
    61.403rd quarter
    
    
    7,910
    
    
    
    7,160
    
    
    
    74.85
    
    
    
    67.804th quarter
    
    
    7,880
    
    
    
    7,050
    
    
    
    75.93
    
    
    
    68.40Year ended March 31, 20061st quarter
    
    
    8,020
    
    
    
    7,250
    
    
    
    74.35
    
    
    
    68.02Monthly highs and lowsFebruary 2005
    
    
    7,630
    
    
    
    7,230
    
    
    
    72.85
    
    
    
    69.37March 2005
    
    
    7,880
    
    
    
    7,300
    
    
    
    75.93
    
    
    
    68.40April 2005
    
    
    7,850
    
    
    
    7,250
    
    
    
    72.50
    
    
    
    68.02May 2005
    
    
    8,000
    
    
    
    7,310
    
    
    
    74.27
    
    
    
    68.22June 2005
    
    
    8,020
    
    
    
    7,510
    
    
    
    74.35
    
    
    
    68.54July 2005
    
    
    7,970
    
    
    
    7,480
    
    
    
    71.98
    
    
    
    67.05
  
 (1)
    
    As reported by the Tokyo Stock Exchange.(2)
    
    As reported by the New York Stock Exchange. - 61 -




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Item 10 . Additional Information
    Organization
 (kabushiki kaisha) (shoho) (shogyo tokibo)
 Objects and purposes
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 - 63 -




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With respect to directors, TDKs Articles of Incorporation, bylaws and associated internal
rules issued pursuant to the Articles provide in summary as follows;
 (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;(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;(e)
    
    share ownership is not required in order to be eligible to serve as a director.
 Common Stock
 General
   Authorized capital
    - 64 -




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Dividends
        (a)
    
    the total amount of the stated capital and reserves as of the end of the last
fiscal year;(b)
    
    the total amount of the retained earnings reserve set aside at the ordinary
general shareholders meeting for the last fiscal year and the retained earnings reserve
required to be set aside at the time of the cash distribution;(c)
    
    the total amount determined to be distributed as dividends or paid out from the
profits or incorporated into the stated capital at the ordinary general shareholders
meeting for the last fiscal year, and the total acquisition price of TDKs own shares
determined by resolution of the ordinary general shareholders meeting for the last
fiscal year and/ or resolution of the Board of Directors after the last fiscal year (see
Acquisition of TDKs Own Shares);(d)
    
    such other amounts as are setout in ordinances promulgated by the Ministry of
Justice;
 - 65 -




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(e)
    
    the balance of the amounts of capital reserve and retained earnings reserve that
have been reduced after tah last fiscal year, after the subtraction of the amounts used
out of such reduced amounts for refunds to shareholders and/or replenishment of capital
deficiencies;(f)
    
    the balance of the amount of capital that has been reduced after the last fiscal
year, after the subtraction of the amounts used out of such reduced amount for refunds
to shareholders, cancellation of shares, and/or replenishment of capital deficiencies;
and(g)
    
    such other amounts as are set out in ordinances promulgated by the Ministry of
Justice.
    Stock splits
   General meeting of shareholders
   - 66 -




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Voting rights
 New Unit share system, below
  - 67 -




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Issue of additional shares and pre-emptive rights
 Voting rights
   Liquidation rights
  Record date
   - 68 -




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Acquisition of TDKs Own Shares
  Dividends Dividend
 Voting Rights
 New Unit share system
   Voting rights under the new unit share system
  - 69 -




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Share certificates for less than a unit
  Repurchase or saleby TDK of shares constituting less than a unit
  Effect of the unit share system on holders of ADRs
  Reporting of substantial shareholdings
    - 70 -




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
    
    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% of the shares are held 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.
    - 71 -




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- 72 -




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Securities Exchange Commission:450 Fifth Street, N.W., Washington D.C. 20549New York Stock Exchange:20 Broad Street, New York, New York 10005
  Securities Exchange Commission Home Page:http://www.sec.gov
   - 73 -




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Item 11 . Quantitative and Qualitative Disclosures about Market Risk
 Market risk exposure
  Foreign exchange and interest rate risk
    2005
    
    
    2004(millions of yen)
    
    
    Average
    
    
    (millions of yen)
    
    
    AverageContract
    
    
    Fair
    
    
    contractual
    
    
    Contract
    
    
    Fair
    
    
    contractualForward exchange contracts
    
    amounts
    
    
    value
    
    
    rate
    
    
    amounts
    
    
    value
    
    
    rateTo sell Malaysian Ringgit
/ receive USD
    
    ¥
    
    
    
    ¥
    
    
    
    
    
    
    
    ¥
    859
    
    
    ¥
    (7
    )
    
    
    3.86To sell USD / receive Yen
    
    
    4,295
    
    
    
    (88
    )
    
    
    105.00
    
    
    
    17,779
    
    
    
    403
    
    
    
    107.75To sell CHF / receive Euro
    
    
    54
    
    
    
    
    
    
    
    1.54
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    ¥
    4,349
    
    
    ¥
    (88
    )
    
    
    
    
    
    ¥
    18,638
    
    
    ¥
    396
 (millions of yen)
    
    
    Average
    
    
    (millions of yen)
    
    
    AverageContract
    
    
    Fair
    
    
    contractual
    
    
    Contract
    
    
    Fair
    
    
    contractualCurrency option contracts
    
    amounts
    
    
    value
    
    
    rate
    
    
    amounts
    
    
    value
    
    
    rateTo sell USD / receive Yen
    
    ¥
    23,803
    
    
    ¥
    (354
    )
    
    
    105.10
    
    
    ¥
    16,340
    
    
    ¥
    91
    
    
    
    108.00To sell USD / receive THB
    
    
    838
    
    
    
    (12
    )
    
    
    39.07
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    ¥
    24,641
    
    
    ¥
    (366
    )
    
    
    
    
    
    ¥
    16,340
    
    
    ¥
    91
 (millions of yen)
    
    
    Average
    
    
    (millions of yen)
    
    
    AverageContract
    
    
    Fair
    
    
    contractual
    
    
    Contract
    
    
    Fair
    
    
    contractualCurrency swap contracts
    
    amounts
    
    
    value
    
    
    rate
    
    
    amounts
    
    
    value
    
    
    rateTo receive Euro / pay GBP
    
    ¥
    2,041
    
    
    ¥
    (10
    )
    
    
    0.69
    
    
    ¥
    3,910
    
    
    ¥
    (35
    )
    
    
    0.68To receive Yen / pay Euro
    
    
    9,026
    
    
    
    (302
    )
    
    
    134.75
    
    
    
    8,695
    
    
    
    287
    
    
    
    133.77Total
    
    ¥
    11,067
    
    
    ¥
    (312
    )
    
    
    
    
    
    ¥
    12,605
    
    
    ¥
    252
 - 74 -




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Stock price risk
   2005
    
    

2004Yen (Millions)
    
    
    Yen (Millions)Gross
    
    
    Gross
    
    
    
    
    
    
    
    
    
    Gross
    
    
    Grossunrealized
    
    
    unrealized
    
    
    
    
    
    
    
    
    
    unrealized
    
    
    unrealizedholding
    
    
    holding
    
    
    
    
    
    
    
    
    
    holding
    
    
    holdingCost
    
    gains
    
    
    losses
    
    
    Fair value
    
    
    Cost
    
    gains
    
    
    losses
    
    
    Fair value¥5,951
    
    
    1,054
    
    
    
    
    
    
    
    7,005
    
    
    
    2,782
    
    
    1,054
    
    
    
    
    
    
    
    3,836
 
 Item 12 . Description of Securities Other than Equity Securities
         - 75 -




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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
         
 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
 - 76 -




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Item 16B. Code of Ethics
  
 Item 16C. Principal Accountant Fees and Services
  (Yen in millions)Year ended March 312005
    
    2004Audit fees
    
    
    323
    
    
    
    265Audit-related fees
    
    
    36
    
    
    
    8Tax fees
    
    
    211
    
    
    
    169All other fees
    
    
    5
    
    
    
    5Total
    
    
    575
    
    
    
    447
    Audit and Non-Audit Services Pre-Approval Policy
  - 77 -




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(i)
    
    The Retainer has received a letter of confirmation from such a public
accounting firm that the public accounting firm is neither an 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.
      (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 20,000,000 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).
 - 78 -




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(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
  
 Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  - 79 -




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PART 3
 
 Item 17. Financial Statements
  PageReport of Independent Registered Public
Accounting Firm
    
    
    81Consolidated Balance Sheets as of March 31, 2005
and 2004
    
    
    82Consolidated Statements of Income
for the years ended March 31, 2005, 2004 and 2003
    
    
    84Consolidated Statements of Stockholders Equity
for the years ended March 31, 2005, 2004 and 2003
    
    
    85Consolidated Statements of Cash Flows
for the years ended March 31, 2005, 2004 and 2003
    
    
    86Notes to Consolidated Financial Statements
    
    
    87Schedule for the years ended March 31, 2005, 2004 and 2003:Schedule II
 Valuation and Qualifying Accounts
    
    
    119
   - 80 -




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Report of Independent Registered Public Accounting Firm
 
       
 - 81 -




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Consolidated balance sheets
 U.S. DollarsYen
    
    (Thousands)(Millions)
    
    (Note 2)ASSET
    
    2005
    
    2004
    
    2005Current assets:Cash and cash equivalents
    
    ¥
    251,508
    
    
    
    227,155
    
    
    $
    2,350,542Marketable securities (Note 4)
    
    
    1,609
    
    
    
    402
    
    
    
    15,037Trade receivables (Note 19):Notes
    
    
    6,133
    
    
    
    6,431
    
    
    
    57,317Accounts
    
    
    144,426
    
    
    
    133,900
    
    
    
    1,349,776Allowance for doubtful receivables
    
    
    (2,560
    )
    
    
    (2,000
    )
    
    
    (23,925
    )Net trade receivables
    
    
    147,999
    
    
    
    138,331
    
    
    
    1,383,168Inventories (Note 5)
    
    
    74,924
    
    
    
    77,301
    
    
    
    700,224Income tax receivables (Note 7)
    
    
    204
    
    
    
    763
    
    
    
    1,907Assets held for sale (Note 20)
    
    
    993
    
    
    
    
    
    
    
    9,280Prepaid expenses and other current assets (Note 7)
    
    
    33,366
    
    
    
    31,821
    
    
    
    311,832Total current assets
    
    
    510,603
    
    
    
    475,773
    
    
    
    4,771,990Investments in securities(Note 4)
    
    
    22,698
    
    
    
    18,381
    
    
    
    212,131Property, plant and equipment, at cost:Land
    
    
    20,097
    
    
    
    20,464
    
    
    
    187,822Buildings
    
    
    181,581
    
    
    
    176,256
    
    
    
    1,697,019Machinery and equipment
    
    
    445,636
    
    
    
    471,247
    
    
    
    4,164,823Construction in progress
    
    
    15,206
    
    
    
    10,312
    
    
    
    142,112662,520
    
    
    
    678,279
    
    
    
    6,191,776Less accumulated depreciation
    
    
    (445,551
    )
    
    
    (469,334
    )
    
    
    (4,164,028
    )Net property, plant and equipment
    
    
    216,969
    
    
    
    208,945
    
    
    
    2,027,748Goodwill(Note 17)
    
    
    9,210
    
    
    
    10,029
    
    
    
    86,075Intangible assets(Note 17)
    
    
    13,247
    
    
    
    15,027
    
    
    
    123,804Deferred income taxes(Note 7)
    
    
    8,633
    
    
    
    34,140
    
    
    
    80,682Other assets(Notes 8 and 12)
    
    
    26,641
    
    
    
    8,024
    
    
    
    248,981¥
    808,001
    
    
    
    770,319
    
    
    $
    7,551,411
 See accompanying notes to consolidated financial statements.
 - 82 -




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U.S. DollarsYen
    
    (Thousands)(Millions)
    
    (Note 2)LIABILITIES AND STOCKHOLDERS EQUITY
    
    2005
    
    2004
    
    2005Current liabilities:Short-term debt (Note 6)
    
    ¥
    
    
    
    
    315
    
    
    $
    Current installments of long-term debt (Note 6)
    
    
    103
    
    
    
    101
    
    
    
    963Trade payables:Notes
    
    
    638
    
    
    
    635
    
    
    
    5,963Accounts
    
    
    61,454
    
    
    
    59,282
    
    
    
    574,336Accrued salaries and wages
    
    
    12,915
    
    
    
    12,085
    
    
    
    120,701Accrued expenses
    
    
    31,065
    
    
    
    33,449
    
    
    
    290,327Income taxes payables (Note 7)
    
    
    19,283
    
    
    
    4,689
    
    
    
    180,215Liabilities held for sale (Note 20)
    
    
    92
    
    
    
    
    
    
    
    860Other current liabilities (Note 7)
    
    
    5,307
    
    
    
    4,662
    
    
    
    49,598Total current liabilities
    
    
    130,857
    
    
    
    115,218
    
    
    
    1,222,963Long-term debt, excluding current installments(Note 6)
    
    
    81
    
    
    
    27
    
    
    
    757Retirement and severance benefits(Note 8)
    
    
    28,839
    
    
    
    73,521
    
    
    
    269,523Deferred income taxes(Note 7)
    
    
    751
    
    
    
    215
    
    
    
    7,019Other noncurrent liabilities
    
    
    3,244
    
    
    
    1,843
    
    
    
    30,318Commitments and contingent liabilities(Notes 12 and 13)
    
    
    
    
    
    
    
    
    
    
    Total liabilities
    
    
    163,772
    
    
    
    190,824
    
    
    
    1,530,580Minority interests
    
    
    5,162
    
    
    
    3,276
    
    
    
    48,242Stockholders equity :Common stock :Authorized 480,000,000 shares;
issued 133,189,659 shares in 2005 and 2004;
outstanding 132,244,587 shares in 2005
and 132,409,452 shares in 2004
    
    
    32,641
    
    
    
    32,641
    
    
    
    305,056Additional paid-in capital
    
    
    63,051
    
    
    
    63,051
    
    
    
    589,262Legal reserve (Note 9)
    
    
    16,918
    
    
    
    16,497
    
    
    
    158,112Retained earnings (Note 9)
    
    
    585,557
    
    
    
    560,756
    
    
    
    5,472,495Accumulated other comprehensive income (loss) (Notes 7, 8 and 11)
    
    
    (51,657
    )
    
    
    (90,387
    )
    
    
    (482,776
    )Treasury stock at cost; 945,072 shares in 2005
and 780,207 shares in 2004 (Note 10)
    
    
    (7,443
    )
    
    
    (6,339
    )
    
    
    (69,560
    )Total stockholders equity
    
    
    639,067
    
    
    
    576,219
    
    
    
    5,972,589¥
    808,001
    
    
    
    770,319
    
    
    $
    7,551,411
 - 83 -




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Consolidated statements of income
  U.S. DollarsYen
    
    (Thousands)(Millions)
    
    (Note 2)2005
    
    2004
    
    2003
    
    2005Net sales (Note 19)
    
    ¥
    657,853
    
    
    
    655,792
    
    
    
    604,865
    
    
    $
    6,148,159Cost of sales
    
    
    484,323
    
    
    
    476,407
    
    
    
    459,552
    
    
    
    4,526,383Gross profit
    
    
    173,530
    
    
    
    179,385
    
    
    
    145,313
    
    
    
    1,621,776Selling, general and administrative expenses
    
    
    119,886
    
    
    
    122,875
    
    
    
    115,569
    
    
    
    1,120,430Transfer to the government of the substitutional
portion of Employees Pension Fund (Note 8):Subsidy from the government
    
    
    (33,533
    )
    
    
    
    
    
    
    
    
    
    
    (313,392
    )Loss on settlement
    
    
    27,347
    
    
    
    
    
    
    
    
    
    
    
    255,579Restructuring cost (Note 16)
    
    
    
    
    
    
    
    
    
    
    5,197
    
    
    
    Operating income
    
    
    59,830
    
    
    
    56,510
    
    
    
    24,547
    
    
    
    559,159Other income (deductions):Interest and dividend income
    
    
    1,692
    
    
    
    1,189
    
    
    
    1,379
    
    
    
    15,813Interest expense
    
    
    (967
    )
    
    
    (323
    )
    
    
    (577
    )
    
    
    (9,037
    )Equity in earnings (loss) of affiliates
    
    
    1,765
    
    
    
    1,639
    
    
    
    361
    
    
    
    16,495Loss on
securities, net (Note 4)
    
    
    (142
    )
    
    
    (1,093
    )
    
    
    (3,298
    )
    
    
    (1,327
    )Foreign exchange gain (loss)
    
    
    (856
    )
    
    
    (3,064
    )
    
    
    (1,479
    )
    
    
    (8,000
    )Other  net
    
    
    (594
    )
    
    
    989
    
    
    
    (381
    )
    
    
    (5,552
    )898
    
    
    
    (663
    )
    
    
    (3,995
    )
    
    
    8,392Income from continuing operations
before income taxes
    
    
    60,728
    
    
    
    55,847
    
    
    
    20,552
    
    
    
    567,551Income taxes(Note 7)
    
    
    23,284
    
    
    
    12,133
    
    
    
    6,193
    
    
    
    217,607Income from continuing operations
before minority interests
    
    
    37,444
    
    
    
    43,714
    
    
    
    14,359
    
    
    
    349,944Minority interests, net of tax
    
    
    479
    
    
    
    359
    
    
    
    766
    
    
    
    4,477Income from continuing operations
    
    
    36,965
    
    
    
    43,355
    
    
    
    13,593
    
    
    
    345,467Discontinued operations (Note 20):Loss from operations of discontinued TSC
(including loss on disposal of ¥454 million in 2005)
    
    
    3,509
    
    
    
    244
    
    
    
    2,471
    
    
    
    32,794Income tax expense (benefit)
    
    
    156
    
    
    
    1,010
    
    
    
    (897
    )
    
    
    1,458Loss from discontinued operations
    
    
    3,665
    
    
    
    1,254
    
    
    
    1,574
    
    
    
    34,252Net income
    
    ¥
    33,300
    
    
    
    42,101
    
    
    
    12,019
    
    
    $
    311,215
 Yen (except number of
    
    U.S. Dollarscommon shares outstanding)
    
    (Note 2)Amounts per share:Income from continuing operations per share (Note 18):Basic
    
    ¥
    279.41
    
    
    
    327.27
    
    
    
    102.42
    
    
    $
    2.61Diluted
    
    
    279.25
    
    
    
    327.15
    
    
    
    102.42
    
    
    
    2.61Loss from discontinued operations per share (Note 18):Basic
    
    ¥
    (27.70
    )
    
    
    (9.47
    )
    
    
    (11.86
    )
    
    $
    (0.26
    )Diluted
    
    
    (27.69
    )
    
    
    (9.46
    )
    
    
    (11.86
    )
    
    
    (0.26
    )Net income per share (Note 18):Basic
    
    ¥
    251.71
    
    
    
    317.80
    
    
    
    90.56
    
    
    $
    2.35Diluted
    
    
    251.56
    
    
    
    317.69
    
    
    
    90.56
    
    
    
    2.35Weighted average basic common shares
outstanding (in thousands) (Note 18)
    
    
    132,293
    
    
    
    132,475
    
    
    
    132,716Weighted average diluted common shares
outstanding (in thousands) (Note 18)
    
    
    132,376
    
    
    
    132,523
    
    
    
    132,716Cash dividends paid during the year (Note 9)
    
    ¥
    60.00
    
    
    
    50.00
    
    
    
    45.00
    
    
    $
    0.56
 See accompanying notes to consolidated financial statements.
 - 84 -




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Consolidated statements of stockholders equity
 U.S. DollarsYen
    
    (Thousands)(Millions)
    
    (Note 2)2005
    
    2004
    
    2003
    
    2005Common stock:Balance at beginning of period
    
    ¥
    32,641
    
    
    
    32,641
    
    
    
    32,641
    
    
    $
    305,056Balance at end of period
    
    
    32,641
    
    
    
    32,641
    
    
    
    32,641
    
    
    
    305,056Additional paid-in capital:Balance at beginning of period
    
    
    63,051
    
    
    
    63,051
    
    
    
    63,051
    
    
    
    589,262Balance at end of period
    
    
    63,051
    
    
    
    63,051
    
    
    
    63,051
    
    
    
    589,262Legal reserve(Note 9):Balance at beginning of period
    
    
    16,497
    
    
    
    15,953
    
    
    
    15,683
    
    
    
    154,177Transferred from retained earnings
    
    
    421
    
    
    
    544
    
    
    
    270
    
    
    
    3,935Balance at end of period
    
    
    16,918
    
    
    
    16,497
    
    
    
    15,953
    
    
    
    158,112Retained earnings(Note 9):Balance at beginning of period
    
    
    560,756
    
    
    
    525,919
    
    
    
    520,143
    
    
    
    5,240,710Net income
    
    
    33,300
    
    
    
    42,101
    
    
    
    12,019
    
    
    
    311,215Cash dividends
    
    
    (7,938
    )
    
    
    (6,625
    )
    
    
    (5,973
    )
    
    
    (74,187
    )Losses on sales of treasury stock
    
    
    (140
    )
    
    
    (95
    )
    
    
    
    
    
    
    (1,308
    )Transferred to legal reserve
    
    
    (421
    )
    
    
    (544
    )
    
    
    (270
    )
    
    
    (3,935
    )Balance at end of period
    
    
    585,557
    
    
    
    560,756
    
    
    
    525,919
    
    
    
    5,472,495Accumulated other comprehensive income (loss)(Notes 7,8 and 11):Balance at beginning of period
    
    
    (90,387
    )
    
    
    (78,824
    )
    
    
    (43,999
    )
    
    
    (844,738
    )Other comprehensive income (loss) for the period, net of tax
    
    
    38,730
    
    
    
    (11,563
    )
    
    
    (34,825
    )
    
    
    361,962Balance at end of period
    
    
    (51,657
    )
    
    
    (90,387
    )
    
    
    (78,824
    )
    
    
    (482,776
    )Treasury stock(Note 10):Balance at beginning of period
    
    
    (6,339
    )
    
    
    (4,855
    )
    
    
    (3,592
    )
    
    
    (59,243
    )Acquisition of treasury stock
    
    
    (1,672
    )
    
    
    (1,865
    )
    
    
    (1,263
    )
    
    
    (15,626
    )Exercise of stock option
    
    
    568
    
    
    
    381
    
    
    
    
    
    
    
    5,309Balance at end of period
    
    
    (7,443
    )
    
    
    (6,339
    )
    
    
    (4,855
    )
    
    
    (69,560
    )Total stockholders equity
    
    ¥
    639,067
    
    
    
    576,219
    
    
    
    553,885
    
    
    $
    5,972,589Disclosure of comprehensive income (loss):Net income for the period
    
    ¥
    33,300
    
    
    
    42,101
    
    
    
    12,019
    
    
    $
    311,215Other comprehensive income (loss) for the period, net of tax (Note 11)
    
    
    38,730
    
    
    
    (11,563
    )
    
    
    (34,825
    )
    
    
    361,962Total comprehensive income (loss) for the period
    
    ¥
    72,030
    
    
    
    30,538
    
    
    
    (22,806
    )
    
    $
    673,177
 See accompanying notes to consolidated financial statements.
 - 85 -




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Consolidated statements of cash flows
 U.S. DollarsYen
    
    (Thousands)(Millions)
    
    (Note 2)2005
    
    2004
    
    2003
    
    2005Cash flows from operating activities:Net income
    
    ¥
    33,300
    
    
    
    42,101
    
    
    
    12,019
    
    
    $
    311,215Loss from discontinued operations, net of tax
    
    
    3,665
    
    
    
    1,254
    
    
    
    1,574
    
    
    
    34,252Income from continuing operations
    
    
    36,965
    
    
    
    43,355
    
    
    
    13,593
    
    
    
    345,467Adjustments to reconcile net income to net cash provided
by operating activities:Depreciation and amortization
    
    
    52,806
    
    
    
    50,726
    
    
    
    57,132
    
    
    
    493,514Loss on disposal of property and equipment
    
    
    1,190
    
    
    
    1,363
    
    
    
    4,589
    
    
    
    11,121Deferred income taxes
    
    
    (5,532
    )
    
    
    1,858
    
    
    
    4,913
    
    
    
    (51,701
    )Loss (gain) on securities, net
    
    
    142
    
    
    
    1,093
    
    
    
    3,298
    
    
    
    1,327Gain on sale of a subsidiary
    
    
    (1,799
    )
    
    
    (567
    )
    
    
    
    
    
    
    (16,813
    )Changes in assets and liabilities:Increase in trade receivables
    
    
    (7,343
    )
    
    
    (7,680
    )
    
    
    (2,654
    )
    
    
    (68,626
    )Decrease (increase) in inventories
    
    
    3,461
    
    
    
    (7,868
    )
    
    
    13,533
    
    
    
    32,346Increase in trade payables
    
    
    245
    
    
    
    8,200
    
    
    
    6,742
    
    
    
    2,290Increase (decrease) in accrued expenses
    
    
    (2,496
    )
    
    
    8,878
    
    
    
    (5,226
    )
    
    
    (23,327
    )Increase (decrease) in income taxes payables, net
    
    
    14,464
    
    
    
    5,704
    
    
    
    2,901
    
    
    
    135,178Increase (decrease) in retirement and severance benefits, net
    
    
    2,519
    
    
    
    9,285
    
    
    
    7,639
    
    
    
    23,542Other  net
    
    
    (1,040
    )
    
    
    (527
    )
    
    
    (544
    )
    
    
    (9,720
    )Net cash provided by operating activities
    
    
    93,582
    
    
    
    113,820
    
    
    
    105,916
    
    
    
    874,598Cash flows from investing activities:Capital expenditures
    
    
    (61,005
    )
    
    
    (44,471
    )
    
    
    (41,026
    )
    
    
    (570,140
    )Proceeds from sale and maturities of investments in securities
    
    
    1,788
    
    
    
    1,814
    
    
    
    1,511
    
    
    
    16,710Payment for purchase of investments in securities
    
    
    (2,424
    )
    
    
    (1
    )
    
    
    (700
    )
    
    
    (22,654
    )Payment for purchase of other investments
    
    
    (221
    )
    
    
    (442
    )
    
    
    (6,606
    )
    
    
    (2,065
    )Proceeds from sales of property, plant and equipment
    
    
    999
    
    
    
    4,299
    
    
    
    4,590
    
    
    
    9,336Acquisition of minority interests
    
    
    
    
    
    
    (366
    )
    
    
    (3,967
    )
    
    
    Proceeds from sale of a subsidiary
    
    
    
    
    
    
    1,523
    
    
    
    
    
    
    
    Other  net
    
    
    
    
    
    
    (3
    )
    
    
    (22
    )
    
    
    Net cash used in investing activities
    
    
    (60,863
    )
    
    
    (37,647
    )
    
    
    (46,220
    )
    
    
    (568,813
    )Cash flows from financing activities:Proceeds from long-term debt
    
    
    218
    
    
    
    69
    
    
    
    211
    
    
    
    2,037Repayment of long-term debt
    
    
    (164
    )
    
    
    (479
    )
    
    
    (646
    )
    
    
    (1,533
    )Increase (decrease) in short-term debt, net
    
    
    (330
    )
    
    
    (1,047
    )
    
    
    (254
    )
    
    
    (3,084
    )Sale (purchase) of treasury stock, net
    
    
    (1,244
    )
    
    
    (1,579
    )
    
    
    (1,263
    )
    
    
    (11,626
    )Dividends paid
    
    
    (7,938
    )
    
    
    (6,625
    )
    
    
    (5,973
    )
    
    
    (74,187
    )Net cash used in financing activities
    
    
    (9,458
    )
    
    
    (9,661
    )
    
    
    (7,925
    )
    
    
    (88,393
    )Net cash provided by (used in) discontinued operations
    
    
    (1,625
    )
    
    
    761
    
    
    
    (1,983
    )
    
    
    (15,187
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    2,717
    
    
    
    (10,669
    )
    
    
    (4,998
    )
    
    
    25,393Net increase in cash and cash equivalents
    
    
    24,353
    
    
    
    56,604
    
    
    
    44,790
    
    
    
    227,598Cash and cash equivalents at beginning of period
    
    
    227,155
    
    
    
    170,551
    
    
    
    125,761
    
    
    
    2,122,944Cash and cash equivalents at end of period
    
    ¥
    251,508
    
    
    
    227,155
    
    
    
    170,551
    
    
    $
    2,350,542
 See accompanying notes to consolidated financial statements.
 - 86 -




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1. Nature of Operations and Summary of Significant Accounting Policies
 (a) Nature of Operations
  a) Electronic materials and components products:
  b) Recording media and systems products:
   (b) Basis of Presentation
   (c) Consolidation Policy
   (d) Cash Equivalents
  (e) Allowance for Doubtful Receivables
  - 87 -




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(f) Investments in Securities
     (g) Inventories
  (h) Property, Plant and Equipment
  Buildings
    
    3 to 60 yearsMachinery and equipment
    
    2 to 22 years
 (i) Income Taxes
   - 88 -




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(j) Stock Option Plan
   Yen
    
    U.S. Dollars(Millions)
    
    (Thousands)2005
    
    2004
    
    2003
    
    2005Income from
continuing
operations, as
reported
    
    
    ¥36,965
    
    
    
    43,355
    
    
    
    13,593
    
    
    $
    345,467Deduct total
stock-based
employee
compensation
expense determined
under
fair-value-based
method for all
awards, net of tax
    
    
    (438
    )
    
    
    (330
    )
    
    
    (239
    )
    
    
    (4,093
    )Pro forma income
from continuing
operations
    
    
    ¥36,527
    
    
    
    43,025
    
    
    
    13,354
    
    
    $
    341,374
 Yen
    
    U.S. DollarsBasic income from continuing
operations per share:As reported
    
    ¥
    279.41
    
    
    
    327.27
    
    
    
    102.42
    
    
    $
    2.61Pro forma
    
    
    276.11
    
    
    
    324.78
    
    
    
    100.62
    
    
    
    2.58Diluted income from continuing
operations per share:As reported
    
    ¥
    279.25
    
    
    
    327.15
    
    
    
    102.42
    
    
    $
    2.61Pro forma
    
    
    275.98
    
    
    
    324.74
    
    
    
    100.62
    
    
    
    2.58
 - 89 -




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##### Table of Contents



Yen
    
    U.S. Dollars(Millions)
    
    (Thousands)2005
    
    2004
    
    2003
    
    2005Net income, as reported
    
    ¥
    33,300
    
    
    
    42,101
    
    
    
    12,019
    
    
    $
    311,215Deduct total
stock-based employee
compensation expense
determined under
fair-value-based
method for all awards,
net of tax
    
    
    (438
    )
    
    
    (330
    )
    
    
    (239
    )
    
    
    (4,093
    )Pro forma net income
    
    ¥
    32,862
    
    
    
    41,771
    
    
    
    11,780
    
    
    $
    307,122
 Yen
    
    U.S. DollarsBasic net income per share:As reported
    
    ¥
    251.71
    
    
    
    317.80
    
    
    
    90.56
    
    
    $
    2.35Pro forma
    
    
    248.40
    
    
    
    315.31
    
    
    
    88.76
    
    
    
    2.32Diluted net income per share:As reported
    
    ¥
    251.56
    
    
    
    317.69
    
    
    
    90.56
    
    
    $
    2.35Pro forma
    
    
    248.29
    
    
    
    315.27
    
    
    
    88.76
    
    
    
    2.32
 (k) Research and Development Expenses
  (l) Advertising Costs
  (m) Shipping and Handling Fees and Costs
  (n) Foreign Currency Translation
  (o) Use of Estimates
  - 90 -




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(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
  (t) Revenue Recognition
     - 91 -




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- 92 -




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(u) New Accounting Standards Not Yet Adopted
    (v) Reclassifications
  2. Financial Statement Translation
  - 93 -




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3. Foreign Operations
  U.S. DollarsYen (Millions)
    
    
    (Thousands)2005
    
    
    2004
    
    
    2003
    
    
    2005Net assets
    
    ¥
    360,925
    
    
    
    318,915
    
    
    
    304,645
    
    
    $
    3,373,131Net sales
    
    
    498,366
    
    
    
    494,184
    
    
    
    432,048
    
    
    
    4,657,626Net income
    
    
    17,362
    
    
    
    38,731
    
    
    
    10,675
    
    
    
    162,262
 4. Marketable Securities and Investments in Securities
  U.S. DollarsYen (Millions)

    
    (Thousands)2005
    
    
    2004
    
    
    2005Short-term marketable securities
    
    ¥
    1,609
    
    
    
    402
    
    
    $
    15,037Long-term marketable securities
    
    
    7,094
    
    
    
    4,535
    
    
    
    66,299Nonmarketable securities
    
    
    1,555
    
    
    
    419
    
    
    
    14,533Investments in affiliates
    
    
    14,049
    
    
    
    13,427
    
    
    
    131,299¥
    24,307
    
    
    
    18,783
    
    
    $
    227,168
  As of March 31, 2005
 Gross
    
    
    GrossUnrealized
    
    
    UnrealizedHolding
    
    
    HoldingYen (Millions):
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueEquity securities
    
    
    ¥ 5,951
    
    
    
    1,054
    
    
    
    
    
    
    
    7,005Debt securities
    
    
    1,698
    
    
    
    
    
    
    
    
    
    
    
    1,698¥ 7,649
    
    
    
    1,054
    
    
    
    
    
    
    
    8,703
 As of March 31, 2004
 Gross
    
    
    GrossUnrealized
    
    
    UnrealizedHolding
    
    
    HoldingYen (Millions):
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueEquity securities
    
    
    ¥ 2,782
    
    
    
    1,054
    
    
    
    
    
    
    
    3,836Debt securities
    
    
    1,101
    
    
    
    
    
    
    
    
    
    
    
    1,101¥ 3,883
    
    
    
    1,054
    
    
    
    
    
    
    
    4,937
 As of March 31, 2005
 Gross
    
    
    GrossUnrealized
    
    
    UnrealizedHolding
    
    
    HoldingU.S. Dollars (Thousands):
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueEquity securities
    
    $
    55,617
    
    
    
    9,850
    
    
    
    
    
    
    
    65,467Debt securities
    
    
    15,869
    
    
    
    
    
    
    
    
    
    
    
    15,869$
    71,486
    
    
    
    9,850
    
    
    
    
    
    
    
    81,336
  - 94 -




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##### Table of Contents



5. Inventories
  Yen
    
    
    U.S. Dollars(Millions)
    
    
    (Thousands)2005
    
    
    2004
    
    
    2005Finished goods
    
    
    ¥ 30,819
    
    
    
    34,104
    
    
    $
    288,028Work in process
    
    
    21,633
    
    
    
    21,351
    
    
    
    202,177Raw materials
    
    
    22,472
    
    
    
    21,846
    
    
    
    210,019¥ 74,924
    
    
    
    77,301
    
    
    $
    700,224
  6. Short-Term and Long-Term Debt
  Yen
    
    
    U.S. Dollars
    
    
    Weighted average(Millions)
    
    
    (Thousands)
    
    
    interest rate2005
    
    
    2004
    
    
    2005
    
    
    2005
    
    
    2004Short-term bank loans
    
    
    ¥ 
    
    
    
    315
    
    
    $
    
    
    
    
    
    %
    
    
    1.36
    %
  - 95 -




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##### Table of Contents



Yen
    
    
    U.S. Dollars(Millions)
    
    
    (Thousands)2005
    
    
    
    
    
    
    2004
    
    
    2005Lease obligation
(weighted average: 2005  4.05%,
2004  4.25%)
    
    ¥
    184
    
    
    
    
    
    
    
    128
    
    
    $
    1,720184
    
    
    
    
    
    
    
    128
    
    
    
    1,720Less current installments
    
    
    103
    
    
    
    
    
    
    
    101
    
    
    
    963¥
    81
    
    
    
    
    
    
    
    27
    
    
    $
    757
  U.S. DollarsYen (Millions)
    
    
    (Thousands)Year ending March 31,2006
    
    ¥
    103
    
    
    $
    9632007
    
    
    53
    
    
    
    4952008
    
    
    21
    
    
    
    1962009
    
    
    6
    
    
    
    562010
    
    
    1
    
    
    
    10¥
    184
    
    
    $
    1,720
    7. Income Taxes
     - 96 -




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##### Table of Contents



2005
    
    
    2004
    
    
    2003Japanese statutory tax rate
    
    
    40.4
    %
    
    
    41.0
    %
    
    
    41.0
    %Expenses not deductible for tax purposes
    
    
    1.1
    
    
    
    1.2
    
    
    
    0.4Non taxable income
    
    
    (0.2
    )
    
    
    0.0
    
    
    
    (2.1
    )Difference in statutory tax rates of foreign subsidiaries
    
    
    (10.5
    )
    
    
    (23.0
    )
    
    
    (19.9
    )Change in the valuation allowance
    
    
    3.8
    
    
    
    4.5
    
    
    
    13.1Change in enacted tax laws and rates
    
    
    
    
    
    
    0.3
    
    
    
    5.1Currency translation adjustment
    
    
    0.0
    
    
    
    0.0
    
    
    
    (2.9
    )Investment tax credit
    
    
    (1.2
    )
    
    
    (1.6
    )
    
    
    (4.0
    )Research and development tax credit
    
    
    (3.6
    )
    
    
    (1.3
    )
    
    
    Residual tax effect in minimum pension liability
adjustments
    
    
    (7.5
    )
    
    
    
    
    
    
    Additional tax related to prior years income
    
    
    17.0
    
    
    
    
    
    
    
    Other
    
    
    (1.0
    )
    
    
    0.6
    
    
    
    (0.6
    )Effective tax rate
    
    
    38.3
    %
    
    
    21.7
    %
    
    
    30.1
    %
  Yen
    
    
    
    
    
    
    U.S. Dollars(Millions)

    (Thousands)2005
    
    
    2004
    
    
    2003
    
    
    2005Income from continuing operations
    
    ¥
    23,284
    
    
    
    12,133
    
    
    
    6,193
    
    
    $
    217,607Loss from discontinued operations
    
    
    156
    
    
    
    1,010
    
    
    
    (897
    )
    
    
    1,458Stockholders equity, accumulated other comprehensive income (loss):Foreign currency translation adjustments
    
    
    8
    
    
    
    245
    
    
    
    (242
    )
    
    
    75Net unrealized gains (losses) on securities
    
    
    (148
    )
    
    
    348
    
    
    
    (166
    )
    
    
    (1,383
    )Minimum pension liability adjustments
    
    
    29,538
    
    
    
    9,422
    
    
    
    (10,950
    )
    
    
    276,056Total income taxes
    
    ¥
    52,838
    
    
    
    23,158
    
    
    
    (6,062
    )
    
    $
    493,813
 - 97 -




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##### Table of Contents



Income FromContinuingOperationsBefore Income
    
    
    Income TaxesTaxes
    
    
    Current
    
    
    Deferred
    
    
    TotalYen (Millions):2005Japanese
    
    
    ¥ 36,836
    
    
    
    22,261
    
    
    
    (5,026
    )
    
    
    17,235Foreign
    
    
    23,892
    
    
    
    6,555
    
    
    
    (506
    )
    
    
    6,049¥ 60,728
    
    
    
    28,816
    
    
    
    (5,532
    )
    
    
    23,2842004Japanese
    
    
    8,611
    
    
    
    4,411
    
    
    
    (7
    )
    
    
    4,404Foreign
    
    
    47,236
    
    
    
    5,864
    
    
    
    1,865
    
    
    
    7,72955,847
    
    
    
    10,275
    
    
    
    1,858
    
    
    
    12,1332003Japanese
    
    
    6,932
    
    
    
    (1,929
    )
    
    
    5,977
    
    
    
    4,048Foreign
    
    
    13,620
    
    
    
    3,209
    
    
    
    (1,064
    )
    
    
    2,14520,552
    
    
    
    1,280
    
    
    
    4,913
    
    
    
    6,193U.S. Dollars (Thousands):2005Japanese
    
    $
    344,261
    
    
    
    208,047
    
    
    
    (46,972
    )
    
    
    161,075Foreign
    
    
    223,290
    
    
    
    61,261
    
    
    
    (4,729
    )
    
    
    56,532$
    567,551
    
    
    
    269,308
    
    
    
    (51,701
    )
    
    
    217,607
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##### Table of Contents



Yen
    
    
    U.S. Dollars(Millions)
    
    
    (Thousands)2005
    
    
    2004
    
    
    2005Deferred tax assets:Trade accounts receivable, principally due to
allowance for doubtful receivables
    
    ¥
    332
    
    
    
    217
    
    
    $
    3,103Inventories
    
    
    894
    
    
    
    251
    
    
    
    8,355Accrued business tax
    
    
    1,330
    
    
    
    344
    
    
    
    12,430Accrued expenses
    
    
    3,863
    
    
    
    3,605
    
    
    
    36,103Retirement and severance benefits
    
    
    10,648
    
    
    
    12,334
    
    
    
    99,514Net operating loss carryforwards
    
    
    14,631
    
    
    
    12,427
    
    
    
    136,738Tax credit carryforwards
    
    
    208
    
    
    
    559
    
    
    
    1,944Minimum pension liability adjustments
    
    
    4,174
    
    
    
    29,133
    
    
    
    39,009Property, plant and equipment, principally due
to differences in depreciation
    
    
    2,523
    
    
    
    1,219
    
    
    
    23,579Other
    
    
    1,493
    
    
    
    1,276
    
    
    
    13,954Total gross deferred tax assets
    
    
    40,096
    
    
    
    61,365
    
    
    
    374,729Less valuation allowance
    
    
    (15,409
    )
    
    
    (11,028
    )
    
    
    (144,009
    )Net deferred tax assets
    
    ¥
    24,687
    
    
    
    50,337
    
    
    $
    230,720Deferred tax liabilities:Investments, principally due to differences
in valuation
    
    
    (6,034
    )
    
    
    (7,329
    )
    
    
    (56,393
    )Undistributed earnings of foreign subsidiaries
    
    
    (2,656
    )
    
    
    (2,773
    )
    
    
    (24,822
    )Net unrealized gains on securities
    
    
    (272
    )
    
    
    (420
    )
    
    
    (2,542
    )Other
    
    
    (1,220
    )
    
    
    (1,068
    )
    
    
    (11,402
    )Total gross deferred tax liabilities
    
    
    (10,182
    )
    
    
    (11,590
    )
    
    
    (95,159
    )Net deferred tax assets
    
    
    ¥ 14,505
    
    
    
    38,747
    
    
    $
    135,561
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##### Table of Contents



U.S. DollarsYen (Millions)
    
    
    (Thousands)Within 1 year
    
    ¥
    159
    
    
    $
    1,4861 to 5 years
    
    
    6,440
    
    
    
    60,1875 to 20 years
    
    
    15,242
    
    
    
    142,449Indefinite periods
    
    
    26,294
    
    
    
    245,738¥
    48,135
    
    
    $
    449,860
   Yen
    
    
    U.S. Dollars(Millions)
    
    
    (Thousands)2005
    
    
    2004
    
    
    2005Prepaid expenses and other current assets
    
    ¥
    6,654
    
    
    
    5,105
    
    
    $
    62,187Deferred income taxes (noncurrent assets)
    
    
    8,633
    
    
    
    34,140
    
    
    
    80,682Other current liabilities
    
    
    (31
    )
    
    
    (283
    )
    
    
    (289
    )Deferred income taxes (noncurrent
liabilities)
    
    
    (751
    )
    
    
    (215
    )
    
    
    (7,019
    )¥
    14,505
    
    
    
    38,747
    
    
    $
    135,561
  8. Retirement and Severance Benefits
    - 100 -




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- 101 -




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##### Table of Contents



Yen
    
    U.S. Dollars(Millions)
    
    (Thousands)2005
    
    2004
    
    2003
    
    2005Service cost-benefits earned
during the year
    
    
    ¥6,806
    
    
    
    10,341
    
    
    
    9,383
    
    
    $
    63,607Interest cost on projected
benefit obligation
    
    
    5,359
    
    
    
    6,271
    
    
    
    5,985
    
    
    
    50,084Expected return on plan assets
    
    
    (3,180
    )
    
    
    (2,640
    )
    
    
    (3,678
    )
    
    
    (29,720
    )Amortization of transition assets
    
    
    (1,331
    )
    
    
    (1,331
    )
    
    
    (1,331
    )
    
    
    (12,439
    )Recognized actuarial loss
    
    
    5,696
    
    
    
    7,480
    
    
    
    5,963
    
    
    
    53,234Amortization of unrecognized
prior service benefit
    
    
    (1,522
    )
    
    
    (1,353
    )
    
    
    (1,342
    )
    
    
    (14,224
    )Settlement gain, net
    
    
    (6,186
    )
    
    
    
    
    
    
    
    
    
    
    (57,813
    )¥5,642
    
    
    
    18,768
    
    
    
    14,980
    
    
    $
    52,729
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##### Table of Contents



Yen
    
    U.S. Dollars(Millions)
    
    (Thousands)2005
    
    2004
    
    2005Change in benefit obligations:Benefit obligations at beginning of period
    
    
    ¥258,991
    
    
    
    250,625
    
    
    $
    2,420,477Service cost
    
    
    6,806
    
    
    
    10,341
    
    
    
    63,607Interest cost
    
    
    5,359
    
    
    
    6,271
    
    
    
    50,084Plan participants contributions
    
    
    
    
    
    
    405
    
    
    
    Plan amendments
    
    
    (10,925
    )
    
    
    68
    
    
    
    (102,103
    )Actuarial loss (gain)
    
    
    (727
    )
    
    
    (1,223
    )
    
    
    (6,794
    )Benefits paid
    
    
    (6,646
    )
    
    
    (6,692
    )
    
    
    (62,112
    )Transfer of substitutional portion
    
    
    (67,862
    )
    
    
    
    
    
    
    (634,224
    )Others
    
    
    (437
    )
    
    
    
    
    
    
    (4,084
    )Translation adjustment
    
    
    438
    
    
    
    (804
    )
    
    
    4,093Benefit obligations at end of period
    
    
    184,997
    
    
    
    258,991
    
    
    
    1,728,944Change in plan assets:Fair value of plan assets at beginning of period
    
    
    168,913
    
    
    
    146,573
    
    
    
    1,578,626Actual return on plan assets
    
    
    8,053
    
    
    
    21,458
    
    
    
    75,262Employer contributions
    
    
    3,596
    
    
    
    6,434
    
    
    
    33,608Plan participants contributions
    
    
    
    
    
    
    405
    
    
    
    Benefits paid
    
    
    (6,046
    )
    
    
    (5,588
    )
    
    
    (56,505
    )Transfer of substitutional portion
    
    
    (31,985
    )
    
    
    
    
    
    
    (298,925
    )Translation adjustment
    
    
    117
    
    
    
    (369
    )
    
    
    1,093Fair value of plan assets at end of period
    
    
    142,648
    
    
    
    168,913
    
    
    
    1,333,159Funded status
    
    
    (42,349
    )
    
    
    (90,078
    )
    
    
    (395,785
    )Unrecognized net transition obligation
being recognized over 18 years
    
    
    (2,607
    )
    
    
    (5,046
    )
    
    
    (24,365
    )Unrecognized net actuarial loss
    
    
    72,650
    
    
    
    113,550
    
    
    
    678,972Unrecognized prior service benefit
    
    
    (28,295
    )
    
    
    (18,891
    )
    
    
    (264,439
    )Net amount recognized
    
    
    (601
    )
    
    
    (465
    )
    
    
    (5,617
    )Amounts recognized in consolidated balance sheets consists of:Prepaid pension cost
    
    
    17,669
    
    
    
    
    
    
    
    165,131Retirement and severance benefits
    
    
    (28,839
    )
    
    
    (73,521
    )
    
    
    (269,523
    )Intangible assets
    
    
    56
    
    
    
    64
    
    
    
    523Accumulated other comprehensive loss
    
    
    10,513
    
    
    
    72,992
    
    
    
    98,252Net amount recognized
    
    
    (601
    )
    
    
    (465
    )
    
    
    (5,617
    )Actuarial present value of accumulated benefit
obligations at end of period
    
    
    ¥167,834
    
    
    
    237,868
    
    
    $
    1,568,542
  Yen
    
    U.S. Dollars(Millions)
    
    (Thousands)2005
    
    2004
    
    2005Plans with projected benefit
obligations in excess of plan assets:Projected benefit obligations
    
    
    ¥184,997
    
    
    
    258,991
    
    
    
    $1,728,944Fair value of plan assets
    
    
    142,648
    
    
    
    168,913
    
    
    
    1,333,159Plans with accumulated benefit
obligations in excess of plan assets:Accumulated benefit obligations
    
    
    54,504
    
    
    
    237,364
    
    
    
    509,383Fair value of plan assets
    
    
    28,531
    
    
    
    168,316
    
    
    
    266,645
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Assumptions
  2005
    
    2004Discount rate
    
    
    2.2
    %
    
    
    2.1
    %Assumed rate of increase in future compensation levels
    
    
    3.0
    %
    
    
    3.0
    %
  2005
    
    2004
    
    2003Discount rate
    
    
    2.1
    %
    
    
    2.1
    %
    
    
    2.6
    %Assumed rate of increase in future compensation levels
    
    
    3.0
    %
    
    
    3.0
    %
    
    
    3.0
    %Expected long-term rate of return on plan assets
    
    
    2.2
    %
    
    
    2.2
    %
    
    
    2.6
    %
  Plan assets
  2005
    
    
    2004Equity securities
    
    
    26.2
    %
    
    
    54.4
    %Debt securities
    
    
    6.9
    %
    
    
    19.9
    %Cash
    
    
    62.5
    %
    
    
    19.9
    %Other
    
    
    4.4
    %
    
    
    5.8
    %100.0
    %
    
    
    100.0
    %
   Contributions
  - 104 -




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##### Table of Contents



Estimated future benefit payments
  Yen
    
    U.S. Dollars(Millions)
    
    (Thousands)Year ending March 31,2006
    
    
    ¥6,075
    
    
    $
    56,7762007
    
    
    5,828
    
    
    
    54,4672008
    
    
    6,806
    
    
    
    63,6072009
    
    
    7,346
    
    
    
    68,6542010
    
    
    8,227
    
    
    
    76,8882011  2015
    
    
    ¥41,146
    
    
    $
    384,542
 9. Legal Reserve and Dividends
  10. Stock Option Plan
  - 105 -




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##### Table of Contents



2005
    
    2004
    
    2003
    
    2005Weighted
    
    
    
    
    
    Weighted
    
    
    
    
    
    Weighted
    
    WeightedNumber
    
    average
    
    Number
    
    average
    
    Number
    
    average
    
    averageof
    
    exercise
    
    of
    
    exercise
    
    of
    
    exercise
    
    exerciseshares
    
    price
    
    shares
    
    price
    
    shares
    
    price
    
    priceU.S.Yen
    
    
    
    
    
    Yen
    
    
    
    
    
    Yen
    
    DollarsOutstanding at
beginning of year
    
    
    739,300
    
    
    ¥
    8,358
    
    
    
    548,000
    
    
    ¥
    8,967
    
    
    
    327,900
    
    
    ¥
    11,050
    
    
    $
    78.11Granted
    
    
    234,300
    
    
    
    8,147
    
    
    
    254,700
    
    
    
    6,954
    
    
    
    223,600
    
    
    
    5,909
    
    
    
    76.14Exercised
    
    
    71,700
    
    
    
    5,979
    
    
    
    46,900
    
    
    
    6,114
    
    
    
    
    
    
    
    
    
    
    
    55.88Forfeited or
Expired
    
    
    33,300
    
    
    
    13,695
    
    
    
    16,500
    
    
    
    13,276
    
    
    
    3,500
    
    
    
    8,777
    
    
    
    127.99Outstanding at
end of year
    
    
    868,600
    
    
    
    8,293
    
    
    
    739,300
    
    
    
    8,358
    
    
    
    548,000
    
    
    
    8,967
    
    
    
    77.50Exercisable at
end of year
    
    
    380,600
    
    
    
    9,275
    
    
    
    264,300
    
    
    
    11,755
    
    
    
    168,900
    
    
    
    15,640
    
    
    
    86.68
  Options OutstandingWeightedaverageNumber
    
    remaining
    
    Weighted averageRange of exercise prices
    
    outstanding at
    
    contractual life
    
    exercise priceYen
    
    March 31, 2005
    
    (years)
    
    Yen
    
    U.S. Dollars8,147
    
    
    234,300
    
    
    
    5.3
    
    
    
    8,147
    
    
    
    76.146,954
    
    
    253,700
    
    
    
    4.3
    
    
    
    6,954
    
    
    
    64.995,909
    
    
    171,600
    
    
    
    3.3
    
    
    
    5,909
    
    
    
    55.226,114
    
    
    79,000
    
    
    
    2.1
    
    
    
    6,114
    
    
    
    57.1415,640
    
    
    130,000
    
    
    
    1.1
    
    
    
    15,640
    
    
    
    146.175,909 to 15,640
    
    
    868,600
    
    
    
    3.2
    
    
    
    8,293
    
    
    
    77.50
 - 106 -




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##### Table of Contents



2005
    
    2004
    
    2003Grant-date fair value
    
    ¥1,910
    ($17.85
    )
    
    ¥
    1,849
    
    
    ¥
    1,569Expected life
    
    4.0 years
    
    4.0 years
    
    4.0 yearsRisk-free interest rate
    
    
    0.59
    %
    
    
    0.47
    %
    
    
    0.35
    %Expected volatility
    
    
    35.05
    %
    
    
    39.65
    %
    
    
    39.96
    %Expected dividend yield
    
    
    0.77
    %
    
    
    0.75
    %
    
    
    0.80
    %
 11. Other Comprehensive Income (Loss)
  Yen
    
    U.S. Dollars(Millions)
    
    (Thousands)2005
    
    2004
    
    2003
    
    2005Foreign currency translation adjustments:Balance at beginning of period
    
    ¥
    (52,807
    )
    
    
    (26,520
    )
    
    
    (7,773
    )
    
    $
    (493,523
    )Adjustments for period
    
    
    5,636
    
    
    
    (26,287
    )
    
    
    (18,747
    )
    
    
    52,672Balance at end of period
    
    
    (47,171
    )
    
    
    (52,807
    )
    
    
    (26,520
    )
    
    
    (440,851
    )Net unrealized gains (losses) on securities:Balance at beginning of period
    
    
    648
    
    
    
    110
    
    
    
    379
    
    
    
    6,056Adjustments for period
    
    
    153
    
    
    
    538
    
    
    
    (269
    )
    
    
    1,430Balance at end of period
    
    
    801
    
    
    
    648
    
    
    
    110
    
    
    
    7,486Minimum pension liability adjustments:Balance at beginning of period
    
    
    (38,228
    )
    
    
    (52,414
    )
    
    
    (36,605
    )
    
    
    (357,271
    )Adjustments for period
    
    
    32,941
    
    
    
    14,186
    
    
    
    (15,809
    )
    
    
    307,860Balance at end of period
    
    
    (5,287
    )
    
    
    (38,228
    )
    
    
    (52,414
    )
    
    
    (49,411
    )Total accumulated other comprehensive income (loss):Balance at beginning of period
    
    
    (90,387
    )
    
    
    (78,824
    )
    
    
    (43,999
    )
    
    
    (844,738
    )Adjustments for period
    
    
    38,730
    
    
    
    (11,563
    )
    
    
    (34,825
    )
    
    
    361,962Balance at end of period
    
    ¥
    (51,657
    )
    
    
    (90,387
    )
    
    
    (78,824
    )
    
    $
    (482,776
    )
 - 107 -




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##### Table of Contents



Yen(Millions)Before
    
    
    Taxtax
    
    
    (expense)
    
    
    Net-of-taxamount
    
    
    or benefit
    
    
    amount2005Foreign currency translation adjustments:Amount arising during the year on investments in
foreign entities held at end of period
    
    ¥
    5,203
    
    
    
    (8
    )
    
    
    5,195Reclassification adjustments for the portion of
gains and losses realized upon liquidation and
sale of investments in foreign entities
    
    
    441
    
    
    
    
    
    
    
    441Net 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
    )
    
    
    38,7302004Foreign currency translation adjustments:Amount arising during the year on investments in
foreign entities held at end of period
    
    ¥
    (26,464
    )
    
    
    (245
    )
    
    
    (26,709
    )Reclassification adjustments for the portion of
gains and losses realized upon liquidation and
sale of investments in foreign entities
    
    
    422
    
    
    
    
    
    
    
    422Net foreign currency translation adjustments
    
    
    (26,042
    )
    
    
    (245
    )
    
    
    (26,287
    )Unrealized gains (losses) on securities:Unrealized holding gains arising for period
    
    
    886
    
    
    
    (348
    )
    
    
    538Minimum pension liability adjustments
    
    
    23,608
    
    
    
    (9,422
    )
    
    
    14,186Other comprehensive income (loss)
    
    ¥
    (1,548
    )
    
    
    (10,015
    )
    
    
    (11,563
    )2003Foreign currency translation adjustments:Amount arising during the year on investments in
foreign entities held at end of period
    
    ¥
    (19,751
    )
    
    
    242
    
    
    
    (19,509
    )Reclassification adjustments for the portion of
gains and losses realized upon liquidation of
investments in foreign entities
    
    
    762
    
    
    
    
    
    
    
    762Net foreign currency translation adjustments
    
    
    (18,989
    )
    
    
    242
    
    
    
    (18,747
    )Unrealized gains (losses) on securities:Unrealized holding gains arising for period
    
    
    104
    
    
    
    (41
    )
    
    
    63Reclassification adjustments for (gains) losses
realized in net income
    
    
    (539
    )
    
    
    207
    
    
    
    (332
    )Net unrealized gains (losses)
    
    
    (435
    )
    
    
    166
    
    
    
    (269
    )Minimum pension liability adjustments
    
    
    (26,759
    )
    
    
    10,950
    
    
    
    (15,809
    )Other comprehensive income (loss)
    
    ¥
    (46,183
    )
    
    
    11,358
    
    
    
    (34,825
    )
 - 108 -




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##### Table of Contents



U.S. Dollars(Thousands)TaxBefore tax
    
    (expense)
    
    Net-of-taxamount
    
    or benefit
    
    amount2005Foreign currency translation adjustments:Amount arising during the year on
investments in foreign entities held at
end of period
    
    $
    48,626
    
    
    
    (75
    )
    
    
    48,551Reclassification adjustments for the
portion of gains and losses realized upon
liquidation and sale of investments in
foreign entities
    
    
    4,121
    
    
    
    
    
    
    
    4,121Net foreign currency translation
adjustments
    
    
    52,747
    
    
    
    (75
    )
    
    
    52,672Unrealized gains (losses) on securities:Unrealized holding gains arising for period
    
    
    6,318
    
    
    
    (1,112
    )
    
    
    5,206Reclassification adjustments for (gains)
losses realized in net income
    
    
    (6,271
    )
    
    
    2,495
    
    
    
    (3,776
    )Net unrealized gains (losses)
    
    
    47
    
    
    
    1,383
    
    
    
    1,430Minimum pension liability adjustments
    
    
    583,916
    
    
    
    (276,056
    )
    
    
    307,860Other comprehensive income (loss)
    
    $
    636,710
    
    
    
    (274,748
    )
    
    
    361,962
 12. Leases
   Yen
    
    U.S. Dollars(Millions)
    
    (Thousands)Year ending March 31,2006
    
    ¥
    2,355
    
    
    $
    22,0092007
    
    
    1,697
    
    
    
    15,8602008
    
    
    1,133
    
    
    
    10,5892009
    
    
    595
    
    
    
    5,5612010
    
    
    305
    
    
    
    2,850Later years
    
    
    723
    
    
    
    6,757¥
    6,808
    
    
    $
    63,626
 13. Commitments and Contingent Liabilities
  - 109 -




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14. Risk Management Activities and Derivative Financial Instruments
     - 110 -




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15. Fair Value of Financial Instruments
  (a)
    
    Cash and cash equivalents, 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)
    
    Currency Swaps, Currency and Interest Rate Swaps, Forward Foreign Exchange Contracts and
Foreign Currency Option Contracts
   Yen (Millions)As of March 31, 2005
    
    Carrying amount
    
    
    Estimated fair valueNonderivatives:Assets:Investments in securities and other
assets for which it is:Practicable to estimate fair value
    
    ¥
    12,684
    
    
    
    12,684Not practicable to estimate fair value
    
    
    1,741
    
    
    
    Liability:Long-term debt, including current portion
    
    
    (184
    )
    
    
    (184
    )Derivatives:Currency and interest rate swaps in a:Gain position
    
    
    
    
    
    
    Loss position
    
    
    (312
    )
    
    
    (312
    )Forward foreign exchange contracts in a:Gain position
    
    
    
    
    
    
    Loss position
    
    
    (88
    )
    
    
    (88
    )Currency option contracts in a:Gain position
    
    
    
    
    
    
    Loss position
    
    
    (366
    )
    
    
    (366
    )
 - 111 -




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Yen (Millions)As of March 31, 2004
    
    Carrying amount
    
    
    Estimated fair valueNonderivatives:Assets:Investments in securities and other
assets for which it is:Practicable to estimate fair value
    
    ¥
    8,259
    
    
    
    8,259Not practicable to estimate fair value
    
    
    1,135
    
    
    
    Liability:Long-term debt, including current portion
    
    
    (128
    )
    
    
    (128
    )Derivatives:Currency and interest rate swaps in a:Gain position
    
    
    287
    
    
    
    287Loss position
    
    
    (35
    )
    
    
    (35
    )Forward foreign exchange contracts in a:Gain position
    
    
    403
    
    
    
    403Loss position
    
    
    (7
    )
    
    
    (7
    )Currency option contracts in a:Gain positions
    
    
    91
    
    
    
    91
 U.S. Dollars (Thousands)As of March 31, 2005
    
    Carrying amount
    
    
    Estimated fair valueNonderivatives:Assets:Investments in securities and other assets
for which it is:Practicable to estimate fair value
    
    $
    118,542
    
    
    
    118,542Not practicable to estimate fair value
    
    
    16,271
    
    
    
    Liability:Long-term debt, including current portion
    
    
    (1,720
    )
    
    
    (1,720
    )Derivatives:Currency and interest rate swaps in a:Gain position
    
    
    
    
    
    
    Loss position
    
    
    (2,916
    )
    
    
    (2,916
    )Forward foreign exchange contracts in a:Gain position
    
    
    
    
    
    
    Loss position
    
    
    (822
    )
    
    
    (822
    )Currency option contracts in a:Gain position
    
    
    
    
    
    
    Loss position
    
    
    (3,421
    )
    
    
    (3,421
    )
   Limitations
  - 112 -




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16. Restructuring Charges
    17. Goodwill and Other Intangible Assets
  Yen (Millions)2005
    
    2004Accumu-
    
    
    
    
    
    
    
    
    
    Accumu-Gross
    
    lated
    
    
    
    
    
    Gross
    
    latedCarrying
    
    Amorti-
    
    Net
    
    Carrying
    
    Amorti-
    
    NetAmount
    
    zation
    
    Amount
    
    Amount
    
    zation
    
    AmountAmortized intangible
assets:Patent
    
    ¥
    10,347
    
    
    
    2,242
    
    
    
    8,105
    
    
    
    10,349
    
    
    
    1,259
    
    
    
    9,090Software
    
    
    7,271
    
    
    
    4,399
    
    
    
    2,872
    
    
    
    7,359
    
    
    
    4,207
    
    
    
    3,152Other
    
    
    2,346
    
    
    
    715
    
    
    
    1,631
    
    
    
    2,739
    
    
    
    870
    
    
    
    1,869Total
    
    
    19,964
    
    
    
    7,356
    
    
    
    12,608
    
    
    
    20,447
    
    
    
    6,336
    
    
    
    14,111Unamortized
intangible assets
    
    ¥
    639
    
    
    
    
    
    
    
    639
    
    
    
    916
    
    
    
    
    
    
    
    916
 U.S. Dollars (Thousands)Accumu-Gross
    
    latedCarrying
    
    Amorti-
    
    NetAmount
    
    zation
    
    AmountAmortized intangible assets:Patent
    
    $
    96,701
    
    
    
    20,953
    
    
    
    75,748Software
    
    
    67,953
    
    
    
    41,112
    
    
    
    26,841Other
    
    
    21,926
    
    
    
    6,683
    
    
    
    15,243Total
    
    
    186,580
    
    
    
    68,748
    
    
    
    117,832Unamortized intangible assets
    
    $
    5,972
    
    
    
    
    
    
    
    5,972
 - 113 -




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Yen (Millions)Electronicmaterials and
    
    
    Recording mediacomponents
    
    
    and systems
    
    
    TotalApril 1, 2003
    
    ¥
    13,634
    
    
    
    497
    
    
    
    14,131Additions
    
    
    76
    
    
    
    
    
    
    
    76Deductions
    
    
    (2,128
    )
    
    
    (497
    )
    
    
    (2,625
    )Translation adjustment
    
    
    (1,553
    )
    
    
    
    
    
    
    (1,553
    )March 31, 2004
    
    
    10,029
    
    
    
    
    
    
    
    10,029Additions
    
    
    991
    
    
    
    
    
    
    
    991Deductions
    
    
    (1,975
    )
    
    
    
    
    
    
    (1,975
    )Translation adjustment
    
    
    165
    
    
    
    
    
    
    
    165March 31, 2005
    
    ¥
    9,210
    
    
    
    
    
    
    
    9,210
 U.S. Dollars (Thousands)Electronicmaterials and
    
    Recording mediacomponents
    
    and systems
    
    TotalMarch 31, 2004
    
    $
    93,729
    
    
    
    
    
    
    
    93,729Additions
    
    
    9,262
    
    
    
    
    
    
    
    9,262Deductions
    
    
    (18,458
    )
    
    
    
    
    
    
    (18,458
    )Translation adjustment
    
    
    1,542
    
    
    
    
    
    
    
    1,542March 31, 2005
    
    $
    86,075
    
    
    
    
    
    
    
    86,075
   - 114 -




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##### Table of Contents



18. Net Income per Share
  Yen
    
    U.S. Dollars(Millions)
    
    (Thousands)2005
    
    2004
    
    2003
    
    2005Income from continuing
operations available to common
stockholders
    
    ¥
    36,965
    
    
    
    43,355
    
    
    
    13,593
    
    
    $
    345,467Loss from discontinued
operations available to common
stockholders
    
    
    3,665
    
    
    
    1,254
    
    
    
    1,574
    
    
    
    34,252Net income available to common
stockholders
    
    ¥
    33,300
    
    
    
    42,101
    
    
    
    12,019
    
    
    $
    311,215
 Number of shares (Thousands)2005
    
    
    2004
    
    
    2003Weighted average common shares
outstanding  Basic
    
    
    132,293
    
    
    
    132,475
    
    
    
    132,716Effect of dilutive stock options
    
    
    83
    
    
    
    48
    
    
    
    Weighted average common shares
outstanding  Diluted
    
    
    132,376
    
    
    
    132,523
    
    
    
    132,716
 Yen
    
    
    U.S. Dollars2005
    
    
    2004
    
    
    2003
    
    
    2005Income from continuing
operations per share:Basic
    
    ¥
    279.41
    
    
    
    327.27
    
    
    
    102.42
    
    
    $
    2.61Diluted
    
    
    279.25
    
    
    
    327.15
    
    
    
    102.42
    
    
    
    2.61Loss from discontinued
operations per share:Basic
    
    ¥
    (27.70
    )
    
    
    (9.47
    )
    
    
    (11.86
    )
    
    $
    (0.26
    )Diluted
    
    
    (27.69
    )
    
    
    (9.46
    )
    
    
    (11.86
    )
    
    
    (0.26
    )Net income per share:Basic
    
    ¥
    251.71
    
    
    
    317.80
    
    
    
    90.56
    
    
    $
    2.35Diluted
    
    
    251.56
    
    
    
    317.69
    
    
    
    90.56
    
    
    
    2.35
 19. Business and Credit Concentrations
  - 115 -




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##### Table of Contents



20. Discontinued Operations
   U.S. DollarsYen (Millions)
    
    (Thousands)2005
    
    2004
    
    2003
    
    2005Net sales
    
    ¥
    2,242
    
    
    
    3,070
    
    
    
    4,015
    
    
    $
    20,953Loss from operations before
income taxes (including loss on
disposal of ¥454 million in
2005)
    
    
    3,509
    
    
    
    244
    
    
    
    2,471
    
    
    
    32,794Income tax expense (benefit)
    
    
    156
    
    
    
    1,010
    
    
    
    (897
    )
    
    
    1,458Loss from discontinued operations
    
    ¥
    3,665
    
    
    
    1,254
    
    
    
    1,574
    
    
    $
    34,252
    - 116 -




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##### Table of Contents



U.S. DollarsYen (Millions)
    
    (Thousands)Assets held
for saleCurrent assets
    
    ¥
    548
    
    
    $
    5,121Net property, plant and equipment
    
    
    430
    
    
    
    4,019Other assets
    
    
    15
    
    
    
    140993
    
    
    
    9,280Liabilities
held for saleCurrent liabilities
    
    ¥
    92
    
    
    $
    860
 21. Sale of a Subsidiary
  22. Subsequent Events
   - 117 -




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##### Table of Contents



23. Supplementary Information
 Yen
    
    
    
    
    
    
    U.S. Dollars(Millions)
    
    
    (Thousands)2005
    
    
    2004
    
    
    2003
    
    
    2005(a) Statement of IncomeResearch and development
    
    ¥
    36,348
    
    
    
    32,948
    
    
    
    30,099
    
    
    $
    339,701Rent
    
    
    7,349
    
    
    
    8,037
    
    
    
    9,194
    
    
    
    68,682Maintenance and repairs
    
    
    11,090
    
    
    
    11,875
    
    
    
    11,111
    
    
    
    103,645Advertising costs
    
    
    4,926
    
    
    
    6,261
    
    
    
    5,521
    
    
    
    46,037(b) Statement of Cash FlowsCash paid during year for:Interest
    
    ¥
    331
    
    
    
    350
    
    
    
    646
    
    
    $
    3,093Income taxes
    
    ¥
    13,740
    
    
    
    4,299
    
    
    
    (1,270
    )
    
    $
    128,411
 Noncash activities
   - 118 -




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##### Table of Contents



Schedule II
  
 Balance at
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balancebeginning
    
    Charged to
    
    Bad debts
    
    Translation
    
    at end ofof period
    
    earnings
    
    written off
    
    adjustment
    
    periodYear ended March 31, 2005:Allowance for doubtful receivables
    
    ¥
    2,000
    
    
    
    598
    
    
    
    106
    
    
    
    68
    
    
    
    2,560Year ended March 31, 2004:Allowance for doubtful receivables
    
    ¥
    2,850
    
    
    
    (227
    )
    
    
    373
    
    
    
    (250
    )
    
    
    2,000Year ended March 31, 2003:Allowance for doubtful receivables
    
    ¥
    3,770
    
    
    
    (218
    )
    
    
    440
    
    
    
    (262
    )
    
    
    2,850
 - 119 -




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##### Table of Contents



Item 18. Financial Statements
  
 Item 19. Exhibits
  1.1
    
    ARTICLES OF INCORPORATION (English translation)1.2
    
    SHARE HANDLING REGULATIONS (English translation)8.1
    
    List of Significant Subsidiaries (See Organizational Structure in Item 4.C. of this
Annual Report)11.1
    
    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
 
 - 120 -




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##### Table of Contents



SIGNATURES
  TDK Corporation
(Registrant)Date:  August 11, 2005
    By:
    /s/Hajime SawabeHajime SawabeRepresentative Director,
President and CEO - 121 -