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<TITLE>TDK CORPORATION</TITLE>
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
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<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>


<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>Form&nbsp;20-F</B>
</DIV>


<DIV align="center" style="font-size: 12pt; margin-top: 12pt"><B>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF<BR>
THE SECURITIES EXCHANGE ACT OF 1934</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0%"><B>For the fiscal year ended <U>March&nbsp;31, 2006</U>
</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Commission file number </B><U><B>2-76735</B></U></DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B><FONT style="border-bottom: 1px solid #000000">TDK KABUSHIKI KAISHA</FONT></B>
</DIV>

<DIV align="center" style="font-size: 10pt">(Exact name of Registrant as specified in its charter)</DIV>


<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B><FONT style="border-bottom: 1px solid #000000">TDK CORPORATION</FONT></B>
</DIV>

<DIV align="center" style="font-size: 10pt">(Translation of Registrant&#146;s name into English)</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><FONT style="border-bottom: 1px solid #000000">Japan</FONT></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 0pt">(Jurisdiction of incorporation or organization)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><FONT style="border-bottom: 1px solid #000000">13-1,
Nihonbashi 1-chome, Chuo-ku, Tokyo 103-8272
Japan</FONT></DIV>
<DIV align="center" style="font-size: 10pt; margin-top:0pt">(Address of principal executive offices)</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Securities registered pursuant to Section 12(b) of the Act.

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
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<TR valign="bottom">
    <TD align="center" valign="top">Title of each class
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Name of each exchange on which registered</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">American Depositary Shares
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">New York Stock Exchange</TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Common stock
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">New York Stock Exchange</TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Securities registered or to be registered pursuant to Section 12(g) of the Act.

</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 12pt">None<BR>
<DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></DIV>

<DIV align="center" style="font-size: 10pt">(Title of Class)</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 12pt">None<BR>
<DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></DIV>

<DIV align="center" style="font-size: 10pt">(Title of Class)</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate the number of outstanding shares of the issuer&#146;s classes of capital or common stock
as of the close of the period covered by the annual report.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">Common stock<br>
Outstanding as of March&nbsp;31, 2006: 132,266,828 shares (excluding treasury stock)
</DIV>


<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>


<P align="center" style="font-size: 10pt">- 1 -
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether if the registrant is a well-known seasoned issuer, as defined
in Rule&nbsp;405 of the securities act.<br>
Yes <FONT face="Wingdings">&#254;</FONT> No <FONT face="Wingdings">&#111;</FONT>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by a check mark whether the registrant (1)&nbsp;has filed all reports required to be filed
by Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12&nbsp;months (or
for such shorter period that the registrant was required to file such reports), and (2)&nbsp;has been
subject to such filing requirements for the past 90&nbsp;days.<br>
Yes <FONT face="Wingdings">&#254;</FONT> No <FONT face="Wingdings">&#111;</FONT>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of &#147;accelerated filer and large accelerated
filer&#148; in Rule&nbsp;12b-2 of the Exchange Act. (Check one):<br>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 0pt">Large accelerated filer <FONT face="Wingdings">&#254;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accelerated filer <FONT face="Wingdings">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-accelerated filer <FONT face="Wingdings">&#111;</FONT>.</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by a check mark which financial statement item the registrant has elected to follow.<br>
Item&nbsp;17 <FONT face="Wingdings">&#254;</FONT> Item&nbsp;18 <FONT face="Wingdings">&#111;</FONT>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this is an annual report, indicate by check mark whether the registrant is a shell company
(as defined in Rule&nbsp;12b-2 of the Exchange Act).<br>
Yes <FONT face="Wingdings">&#111;</FONT> No <FONT face="Wingdings">&#254;</FONT>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All information contained in this Report is as of March&nbsp;31, 2006 unless otherwise specified.
Fiscal 2006, fiscal 2005, fiscal 2004, fiscal 2003 and fiscal 2002 of this Report indicate TDK
Corporation&#146;s fiscal period of the fiscal years ended March&nbsp;31, 2006, 2005, 2004, 2003 and 2002,
respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The figures in this Report are expressed in yen and, solely for the convenience of the reader,
are translated into United States dollars at the rate of &#165;117 = U.S.$1, the approximate exchange
rate prevailing on the Tokyo Foreign Exchange Market as of March&nbsp;31, 2006. (See Note 2 of the
Notes to Consolidated Financial Statements.) On July&nbsp;14, 2006 the noon buying rate for yen cable
transfers in New York City as reported by the Federal Reserve Bank of New York was &#165;116.33 = $1.
This translation should not be construed as a representation that the amounts shown could be
converted into U.S. dollars at such rate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forward-Looking Statements
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This material contains forward-looking statements, including projections, plans, policies,
management strategies, targets, schedules, understandings and evaluations, about TDK Corporation
(&#147;TDK&#148;) and its group companies (TDK and its group companies are referred to also as &#147;TDK&#148; where
the context so requires). These forward-looking statements are based on the current forecasts,
estimates, assumptions, plans, beliefs and evaluations of TDK in light of information currently
available to it, and contain known and unknown risks, uncertainties and other factors. TDK
therefore wishes to caution readers that, being subject to risks, uncertainties and other factors,
TDK&#146;s actual results, performance, achievements or financial position could be materially different
from any future results, performance, achievements or financial position expressed or implied by
these forward-looking statements, and TDK undertakes no obligation to publicly update or revise any
forward-looking statements after the issue of this material.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The electronics markets in which TDK operates are highly susceptible to rapid changes. Risks,
uncertainties and other factors that can have significant effects on TDK include, but are not
limited to, shifts in technology, fluctuations in demand, prices, interest and foreign exchange
rates, and changes in economic environments, conditions of competition, laws and regulations.
</DIV>


<P align="center" style="font-size: 10pt">- 2 -
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<A name="tocpage"></A>
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<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="15%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
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<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#101">PART 1</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
<TD></TD>
<TD align="right"></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#102">Item&nbsp;1.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#102"><B>Identity of Directors, Senior Management and Advisers</B></A></TD>
<TD></TD>
<TD align="right">3</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#103">Item&nbsp;2.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#103"><B>Offer Statistics and Expected Timetable</B></A></TD>
<TD></TD>
<TD align="right">3</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#104">Item&nbsp;3.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#104"><B>Key Information</B></A></TD>
<TD></TD>
<TD align="right">4</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#105">Item&nbsp;4.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#105"><B>Information on the Company</B></A></TD>
<TD></TD>
<TD align="right">11</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#106">Item&nbsp;4A.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#106"><B>Unresolved Staff Comments</B></A></TD>
<TD></TD>
<TD align="right">18</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#107">Item&nbsp;5.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#107"><B>Operating and Financial Review and Prospects</B></A></TD>
<TD></TD>
<TD align="right">19</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#108">Item&nbsp;6.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#108"><B>Directors, Senior Management and Employees</B></A></TD>
<TD></TD>
<TD align="right">48</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#109">Item&nbsp;7.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#109"><B>Major Shareholders and Related Party Transaction</B></A></TD>
<TD></TD>
<TD align="right">67</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#110">Item&nbsp;8.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#110"><B>Financial Information</B></A></TD>
<TD></TD>
<TD align="right">68</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#111">Item&nbsp;9.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#111"><B>The Offer and Listing</B></A></TD>
<TD></TD>
<TD align="right">69</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#112">Item&nbsp;10.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#112"><B>Additional Information</B></A></TD>
<TD></TD>
<TD align="right">71</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#113">Item&nbsp;11.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#113"><B>Quantitative and Qualitative Disclosures about Market Risk</B></A></TD>
<TD></TD>
<TD align="right">81</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#114">Item&nbsp;12.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#114"><B>Description of Securities Other than Equity Securities</B></A></TD>
<TD></TD>
<TD align="right">82</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#115">PART 2</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
<TD></TD>
<TD align="right"></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#116">Item&nbsp;13.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#116"><B>Defaults, Dividend Arrearages and Delinquencies</B></A></TD>
<TD></TD>
<TD align="right">83</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#117">Item&nbsp;14.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#117"><B>Material Modifications to the Rights of Security Holders and Use of Proceeds</B></A></TD>
<TD></TD>
<TD align="right">83</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#118">Item&nbsp;15.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#118"><B>Controls and Procedures</B></A></TD>
<TD></TD>
<TD align="right">83</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#119">Item&nbsp;16A.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#119"><B>Audit Committee Financial Expert</B></A></TD>
<TD></TD>
<TD align="right">83</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#120">Item&nbsp;16B.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#120"><B>Code of Ethics</B></A></TD>
<TD></TD>
<TD align="right">84</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#121">Item&nbsp;16C.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#121"><B>Principal Accountant Fees and Services</B></A></TD>
<TD></TD>
<TD align="right">84</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#122">Item&nbsp;16D.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#122"><B>Exemptions from Listing Standards for Audit Committees</B></A></TD>
<TD></TD>
<TD align="right">86</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#123">Item&nbsp;16E.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#123"><B>Purchases of Equity Securities by the Issuer and Affiliated Purchasers</B></A></TD>
<TD></TD>
<TD align="right">87</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#124">PART 3</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
<TD></TD>
<TD align="right"></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#125">Item&nbsp;17.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#125"><B>Financial Statements</B></A></TD>
<TD></TD>
<TD align="right">88</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Independent Auditors&#146; Report</B></TD>
<TD></TD>
<TD align="right">89</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Consolidated Financial Statements</B></TD>
<TD></TD>
<TD align="right">90</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Notes to Consolidated Financial Statements</B></TD>
<TD></TD>
<TD align="right">95</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Schedule II &#150; Valuation and Qualifying Accounts</B></TD>
<TD></TD>
<TD align="right">133</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#126">Item&nbsp;18.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#126"><B>Financial Statements</B></A></TD>
<TD></TD>
<TD align="right">134</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#127">Item&nbsp;19.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#127"><B>Exhibits</B></A></TD>
<TD></TD>
<TD align="right">134</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1.1 Articles of Incorporation (English translation)</B></TD>
<TD></TD>
<TD align="right"></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1.2 Regulations of the Board of Directors (English translation)</B></TD>
<TD></TD>
<TD align="right"></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.1 Share Handling Regulations (English translation)</B></TD>
<TD></TD>
<TD align="right"></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.1 List of Significant Subsidiaries</B></TD>
<TD></TD>
<TD align="right"></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.1 TDK Code of Ethics (English translation)</B></TD>
<TD></TD>
<TD align="right"></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="white-space: nowrap">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of CEO of the Company</B></FONT></TD>
<TD></TD>
<TD align="right"></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="white-space: nowrap">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of CFO of the Company</B></FONT></TD>
<TD></TD>
<TD align="right"></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>13.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of CEO of the Company</B></TD>
<TD></TD>
<TD align="right"></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="white-space: nowrap">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>13.2 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of CFO of the Company</B></FONT></TD>
<TD></TD>
<TD align="right"></TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="k01184exv1w1.htm">EX-1.1 ARTICLES OF INCORPORATION (ENGLISH TRANSLATION)</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="k01184exv1w2.htm">EX-1.2 REGULATION OF THE BOARD OF DIRECTORS (ENGLISH TRANSLATION)</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="k01184exv2w1.htm">EX-2.1 SHARE HANDLING REGULATIONS (ENGLISH TRANSLATION)</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="k01184exv8w1.htm">EX-8.1 LIST OF SIGNIFICANT SUBSIDIARIES</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="k01184exv11w1.htm">EX-11.1 TDK CODE OF ETHICS (ENGLISH TRANSLATION)</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="k01184exv12w1.htm">EX-12.1 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 OF CEO OF THE COMPANY</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="k01184exv12w2.htm">EX-12.2 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 OF CFO OF THE COMPANY</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="k01184exv13w1.htm">EX-13.1 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 OF CEO OF THE COMPANY</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="k01184exv13w2.htm">EX-13.2 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 OF CFO OF THE COMPANY</A></FONT></TD></TR>
</TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>


<P align="center" style="font-size: 10pt">
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="101"></A>
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART 1</B>
</DIV>

<DIV align="left">
<A name="102"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Item&nbsp;1</B></U><B>. Identity of Directors, Senior Management and Advisers</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">A.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Directors and senior management</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Not applicable.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">B.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Advisers</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Not applicable.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">C.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Auditors</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Not applicable.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left">
<A name="103"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Item&nbsp;2</B></U><B>. Offer Statistics and Expected Timetable</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">A.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Offer statistics</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Not applicable.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">B.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Method and expected timetable</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Not applicable.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">- 3 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>


<DIV align="left">
<A name="104"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Item&nbsp;3</B></U><B>. Key Information</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">A.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Selected financial data</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3"><I>Thousands of</I></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3"><I>U.S. dollars,</I></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3"><I>except per</I></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3"><I>share</I></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">Millions of yen, except per share amounts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3" style="border-bottom: 1px solid #000000"><I>amounts (1)</I></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2002</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><I>2006</I></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">795,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">657,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">655,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">604,865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">564,286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>$</I></TD>
    <TD align="right"><I>6,796,410</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">585,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">484,323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">476,407</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">459,552</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">463,331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>5,006,666</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">209,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173,530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">179,385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">145,313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>1,789,744</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and
administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">142,052</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,886</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115,569</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>1,214,120</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Transfer to the government
of the substitutional portion
of Employees&#146; Pension Fund:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Subsidy from the government</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(33,533</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss on settlement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Restructuring cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,825</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,489</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>58,333</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,523</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(40,230</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>517,291</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income (loss)&nbsp;from continuing operations before
income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,847</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,552</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(40,230</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>564,983</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income (loss)&nbsp;from continuing
operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,411</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,965</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,593</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(23,619</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>379,581</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss from discontinued
operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">310</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,665</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,574</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>2,649</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(25,771</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>376,932</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Per Common Share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income (loss)&nbsp;from continuing
operations per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">335.84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">279.41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">327.27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">102.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#165;</TD>
    <TD align="right">(177.72</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>$</I></TD>
    <TD align="right"><I>2.87</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">335.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">279.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">327.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(177.72</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>2.87</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss from discontinued
operations per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#165;</TD>
    <TD align="right">(2.34</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#165;</TD>
    <TD align="right">(27.70</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#165;</TD>
    <TD align="right">(9.47</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#165;</TD>
    <TD align="right">(11.86</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#165;</TD>
    <TD align="right">(16.19</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><I>$</I></TD>
    <TD align="right"><I>(0.02</I></TD>
    <TD nowrap><I>)</I></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.34</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(27.69</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9.46</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11.86</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(16.19</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><I>(0.02</I></TD>
    <TD nowrap><I>)</I></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income (loss)&nbsp;per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">333.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">251.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">317.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">90.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#165;</TD>
    <TD align="right">(193.91</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>$</I></TD>
    <TD align="right"><I>2.85</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">333.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">251.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">317.69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(193.91</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>2.85</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">80.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">60.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">50.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">45.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">60.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">U.S. Dollar equivalents (2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>$</I></TD>
    <TD align="right"><I>0.68</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>$</I></TD>
    <TD align="right"><I>0.56</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>$</I></TD>
    <TD align="right"><I>0.47</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>$</I></TD>
    <TD align="right"><I>0.38</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>$</I></TD>
    <TD align="right"><I>0.45</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">- 4 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD colspan="5">&nbsp;</TD>
    <TD nowrap align="center" colspan="18" style="border-bottom: 0px solid #000000">Millions of yen, except per share amounts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><I>Thousands of</I></TD>

</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD colspan="5">&nbsp;</TD>
    <TD nowrap align="center" colspan="18" style="border-bottom: 1px solid #000000">and exchange rate for yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><I>U.S. dollars (1)</I></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2002</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><I>2006</I></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net working
capital (3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">397,131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">379,746</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">360,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">315,948</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">288,865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center"><I>$</I></TD>
    <TD align="right"><I>3,394,282</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">923,503</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">808,001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">770,319</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">747,337</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">749,910</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>7,893,188</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Short-term indebtedness</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,427</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">416</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,312</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>54,932</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term indebtedness</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">405</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">459</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>3,462</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Retirement
and severance benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,839</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,521</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,971</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,992</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>228,974</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">702,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">639,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">576,219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">553,885</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">583,927</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>6,003,581</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Number of
shares outstanding (in thousands)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,267</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,409</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Yen exchange rates per U.S. dollar (4)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Term end</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">High</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Low</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Year ended March&nbsp;31:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125.64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">134.77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115.89</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">121.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115.71</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120.55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104.18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102.26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113.67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117.48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120.93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104.64</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2007 (through July&nbsp;14, 2006)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110.07</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">January, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117.55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113.96</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">February, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118.95</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115.82</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">March, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115.89</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">April, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113.79</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">May, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113.46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110.07</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">June, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">111.66</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Notes:

</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Translated, except for cash dividend amounts, for convenience of the reader
into U.S. dollars at the rate of &#165;117 = $1, the approximate rate on the
Tokyo Foreign Exchange Market on March&nbsp;31, 2006.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Translated based on the rates specified in Note (4)&nbsp;below on the respective
dates of semi-annual payments for each year.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Net working capital is defined as current assets less current liabilities.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>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.</TD>
</TR>

</TABLE>



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">

    <TD width="3%" nowrap align="left">B.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Capitalization and indebtedness</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">

    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Not applicable.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">

    <TD width="3%" nowrap align="left">C.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Reasons for the offer and use of proceeds</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">

    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Not applicable.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">- 5 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">

    <TD width="3%" nowrap align="left">D.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Risk factors</TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><B><I>Our business is exposed to fluctuations in economic conditions that may adversely affect our
business results and financial condition.</I></B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The electronics industry, our field of operations, is highly susceptible to economic trends in
the U.S., Europe, China and Japan, which are the main markets of end products. In addition, these
countries are constantly grappling with various risk factors such as international issues and
economic fluctuations. Furthermore, the digital consumer products field is significantly affected
by the extremely fast pace of technological innovation and competition in the development of new
products as well as changes in economic conditions. Changes in the economic environments from our
expectations could significantly affect our business results and financial condition.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><B><I>Fluctuations in currency exchange rates could adversely affect our business results and
financial condition.</I></B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We import and export products between different regions of the world as we conduct our
business activities in countries around the globe. Sudden changes in foreign currency exchange
rates affect company transactions between regions and costs and prices of our products and services
at overseas bases, which consequently have effects on our business results such as sales and
income. Such fluctuations also give rise to conversion differences with respect to our investments
in overseas assets and liabilities, which are converted into Japanese yen in our consolidated
financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Therefore,
significant fluctuations in foreign currency exchange rates could have a significant adverse
effect on our business results and financial condition.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><B><I>We are susceptible to risks involved with selling our products in markets outside of
Japan.</I></B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;One of our corporate strategies is to expand in markets outside Japan as we conduct business
in countries around the world. Overseas sales account for more than 70&nbsp;percent of total sales on a
consolidated basis.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However, in many of these markets, we may be exposed to international political risks, such as
war, terrorism and other events; economic risks, such as fluctuations in foreign currency exchange
rates and trade friction; and social risks, including disease, labor problems stemming from
differences in cultures and customs. Such risks may give rise to changes of a far greater
magnitude than we anticipate. We may also face unexpected barriers in building relationships with
trading partners due to differences in commercial and business customs. Manifestation of these
risks could lower productivity in manufacturing processes, undermining the competitiveness of
products and also hinder sales activities and result in other negative consequences. These
outcomes could in turn have a significant adverse effect on our business results and financial
condition.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><B><I>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.</I></B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have many production bases in China for mainstay products, such as
HDD heads. China is a country in
the midst of strong economic growth. We have also established a system for supplying both local
companies and customers that have been setting up operations in China. Furthermore, we plan to
expand business further in this country.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However, in the event that political factors (such as changes in laws and regulations),
economic factors (such as the continuity of high growth, fluctuations in Renminbi (RMB)&nbsp;against
U.S. dollars and problems with electric power supply and other infrastructure) and social factors
cause unexpected events in China, there could be a material adverse effect on our growth and
profitability.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><B><I>We may not be able to compete effectively with respect to prices, which would have a material
adverse effect on our profitability.</I></B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We supply products in a broad range of fields in an electronics industry defined by intense
competition. These fields include IT and communications devices such as digital home appliances,
PCs and mobiles phones. In this industry, price is one of the main competitive factors
differentiating us from other companies, while leading Japanese companies and Asian companies in
South Korea and Taiwan have fueled intense price-based competition.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However, pressure continues to mount from customers for price discounts. In the event that
the fall in prices far exceeds our expectations or becomes protracted, there could be a material
adverse effect on our profitability.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><B><I>Rapid changes in technology could adversely affect our business and hurt our competitive
position.</I></B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that our ability to increase sales by developing appealing, innovative products has
an important role to play in our growth. However, it is extremely difficult to predict future
demand in the rapidly changing electronics industry and develop new technologies to meet that
demand. We may fail to develop and supply in a timely manner attractive, new products with
innovative technologies for this industry and our markets. In the event that we misread the
industry and market and/or are slow in developing innovative technologies on a cost competitive
basis, actual earnings could differ significantly from our forecasts. At the same time, we may
cease to be able to compete in markets, resulting in a significant adverse effect on our business
results and growth prospects.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><B><I>Claims of product liability and other issues associated with the quality of our products
could adversely affect our business results and brand name.</I></B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We manufacture various products at overseas manufacturing bases that we are developing
globally in accordance with ISO (International Organization for Standardization) quality management
standards (ISO 9001) and the strict standards required by customers in the electronics industry,
where technological innovation is remarkable.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We cannot be fully certain, however, that all of our products are defect-free and immune from
recalls at some later date. A product recall or a product liability claim against us caused by
product defects could result in recall costs or damage claims, lower sales and have a negative
impact on our reputation and brand, endangering our continued existence. A situation resulting
from poor product quality due to a major product defect could have a materially adverse effect on
our business results and brand name.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><B><I>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.</I></B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our growth depends to a great extent on our ability to obtain patents, licenses and other
intellectual property rights covering our products, product designs and manufacturing processes.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However, there are cases where our intellectual property rights cannot be fully protected in a
particular region for reasons unique to that region. Furthermore, we may suffer damages resulting
from the manufacture by a third party of similar products to our own with the unauthorized use of
our intellectual property rights. The failure to protect intellectual property rights of others
could reduce the value of our products and brand and impair our ability to compete effectively.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><B><I>Our business may suffer if we are sued for infringing upon the intellectual property rights
of third parties.</I></B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There may be cases where it is alleged that our products infringe on the intellectual property
rights of third parties. Regarding problems relating to the infringement of such intellectual
property rights, we may suffer damages or may be sued for damages. In either case, settlement
negotiations and legal procedures would be inevitable and could be expected to be lengthy and
expensive. If our assertions are not accepted in such disputes, we may have to pay damages and
royalties and suffer losses such as the loss of markets.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The failure to prevent infringement on the rights of others could have a materially adverse
effect on our business development and business results and financial condition.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><B><I>Our success depends on attracting and retaining highly-skilled employees, and we would
suffer material adverse effects if we are unable to do so.</I></B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To prevail against fierce competition in the electronics industry, we believe that it is
necessary to recruit and retain staff possessing advanced technical skills. Regarding personnel
with superior management ability, such as with respect to the ability to formulate strategy and
organizational management, we believe that it is necessary to upgrade skills at an advanced level.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However, intense competition to recruit such skilled employees is not limited to the
industries where we are active. Moreover, in Japan, there is increasing fluidity in the labor
market caused by revisions to the life-time employment system and other developments. These and
other factors mean there is no guarantee that we will continue to be able to recruit and retain
skilled employees. The inability to recruit and train personnel as planned could have a materially
adverse effect on the our operations, business results and growth prospects.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><B><I>We are dependent on certain raw materials and other products, and our business will
suffer if we are unable to procure such materials.</I></B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our manufacturing system is premised on deliveries of raw materials, components, equipment and
other supplies in adequate quality and quantity in a timely manner from many external suppliers.
In new product development, we may rely on certain irreplaceable suppliers for materials.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because of this, there may be cases where supplies of raw materials and other products to us
are interrupted by an accident or some other event at a supplier, supply is suspended due to
quality or other issues, or there is a shortage of or instability in supply due to a rapid increase
in demand for finished products that use certain materials and products. If any of these
situations becomes protracted, we may have difficulty finding substitutes in a timely manner from
other suppliers, which could have a significant, adverse effect on our production and prevent us
from fulfilling our responsibilities to supply products to our customers. Furthermore, if an
imbalance arises in the supply-demand equation, there could be a spike in the price of raw
materials. In the event of these or other similar occurrences, there could be a material adverse
effect on our business results and financial condition.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><B><I>Increased government regulation of our industry or changes in those regulations, whether in
Japan or overseas, may limit our ability to compete effectively.</I></B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to various regulations in Japan and other countries where we conduct business.
These include approval for conducting business and making investments, laws and regulations
governing the safety of electric and electronic products, laws and regulations relating to national
security between nations, and export/import laws and regulations. We are also subject to
commercial, antitrust, patent, product liability, environmental, consumer and business taxation
laws and regulations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event that these laws and regulations become more stringent in the future, our business
development could be affected in no small way and we may incur various additional operating costs.
Furthermore, in the event that we are unable to respond appropriately to these laws and
regulations, we may be forced to partially withdraw from certain businesses or take other actions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Government laws and regulations in their various forms may limit our ability to compete
effectively.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><B><I>Fluctuations in interest rates may have an adverse effect on our profitability.</I></B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although we attempt to limit our borrowings from third parties, from time to time, we or our
subsidiaries may need to borrow funds from such third parties. To the extent that interest rates
increase, we or our subsidiaries may be subject to higher interest expenses. In contrast, a
protracted period of low interest rates also may have an adverse effect on us by limiting our
interest income from investments. Low interest rates also may require us to make additional
contributions to pension benefit funds since the assets of those funds may become under funded.
Either of these changes could have a material adverse effect on our business results and financial
condition.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><B><I>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.</I></B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are developing on a global scale an OEM business, whereby we supply mainly electronic
components to electronics manufacturers, personal computer (PC)&nbsp;makers and other customers.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However, supplies to these customers are significantly affected by various factors that are
beyond our control such as changes in each customer&#146;s business results and management strategies.
A drop-off in purchasing demand due to poor business results at major customers, changes in
customers&#146; purchasing plans and policies, the unexpected termination of contracts and other
occurrences could result in our profit margins being reduced due to discounting pressure from
customers or our being left holding large amounts of inventory.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During fiscal 2006, Maxtor Peripherals (S)&nbsp;Pte. Ltd., our major customer related to the
electronic materials and components business with sales of 11.5&nbsp;percent of consolidated net sales
in 2006, agreed to be acquired by a competitor. The acquisition was
completed in May 2006. During the year ended March&nbsp;31, 2007. TDK
will be losing the majority of the sales from this customer that it
recorded in the year ended March&nbsp;31, 2006.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Customers&#146; business results, changes in management strategy or other factors could thus have a
material adverse effect on our business results and financial condition.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><B><I>Our operations depend on facilities throughout the world and are subject to forces of nature
that could disrupt our ability to serve our customers.</I></B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have many production sites and R&#038;D facilities in Japan and overseas. These facilities and
plants have taken measures to prevent damage caused by natural disasters. However, these
facilities and plants could still suffer significant damage due to a force majeure event such as a
large earthquake, typhoon or flood that far exceeds any level expected. In the event of
interruption to manufacturing, disruption of transportation routes, damage to or disconnection of
information and communications infrastructure, our ability to supply our customers could be
affected for a long period of time. This situation could have a material adverse effect on our
business results and financial condition.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><B><I>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.</I></B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to various environmental laws and regulations with respect to industrial waste
and emissions into the atmosphere and water from our production processes in Japan and overseas,
and specified hazardous chemical substances used in the products. From the perspective of
environmental protection, environmental regulations are expected to become increasingly stringent
in the future, and expenses are expected to increase for responding to these regulations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are engaged in various activities to help protect the environment, including complying with
environmental regulations. However, if we have difficulty responding appropriately to these
demands and laws and regulations, we may be forced to withdraw from certain business activities
impacting our brand name, and in consequence could have a material adverse effect on our business
results and financial condition.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><B><I>Japan&#146;s Unit Share System could affect access to Japanese markets by holders of American
Depositary Shares (&#147;ADSs&#148;), which could adversely affect the price of our shares.</I></B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to our Articles of Incorporation, 100 of our shares constitute one unit. A holder
who owns ADRs evidencing less than 100 ADSs will indirectly own less than a whole unit of shares of
Common Stock. Although, under the unit share system holders of less than a unit have the right to
require us to purchase their shares, holders of ADRs evidencing ADSs that represent other than
integral multiples of whole units are unable to withdraw the underlying shares of Common Stock
representing less than a unit and, therefore, are unable to exercise the rights to require us to
purchase such underlying shares at this time. As a result, access to the Japanese markets by
holders of ADRs through the withdrawal mechanism will not be available for dispositions of shares
of Common Stock in lots less than a unit. The unit share system does not affect the
transferability of ADSs, which may be transferred in lots of any size.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><B><I>Holders of American Depositary Shares have limited rights, which could adversely affect the
price of our shares.</I></B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The rights of shareholders under Japanese law to take actions, including voting their shares,
receiving dividends and distributions, bringing derivative actions, examining our accounting books
and records and exercising appraisal rights are available only to shareholders of record.
Citibank, N.A., through its custodian agent, is the record holder of the shares underlying the
ADSs, and therefore only it can exercise the rights of shareholders in connection with the
deposited shares. The depositary has agreed to endeavor to vote the shares underlying ADSs in
accordance with the instructions of ADS holders and to pay the dividends and distributions
collected from us. However, ADS holders will not be able to bring a derivative action, examine our
accounting books and records or exercise appraisal rights through the depositary.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are incorporated in Japan and a substantial portion of our assets are located outside of
the United States (U.S.). As a result, it may be more difficult for investors to enforce against
us judgments obtained in U.S. courts predicated upon the civil liability provisions of the Federal
securities laws of the United States, including the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, or judgments obtained in other courts outside of
Japan. In addition, there is doubt as to the enforceability in Japanese courts, in original
actions or in actions for enforcements of judgments of U.S. courts, of civil liabilities based
solely upon violation of these Federal securities laws of the United States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I><U>Because
we have not yet completed the implementation of the SEC&#146;s
requirements with respect to internal controls over financial
reporting, we might not be aware of weaknesses in our internal
controls over financial reporting that could adversely affect our
ability to report our financial results timely and
accurately.</U></I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Sarbanes-Oxley Act requires that management maintain, evaluate and
report on internal controls over financial reporting. As a foreign
private issuer, we will be required to comply with this requirement
for our fiscal year ending March&nbsp;31, 2007. Currently, we are
engaged in the process of assessing our existing internal controls
over financial reporting to ensure our compliance with the new
requirements. As a result, we might not be aware of weaknesses that
could exist and that might be identified once the evaluation of the
effectiveness of our internal controls over financial reporting has
been completed. In addition, there is a risk that we may not be able
to implement our internal controls and procedures over financial
reporting in the time frame allowed by the Sarbanes-Oxley
requirements.
</DIV>

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<DIV align="left">
<A name="105"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Item&nbsp;4</B></U><B>. Information on the Company</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;History and development of the Company
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>History</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK Corporation (TDK Kabushiki Kaisha) is a corporation formed under the Commercial Code of
Japan. TDK&#146;s principal place of business is at 13-1, Nihonbashi 1-chome, Chuo-ku, Tokyo 103-8272
Japan and the telephone number is &#043;81-3-5201-7102. The agent in the U.S. for purposes of this Item
4 is TDK U.S.A. Corporation, 901 Franklin Avenue, P.O. Box 9302, Garden City, New York, NY 11530.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK is the world&#146;s leading manufacturer of recording media, ferrite products and recording
device products, and a major producer of inductor, ceramic capacitor, magnet, HDD head and other
components. TDK is a Tokyo-based company founded on December&nbsp;7, 1935 to commercialize ferrite.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Historically, TDK&#146;s growth has been centered on ferrite, a material invented in 1933 by Doctor
Yogoro Kato and Doctor Takeshi Takei. Ferrite is indispensable as a magnetic substance in the
manufacture of electronic equipment. It is a magnetic material with a ceramic structure composed
of iron oxide and other metallic oxides. Its advantages over other magnetic materials include
higher resistivity and thus lower eddy current loss while maintaining superior permeability and
flux density. Based on its strong materials knowledge and production technology, TDK expanded into
ceramic capacitors and magnetic recording tapes in the early 1950s, and ferrite magnets and coil
components in the early 1960s. In the early 1980s, TDK began production of a magnetic head,
continuing development to its modern day product the &#147;HDD head&#148;. Since the 1990s, TDK has promoted
the establishment of world-wide research and development organizations and environmental management
efforts. TDK has continued to broaden its product development programs by building up expertise in
materials technology and new recording-related products.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the years ended March&nbsp;31, 2006, 2005 and 2004, TDK&#146;s capital expenditures were &#165;73.9
billion ($632&nbsp;million), &#165;61.0&nbsp;billion and &#165;44.5&nbsp;billion, respectively. For further information of
TDK&#146;s capital expenditures, see &#147;Capital Expenditures&#148; included in Item&nbsp;5.B. &#147;Liquidity and capital
resources&#148;.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK is planning capital expenditures of &#165;70.0&nbsp;billion ($598&nbsp;million) in fiscal 2007, primarily
for the expansion of production facilities and upgrading of facilities. Regarding TDK&#146;s capital
expenditure plans, TDK&#146;s policy is to invest actively in targeted strategic fields to drive growth.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;Business overview
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Sales by product category</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK&#146;s sales are generated by two business segments: electronic materials and components, and
recording media. In fiscal 2006, &#147;Semiconductors and others&#148; and &#147;Recording Media and Systems&#148;
were renamed &#147;Other electronic components&#148; and &#147;Recording Media&#148;, respectively. There were no
changes in product classifications.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a breakdown of consolidated net sales of TDK and its consolidated
subsidiaries by business segment for fiscal 2006, 2005 and 2004:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000">Years ended March 31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><I>2006</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(millions of yen)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><I>(millions of U.S.</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(%)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><I>dollars)</I></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Electronic Materials and Components:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Electronic materials</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">180,766</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right">&#165;174,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">166,818</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right"><I>$</I><I>1,545.0</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(26.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(25.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Electronic devices</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">154,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107,999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>1,322.1</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(16.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Recording devices</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">315,928</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">234,578</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">230,105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>2,700.2</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(39.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(35.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(35.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other
electronic components</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,449</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,870</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>310.9</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="1" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="1" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Sub total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">687,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">545,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">519,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>5,878.2</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(86.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(82.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(79.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="1" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="1" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Recording Media</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107,430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112,639</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>918.2</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="1" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="1" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">795,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right">&#165;657,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">655,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right"><I>$</I><I>6,796.4</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="1" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="1" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notes:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The business segment information is required by the Japanese Securities
Exchange Law. Segment information is unaudited.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Electronic Materials and Components </B>TDK&#146;s electronic materials and components are divided
into four principal categories: (i)&nbsp;electronic materials; (ii)&nbsp;electronic devices; (iii)&nbsp;recording
devices; and (iv)&nbsp;other electronic components. Overall business results of each category in fiscal
2006 compared to fiscal 2005 are as follows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>(i)&nbsp;Electronic materials </B>The electronics materials sector is broken down into two product
categories: capacitors, and ferrite cores and magnets.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales of capacitors increased marginally year over year, as the impact on sales of sluggish
demand in the communications market and falling prices was offset by higher sales to the car
electronics market. A weaker yen also supported sales.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales of ferrite cores and magnets rose year over year. Sales of ferrite cores were largely
unchanged, as higher sales from increasing demand for power supply cores was negated by lower sales
of cores used in CRT TVs. Ferrite magnet sales were also largely unchanged, with lower demand
stemming from customer inventory cutbacks offset by higher sales of products to the car electronics
market. Sales of rare-earth magnets rose on increasing HDD demand.
</DIV>


<P align="center" style="font-size: 10pt"> - 12 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>(ii)&nbsp;Electronic devices </B>The electronic devices sector has three product categories: inductive
devices, high-frequency components and other products.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The growth of sales in this sector was mainly due to the inclusion of the operating results of
Lambda Power Business from the second half of the fiscal year. Lambda Power Business was acquired
by TDK from U.K.-based Invensys plc. on October&nbsp;1, 2005. However, even excluding these sales,
existing businesses in this sector posted year over year growth.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales of inductive devices increased mainly due to growth in sales of power line coils for use
in mobile phones and HDDs, and in sales of products for use in car electronics.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales of high-frequency components were down year over year. While sales of wireless LAN
components rose, total category sales were brought down by further declines in sales prices of some
components for mobile phones.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales of other products rose year over year. The main factors were growth in sales of DC-AC
inverters for use in LCD panels and of sensors and actuators for HDDs and mobile phones. The
inclusion of six months&#146; sales of Lambda Power Business in this category also boosted sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>(iii)&nbsp;Recording devices </B>The recording devices sector has two product categories: HDD heads and
other heads.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales of HDD heads increased year over year. Amid rising demand for HDDs used in PCs and
consumer electronics, HDD head shipments increased. This higher volume outweighed a drop in sales
prices, resulting in an increase in overall sales.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales of other heads declined due to inventory reductions of optical pickups.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>(iv)&nbsp;Other electronic components </B>The other electronic components sector includes all other
products in the electronic materials and components segment not included in the three sectors
above. The main products are organic EL displays, anechoic chambers and manufacturing equipment.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales of this sector surged due to higher sales of anechoic chambers, which block external
electromagnetic radiation to permit the measurement of electromagnetic noise, and due to sales
growth in new businesses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Recording Media </B>The recording media segment has three product categories: audiotapes and
videotapes, optical media and other products. In March&nbsp;2006, TDK decided to restructure certain of
its recording media business, including the withdrawal from the manufacturing of recordable CD and
DVDs. With this decision, TDK shut down the production facilities at its European subsidiary, TDK
Recording Media Europe S.A. in Luxembourg in April&nbsp;2006.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales of audiotape and videotapes declined year over year. While TDK maintained a high market
share, demand is declining for these products as a whole.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales of optical media increased year over year. CD-R demand has peaked and is declining
slowly. However, lower CD-R sales caused by the downturn in demand and discounting pressure were
offset by higher sales of DVDs driven by increasing demand.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales of other products decreased year over year. Sales of LTO-standard* (Linear Tape-Open)
tape-based data storage media for computers rose on higher demand. However, sales of recording
equipment and accessory products declined as TDK made progress with efforts to create a more
tightly focused product lineup.
</DIV>

<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 0pt; margin-left: 3%">* Linear Tape-Open, LTO, LTO logo, Ultrium and Ultrium logo are trademarks of HP, IBM and
Quantum Corporation in the U.S. and other countries.
</DIV>

<P align="center" style="font-size: 10pt"> - 13 -
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Marketing and Distribution
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Marketing channels in Japan</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK markets electronic materials and components in Japan through its sales division, which had
approximately 304 sales representatives at March&nbsp;31, 2006.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In Japan, TDK markets magnetic recording tapes and optical disks through 5 district sales
offices with a staff of 88. Approximately 50&nbsp;percent of domestic sales of TDK brand products are
made to approximately 116 distribution agents. These agents in turn sell TDK brand products to
over 40,000 retailers in Japan. Remaining TDK brand products are sold directly to approximately
5,500 retail stores in Japan. OEM sales are made to certain manufacturers as well.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Operations outside Japan</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK has 70 direct and indirect foreign subsidiaries as follows: 29 manufacture various product
lines and distribute their products in their country of operation and other countries; 20 are sales
subsidiaries which exclusively handle products manufactured by TDK; 1 is a holding company for the
administration of TDK&#146;s U.S. operations; 1 is a holding company for the administration of TDK&#146;s
European operations; 1 is a company for research and development in Ireland; 2 are companies for
research and development in the U.S.; 1 is a company for engineering service for magnetic heads in
Singapore; 1 is a local management company for the administration of TDK&#146;s Chinese operations; 1 is
a company for engineering service for magnetic heads in China; 1 is a company for engineering
service for magnetic heads in Korea; 1 is a holding company for the administration of Lambda&#146;s U.S.
operations; 1 is a company for the administration in Canada; 1 is a holding company for the
administration of Lambda&#146;s European operations; 1 is a company for engineering service for
switching power supplies; 3 are dormant companies and 5 are companies in the course of liquidation.
Principal manufacturing or assembly operations are conducted by subsidiaries in the following
countries:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="18%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">China
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">-
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">GMR heads, inductors, ferrite cores, capacitors, transformer, power supplies and ferrite magnets</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">United States
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">-
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">GMR heads, capacitors, ferrite magnets and power supplies</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Luxembourg
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">-
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Videotapes, CD-Rs and DVDs</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Taiwan
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">-
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Capacitors, ferrite cores and power supplies</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Philippines
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">-
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">GMR heads</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thailand
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">-
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Audiotapes, rare-earth metal magnets and power supplies</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Malaysia
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">-
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Capacitors and high-frequency components</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Korea
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">-
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Capacitors and inductors</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Hungary
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">-
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Capacitors and ferrite cores</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Hong Kong
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">-
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ferrite cores</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A manufacturing subsidiary in Luxembourg has ceased operation in April&nbsp;2006.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, TDK has sales subsidiaries in Germany, the United Kingdom, the United States,
Hong Kong, Singapore, Australia, Brazil, Poland, China, Philippines, France, Italy and Sweden.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK is pursuing a policy of expanding overseas production, which enables TDK to more easily
adapt to fluctuating exchange rates and potential trade barriers. Production outside Japan as a
percentage of sales outside Japan was 79.0&nbsp;percent in fiscal 2006, 81.9&nbsp;percent in fiscal 2005 and
78.9&nbsp;percent in fiscal 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Outside of Japan, TDK relies on a combination of its sales force, distribution agents,
retailers and directed sales efforts to market its products.
</DIV>

<P align="center" style="font-size: 10pt"> - 14 -
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consolidated net sales of TDK and consolidated subsidiaries by geographical area for fiscal
2006, 2005 and 2004 were as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%" nowrap>&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="26" style="border-bottom: 1px solid #000000">Years ended March 31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><I>2006</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000">(millions of yen)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000">(%)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><I>(millions of</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><I>U.S. dollars)</I></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Japan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">168,554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right">&#165;159,487</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(24.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">161,607</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(24.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><I>$</I></TD>
    <TD align="right"><I>1,440.6</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">North America</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,224</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>563.5</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Europe</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,846</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,085</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,233</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>639.7</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Asia and others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">485,849</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(61.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">368,431</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(56.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">342,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(52.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>4,152.6</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="1" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">795,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right">&#165;657,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">655,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><I>$</I></TD>
    <TD align="right"><I>6,796.4</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="1" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notes:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Net sales in each geographic area are based on the location of TDK entities
where the external sales are generated.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Patents and Licenses</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK has a variety of patents in Japan and other countries, and also has licenses from other
companies. It believes that expiration of any one of its patents or licenses or related group of
patents or licenses would not materially adversely affect its business activities. TDK does not
believe that acquisition of new proprietary patents or other companies&#146; patents would have a
material effect on operating results in the future.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Competition</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In electronic materials and components, rapid technological innovation makes technological
improvement a particularly significant competitive factor in the industry. Product performance
characteristics, reliability, price, and the diversity of product line-ups are also significant
competitive factors. In general, TDK&#146;s ferrite and other products compete with similar products
made of other materials. For many applications in which specific performance characteristics are
required, however, competition with other materials is not significant.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In Japan and elsewhere, the markets in which TDK sells its products are highly competitive.
TDK believes that the principal elements of competition in recording media are price, brand
recognition, product quality, and marketing strategy. While the Japanese, American and European
optical disks markets have grown in terms of volume, they have continued to be plagued by severe
price competition. However, TDK has consistently promoted internationalization in manufacturing
and marketing and has maintained strategic sales in regions where high profitability is expected.
Meanwhile, TDK has implemented further cost-reduction programs and is increasing its competitive
strength in other ways, notably through the expansion of overseas production.
</DIV>


<P align="center" style="font-size: 10pt"> - 15 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Raw Materials and Sources of Supply</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK purchases a wide variety of raw materials, machines, tools and parts for use in the
manufacture of its products. The principal raw materials purchased include plastic resin, used to
mould tape cassette shell and in packaging, magnetic powder of iron oxide, base film for magnetic
tape and various electronic and mechanical parts. For products manufactured in Japan, TDK
purchases such raw materials from approximately 1,900 different sources, primarily in Japan.
However, TDK purchases base tape from mainly three suppliers in Japan, although alternative sources
of supply exist. Recently TDK increased its purchases from overseas and also increased local
procurement of raw materials. No single source accounted for more than 10&nbsp;percent of total
purchases for fiscal 2006.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK monitors the availability of raw materials on a regular basis to ensure that it will not
encounter any shortages. TDK has not experienced any significant difficulty in obtaining raw
materials and believes that it will be able to continue to obtain comparable raw materials in
sufficient quantities to meet its manufacturing needs in the future. TDK also believes that the
effect of price volatility with respect to raw materials that it uses in manufacturing its products
can be managed.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;Organizational structure
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March&nbsp;31, 2006, TDK had 70 overseas subsidiaries and 20 Japanese subsidiaries. See
Exhibit&nbsp;8.1 &#147;List of Significant Subsidiaries&#148; for further information.
</DIV>


<P align="center" style="font-size: 10pt"> - 16 -
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D.&nbsp;Property, plants and equipment
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK&#146;s manufacturing operations are conducted primarily at 35 plants in Japan and 28 plants
overseas.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information, as of March&nbsp;31, 2006, with respect to TDK&#146;s
manufacturing facilities, approximately 76&nbsp;percent (in terms of floor space) of which are owned by
TDK.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="37%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Floor space</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">principal</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(thousands of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Location</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">factories</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">square feet)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Principal products manufactured</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><I>Japan</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Akita
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">16</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">2,065</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Capacitors, ferrite cores,
inductors and high-frequency
components</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Nagano
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">1,150</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">GMR heads and optical disks</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Chiba
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">663</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Rare-earth metal magnets,
ferrite cores and power
supplies</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yamanashi
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">603</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">GMR heads and data storage tapes</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Oita
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">471</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Videotapes</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Shizuoka
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">465</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ferrite magnets</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yamagata
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">345</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Inductors</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Iwate
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">298</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Capacitors</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ibaraki
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">219</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Display and power supplies</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Niigata
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">54</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Power supplies</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><I>Overseas</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">China
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">9</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">4,155</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">GMR heads, inductors, ferrite
cores, capacitors,
transformer, power supplies
and ferrite magnets</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">United States of
America
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">7</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">746</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">GMR heads, capacitors,
ferrite magnets and power
supplies</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Luxembourg
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">494</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Videotapes, CD-Rs and DVDs</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Philippines
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">441</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">GMR heads</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thailand
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">435</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Audiotapes, rare-earth metal
magnets and power supplies</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Malaysia
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">364</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Capacitors and high-frequency
components</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Taiwan
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">345</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Capacitors, ferrite cores and
power supplies</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Korea
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">164</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Capacitors and inductors</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Hungary
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">160</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Capacitors and ferrite cores</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">England
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">42</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Power supplies</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Hong Kong
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">42</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ferrite cores</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Israel
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top" style="border-bottom: 1px solid #000000">1</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>

<TD align="right" valign="top" style="border-bottom: 1px solid #000000">28</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Power supplies</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Total
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">63</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">13,749</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK considers all of its principal manufacturing facilities and other significant properties
to be in good condition and adequate to meet the needs of its operations. TDK owns each of its
significant properties.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Though TDK included 1 plant in Luxembourg (494 thousand square feet) in the above table, this
plant has ceased operation in April&nbsp;2006.
</DIV>


<P align="center" style="font-size: 10pt"> - 17 -
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, TDK utilizes additional floor space at the above plants and elsewhere for
laboratories, office buildings, and employee housing and welfare facilities, with an aggregate
floor space of 6,530 thousand square feet, of which approximately 51&nbsp;percent is owned by TDK and
the balance is leased to TDK.
</DIV>

<DIV align="left">
<A name="106"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Item&nbsp;4A</B></U><B>. Unresolved Staff Comments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>

<P align="center" style="font-size: 10pt"> - 18 -
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="107"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Item&nbsp;5</B></U><B>. Operating and Financial Review and Prospects</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Overview</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK was established in 1935 as the world&#146;s first company to commercialize a magnetic material
called ferrite. In the ensuing years, TDK has developed and commercialized a host of other
materials and products. This drive is based on TDK&#146;s founding spirit of &#147;Contribute to culture and
industry through creativity.&#148;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Looking ahead, TDK is determined to further refine its materials, process, and evaluation &#038;
simulation technologies-its core technologies-aiming to be an Exciting Company, a consummate
e-material solution provider that delivers products imbuing value that customers want with perfect
timing.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK&#146;s operations are affected by the economies of various regions of the world, including
Japan, the United States, Europe and Asia. Looking at economic conditions worldwide during the
past fiscal year, the U.S. economy grew on the back of steadily rising consumer spending, which was
supported by a strong job market, and higher levels of capital expenditures in the corporate
sector. Meanwhile, European economies tended toward recovery due to a strong corporate sector, led
by German companies, and the add-on effects of this recovery on employment and consumer spending.
In Asia, China maintained a high economic growth rate and economies elsewhere in the region grew as
well. Expansion was also evident in the Japanese economy, with capital expenditures rising due to
increased production activity in the corporate sector and personal spending increasing as the job
market improved.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the electronics industry, to which TDK belongs, there was growth in the market for digital
home appliances such as LCD and plasma flat-screen TVs and DVD recorders during the past fiscal
year. The notebook PC, HDD and mobile phone markets also remained robust. There was rapid
expansion, too, in the market for MP3 digital audio players, which store music using semiconductors
or HDDs. The market for car electronics also remained firm. Strength in these markets, along with
the beneficial effects of an increase in the number of components used in these products, produced
solid demand in fiscal 2006 for TDK&#146;s electronic components. Amid this operating environment, TDK
made two corporate acquisitions and executed reforms to improve its profit structure in the
recording media segment. In these and other ways, TDK thus actively invested to accelerate growth
and increase its earnings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
electronic components business is constantly subject to two sources of
downward pressure on prices. One is price discounting pressure from
finished products manufacturers, the customers of electronic
component manufacturers. The other is competition among manufacturers
of electronic components.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Demands
for price discounts are the result of competition among finished
product manufacturers being passed on to component manufacturers. As
they compete with each other, consumer electronics manufacturers,
customers of TDK, are constantly seeking ways to establish a
competitive advantage. For example, these companies pursue strategies
such as differentiating products by adding new functions to existing
products, as well as securing a competitive edge through pricing.
This sort of competition involving finished products tends to force
companies to compete by launching new products, resulting in shorter
product lifecycles and a greater risk of price declines.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK&#146;s
electronic materials and components segment supplies products that
are used mainly in digital home appliances, mobile phones and other
consumer electronics as well as in automotive electronics. As such,
this business is directly exposed to the effects of the competition
outlined above. No change is foreseen in discounting pressure from
customers in the coming years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Electronic
component manufacturers, as with other industries, compete with peer
companies. Consumer electronics manufacturers commonly certify
several suppliers so that companies need to compete for orders. A
company&#146;s pricing strategy is a key element in determining the
share of electronic components it supplies to finished product
manufacturers. As a consequence, there is constantly downward
pressure on prices.
</DIV>



<P align="center" style="font-size: 10pt"> - 19 -
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The electronic components business thus requires
the constant execution of initiatives to mitigate the effect of these
pricing pressures. Actions to reduce costs are an obvious response.
But it is also necessary to establish a position as a components
manufacturer that can supply key components when customers launch new
products. There is no substitute for product development activities
aimed at supplying these key components. Price declines are thus
inevitable in the electronic components business, but it is possible
to reduce or absorb the effects of lower prices by implementing the
above measures appropriately, when required. We believe that these
actions are an inherently vital element that will ultimately
determine the competitiveness of an electronic components business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK posted consolidated net sales of &#165;795,180&nbsp;million ($6,796,410 thousand) in fiscal 2006, up
20.9&nbsp;percent from &#165;657,853&nbsp;million in fiscal 2005. Operating income rose 1.2&nbsp;percent from &#165;59,830
million in fiscal 2005 to &#165;60,523&nbsp;million ($517,291 thousand) in fiscal 2006. Income from
continuing operations before income taxes increased 8.9&nbsp;percent from &#165;60,728&nbsp;million in fiscal 2005
to &#165;66,103&nbsp;million ($564,983 thousand) in fiscal 2006. Net income rose 32.4&nbsp;percent from &#165;33,300
million in fiscal 2005 to &#165;44,101&nbsp;million ($376,932 thousand) in fiscal 2006. Basic net income per
common share was &#165;333.50 in fiscal 2006, up from &#165;251.71 in fiscal 2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;1, 2005, TDK purchased shares of Lambda Power Business (power supply business)
owned by U.K.-based Invensys plc. Consequently, the operating results of 20 companies that form
Lambda Power Business have been included in the TDK&#146;s consolidated operating results beginning with
the second half of fiscal 2006.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK&#146;s businesses are broadly classified into two business segments: the electronic materials
and components segment and the recording media segment.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Electronic Materials and Components Segment is made up of four product sectors: (1)&nbsp;electronic
materials, (2)&nbsp;electronic devices, (3)&nbsp;recording devices, and (4)&nbsp;other electronic components,
which we previously referred to as semiconductors and others. Segment net sales climbed 26.1
percent to &#165;687,750&nbsp;million ($5,878,205 thousand) in fiscal 2006, from &#165;545,214&nbsp;million in fiscal
2005, while segment operating income rose 10.1&nbsp;percent to &#165;74,333&nbsp;million ($635,325 thousand) in
fiscal 2006, from &#165;67,520&nbsp;million in fiscal 2005.
</DIV>




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Recording Media Segment, which we previously referred to as Recording Media &#038; Systems, has
three product categories: audiotapes and videotapes, optical media and other products. Segment
sales declined 4.6&nbsp;percent from &#165;112,639&nbsp;million in fiscal 2005 to &#165;107,430&nbsp;million ($918,205
thousand) in fiscal 2006. Operating loss of the recording media segment in fiscal 2006 was &#165;13,810
million ($118,034 thousand), up &#165;6,120&nbsp;million from fiscal 2005. In March&nbsp;2006, TDK decided to
restructure certain of its recording media business, including the withdrawal from the
manufacturing of recordable CD and DVDs, and recorded a restructuring cost of &#165;6,825&nbsp;million
($58,333 thousand).
</DIV>


<P align="center" style="font-size: 10pt"> - 20 -
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt">A. Operating Results
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Results of Operations</U>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000">Years ended March 31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><I>2006</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD nowrap align="center" colspan="5">(millions of yen)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><I>(thousands</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(%)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><I>of dollars)</I></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">795,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">657,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">655,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><I>$</I></TD>
    <TD align="right"><I>6,796,410</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">585,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">484,323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">476,407</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>5,006,666</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(73.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(73.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(72.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">209,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173,530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">179,385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>1,789,744</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(26.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(26.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling,
general and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">142,052</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,886</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>1,214,120</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>&nbsp;</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Transfer to the government of
the substitutional portion of
Employees&#146; Pension Fund:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Subsidy from the government</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(33,533</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">(-5.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on settlement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>&#151;</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Restructuring cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,825</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>58,333</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,523</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>517,291</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other income (other deductions)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,580</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">898</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(663</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>47,692</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">(-0.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income taxes
and minority interests, net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,763</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,492</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>185,402</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>&nbsp;</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss from discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">310</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,665</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>2,649</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">44,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">33,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">42,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><I>$</I></TD>
    <TD align="right"><I>376,932</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Sales by Region</U>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000">Years ended March 31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><I>2006</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD nowrap align="center" colspan="5">(millions of yen)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><I>(millions</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(%)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><I>of dollars)</I></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Japan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">173,658</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">184,025</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">168,623</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><I>$</I></TD>
    <TD align="right"><I>1,484,256</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(28.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(25.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Americas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,192</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,813</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88,734</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>770,872</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Europe</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,895</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>648,675</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Asia (excluding Japan) and Oceania</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">451,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">321,612</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">314,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>3,860,769</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(56.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(48.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(48.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Middle East and Africa</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,725</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,701</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>31,838</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">795,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">657,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">655,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><I>$</I></TD>
    <TD align="right"><I>6,796,410</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This summary of sales by region is based on the location of the customer.
</DIV>

<P align="center" style="font-size: 10pt">- 21 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Segment Information</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following industry and geographic segment information is required by the Japanese
Securities Exchange Law. Segment information is unaudited.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Industry Segment Information
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000">Years ended March 31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><I>2006</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD nowrap align="center" colspan="5" style="border-bottom: 0px solid #000000">(millions of yen)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><I>(thousands</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><I>of dollars)</I></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ELECTRONIC MATERIALS AND COMPONENTS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">External sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">687,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">545,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">519,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><I>$</I></TD>
    <TD align="right"><I>5,878,205</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Intersegment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>&#151;</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Total revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">687,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">545,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">519,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>5,878,205</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.0</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.0</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.0</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><I>(100.0</I></TD>
    <TD nowrap><I>%)</I></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">613,417</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">477,694</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">461,077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>5,242,880</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(89.2</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(87.6</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(88.7</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><I>(89.2</I></TD>
    <TD nowrap><I>%)</I></TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">74,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">67,520</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">58,715</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><I>$</I></TD>
    <TD align="right"><I>635,325</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10.8</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12.4</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11.3</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><I>(10.8</I></TD>
    <TD nowrap><I>%)</I></TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Identifiable assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">672,596</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">537,593</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">505,178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,748,684</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,599</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,409</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,293</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">458,111</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,070</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,192</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,084</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">607,436</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">RECORDING MEDIA</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">External sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">107,430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">112,639</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">136,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><I>$</I></TD>
    <TD align="right"><I>918,205</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Intersegment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>&#151;</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Total revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107,430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112,639</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>918,205</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.0</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.0</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.0</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><I>(100.0</I></TD>
    <TD nowrap><I>%)</I></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">121,240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,329</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138,205</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>1,036,239</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(112.9</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(106.8</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(101.6</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><I>(112.9</I></TD>
    <TD nowrap><I>%)</I></TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(13,810</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(7,690</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(2,205</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><I>$</I></TD>
    <TD align="right"><I>(118,034</I></TD>
    <TD nowrap><I>)</I></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">(-12.9</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">(-6.8</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">(-1.6</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right"><I>(-12.9</I></TD>
    <TD nowrap><I>%)</I></TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Identifiable assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">676,145</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,941</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,433</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,231</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,841</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,813</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,282</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ELIMINATIONS AND CORPORATE</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Corporate assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">171,798</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">186,248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">167,955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><I>$</I></TD>
    <TD align="right"><I>1,468,359</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">TOTAL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">External sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">795,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">657,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">655,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><I>$</I></TD>
    <TD align="right"><I>6,796,410</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Intersegment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>&#151;</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Total revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">795,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">657,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">655,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>6,796,410</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.0</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.0</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.0</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><I>(100.0</I></TD>
    <TD nowrap><I>%)</I></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">734,657</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">598,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">599,282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>6,279,119</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(92.4</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(90.9</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(91.4</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><I>(92.4</I></TD>
    <TD nowrap><I>%)</I></TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">60,523</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">59,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">56,510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><I>$</I></TD>
    <TD align="right"><I>517,291</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7.6</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9.1</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8.6</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><I>(7.6</I></TD>
    <TD nowrap><I>%)</I></TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Identifiable and corporate assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">923,503</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">808,001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">770,319</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,893,188</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,726</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">500,342</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,911</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,471</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">631,718</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"> - 22 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Geographic Segment Information
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Years ended March 31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><I>2006</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">(millions of yen)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><I>(thousands</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">&nbsp;&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><I>of dollars)</I></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">JAPAN</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net sales (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">360,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">339,493</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">329,782</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><I>$</I></TD>
    <TD align="right"><I>3,078,718</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,437</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,382</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,538</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">422,539</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Identifiable assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">347,942</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">305,717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">316,695</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,973,863</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">AMERICAS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net sales (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">105,979</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87,594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,971</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">905,803</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,995</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,985</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,427</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Identifiable assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,611</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,844</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">859,923</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">EUROPE</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net sales (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,682</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,641</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">651,624</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,996</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,125</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(115</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><I>(85,436</I></TD>
    <TD nowrap><I>)</I></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Identifiable assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,729</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,961</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,797</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">390,846</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ASIA AND OTHERS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net sales (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">531,824</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">400,866</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">380,781</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,545,504</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,607</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,551</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,912</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107,752</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Identifiable assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">348,008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">263,621</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">228,058</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,974,428</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ELIMINATIONS AND CORPORATE</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net sales (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">279,073</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">241,782</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">236,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,385,239</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,520</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(190</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,991</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Identifiable assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122,858</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108,185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">694,128</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">TOTAL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">795,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">657,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">655,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><I>$</I></TD>
    <TD align="right"><I>6,796,410</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,523</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">517,291</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Identifiable and corporate assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">923,503</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">808,001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">770,319</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,893,188</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">OVERSEAS SALES (2)</DIV>
</TD>
<TD colspan="17">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">
Americas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">90,192</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">77,813</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">88,734</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><I>$</I></TD>
    <TD align="right"><I>770,872</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Europe</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,895</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">648,675</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Asia and others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">455,435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">324,313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">317,725</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,892,607</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Overseas sales total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">621,522</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">473,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">487,169</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><I>$</I></TD>
    <TD align="right"><I>5,312,154</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Percentage of consolidated sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">78.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">72.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">74.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><I>78.2</I></TD>
    <TD nowrap><I>%</I></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD colspan="3">Notes:</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Net sales in each geographic area are based on the location of TDK
entities where the sales are generated.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Overseas sales are based on the location of the customers.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">- 23 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Fiscal 2006 Compared to Fiscal 2005
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Sales</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consolidated net sales increased 20.9&nbsp;percent from &#165;657.9&nbsp;billion to &#165;795.2&nbsp;billion ($6,796.4
million) for the fiscal year ended March&nbsp;31, 2006.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Looking at economic conditions worldwide during the past fiscal year, the U.S. economy grew on
the back of steadily rising consumer spending, which was supported by a strong job market, and
higher levels of capital expenditures in the corporate sector. Meanwhile, European economies
tended toward recovery due to a strong corporate sector, led by German companies, and the knock-on
effects of this recovery on employment and consumer spending. In Asia, China maintained a high
economic growth rate and economies elsewhere in the region grew as well. Expansion was also
evident in the Japanese economy, with capital expenditures rising due to increased production
activity in the corporate sector and personal spending increasing as the job market improved.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the electronics industry, to which TDK belongs, there was growth in the market for digital
home appliances such as LCD and plasma flat-screen TVs and DVD recorders during the past fiscal
year. The notebook PC, HDD and mobile phone markets also remained robust. There was rapid
expansion, too, in the market for MP3 digital audio players, which store music using semiconductors
or HDDs. The market for car electronics also remained firm. Strength in these markets, along with
the beneficial effects of an increase in the number of components used in these products, produced
solid demand in fiscal 2006 for TDK&#146;s electronic components. Amid this operating environment, TDK
made two corporate acquisitions and executed reforms to improve its profit structure in the
recording media segment. In these and other ways, TDK thus actively invested to accelerate growth
and increase its earnings.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
a result, the electronic materials and components segment posted net
sales of &#165;687.8
billion ($5,878.2&nbsp;million), up 26.1&nbsp;percent from &#165;545.2&nbsp;billion in the previous fiscal year.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales in the electronic materials sector rose 3.4&nbsp;percent from &#165;174.8&nbsp;billion to &#165;180.8
billion ($1,545.0&nbsp;million). Sales of multilayer chip capacitors, a mainstay of capacitor products,
increased marginally year over year, as the impact on sales of sluggish demand in the
communications market and falling prices was offset by higher sales to the car electronics market.
A weaker yen also supported sales. Sales of ferrite cores and magnets rose year over year. Sales
of ferrite cores were largely unchanged, as higher sales from increasing demand for power supply
cores was negated by lower sales of cores used in CRT TVs. Ferrite magnet sales were also largely
unchanged, with lower demand stemming from customer inventory cutbacks offset by higher sales of
products to the car electronics market. Sales of rare-earth magnets rose on increasing HDD demand.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales in the electronic devices sector leapt 32.9&nbsp;percent to &#165;154.7&nbsp;billion ($1,322.1
million), from &#165;116.4&nbsp;billion. This growth was mainly due to the inclusion of the operating
results of Lambda Power Business from the second half of the fiscal year. However, even excluding
these sales, existing business in this sector posted
10.8&nbsp;percent year over year sales growth. Sales of
inductive devices increased mainly due to growth in sales of SMD power line coils for use in mobile
phones and HDDs, and in sales of products for use in car electronics. Sales of high-frequency
components were down year over year. While sales of wireless LAN components rose, total category
sales were brought down by further declines in sales prices of some components for mobile phones.
Sales of other products rose year over year. The main factors were growth in sales of DC-AC
inverters for use in LCD panels and of sensors and actuators for HDDs and mobile phones. The
inclusion of six months&#146; sales of Lambda Power Business in this category also boosted sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the recording devices sector, sales rose 34.7&nbsp;percent from &#165;234.6&nbsp;billion to &#165;315.9&nbsp;billion
($2,700.2&nbsp;million). Sales of HDD heads increased year over year. Amid arising demand for HDDs
used in PCs and consumer electronics, HDD head shipments increased. This higher volume outweighed
a drop in sales prices, resulting in an increase in overall sales. Sales of other heads declined
due to inventory reductions of optical pickups.
</DIV>

<P align="center" style="font-size: 10pt">- 24 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Maxtor Peripherals&nbsp;(S) Pte. Ltd., TDK&#146;s major customer related to electronic materials and components business with sales of 11.5&nbsp;percent of
consolidated net sales for the year ended March&nbsp;31, 2006, was acquired by a company in the same industry in
May 2006. During the year ended March&nbsp;31, 2007, TDK will be losing the majority of sales from Maxtor Peripherals&nbsp;(S) Pte.
Ltd. that it recorded for the year ended March&nbsp;31, 2006. TDK, however, plans to set off the loss with other businesses
in the electronic materials and components segment and to raise its sales further, due mainly to growing demand for
digital home appliances and cell phones.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales in the other electronic components sector surged 87.0&nbsp;percent from &#165;19.4&nbsp;billion to
&#165;36.4&nbsp;billion ($310.9&nbsp;million) due to higher sales of anechoic chambers, which block external
electromagnetic radiation to permit the measurement of electromagnetic noise, and due to sales
growth in new businesses.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating income of the electronic materials and components segment in fiscal 2006 was &#165;74.3
billion ($635.3&nbsp;million), up &#165;6.8&nbsp;billion from fiscal 2005. In spite of the deep-rooted pressure
for sales price discounts, operating income increased due to higher sales of HDD heads and
inductive devices, discounts in raw materials and cost improvements by rationalization.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the recording media segment, sales declined 4.6&nbsp;percent from &#165;112.6&nbsp;billion to &#165;107.4
billion ($918.2&nbsp;million). Sales of audiotapes and videotapes declined year over year. While TDK
maintained a high market share, demand is declining for these products as a whole. Sales of
optical media increased year over year. CD-R demand has peaked and is declining slowly. However,
lower CD-R sales caused by the downturn in demand and discounting pressure were offset by higher
sales of DVDs driven by increasing demand. Sales of other products decreased year over year.
Sales of LTO-standard* (Linear Tape-Open) tape-based data storage media for computers rose on
higher demand. However, sales of recording equipment and accessory products declined as TDK made
progress with efforts to create a more tightly focused product lineup.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating loss of the recording media segment in fiscal 2006 was &#165;13.8&nbsp;billion (118.0
million), up &#165;6.1&nbsp;billion from fiscal 2005. Operating loss increased due to a decline in demand of
audiotapes and videotapes as a whole, and continuous drop in sales prices mainly in optical media.
In March&nbsp;2006, TDK decided to restructure certain of its recording media business, including the
withdrawal from the manufacturing of recordable CD and DVDs, and recorded a restructuring cost of
&#165;6.8&nbsp;billion ($58.3&nbsp;million).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*Linear Tape-Open, LTO, LTO logo, Ultrium and Ultrium logo are trademarks of HP, IBM and
Quantum Corporation in the U.S. and other countries.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By region, sales in Japan declined 5.6&nbsp;percent from &#165;184.0&nbsp;billion to &#165;173.7&nbsp;billion ($1,484.3
million). Overseas sales climbed 31.2&nbsp;percent from &#165;473.8&nbsp;billion to &#165;621.5&nbsp;billion ($5,312.2
million). Overseas sales accounted for 78.2&nbsp;percent of consolidated net sales.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In Japan, sales in the recording devices sector and recording media segment declined, while
higher sales were recorded in the electronic materials, electronic devices and other electronic
components sectors. Operating income of the electronic materials and components segment increased
by &#165;24.4&nbsp;billion to &#165;53.4&nbsp;billion. This increase was mainly due to the payment made by its
subsidiary in Asia to TDK in the amount of &#165;24.0&nbsp;billion relating to the assessment of additional
tax in fiscal 2005 on prices charged and paid by TDK in connection with sales and purchases of
products involving the subsidiary. Recognition of operating expense in the subsidiary resulted in
reduction of operating expenses in Japan. Operating loss of the recording media segment increased
slightly, resulting in operating loss in fiscal 2006 of &#165;4.6&nbsp;billion, up &#165;1.5&nbsp;billion from fiscal
2005.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In Asia (excluding Japan) and Oceania, sales increased in the electronic materials, electronic
devices, recording devices and other electronic components sectors, but sales declined in the
recording media segment slightly. The operating income of the electronic materials and components
segment decreased by &#165;21.3&nbsp;billion to &#165;11.6&nbsp;billion. This decrease was mainly due to the payment
made by its subsidiary in Asia to TDK in the amount of &#165;24.0&nbsp;billion relating to the assessment of
additional tax in fiscal 2005 on prices charged and paid by TDK in connection with sales and
purchases of products involving the subsidiary. Recognition of operating expense in the subsidiary
resulted in increase of operating expenses in recording devices. Operating income of the recording
media segment increased slightly, resulting in operating income for fiscal 2006 of &#165;0.8&nbsp;billion,
&#165;0.1&nbsp;billion more than fiscal 2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the Americas, sales increased mainly in the electronic devices and recording devices
sectors. The lower yen versus the U.S. dollar also led to increased sales in the Americas. The
operating income of the electronic materials and components segment increased by &#165;3.0&nbsp;billion to
&#165;9.0&nbsp;billion from fiscal 2005 due to increase in sales mainly in the recording devices sector.
However, operating income of the recording media segment in fiscal 2006 was &#165;0.3&nbsp;billion, up &#165;0.8
billion from fiscal 2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In Europe, sales increased in the electronic devices sector and the recording media segment.
While operating loss of the electronic materials and components reversed to the operating income of
&#165;0.3&nbsp;billion, up &#165;0.7&nbsp;billion from fiscal 2005, operating loss of the recording media segment in
fiscal 2006 was &#165;10.3&nbsp;billion, up &#165;5.6&nbsp;billion from fiscal 2005, mainly due to restructuring cost
of &#165;6.8&nbsp;billion.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Effect of foreign exchange movements</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In fiscal 2006, overseas sales accounted for 78.2&nbsp;percent of consolidated net sales, up 6.2
percentage points. As a result, fluctuations in foreign exchange rates had a significant effect on
TDK&#146;s consolidated sales and income. During fiscal 2006, the yen&#146;s value declined 5.4&nbsp;percent
against the U.S. dollar and 2.0&nbsp;percent against the euro, based on TDK&#146;s average internal exchange
rates. Overall, exchange rate movements had the effect of increasing net sales by approximately
&#165;31.3&nbsp;billion and operating income by approximately &#165;7.7&nbsp;billion in fiscal 2006.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By region, foreign exchange fluctuations increased sales in Japan by about &#165;8.6&nbsp;billion, in
Asia (excluding Japan) and Oceania by about &#165;32.5&nbsp;billion, in the Americas by about &#165;6.0&nbsp;billion
and in Europe by about &#165;3.1&nbsp;billion. The effect of foreign exchange fluctuations on consolidated
net sales after the elimination of intersegment transactions was about &#165;31.3&nbsp;billion.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK conducts a large share of business activities outside Japan as one way to offset the
impact of exchange-rate fluctuations. Such activities include manufacturing and sales, as well as
research, design and procurement. In-region production in fiscal 2006 represented 102.2&nbsp;percent
compared with 112.1&nbsp;percent one year earlier of sales in Asia (excluding Japan) and Oceania, 22.0
percent compared with 20.9&nbsp;percent one year earlier in the Americas, and 19.1&nbsp;percent compared with
23.9&nbsp;percent one year earlier in Europe. Overseas production accounted for 61.7&nbsp;percent of total
sales in fiscal 2006, compared with 59.0&nbsp;percent one year earlier, and for 79.0&nbsp;percent of overseas
sales, compared with 81.9&nbsp;percent one year earlier. The rise in the percentage of overseas
production in fiscal 2006 is mainly due to higher production in Asia in the electronic materials
and components segment.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK and certain overseas consolidated subsidiaries hedge exposure to foreign exchange
movements by entering into forward foreign exchange contracts and swaps for some foreign
currency-denominated obligations. Foreign exchange risk arising in operating activities is hedged
by using forward foreign exchange contracts. In principle, TDK&#146;s policy is to hedge up to 50
percent of expected foreign currency-denominated accounts receivable for each month for the next
six months. Due to the global nature of operations, management realizes that currency movements
continue to have the potential to exert a material influence on consolidated performance.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Cost and expenses</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The cost of sales increased 20.9&nbsp;percent from &#165;484.3&nbsp;billion in fiscal 2005 to &#165;585.8&nbsp;billion
in fiscal 2006 due primarily to higher sales. Cost of sales increased from 73.6&nbsp;percent to 73.7
percent of net sales, respectively. This reflected the negative effects on earnings of strong
discounting pressure in all segments, which were positively offset by cost reductions from
structural reforms and numerous other actions to cut costs, including the receipt of discounts on
purchased materials. As a result, gross profit was 26.3&nbsp;percent in fiscal 2006, compared to gross
profit of 26.4&nbsp;percent in fiscal 2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative expenses increased &#165;22.2&nbsp;billion from &#165;119.9&nbsp;billion in
fiscal 2005 to &#165;142.1&nbsp;billion in fiscal 2006, but decreased from 18.2&nbsp;percent to 17.9&nbsp;percent of
net sales, respectively. Selling, general and administrative expenses as a percentage of net sales
reduced due to a 20.9&nbsp;percent rise in net sales and to the improvements of sales productivity. The
main components of this increase were personnel expenses of &#165;4.8&nbsp;billion, shipping and handling
costs of &#165;1.9&nbsp;billion, and loss on disposal of property, plant and equipment of &#165;2.0&nbsp;billion.
Research and development expenses included in selling, general and administrative expenses
increased by &#165;9.2&nbsp;billion from &#165;36.3&nbsp;billion in fiscal 2005 to &#165;45.5&nbsp;billion in fiscal 2006, and
increased from 5.5&nbsp;percent to 5.7&nbsp;percent of net sales, respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, TDK decided to restructure certain of its recording media business in March&nbsp;2006,
including the withdrawal from the manufacturing of recordable CD and DVDs, and recorded a
restructuring cost of &#165;6.8&nbsp;billion ($58.3&nbsp;million).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Other income and deductions</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other income (deductions)&nbsp;improved &#165;4.7&nbsp;billion from the previous fiscal year, reflecting a
&#165;1.9&nbsp;billion increase in interest and dividend income due to upturn in overseas interest rates and
a &#165;1.8&nbsp;billion increase in foreign exchange gain (loss), as well as other factors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Income taxes and minority interests</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The ratio of income taxes to income from continuing operations before income taxes (the
effective tax rate) decreased from 38.3&nbsp;percent in fiscal 2005 to 31.9&nbsp;percent in fiscal 2006. The
decrease reflects mainly the fact that in fiscal 2005 TDK received a notification and assessment of
additional tax from the Tokyo Regional Tax Bureau (Nihonbashi Tax Office) asserting that prices
charged and paid by TDK in connection with sales and purchases of products involving its overseas
subsidiaries have not been commensurate with the prices of similar transactions involving unrelated
third parties. The period of additional assessments covers tax years ending March&nbsp;1999 through
March&nbsp;2003. The additional tax assessed by the Tokyo Regional Tax Bureau amounted to &#165;12.0&nbsp;billion
including interest and penalty, which has been reflected as additional tax expense and other
expense, net of deferred income tax benefits, in the accompanying consolidated statements of income
for the year ended March&nbsp;31, 2005. In addition, the residual tax effects of &#165;4,571&nbsp;million
previously recorded in accumulated other comprehensive income (minimum pension liability
adjustments) were released and recorded as a reduction to income tax expense in the consolidated
statements of income as a result of the elimination of the minimum pension liability adjustment for
the year ended March&nbsp;31, 2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Net income</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK posted net income of &#165;44.1&nbsp;billion, resulting in net income per diluted share of &#165;333.20,
compared with &#165;251.56 in the previous fiscal year. Return on Equity, which is net income divided by average total stockholders&#146; equity, increased from 5.5
percent to 6.6&nbsp;percent. This was mainly due to a &#165;10.8&nbsp;billion increase in net income.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash dividends per share paid during the fiscal year totaled &#165;80. This dividend is the sum of
the June&nbsp;2005&nbsp;year-end dividend of &#165;40 and the December&nbsp;2005 interim dividend of &#165;40. Shareholders
of record on March&nbsp;31, 2006 received a cash dividend of &#165;50 per share at the end of June&nbsp;2006.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In fiscal 2006, consolidated net income included loss from discontinued operations of &#165;310
million related to TDK Semiconductor Corporation (&#147;TSC&#148;). See discussion at Discontinued
Operations.
</DIV>





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<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Fiscal 2005 Compared to Fiscal 2004
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Sales</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consolidated net sales rose 0.3&nbsp;percent from &#165;655.8&nbsp;billion to &#165;657.9&nbsp;billion in fiscal 2005,
the year ended March&nbsp;31, 2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK&#146;s operations are affected by the economies of various regions of the world, including
Japan, the United States, Europe and China. Despite rising crude oil prices and other factors that
restricted growth, the U.S. economy generally expanded steadily due in part to an upturn in capital
expenditures and improvements in employment statistics and household incomes. European economies,
while resilient in the first half of fiscal 2005, suffered a slowdown in the second half due to the
effects of a strengthening euro, rising crude oil prices and other negative factors. China,
meanwhile, maintained a high economic growth rate. In comparison, the Japanese economy slowed due
to a drop-off in exports, the result of second-half production cutbacks by manufacturers of IT and
digital products, despite strength in capital expenditures that was supported by strong corporate
earnings.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the electronics industry in the first half of fiscal 2005, demand for digital home
appliances, such as LCD and plasma TVs and DVD recorders, was boosted by the Summer Olympic Games
in Athens and other factors. This resulted in strong demand for the TDK&#146;s electronic components in
the first half. However, demand for these components began to cool in the second half in line with
production cutbacks of finished products that use them.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In this business environment, TDK continued to implement cost structure reforms, for example,
the improvement of variable expenses by reviewing terms of supply and requesting discounts from
purchased materials vendors. TDK also actively made investments to drive growth, such as by
ramping up production capacity of capacitors and forging a strategic alliance in HDD heads.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result, the electronic materials and components segment posted net sales of &#165;545.2
billion, up 4.9&nbsp;percent from &#165;519.8&nbsp;billion in the previous fiscal year.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales in the electronic materials sector rose 4.8&nbsp;percent from &#165;166.8&nbsp;billion to &#165;174.8
billion. Sales of multilayer chip capacitors, a mainstay of capacitor products, increased year
over year. In the first half of fiscal 2005, the Athens Olympics propelled demand for digital home
appliances higher, which had an add-on effect for components used in them. In the second half,
however, demand for components cooled, this time the result of cutbacks in the production of
digital home appliances, and prices also dropped. But, against this market backdrop, TDK absorbed
the sales price declines and the effect of unfavorable foreign exchange movements through
improvements to its product mix. In ferrite cores, sales declined from the previous fiscal year,
despite higher demand for general-purpose power supply cores for digital home appliances and cores
for communications equipment. This decrease was due to a reduction in output of deflection yoke
cores and flyback transformer cores used in CRT TVs. Magnet sales increased year over year, the
result of steadily rising demand for use in automotive and HDD applications.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales in the electronic devices sector increased 7.8&nbsp;percent from &#165;108.0&nbsp;billion to &#165;116.4
billion. Inductive devices, the largest product category in this sector, posted higher sales,
despite lower sales prices and the negative effect of foreign exchange movements. This increase
was attributable to higher demand spurred by acceleration in the pace at which automobiles are
incorporating electronics and the increasing sophistication of mobile phones, as well as by new
product launches. Sales of high-frequency components declined marginally year over year because
higher sales volume and an improved product mix failed to completely offset persistently strong
discounting pressure from mobile phone handset manufacturers, the main customer for these
components. In power systems, sales of DC-DC converters and DC-AC inverters were healthy. Sensors
and actuators recorded higher sales due to growth in demand for use in PCs and peripherals and
communications equipment.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the recording devices sector, sales rose 1.9&nbsp;percent from &#165;230.1&nbsp;billion to &#165;234.6&nbsp;billion.
Sales of HDD heads, the main product in this sector, rose year over year. However, TDK had to
overcome the loss of business from a major customer that started producing heads in house in 2004,
as well as the impact of falling sales prices and unfavorable foreign exchange movements. Cutbacks
in HDD inventories at customers in the first half of fiscal 2005 also affected the sector&#146;s
performance. However, demand for HDD heads rose in the second half of the fiscal year following
the end of these cutbacks. Sales of other heads declined year over year due to sluggish sales of
optical pickups.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales in the other electronic components sector climbed 30.8&nbsp;percent from &#165;14.9&nbsp;billion to
&#165;19.4&nbsp;billion. TDK recorded slightly higher sales of anechoic chambers for electromagnetic noise
control and equipment used in these chambers. There was also growth in external sales of
manufacturing equipment due to higher investments in semiconductor facilities and equipment by
customers.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating income of the electronic materials and components segment in fiscal 2005 was &#165;67.5
billion, up &#165;8.8&nbsp;billion from fiscal 2004. In spite of the deep-rooted pressure for sales price
discounts, operating income increased due to higher sales of capacitors and inductive devices,
discounts in raw materials and cost improvements by rationalization.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the recording media segment, sales declined 17.2&nbsp;percent from &#165;136.0&nbsp;billion to &#165;112.6
billion. Sales of audiotapes and videotapes declined year over year. While TDK maintained a high
market share, demand is declining for these products as a whole. Sales of optical media increased,
with higher DVD sales volume offsetting a sharp fall in DVD prices and lower CD-R sales. Sales of
other products decreased year over year. There was an increase in sales of LTO-standard* (Linear
Tape-Open) tape-based data storage media for computers. However, a decline in sales caused by the
sale in the previous fiscal year of a U.S. software development subsidiary and lower sales of
recording equipment brought overall sales of other products down year over year.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating loss of the recording media segment in fiscal 2005 was &#165;7.7&nbsp;billion, up &#165;5.5&nbsp;billion
from fiscal 2004. Operating loss increased due to a decline in demand of audiotapes and videotapes
as a whole, decrease in sales as a result of sale of a subsidiary in the United States of America
in fiscal 2004, and continuous drop in sales prices mainly in optical media.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*Linear Tape-Open, LTO, LTO logo, Ultrium and Ultrium logo are trademarks of HP, IBM and
Quantum Corporation in the U.S. and other countries.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By region, sales in Japan rose 9.1&nbsp;percent from &#165;168.6&nbsp;billion to &#165;184.0&nbsp;billion. Overseas
sales declined 2.7&nbsp;percent from &#165;487.2&nbsp;billion to &#165;473.8&nbsp;billion. Overseas sales accounted for
72.0&nbsp;percent of consolidated net sales.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In Japan, sales in the electronic devices sector and recording media segment declined, while
higher sales were recorded in the electronic materials, recording devices and other electronic
components sectors. The electronics materials and components segment saw its operating income
increase by &#165;17.6&nbsp;billion due to increase in operating ratio, discount in raw materials and
decrease in cost by rationalization. Although operating loss of the recording media segment
increased slightly, operating income in fiscal 2005 was &#165;25.8&nbsp;billion, up &#165;16.9&nbsp;billion from fiscal
2004.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In Asia (excluding Japan) and Oceania, sales declined in the recording devices sector and
recording media segment, but sales increased in the electronic materials and electronic devices
sectors. The operating income of the electronic materials and components segment decreased by &#165;8.8
billion. This decrease is due to a significant decline in sales prices mainly in recording devices
and capacitors. Operating income of the recording media segment also decreased slightly, resulting
in operating income for fiscal 2005 of &#165;33.6&nbsp;billion, &#165;9.5&nbsp;billion less than fiscal 2004.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the Americas, sales decreased in the electronic materials and recording devices sectors as
well as the recording media segment. The higher yen versus the U.S. dollar also impacted sales in
the Americas. The operating income of the electronic materials and components segment decreased by
&#165;0.9&nbsp;billion from fiscal 2004. However, operating income in fiscal 2005 was &#165;5.5&nbsp;billion, up &#165;0.9
billion from fiscal 2004, due to decrease in operating loss of the recording media segment as a
result of sale of a subsidiary engaged in software development.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In Europe, lower sales were recorded in the electronic materials and other electronic
components sectors as well as the recording media segment. While operating loss of the electronic
materials and components decreased, operating loss of the recording media segment in fiscal 2005
reversed from operating income in fiscal 2004 to operating loss of &#165;4.7&nbsp;billion by decrease of &#165;5.8
billion, due to a significant decline in sales prices mainly in optical media. As a result,
operating loss in fiscal 2005 was &#165;5.1&nbsp;billion, &#165;5.0&nbsp;billion up from fiscal 2004.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Effect of foreign exchange movements</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In fiscal 2005, overseas sales accounted for 72.0&nbsp;percent of consolidated net sales, down 2.3
percentage points. As a result, fluctuations in foreign exchange rates have a significant effect
on TDK&#146;s consolidated sales and income. During fiscal 2005, the yen appreciated 5.0&nbsp;percent in
relation to the U.S. dollar and depreciated 1.9&nbsp;percent in relation to the euro, based on TDK&#146;s
average internal exchange rates. Overall, TDK estimates that each &#165;1 movement in the exchange
rates during fiscal 2005 had the effect of reducing net sales by about &#165;4.0&nbsp;billion and operating
income by about &#165;1.0&nbsp;billion, in relation to the prior fiscal year.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By region, foreign exchange fluctuations reduced sales in Japan by about &#165;3.8&nbsp;billion, in Asia
(excluding Japan) and Oceania by about &#165;23.6&nbsp;billion and in the Americas by about &#165;5.5&nbsp;billion, but
increased sales in Europe by about &#165;1.4&nbsp;billion. The effect of foreign exchange fluctuations on
consolidated net sales after the elimination of intersegment transactions was about &#165;20.6&nbsp;billion.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK conducts a large share of business activities outside Japan as one way to offset the
impact of exchange-rate fluctuations. Such activities include manufacturing and sales, as well as
research, design and procurement. In-region production in fiscal 2005 represented 112.1&nbsp;percent
compared with 111.6&nbsp;percent one year earlier of sales in Asia (excluding Japan) and Oceania, 20.9
percent compared with 22.5&nbsp;percent one year earlier in the Americas, and 23.9&nbsp;percent compared with
23.8&nbsp;percent one year earlier in Europe. Overseas production accounted for 59.0&nbsp;percent of total
sales in fiscal 2005, compared with 58.6&nbsp;percent one year earlier, and for 81.9&nbsp;percent of overseas
sales, compared with 78.9&nbsp;percent one year earlier. The rise in the percentage of overseas
production in fiscal 2005 is mainly due to higher production in Asia in the electronic materials
and components segment.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK and certain overseas consolidated subsidiaries hedge exposure to foreign exchange
movements by entering into forward foreign exchange contracts and swaps for some foreign
currency-denominated obligations. Foreign exchange risk arising in operating activities is hedged
by using forward foreign exchange contracts. In principle, TDK&#146;s policy is to hedge up to 50
percent of expected foreign currency-denominated accounts receivable for each month for the next
six months. Due to the global nature of operations, management realizes that currency movements
continue to have the potential to exert a material influence on consolidated performance.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Cost and expenses</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The cost of sales increased 1.7&nbsp;percent from &#165;476.4&nbsp;billion in fiscal 2004 to &#165;484.3&nbsp;billion
in fiscal 2005 due to higher sales. Cost of sales increased from 72.6&nbsp;percent to 73.6&nbsp;percent of
net sales, respectively. This reflected the negative effects on earnings of strong discounting
pressure in all segments and foreign exchange movements, mainly the appreciation of the yen
relative to the U.S. dollar. These factors outweighed positive influences such as cost reductions
from structural reforms and numerous other actions to cut costs, including the receipt of discounts
on purchased materials. As a result, gross profit was 26.4&nbsp;percent in fiscal 2005, compared to
gross profit of 27.4&nbsp;percent in fiscal 2004.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative expenses decreased &#165;3.0&nbsp;billion from &#165;122.9&nbsp;billion in
fiscal 2004 to &#165;119.9&nbsp;billion in fiscal 2005, and decreased from 18.8&nbsp;percent to 18.2&nbsp;percent of
net sales, respectively. Selling, general and administrative expenses decreased despite a 0.3
percent rise in net sales due to efforts to strictly manage fixed expenses, such as by lowering
personnel expenses through greater operational efficiency. The main components of this decrease
were personnel expenses of &#165;3.1&nbsp;billion and marketing expenses of &#165;1.3&nbsp;billion. Research and
development expenses included in selling, general and administrative expenses increased &#165;3.4
billion from &#165;32.9&nbsp;billion in fiscal 2004 to &#165;36.3&nbsp;billion in fiscal 2005, and increased from 5.0
percent to 5.5&nbsp;percent of net sales, respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, pursuant to the newly enacted Contributed Benefit Pension Plan Law, TDK received
an exemption from the Minister of Health, Labor and Welfare, effective September&nbsp;25, 2003, from the
obligation to pay benefits related to future employee services with respect to the substitutional
portion of its Employees&#146; Pension Fund (EPF). TDK was also granted an exemption from the
obligation to pay benefits in relation to past employee services in October&nbsp;2004 with respect to
the substitutional portion of its domestic contributory plan. The transfer of the substitutional
portion of TDK&#146;s EPF liabilities to the government was completed on January&nbsp;31, 2005. As a result
of the transfer, TDK recognized as a subsidy from the Japanese government an amount equal to the
difference between the fair value of the obligation deemed &#147;settled&#148; with the Japanese government
and the assets required to be transferred to the government. The subsidy that TDK recognized
amounted to &#165;33.5&nbsp;billion. In addition, TDK recognized a settlement loss in an amount equal to the
product of (i)&nbsp;the ratio of the obligation settled to the total EPF obligation outstanding
immediately prior to settlement, both of which exclude the effect of future salary progression
relating to the substitutional portion of the EPF obligation, and (ii)&nbsp;the net unrecognized
gain/loss immediately prior to settlement, which amounted to &#165;27.3&nbsp;billion. This gain and loss is
included in operating income in the accompanying consolidated statements of income for the year
ended March&nbsp;31, 2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Other income and deductions</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other income (deductions)&nbsp;improved &#165;1.6&nbsp;billion from the previous fiscal year, reflecting a
&#165;2.2&nbsp;billion decline in foreign exchange losses and a &#165;1.0&nbsp;billion decrease in loss on securities,
net, as well as other factors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Income taxes and minority interests</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The ratio of income taxes to income from continuing operations before income taxes (the
effective tax rate) increased from 21.7&nbsp;percent in fiscal 2004 to 38.3&nbsp;percent in fiscal 2005. The
increase reflects mainly the fact that TDK received a notification and assessment of additional tax
from the Tokyo Regional Tax Bureau (Nihonbashi Tax Office) asserting that prices charged and paid
by TDK in connection with sales and purchases of products involving its overseas subsidiaries have
not been commensurate with the prices of similar transactions involving unrelated third parties.
The period of additional assessments covers tax years ending March&nbsp;1999 through March&nbsp;2003. The
additional tax assessed by the Tokyo Regional Tax Bureau amounted to &#165;12.0&nbsp;billion including
interest and penalty, which has been reflected as additional tax expense and other expense, net of
deferred income tax benefits, in the accompanying consolidated statements of income for the year
ended March&nbsp;31, 2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Net income</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK posted net income of &#165;33.3&nbsp;billion, resulting in net income per diluted share of &#165;251.56,
compared with &#165;317.69 in the previous fiscal year. Return on Equity, which is net income divided by average total stockholders&#146; equity, decreased from 7.5
percent to 5.5&nbsp;percent. This was due to an approximate &#165;62.8&nbsp;billion increase in stockholders&#146;
equity, which reflected a decrease of about &#165;38.7&nbsp;billion in accumulated other comprehensive loss
due to such factors as a decrease of about &#165;32.9&nbsp;billion in minimum pension liability adjustments
following the transfer of the substitutional portion of EPF liabilities, as well as an increase in
retained earnings.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash dividends per share paid during the fiscal year totaled &#165;60. This dividend is the sum of
the June&nbsp;2004&nbsp;year-end dividend of &#165;30 and the December&nbsp;2004 interim dividend of &#165;30. Shareholders
of record on March&nbsp;31, 2005 received a cash dividend of &#165;40 per share at the end of June&nbsp;2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In fiscal 2005, consolidated net income included loss from discontinued operations of &#165;3,665
million related to TSC. See discussion at Discontinued Operations.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Discontinued Operations</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;31, 2005, TDK entered into an agreement to sell all outstanding stock of its wholly
owned subsidiary, TSC for $14,028 thousand to Golden Gates Capital (&#147;Buyer&#148;). The sale of TSC is
part of TDK&#146;s continuing shift away from non-core products and technologies. The sale agreement
also includes earn-out payments, to be made by the Buyer to TDK, of up to $32,500 thousand. No
earn-out payments were made through March&nbsp;31, 2006. The payments are contingent upon certain
milestones being met related to future revenue targets extending through 2007. The transaction was
completed on April&nbsp;8, 2005. TDK has accounted for the sale of TSC as a discontinued operation
pursuant to FASB Statement No.&nbsp;144, &#147;Accounting for the impairment or Disposal of Long-Lived
Assets&#148;, as TSC meets the definition of a &#147;component of an entity&#148;. The results of operations for
this subsidiary have been reported as discontinued operations for all periods presented and
selected financial information for the years ended March&nbsp;31, 2006, 2005 and 2004 for the
discontinued operations, are summarized as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">Yen (Millions)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>45</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,070</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>385</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss from operations before
income taxes (including loss on
disposal of &#165;224&nbsp;million in
2006)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>310</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,509</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">244</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,650</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">156</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss from discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>310</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,665</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>2,650</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss from discontinued operations per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>&#165;</B></TD>
    <TD align="right"><B>(2.34</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(27.70</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9.47</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(0.02</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(2.34</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(27.69</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9.46</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(0.02</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">See Note 21 to the Consolidated Financial Statements for further discussion.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;B.&nbsp;Liquidity and capital resources
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Operating capital requirements</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK&#146;s requirements for operating capital primarily are for the purchase of raw materials and
parts for use in the manufacture of its products. These purchases are booked as manufacturing
costs and selling, general and administrative expenses. The payment of payroll expenses,
marketing expenses accompanying sales activities, and distribution-related expenses account for a
significant portion of operating expenses. Personnel expenses account for a significant portion of
R&#038;D expenses. The necessary funds for these expenses are provided from cash generated by
operations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Capital Expenditures</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In fiscal 2006, capital expenditures on a cash basis rose &#165;12.9&nbsp;billion from &#165;61.0&nbsp;billion to
&#165;73.9&nbsp;billion ($631.7&nbsp;million). This was the result of aggressive investment in IT home
electronics appliances; high-speed, large-capacity networks; and car electronics, which are fields
TDK regards as strategically important for growth.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the electronic materials and components segment, capital expenditures totaled &#165;71.1
billion. The bulk of the capital expenditures were for facilities to develop and produce HDD heads
with higher areal density mainly in China, the U.S. and the Philippines, and for facilities to
increase production and rationalize operations for multilayer chip capacitors mainly in Japan and
China.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the recording media segment, capital expenditures totaled &#165;2.8&nbsp;billion, mainly for
facilities to increase production of LTO-standard tapes.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In principle, the funds for these capital expenditures are provided from cash generated by
operations. In addition, TDK paid &#165;32.9&nbsp;billion to acquire Lambda Power Business and Amperex
Technology Limited. The funds for these acquisitions were also provided from cash generated by
operations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital expenditures for fiscal 2005, which are described in detail below, increased by &#165;16.5
billion, from &#165;44.5&nbsp;billion for fiscal 2004 to &#165;61.0&nbsp;billion.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the electronic materials and components segment, capital expenditures in 2005 totaled &#165;57.2
billion. TDK invested in the expansion of production capacity of HDD heads, facilities for
rationalizing these activities and the development of technology for coping with increasing areal
density. These investments centered mainly on China, the U.S. and the Philippines. Furthermore,
investments were made to increase production and rationalize operations in multilayer chip
capacitors and inductors, where growth in sales is expected due to acceleration in the pace at
which electronics are being incorporated in automobiles, the increasingly sophisticated nature of
mobile phones and other factors. These investments were made mainly in Japan and China.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the recording media segment, capital expenditures totaled &#165;3.8&nbsp;billion, mainly for
facilities to increase LTO production.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital expenditures for fiscal 2004, which are described in detail below, increased by &#165;3.5
billion, from &#165;41.0&nbsp;billion for fiscal 2003 to &#165;44.5&nbsp;billion.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the electronic materials and components segment, due to the expansion of the market for
recording devices, TDK made investments principally in Asia, but also in the Americas and Japan, to
increase production and rationalization for its recording devices. Other major expenditures
include investments to increase production and rationalization for electronic materials and
electronic devices (principally capacitors), and investments into the development of new products.
Capital expenditures of this segment increased by &#165;1.7&nbsp;billion from &#165;38.4&nbsp;billion to &#165;40.1&nbsp;billion.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the recording media segment, investments have been made in Europe and Japan to increase
production and develop optical media products, whose market was expanding. Capital expenditures of
this segment increased by &#165;1.8&nbsp;billion from &#165;2.6&nbsp;billion to &#165;4.4&nbsp;billion.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Financial Management</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating capital and capital expenditures are, in principle, funded by cash generated through
operating activities. To improve capital efficiency, to the extent possible, TDK centralizes
financial management in the Head Office, having introduced a cash management system (CMS)&nbsp;in Japan,
the U.S. and Europe. Surplus funds are invested with an emphasis on low risk and liquidity. Funds
from within the group will be utilized, to the extent possible, to extend financing to subsidiaries
that cannot procure operating capital or funds for capital expenditures themselves.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cash flows for fiscal 2006, 2005 and 2004 are summarized as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Years ended March 31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><I>2006</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000">(millions of yen)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><I>(millions</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><I>of dollars)</I></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">44,411</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">36,965</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">43,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><I>$</I></TD>
    <TD align="right"><I>379.6</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustments to reconcile net income to
net cash provided by operating
activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,707</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,284</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,664</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>382.1</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95,249</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>761.7</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash used in investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(104,782</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(62,359</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(37,647</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><I>(895.6</I></TD>
    <TD nowrap><I>)</I></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash used in financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,125</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,629</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,860</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><I>(60.9</I></TD>
    <TD nowrap><I>)</I></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by (used in)
discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(414</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,625</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">761</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><I>(3.5</I></TD>
    <TD nowrap><I>)</I></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of exchange rate changes on cash
and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,712</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,669</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>91.5</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net change in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(12,491</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">24,353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">56,604</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><I>$</I></TD>
    <TD align="right"><I>(106.8</I></TD>
    <TD nowrap><I>)</I></TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fiscal 2006 cash and cash equivalents decreased &#165;12.5&nbsp;billion from &#165;251.5&nbsp;billion to
&#165;239.0&nbsp;billion ($2,043&nbsp;million). Operating activities provided net cash of &#165;89.1&nbsp;billion ($761.7
million), &#165;6.1&nbsp;billion less than in fiscal 2005. Income from continuing operations rose &#165;7.4
billion to &#165;44.4&nbsp;billion ($380&nbsp;million) and depreciation and amortization increased &#165;5.7&nbsp;billion to
&#165;58.5&nbsp;billion ($500&nbsp;million) mainly due to increase in the recording devices segment. In terms of
changes in assets and liabilities, the increase in trade receivables climbed &#165;9.5&nbsp;billion, changes
in inventories increased &#165;3.7&nbsp;billion, changes in trade payables increased &#165;6.9&nbsp;billion, and
changes in accrued expenses increased &#165;14.8&nbsp;billion, while changes in income taxes payables, net
declined &#165;25.1&nbsp;billion.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Regarding research and development expenses, TDK&#146;s policy is to focus investments in the
strategic fields of IT home electronic appliances, high-speed and large-capacity networks and car
electronics. Funds for research and development are appropriated from internal funds.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investing activities used net cash of &#165;104.8&nbsp;billion ($896&nbsp;million), &#165;42.4&nbsp;billion more than
the &#165;62.4&nbsp;billion used in the previous fiscal year. TDK used &#165;73.9&nbsp;billion for capital
expenditures, &#165;12.9&nbsp;billion more than in fiscal 2005, as a result of making aggressive investments
to drive growth. Furthermore, acquisition of businesses, net of cash acquired increased &#165;31.4
billion and proceeds from sale and maturity of investments in securities increased &#165;2.5&nbsp;billion
year over year, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financing activities used net cash of &#165;7.1&nbsp;billion ($60.9&nbsp;million),
a decrease of &#165;2.5&nbsp;billion from the &#165;9.6&nbsp;billion used in fiscal 2005. Dividends paid increased
&#165;2.6&nbsp;billion due to a &#165;20 per common share increase in the year-end dividend. On the other hand,
there were an increase of &#165;4.0&nbsp;billion in increase (decrease)&nbsp;in short-term debt, net mainly in
newly consolidated subsidiaries, and a decrease of &#165;0.7&nbsp;billion in cash paid to acquire treasury
stock for stock options.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Regarding
financing costs, TDK has long-term corporate credit ratings of AA- and A1 from
Standard &#038; Poor&#146;s and Moody&#146;s, respectively. Furthermore, Standard &#038; Poor&#146;s gives TDK their
highest short-term credit rating, A-1&#043;. These ratings allow TDK
to procure funds if needed relatively at low
interest rates.
</DIV>


<P align="center" style="font-size: 10pt">- 36 -
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK&#146;s
fundamental treasury management policy is to give consideration to a consistent increase in dividends based
on factors such as the return on equity (ROE), dividends as a percentage of equity (DOE)&nbsp;and TDK&#146;s
results of operations on a consolidated basis. Funds for paying dividends are allocated from
internal funds.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the dynamically changing electronics industry, it is necessary to make well-timed
investments. Given this need, and the possibility that unstable financial conditions will continue
in Japan, TDK&#146;s policy is to maintain an adequate level of liquidity, considering risk factors as
well as a capital requirement forecast. Based on the current liquidity, TDK does not have
immediate plans of repurchasing its stock for the purpose of extinguishment.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK estimates that operating cash flows and other internal resources will provide adequate
liquidity in fiscal 2007. Regarding cash flows for the fiscal years ending March&nbsp;31, 2007 and
onward, TDK expects to provide the necessary funds from operating cash flows by increasing
profitability and improving the return on assets.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fiscal 2005 cash and cash equivalents increased &#165;24.3&nbsp;billion from &#165;227.2&nbsp;billion to &#165;251.5
billion in the previous fiscal year. Operating activities provided net cash of &#165;95.2&nbsp;billion, a
year-on-year decrease of &#165;18.8&nbsp;billion. The major component of cash provided by operating
activities was depreciation and amortization of &#165;52.8&nbsp;billion, up &#165;2.1&nbsp;billion. In terms of
changes in assets and liabilities, inventories decreased &#165;11.3&nbsp;billion, the result of efforts to
reduce inventories, while retirement and severance benefits declined &#165;6.8&nbsp;billion due to the
transfer of the substitutional portion of EPF liabilities and changes to the pension system. In
addition, the decrease in changes in trade payables and accrued expenses decreased &#165;8.0&nbsp;billion and
&#165;11.4&nbsp;billion, respectively, and income taxes payables, net increased &#165;8.8&nbsp;billion.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investing activities used net cash of &#165;62.4&nbsp;billion, &#165;24.7&nbsp;billion more than the &#165;37.6&nbsp;billion
used in the previous fiscal year. TDK used &#165;61.0&nbsp;billion for capital expenditures, &#165;16.5&nbsp;billion
more than in fiscal 2004, as a result of making aggressive investments to drive growth.
Furthermore, payment for purchase of investments in securities increased &#165;2.4&nbsp;billion year over
year.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financing activities used net cash of &#165;9.6&nbsp;billion, a decrease of &#165;0.2&nbsp;billion from the &#165;9.8
billion used in fiscal 2004. There was an increase of &#165;1.3&nbsp;billion in dividends paid due to the
increase in the dividend. On the other hand, there was a decline in the repayment of debt because
debt has been virtually eliminated.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fiscal 2004 cash and cash equivalents increased &#165;56.6&nbsp;billion to &#165;227.2&nbsp;billion from &#165;170.6
billion in the previous fiscal year. Operating activities provided net cash of &#165;114.0&nbsp;billion, a
year-on-year increase of &#165;8.1&nbsp;billion. This reflected mainly a &#165;30.1&nbsp;billion increase in net
income to &#165;42.1&nbsp;billion and a &#165;6.4&nbsp;billion decrease in depreciation and amortization to &#165;50.7
billion, as well as decreases in changes in trade receivables and inventories of &#165;5.0&nbsp;billion and
&#165;21.4&nbsp;billion, respectively. Regarding the shortfall in pension assets, TDK planned to take action
in response to certain recent reforms to the pension system, including transferring the
substitutional portion of Employees&#146; Pension Fund (&#147;EPF&#148;) liabilities.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investing activities used net cash of &#165;37.6&nbsp;billion, a decrease of &#165;8.6&nbsp;billion from &#165;46.2
billion in the previous fiscal year. The main factor was a &#165;6.2&nbsp;billion decrease in payment for
purchase of other investments to &#165;0.4&nbsp;billion.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financing activities used net cash of &#165;9.8&nbsp;billion, &#165;1.9&nbsp;billion more than the &#165;7.9&nbsp;billion in
cash used in the previous fiscal year. This mainly represented an increase of &#165;0.8&nbsp;billion in
repayments of short-term debt and a &#165;0.7&nbsp;billion increase in dividends paid.
</DIV>


<P align="center" style="font-size: 10pt">- 37 -
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Capital resources as of March&nbsp;31, 2006, 2005 and 2004 are summarized as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Years ended March 31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><I>2006</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">(millions of yen)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><I>(millions</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">(%)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><I>of dollars)</I></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Short-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">4,469</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><I>$</I></TD>
    <TD align="right"><I>38.2</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(&#151;</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current installments of long term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>16.7</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">405</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>3.5</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">excluding current installments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">702,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">639,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">576,219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>6,003.6</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(99.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(99.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">709,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">639,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">576,662</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><I>$</I></TD>
    <TD align="right"><I>6,062.0</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK currently has no capital market debt outstanding. However, TDK maintains long-term
corporate credit ratings of AA- and A1 from Standard &#038; Poor&#146;s and Moody&#146;s, respectively.
Furthermore, Standard &#038; Poor&#146;s gives TDK their highest short-term credit rating, A-1&#043;.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets amounted to &#165;923.5&nbsp;billion ($7,893&nbsp;million) as of March&nbsp;31, 2006, up &#165;115.5
billion from &#165;808.0&nbsp;billion at the previous fiscal year-end. As of March&nbsp;31, 2006, trade
receivables were &#165;189.1&nbsp;billion ($1,616&nbsp;million), &#165;41.1&nbsp;billion higher than &#165;148.0&nbsp;billion and
inventories were &#165;89.0&nbsp;billion ($760&nbsp;million), &#165;14.1&nbsp;billion more than &#165;74.9&nbsp;billion a year ago,
respectively. Property, plant and equipment increased &#165;26.7&nbsp;billion from &#165;217.0&nbsp;billion to &#165;243.7
billion ($2,083&nbsp;million), investments in securities increased &#165;6.1&nbsp;billion from &#165;22.7&nbsp;billion to
&#165;28.8&nbsp;billion ($246&nbsp;million). In addition, goodwill increased &#165;10.3&nbsp;billion from &#165;9.2&nbsp;billion to
&#165;19.5&nbsp;billion ($166&nbsp;million) and intangible assets increased &#165;16.3&nbsp;billion from &#165;13.2&nbsp;billion to
&#165;29.5&nbsp;billion ($252&nbsp;million) due to the acquisition of businesses.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities increased &#165;43.3&nbsp;billion from &#165;163.8&nbsp;billion to &#165;207.1&nbsp;billion ($1,770
million). Income taxes payables decreased &#165;10.1&nbsp;billion from &#165;19.3&nbsp;billion to &#165;9.2&nbsp;billion ($78
million), while trade payables rose &#165;22.6&nbsp;billion from &#165;62.1&nbsp;billion to &#165;84.7&nbsp;billion ($724
million), accrued expenses increased &#165;12.4&nbsp;billion from &#165;31.1&nbsp;billion to &#165;43.5&nbsp;billion ($372
million), and deferred income taxes increased &#165;4.5&nbsp;billion from &#165;0.8&nbsp;billion to &#165;5.3&nbsp;billion ($45
million).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stockholders&#146; equity increased &#165;63.3&nbsp;billion from &#165;639.1&nbsp;billion to &#165;702.4&nbsp;billion
($6,004&nbsp;million). Retained earnings increased &#165;32.7&nbsp;billion from &#165;585.6&nbsp;billion to &#165;618.3&nbsp;billion
($5,284&nbsp;million) and accumulated other comprehensive loss decreased &#165;29.7&nbsp;billion from &#165;51.7
billion to &#165;21.9&nbsp;billion ($188&nbsp;million).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets amounted to &#165;808.0&nbsp;billion as of March&nbsp;31, 2005, up &#165;37.7&nbsp;billion from &#165;770.3
billion at the previous fiscal year-end. As of March&nbsp;31, 2005, cash and cash equivalents were
&#165;251.5&nbsp;billion, &#165;24.3&nbsp;billion higher than &#165;227.2&nbsp;billion a year ago. Trade receivables were &#165;148.0
billion, &#165;9.7&nbsp;billion higher than &#165;138.3&nbsp;billion a year ago. Property, plant and equipment
increased &#165;8.1&nbsp;billion from &#165;208.9&nbsp;billion to &#165;217.0&nbsp;billion and noncurrent deferred income taxes
decreased &#165;25.5&nbsp;billion from &#165;34.1&nbsp;billion to &#165;8.6&nbsp;billion.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities decreased &#165;27.0&nbsp;billion from &#165;190.8&nbsp;billion to &#165;163.8&nbsp;billion. Trade
payables rose &#165;2.2&nbsp;billion from &#165;59.9&nbsp;billion to &#165;62.1&nbsp;billion, and income taxes payables increased
&#165;14.6&nbsp;billion from &#165;4.7&nbsp;billion to &#165;19.3&nbsp;billion. However, retirement and severance benefits
declined &#165;44.7&nbsp;billion from &#165;73.5&nbsp;billion to &#165;28.8&nbsp;billion due to the transfer of the
substitutional portion of EPF liabilities and changes to the pension system. Accrued expenses
decreased &#165;2.4&nbsp;billion from &#165;33.4&nbsp;billion to &#165;31.0&nbsp;billion.
</DIV>


<P align="center" style="font-size: 10pt">- 38 -
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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stockholders&#146; equity increased &#165;62.9&nbsp;billion from &#165;576.2&nbsp;billion to &#165;639.1&nbsp;billion.
Retained earnings increased &#165;24.8&nbsp;billion from &#165;560.8&nbsp;billion to &#165;585.6&nbsp;billion and accumulated
other comprehensive loss decreased &#165;38.7&nbsp;billion from &#165;90.4&nbsp;billion to &#165;51.7&nbsp;billion.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets amounted to &#165;770.3&nbsp;billion as of March&nbsp;31, 2004, up &#165;23.0&nbsp;billion from &#165;747.3
billion at the previous fiscal year-end. As of March&nbsp;31, 2004, cash and cash equivalents were
&#165;227.2&nbsp;billion, &#165;56.6&nbsp;billion higher than &#165;170.6&nbsp;billion a year ago. However, property, plant and
equipment decreased &#165;17.0&nbsp;billion to &#165;208.9&nbsp;billion from &#165;225.9&nbsp;billion, and noncurrent deferred
income taxes decreased &#165;9.8&nbsp;billion to &#165;34.1&nbsp;billion from &#165;43.9&nbsp;billion.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities increased &#165;0.7&nbsp;billion, from &#165;190.1&nbsp;billion to &#165;190.8&nbsp;billion. Trade
payables increased &#165;2.9&nbsp;billion, from &#165;57.0&nbsp;billion to &#165;59.9&nbsp;billion, accrued expenses increased
&#165;5.3&nbsp;billion from &#165;28.1&nbsp;billion to &#165;33.4&nbsp;billion, and income taxes payables increased &#165;3.6&nbsp;billion,
from &#165;1.1&nbsp;billion to &#165;4.7&nbsp;billion. Retirement and severance benefits decreased &#165;11.5&nbsp;billion, from
&#165;85.0&nbsp;billion to &#165;73.5&nbsp;billion.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stockholders&#146; equity increased &#165;22.3&nbsp;billion, from &#165;553.9&nbsp;billion to &#165;576.2&nbsp;billion.
Retained earnings rose &#165;34.9&nbsp;billion, from &#165;525.9&nbsp;billion to &#165;560.8&nbsp;billion, while accumulated
other comprehensive loss rose &#165;11.6&nbsp;billion, from &#165;78.8&nbsp;billion to &#165;90.4&nbsp;billion.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK has various pension plans covering its employees. The unfunded amount as of March&nbsp;31,
2006 was &#165;20.4&nbsp;billion ($175&nbsp;million). As of March&nbsp;31, 2006, &#165;26.8&nbsp;billion was accrued on the
balance sheet as retirement and severance benefits, &#165;2.0&nbsp;billion less than a year ago.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK&#146;s policy is to utilize group funds for the development of its business, and to use loans
from banks or other sources, if necessary, as a secondary method of financing.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Regarding TDK&#146;s capital expenditure plans, TDK&#146;s policy is to invest actively in targeted
strategic fields to drive growth. Capital expenditures will be funded using internally generated
funds.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK is planning capital expenditures of &#165;70.0&nbsp;billion in fiscal 2007, primarily for the
expansion of production facilities and upgrading of facilities. Actual capital expenditures could
differ from this forecast as a result of factors such as shifts in technology, demand, prices,
competition, economic environments and foreign exchange rates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Restructuring Costs</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the year ended March&nbsp;31, 2006, TDK was fundamentally restructuring the recording media
business. While reviewing the progress of the restructuring and future strategies of the recording
media business, TDK looked for ways to re-strengthen the manufacturing of recordable CD &#038; DVD
foundations from various perspectives. However, a sharp drop in market prices of recordable CD &#038;
DVDs as well as the increased cost of natural resources has a material impact on
the recording media business of TDK. Following further study,
at a board meeting held on March&nbsp;8, 2006, TDK management decided to withdraw from the
manufacturing of recordable CD &#038; DVDs, which should lead to an
improvement and reform of its recording
media business.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK accelerated its ODM business model for the current generation of recordable CD &#038; DVD
products and the third-party supply of such products following
TDK&#146;s withdrawal. TDK also continued its R&#038;D and
manufacturing activities in Japan of the blue laser disc, a highly value-added product expected to
grow in the near future. TDK has also concentrated its resources on strengthening data storage
tape business, which is another core business.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With this decision, TDK shut down the production facilities at its European subsidiary, TDK
Recording Media Europe S.A. in Luxembourg in April&nbsp;2006. TDK recorded a restructuring charge of
&#165;6,825&nbsp;million ($58,333 thousand) which included a charge of &#165;3,309&nbsp;million ($28,282 thousand)
relating to employee termination benefits. As a result of the restructuring, a total of 350
regular employees were terminated through May&nbsp;31, 2006. In addition, TDK recorded a restructuring
charge of &#165;2,594&nbsp;million ($22,171 thousand) relating to an impairment on property, plant and
equipment in connection with the decision to shut down production facilities at its European
subsidiary.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For a discussion of financial instruments, see Note 14 &#147;Risk Management Activities and
Derivative Financial Instruments&#148;, Note 15 &#147;Fair Value of Financial Instruments&#148; and Note 6
&#147;Short-Term and Long-Term Debt&#148; in Item&nbsp;17 &#147;Financial Statements&#148;.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;Research and development, patents and licenses, etc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;R&#038;D expenditures amounted to &#165;45.5&nbsp;billion ($389&nbsp;million), 5.7&nbsp;percent of net sales in fiscal
2006; &#165;36.3&nbsp;billion, 5.5&nbsp;percent of net sales in fiscal 2005; and &#165;32.9&nbsp;billion, 5.0&nbsp;percent of net
sales in fiscal 2004.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In its R&#038;D activities, TDK continues to work on strengthening and expanding development of new
products that respond to diversification in the electronics market. In particular, TDK is
concentrating on next-generation recording-related products, micro electronics modules for mobile
communications-related applications, and energy-efficient, environmentally friendly devices based
on materials and design technologies. Furthermore, TDK is using its reservoir of technologies to
conduct efficient R&#038;D activities concentrating in three strategic areas: IT home electronic
appliances; high-speed and large-capacity networks and car electronics.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the electronic materials and components field, development themes include commercialization
of Polymer PTC thermistor with TDK&#146;s materials technologies, commercialization of 130Gbpsi PMR
heads for HDDs and 100Gbpsi TMR heads for mobile communications applications. In the recording
media field, TDK has made progress with research on post DVD generation products, including
commercialization of Blu-ray discs. Furthermore, TDK commercialized thin-film Common-mode Filter
with TDK&#146;s thin-film technologies.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;R&#038;D at TDK is conducted by the Materials R&#038;D Center, Advanced Process Technology Center,
Devices Development Center, Production Engineering Development Center, Materials Analysis Center,
Application Center, SQ Research Center and the R&#038;D functions of each operating group. Each
facility is developing new products and technologies in its respective area of responsibility. The
Application Center devises the necessary application technologies with the aim of keeping TDK in
step with market trends and customer needs. The Materials R&#038;D Center is responsible for research
in magnetic and dielectric materials that use powder metallurgy. The Advanced Process Technology
Center facilitates the use of cutting-edge process technologies. The Devices Development Center
conducts research in next-generation recording and communications technologies as well as new
devices.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In terms of overseas R&#038;D activities, TDK is conducting R&#038;D in collaboration with leading
universities in the U.S. and U.K., and overseas R&#038;D subsidiaries are making use of local
technological resources. In China, where TDK is aiming to establish and develop an operating base
capable of supporting growth, R&#038;D activities are being carried out in the area of electronic
components and materials. In addition, consolidated subsidiary Headway Technologies, Inc. is
developing next-generation HDD heads.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although TDK has a variety of patents in Japan and other countries, and licenses from other
companies, it believes that expiration of any one of its patents or licenses or related group of
patents or licenses would not materially adversely affect its business activities. Total income
from patents and licenses was &#165;0.1&nbsp;billion ($1&nbsp;million) in fiscal 2006, &#165;0.5&nbsp;billion in fiscal 2005
and &#165;0.1&nbsp;billion in fiscal 2004. TDK paid &#165;7.1&nbsp;billion ($60&nbsp;million) in fiscal 2006, &#165;9.3&nbsp;billion
in fiscal 2005 and &#165;8.1&nbsp;billion in fiscal 2004 for patents and licenses, mainly royalties for
licenses related to the recording devices business. TDK does not believe that acquisition of new
proprietary patents or other companies&#146; patents would have a material effect on operating results
in the future.
</DIV>


<P align="center" style="font-size: 10pt">- 40 -
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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D.&nbsp;Trend information
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Economic environment</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While the world economy is expected to continue growing for the medium-term, it is relatively
unstable for the short-term, largely influenced by the U.S., where the economy continues to grow
despite the backdrop of a burdensome current account deficit, and China, which continues to
implement a high-growth policy. Among these risk factors are the specter of inflation caused by
persistently high crude oil prices and raw materials costs, trade imbalances among major countries
and volatile foreign exchange rates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under these economic circumstances, from a medium-term perspective, the electronics industry
is expected to see the growth of digital home appliances; the convergence of information and
communications, as typified by the increasingly diverse functions offered by mobile phones and
advances in portable devices; and the greater use of electronics in motor vehicles. These trends
are expected to result in a continued increase in demand for electronics components. TDK believes
that this increase will create a large number of opportunities for its electronic components
business and potential for growth.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The electronic components business is constantly subject to two sources of downward pressure
on prices. One is price discounting pressure from finished products manufacturers, the customers
of electronic component manufacturers. The other is competition among manufacturers of electronic
components.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Demands for price discounts are the result of competition among finished product manufacturers
being passed on to component manufacturers. As they compete with each other, consumer electronics
manufacturers, customers of TDK, are constantly seeking ways to establish a competitive advantage.
For example, these companies pursue strategies such as differentiating products by adding new
functions to existing products, as well as securing a competitive edge through pricing. This sort
of competition involving finished products tends to force companies to compete by launching new
products, resulting in shorter product lifecycles and a greater risk of price declines.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK&#146;s electronic materials and components segment supplies products that are used mainly in
digital home appliances, mobile phones and other consumer electronics as well as in automotive
electronics. As such, this business is directly exposed to the effects of the competition outlined
above. No change is foreseen in discounting pressure from customers in the coming years.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Electronic component manufacturers, as with other industries, compete with peer companies.
Consumer electronics manufacturers commonly certify several suppliers so that companies need to
compete for orders. A company&#146;s pricing strategy is a key element in determining the share of
electronic components it supplies to finished product manufacturers. As a consequence, there is
constantly downward pressure on prices.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The electronic components business thus requires the constant execution of initiatives to
mitigate the effect of these pricing pressures. Actions to reduce costs are an obvious response.
But it is also necessary to establish a position as a components manufacturer that can supply key
components when customers launch new products. There is no substitute for product development
activities aimed at supplying these key components.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Price declines are thus inevitable in the electronic components business, but it is possible
to reduce or absorb the effects of lower prices by implementing the above measures appropriately,
when required. We believe that these actions are an inherently vital element that will ultimately
determine the competitiveness of an electronic components business.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Critical accounting policies</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Critical accounting policies are those that require application of management&#146;s most
difficult, subjective or complex judgments, often as a result of the need to make estimates about
the effect of matters that are inherently uncertain and may change in subsequent periods.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is not intended to be a comprehensive list of all of TDK&#146;s accounting policies.
TDK&#146;s significant accounting policies are more fully described in Note 1 to the Consolidated
Financial Statements. In many cases, the accounting treatment of a particular transaction is
specifically dictated by U.S. generally accepted accounting principles, with no need for
management&#146;s judgment in their application. There are also areas in which management&#146;s judgment in
selecting an available alternative would not produce a materially different result.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK has identified the following as critical accounting policies: impairment of long-lived
assets, valuation of inventories, goodwill and other intangible assets, pension benefit costs, and
deferred tax assets.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Impairment of long-lived assets</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March&nbsp;31, 2006 and 2005, the aggregate of TDK&#146;s property, plant and equipment and
amortized intangible assets was &#165;270.3&nbsp;billion
($2,310&nbsp;million) and &#165;229.6&nbsp;billion, which accounted
for 29.3&nbsp;percent and 28.4&nbsp;percent of the total assets, respectively. TDK believes that impairment
of long-lived assets are critical to TDK&#146;s financial statements because the recoverability of the
amounts or lack thereof, could significantly affect its results of operations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK&#146;s long-lived assets and certain identifiable intangibles are reviewed for impairment when
events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. This review is performed using estimates of future cash flows. If the carrying
amount of the asset is considered to be impaired, an impairment charge is recorded for the amount
by which the carrying value of an asset exceeds its fair value. Management believes that the
estimates of future cash flows and fair values are reasonable; however, changes in estimates
resulting in lower future cash flows and fair value due to unforeseen changes in business
assumptions could negatively affect the valuation of those long-lived assets and significantly
affect TDK&#146;s financial position and results of operations. TDK makes investments with due
prudence, taking sufficiently into consideration the future profitability of products and the
recoverability of investments.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Valuation of inventories</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories are stated at the lower of cost or market, with cost determined on the average
cost method. The carrying value of inventory is reduced for estimated obsolescence by the
difference between its cost and the estimated market value based upon assumptions about future
demand. TDK evaluates the inventory carrying value for potential excess and obsolete inventory
exposures by analyzing historical and anticipated demand. In addition, known and anticipated
engineering change orders are evaluated against on-hand quantities for their potential obsolescence
affects. As fluctuations in estimates, which become a standard in recognizing adjustments in the
carrying values of inventory for expected obsolescence, are influential to business results of TDK,
we conclude it as a critical accounting policy. If actual demand were to be substantially lower
than estimated, additional inventory adjustments for excess or obsolete inventory may be required,
which could have a material adverse effect on TDK&#146;s business, financial condition and results of
operations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Regarding the appropriateness of estimates in the past, TDK does not use a method based on
various scenarios, but a method to reconsider every quarter by comparing estimate and actual
results. For example, in the operation management of product sector with rapid development in
technological innovation such as the recording devices sector, TDK revises the estimates of
valuation of obsolete inventories arising from the timely response to customers&#146; demands for
high-efficiency products on a quarterly basis.
</DIV>


<P align="center" style="font-size: 10pt"> - 42 -
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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Purchase Accounting</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We account for acquired businesses using the purchase method of accounting which requires that
the assets acquired and liabilities assumed be recorded at the date of acquisition at their
respective fair values. The judgments made in determining the estimated fair value assigned to
each class of assets acquired, as well as asset lives, can materially impact net income of the
periods subsequent to the acquisition through depreciation and amortization, and in certain
instances by impairment charges, if the asset becomes impaired in the future.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In determining the estimated fair value for intangible assets, we typically utilize the income
approach, which employs discounting of the projected future net cash flow using an appropriate
discount rate that reflects the risk factors associated with the cash flow streams.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Determining the useful life of an intangible asset also requires judgment as different types
of intangible assets will have different useful lives and certain assets may even be considered to
have indefinite useful lives. Intangible assets determined to have an indefinite useful life have
been reassessed periodically based on the factors prescribed in SFAS No.&nbsp;142 including, but not
limited to, the expected use of the asset by us, legal or contractual provisions that may affect
the useful life or renewal or extension of the asset&#146;s contractual life without substantial cost,
and the effects of demand, competition and other economic factors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Goodwill and other intangible assets</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill and other intangible assets that are determined to have an indefinite life are not
amortized and are tested for impairment on an annual basis and between annual tests if an event
occurs or circumstances change that would more likely than not reduce the fair value of these
assets below their carrying amount. Fair value for these assets is determined using a discounted
cash flow analysis, which is based on an authorized business plan. Management believes that the
estimates of future cash flows and fair value are reasonable; however, changes in estimates
resulting in lower future cash flows and fair value due to unforeseen changes in business
assumptions could negatively affect the valuations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Pension benefit costs</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Employee pension benefit costs and obligations are dependent on assumptions used by actuaries
in calculating such amounts. These assumptions include discount rates, retirement rates and
mortality rates which are based upon current statistical data, as well as salary growth, long-term
return on plan assets and other factors. Actual results that differ from the assumptions are
accumulated and amortized over future periods and, therefore, generally affect TDK&#146;s recognized
expense and recorded obligation in future periods. While TDK believes that its assumptions used
are appropriate, differences in actual experience or changes in assumptions may affect TDK&#146;s
benefit obligations and future expense.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In preparing its financial statements for fiscal 2006, TDK established a discount rate of 2.2
percent and an expected long-term rate of return of 2.7&nbsp;percent on plan assets. In estimating the
discount rate, TDK uses available information about rates of return on long-term corporate bonds
currently available and expected to be available during the period to the maturity of the pension
benefits. TDK established the expected long-term rate of return on plan assets based on
management&#146;s expectations in respect of the long-term returns of the various plan asset categories
in which it invests. Management developed expectations with respect to each plan asset category
based on actual historical returns and its current expectations for future returns.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A decrease in the discount rate leads to an increase in actuarial pension benefit obligations
that could lead to an increase in net periodic pension cost through amortization of unrecognized
actuarial gain or losses. A 50 basis point decrease in the discount rate would increase the
projected benefit obligation by approximately 10&nbsp;percent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An increase in the expected return on plan assets may decrease net periodic pension cost in
the current year. For fiscal 2006, a 50 basis point decrease in the long-term rate of return would
increase net benefit cost by approximately &#165;0.9&nbsp;billion. However, the difference between the
expected return and the actual return on those assets could negatively affect net income in future
years.
</DIV>

<P align="center" style="font-size: 10pt"> - 43 -
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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Deferred tax assets</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK has significant deferred tax assets, which are subject to realizability assessment. In
assessing the realizability of deferred tax assets, management considers whether it is more likely
than not that some portion or all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of future taxable income during
the periods in which those temporary differences become deductible. Management considers the
planned reversal of deferred tax liabilities, projected future taxable income, and tax planning
strategies in making this assessment. Based upon the level of historical taxable income and
projections for future taxable income over the periods in which the deferred tax assets are
deductible, management believes that it is more likely than not that all of the deferred tax assets
less valuation allowance, will be realized. However, in the event future projections for income
are not realized or are realized in lesser amounts, or in cases where management revises the
assessment of the potential for realization of deferred tax assets based on other factors, deferred
tax assets may be determined not to be realizable, which then would require TDK to increase a
valuation allowance against the deferred tax assets resulting in additional income tax expenses.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>New accounting pronouncements</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>New Accounting Standards</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November&nbsp;2004, the FASB issued Statement of Financial Accounting Standards No.&nbsp;151 (&#147;SFAS
151&#148;), &#147;Inventory Costs &#150; an amendment of Accounting Research Bulletin No.&nbsp;43 (&#147;ARB 43&#148;), Chapter
4&#148;. SFAS 151 amends the guidance in ARB 43, Chapter&nbsp;4, &#147;Inventory Pricing&#148;, to clarify the
accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted
material (spoilage). SFAS 151 requires that items such as idle facility expense, excessive
spoilage, double freight and rehandling costs be recognized as current-period charges regardless of
whether they meet the criterion of &#147;so abnormal&#148; as stated in ARB 43. In addition, SFAS 151
requires that allocation of fixed production overheads to the costs of conversion be based on the
normal capacity of the production facilities. SFAS 151 is effective for inventory costs incurred
in fiscal periods beginning after June&nbsp;15, 2005. TDK does not expect the adoption of SFAS 151 to
have a material effect on TDK&#146;s consolidated financial position and results of operations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2004, the FASB issued Statement of Financial Accounting Standards No.&nbsp;123 (revised
2004), &#147;Share Based Payment&#148; (&#147;SFAS 123R&#148;). SFAS 123R is a revision of SFAS 123, &#147;Accounting for
Stock Based Compensation&#148;, and supersedes APB 25. SFAS 123R requires TDK to measure the cost of
employee services received in exchange for equity awards based on the grant date fair value of the
awards. The cost will be recognized as compensation expense over the vesting period of the awards.
In April&nbsp;2005, the Securities and Exchange Commission deferred the effective date of SFAS 123R to
the beginning of the first annual period after June&nbsp;15, 2005. TDK adopted SFAS 123R in the first
quarter of fiscal 2007 and will continue to evaluate the impact of SFAS 123R on TDK&#146;s consolidated
financial position and results of operations. The pro forma information presented in Note 1(j) and
Note 10 presents the estimated compensation charges under SFAS 123. TDK&#146;s assessment of the
estimated compensation charges is affected by TDK&#146;s stock price as well as assumptions regarding a
number of complex and subjective variables and the related tax impact. These variables include,
but are not limited to, TDK&#146;s stock price volatility and employee stock option exercise behaviors.
TDK will recognize the compensation cost for stock-based awards issued after April&nbsp;1, 2006 on a
straight-line basis over the requisite service period for the entire award. In addition, TDK will
recognize the unvested portion of the grant date fair value of awards issued prior to adoption
based on the fair values previously calculated for disclosure purposes. At March&nbsp;31, 2006, the
aggregate value of unvested options, as determined using a Black-Scholes option pricing model, was
&#165;227&nbsp;million. Upon adoption of SFAS 123R, this amount will be recognized over the remaining
vesting period of these options.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;2005, the FASB issued Statement of Financial Accounting Standards No.&nbsp;154 (&#147;SFAS 154&#148;),
&#147;Accounting Changes and Error Corrections &#150; a replacement of Opinion of the Accounting Principle
Board No.&nbsp;20 (&#147;APB 20&#148;) and Statement of Financial Accounting Standards No.&nbsp;3 (&#147;SFAS 3&#148;)&#148;. SFAS
154 replaces APB 20, &#147;Accounting Changes&#148; and SFAS 3, &#147;Reporting Accounting Changes in Interim
Financial Statements&#148;, and provides guidance on the accounting for and reporting of accounting
changes and error corrections. SFAS 154 establishes retrospective application, or the latest
practicable date, as the required method for reporting a change in accounting principle and the
reporting of a correction of an error. SFAS 154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after December&nbsp;15, 2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July&nbsp;2006, the FASB issued FASB Interpretation No.&nbsp;48 (&#147;FIN 48&#148;), &#147;Accounting for
Uncertainty in Income Taxes&#148;. FIN 48 establishes the threshold for recognizing the benefits of
tax-return positions in the consolidated financial statements as &#147;more-likely-than-not&#148; to be
sustained by the taxing authority, and prescribes a measurement methodology for those positions
meeting the recognition threshold. FIN 48 is effective the fiscal year beginning after December&nbsp;15,
2006. TDK is currently evaluating the effect that the adoption of FIN 48 will have on TDK&#146;s
consolidated financial position and results of operations.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E.&nbsp;Off-Balance Sheet Arrangements
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As part of its ongoing business, TDK does not conduct transactions with unconsolidated
entities or financial partnerships, such as entities often referred to as structured finance or
special purpose entities, which have been established for the purpose of facilitating off-balance
sheet arrangements or other limited purposes.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;F.&nbsp;Tabular Disclosure of Contractual Obligations
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;31, 2006, commitments outstanding for the purchase of property, plant and equipment
approximated &#165;13.1&nbsp;billion ($112&nbsp;million). TDK has entered into several purchase agreements with
certain suppliers whereby TDK is committed to purchase a minimum amount of raw materials to be used
in the manufacture of its products. Future minimum purchases remaining under the agreements
approximated &#165;4.5&nbsp;billion ($39&nbsp;million) at March&nbsp;31, 2006. Contingent liabilities for guarantees
of loans of TDK&#146;s employees and affiliates amounted to approximately &#165;5.7&nbsp;billion ($49&nbsp;million).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Contractual obligations on March&nbsp;31, 2006 are summarized as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19" style="border-bottom: 1px solid #000000">Payments Due by Period (Yen in millions)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Less than</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">1 to 3</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">3 to 5</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">After 5</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Total</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">1 year</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">years</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">years</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">years</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Contractual obligations:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">2,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Operating leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,499</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,881</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,873</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Contributions to
defined benefit plans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchase commitment
of raw materials</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,539</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,061</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">231</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchase commitment
of property, plant and
equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,088</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,088</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,921</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,885</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,931</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"> - 46 -
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;G.&nbsp;Safe Harbor
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This material contains forward-looking statements, including projections, plans, policies,
management strategies, targets, schedules, understandings and evaluations, about TDK Corporation
(&#147;TDK&#148;) and its group companies (TDK and its group companies are referred to also as &#147;TDK&#148; where
the context so requires). These forward-looking statements are based on the current forecasts,
estimates, assumptions, plans, beliefs and evaluations of TDK in light of information currently
available to it, and contain known and unknown risks, uncertainties and other factors. TDK
therefore wishes to caution readers that, being subject to risks, uncertainties and other factors,
TDK&#146;s actual results, performance, achievements or financial position could be materially different
from any future results, performance, achievements or financial position expressed or implied by
these forward-looking statements, and TDK undertakes no obligations to publicly update or revise
any forward-looking statements after the issue of this material.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The electronics markets in which TDK operates are highly susceptible to rapid changes. Risks,
uncertainties and other factors that can have significant effects on TDK include, but are not
limited to, shifts in technology, fluctuations in demand, prices, interest and foreign exchange
rates, and change in economic environments, conditions of competition, laws and regulations.
</DIV>


<P align="center" style="font-size: 10pt"> - 47 -
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left">
<A name="108"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Item&nbsp;6</B></U><B>. Directors, Senior Management and Employees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;Directors and senior management
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Directors, corporate officers and corporate auditors of TDK as of June&nbsp;29, 2006 and their
respective business experience are listed below.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Directors</U>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="75%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name (Date of birth)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Position, responsibility and brief personal record</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">Hajime Sawabe</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Representative Director, Chairman and CEO &#150; since June&nbsp;2006</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">(Jan. 9, 1942)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Director of TDK since June&nbsp;1996</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed Representative Director, President and CEO in June&nbsp;1998</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">Takehiro Kamigama</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Representative Director, President and COO &#150; since June&nbsp;2006</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">(Jan. 12, 1958)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed
General Manager of Data Storage Components Business Group in October&nbsp;2001</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Corporate Officer of TDK since June&nbsp;2002</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed Senior Vice President of TDK in June&nbsp;2003</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed General Manager of Data Storage and Thin Film Technology Components Business Group in June&nbsp;2003</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed Director, Executive Vice President in June&nbsp;2004</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">Jiro Iwasaki</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Director, Executive Vice President &#150; since June&nbsp;2006</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">(Dec. 6, 1945)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">In charge of General Manager of Administration Group and Environment</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Director of TDK since June&nbsp;1996</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- General Manager of Administration Group and Environment since June&nbsp;2002</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed Senior Vice President in June&nbsp;2002</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">Shinji Yoko</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Director, Senior Vice President &#150; since June&nbsp;2002</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">(Jan. 2, 1948)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">In charge of General Manager of Electronic Components Sales and Marketing Group</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Director of TDK since June&nbsp;1998</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed Deputy General Manager of Electronic Components Business Group, General Manager of High Frequency Devices Division in April&nbsp;2000</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- General Manager of Electronic Components Sales and Marketing Group since June&nbsp;2002</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"> - 48 -
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="75%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name (Date of birth)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Position, responsibility and brief personal record</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">Takeshi Nomura</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Director, Senior Vice President &#150; since June&nbsp;2002</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">(Mar. 8, 1952)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">In charge of General Manager of Ferrite and Magnet Products Business Group</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Director of TDK since 1998</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed General Manager of Materials Research Center, General Manager of Intellectual Properties Center in July&nbsp;2002</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed General Manager of Materials Research Center, General Manager of Intellectual Properties Center, General Manager of Information Technology Research Center and Technology in July&nbsp;2003</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed General Manager of Technology Group, General Manager of Intellectual Properties Center and Technology in January&nbsp;2004</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed General Manager of Technology Group, General Manager of Intellectual Properties Center, General Manager of Devices Development Center and Technology in July&nbsp;2004</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- General
Manager of Ferrite and Magnet Products Business Group since April&nbsp;2005</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">Yasuhiro Hagihara</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Director* &#150; since June&nbsp;2002</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">(Oct. 19, 1937)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Admitted to the bar in Washington D.C., U.S.A. in April&nbsp;1971</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Elected Partner of Graham &#038; James L.L.P. in January&nbsp;1979</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Partner of Squire, Sanders &#038; Dempsey L.L.P. since July&nbsp;2000</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Partner of Squire Sanders Gaikokuho Kyodo Jigyo Horitsu Jimusho since April&nbsp;2005</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">Seiji Enami</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Director and CFO&#150; since June&nbsp;2005</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">(Sep. 14, 1947)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">In charge of General Manager of Finance and Accounting Department</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed General Manager of Recording Media and Systems Business Group Industrial Sales Department in April&nbsp;2000</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- General Manager of Finance and Accounting Department since April&nbsp;2001</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- CFO of TDK since June&nbsp;2004</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"> - 49 -
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Corporate Officers</u>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="70%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name (Date of birth)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Position, responsibility and brief personal record</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">Kiyoshi Ito</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate Officer, Senior Executive Vice President &#150; since June&nbsp;2006</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">(May 28, 1944)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">In charge of General Manager of SCM Group and Production</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed General Manager of Electronic Components Business Group Capacitors Division in March&nbsp;1999</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed Director of TDK in June&nbsp;2000</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed General Manager of Circuit Devices Business Group in October&nbsp;2001</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed Corporate Officer, Senior Vice President of TDK in June&nbsp;2002</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed General Manager of Circuit Devices Business Group, General Manager of Ceramic Material Products Division in June&nbsp;2002</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed Executive Vice President in June&nbsp;2004</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- General Manager of SCM Group and Production since April&nbsp;2005</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">Takaya Ishigaki</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate Officer, Senior Vice President &#150; since June&nbsp;2005</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">(Apr. 10, 1953)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">In charge of General Manager of Circuit Devices Business Group, Capacitor Group Senior Manager</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed Deputy General Manager of Circuit Devices Business Group, Capacitor Group Senior Manager, General Manager of Multilayer Ceramics Manufacturing Department in October&nbsp;2001</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed Corporate Officer of TDK in June&nbsp;2003</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- General Manager of Circuit Devices Business Group, Capacitor Group Senior Manager since April&nbsp;2005</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">Minoru Takahashi</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate Officer, Senior Vice President &#150; since June&nbsp;2005</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">(Feb. 12, 1948)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">In charge of General Manager of Technology Group, General Manager of Devices Development Center and Technology, Intellectual Properties</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed General Manager of Sensors and Actuators Business Division, General Manager of Business Promotions Department in April&nbsp;2002</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed Corporate Officer of TDK in June&nbsp;2003</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed General Manager of Sensors and Actuators Business Group in November&nbsp;2004</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- General Manager of Technology Group, General Manager of Devices Development Center and Technology, Intellectual Properties since April&nbsp;2005</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">Michinori Katayama</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate Officer, Senior Vice President &#150; since June&nbsp;2006</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">(Dec. 9, 1946)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">In charge of General Manager of Corporate Communications Department</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- General Manager of Corporate Communications Department since January&nbsp;1999</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed Corporate Officer in June&nbsp;2002</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"> - 50 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="70%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name (Date of birth)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Position, responsibility and brief personal record</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">Yukio Hirokawa</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate Officer &#150; since June&nbsp;2002</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">(Feb. 19, 1947)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">In charge of General Manager of Network Devices Business Group</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed Associate Director, Electronic Components Sales and Marketing Group East Japan Sales Department Senior Manager in June&nbsp;2000</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed Associate Director, CRM Group Strategic Sales Department Senior Manager in April&nbsp;2001</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed Associate Director, Deputy General Manager of Network Devices Business Group in October&nbsp;2001</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- General Manager of Network Devices Business Group since January&nbsp;2002</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">Masatoshi Shikanai</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate Officer &#150; since June&nbsp;2002</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">(Oct. 3, 1949)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">In charge of General Manager of Recording Media and Solutions Business Group</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed General Manager of Recording Media and Systems Business Group Europe Division in April&nbsp;2000</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed Deputy General Manager of Recording Media and Systems Business Group in February&nbsp;2001</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- General Manager of Recording Media and Solutions Business Group since October&nbsp;2001</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">Kenryo Namba</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate Officer &#150; since June&nbsp;2002</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">(Jan. 6, 1947)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">In charge of Deputy General Manager of Technology Group, General Manager of Material Analysis Center and Organic Materials</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed General Manager of Corporate Research and Development Center in April&nbsp;2001</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed Deputy General Manager of Technology Group, General Manager of Devices Development Center, General Manager of Material Analysis Center in January&nbsp;2004</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Deputy General Manager of Technology Group, General Manager of Material Analysis Center and Organic Materials since July&nbsp;2004</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">Raymond Leung</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate Officer &#150; since June&nbsp;2004</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">(Apr. 18, 1956)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">In charge of General Manager of China Operation Group, Vice Chairman of SAE Magnetics (H.K.) Ltd.</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed President of SAE Magnetics (H.K.) Ltd. in October&nbsp;2000</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed Deputy General Manager of Data Storage and Thin Film Technology Components Business Group in June&nbsp;2004</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- General Manager of China Operation Group, Vice Chairman of SAE Magnetics (H.K.) Ltd. since April&nbsp;2005</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">Shunji Itakura</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate Officer &#150; since June&nbsp;2005</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">(Nov. 15, 1947)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">In charge of General Manager of Display Business Department</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed President of TDK (Malaysia) Sdn. Bhd. in January&nbsp;1999</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- General Manager of Display Business Department since April&nbsp;2001</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"> - 51 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="70%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name (Date of birth)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Position, responsibility and brief personal record</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">Shiro Nomi</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate Officer &#150; since June&nbsp;2005</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">(May 8, 1949)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">In charge of General Manager of Corporate Strategy Corporate Planning Department</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed General Manager of Corporate Planning Department in October&nbsp;2000</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- General Manager of Corporate Strategy Corporate Planning Department since October&nbsp;2001</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- General Manager of Corporate Strategy Management Review &#038; Support Department since April&nbsp;2006</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">Shinichi Araya</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate Officer &#150; since June&nbsp;2005</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">(Mar. 7, 1952)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">In charge of Deputy General Manager of Circuit Devices Business Group, Inductor Group Senior Manager</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed General Manager of Mechatronics Division in January&nbsp;1999</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed General Manager of Mechatronics Division, General Manager of Production Engineering Development Department in April&nbsp;2000</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed Deputy General Manager of Production Engineering Development Center in April&nbsp;2001</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed General Manager of Production Engineering Development Department in October&nbsp;2001</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Deputy General Manager of Circuit Devices Business Group, Inductor Group Senior Manager since April&nbsp;2002</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"> - 52 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Corporate Auditors</u>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="70%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name (Date of birth)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Position, responsibility and brief personal record</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">Masaaki Miyoshi</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate Auditor &#150; since June&nbsp;2003</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">(Sep. 3, 1947)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed President of Korea TDK Co., Ltd. in July&nbsp;2000</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">Takuma Otsuka</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate Auditor &#150; since June&nbsp;2000</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">(Feb. 23, 1944)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed Director of TDK in June&nbsp;1998</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">Kazutaka Kubota</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate Auditor* &#150; since June&nbsp;2003</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">(Oct. 11, 1942)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed Vice President of Asahi Bank, Ltd. in June&nbsp;2000</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed President of Asahigin Research Institute, Ltd. and Corporate Auditor of Saitama Railway Corporation in June&nbsp;2002</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">Kaoru Matsumoto</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate Auditor* &#150; since June&nbsp;2003</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">(Dec. 8, 1947)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Registration as a Certified Public Accountant in March&nbsp;1976</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Establishment of Kaoru Matsumoto &#038; Co. since November&nbsp;1977</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">Ryoichi Ohno</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate Auditor* &#150; since June&nbsp;2004</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">(Nov. 3, 1958)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Registration as a U.S. Certified Public Accountant in November&nbsp;1988</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Appointed Senior Vice President and Chief Financial Officer of The Gibraltar Life Insurance Co., Ltd. in September&nbsp;2001</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Finance Vice President of Prudential Financial Inc. since September&nbsp;2001</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:30px; text-indent:-15px">- Executive Vice President and Chief Financial Officer of The Gibraltar Life Insurance Co., Ltd. since July&nbsp;2005</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Notes(*)</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of TDK&#146;s Directors (except Yasuhiro Hagihara), Corporate Officers and Corporate
Auditors (except Kazutaka Kubota, Kaoru Matsumoto and Ryoichi Ohno) have been engaged on a
full-time basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All Directors and Corporate Auditors are elected by the general meeting of shareholders.
The term of office of Directors is one year. The current term of all Directors expires in June
2007. The term of office of Corporate Auditors is four years. The current terms for Mr.
Miyoshi, Mr.&nbsp;Otsuka, Mr.&nbsp;Kubota, Mr.&nbsp;Matsumoto and Mr.&nbsp;Ohno expire in June&nbsp;2007.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are no family relationships between any Director or Corporate Officer or Corporate
Auditor and any other Director or Corporate Officer or Corporate Auditor of TDK.
</DIV>



<P align="center" style="font-size: 10pt"> - 53 -
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp; B. Compensation
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The aggregate direct remuneration, including bonuses but excluding retirement allowances,
paid by TDK during the years ended March&nbsp;31, 2006 and 2005 to all Directors and Corporate
Auditors of TDK who served during each of those years was approximately&nbsp;250&nbsp;million ($2,137
thousand) and&nbsp;254&nbsp;million, respectively. During fiscal 2006, TDK&#146;s Directors and Corporate
Officers as of June&nbsp;29, 2006 received 126 and 130 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&nbsp;6.E. &#147;Share
ownership&#148;. 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. Corporate Auditors do not receive stock acquisition rights.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="26%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="61%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number of stock</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">acquisition rights</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">granted individually</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Name</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Position</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">during fiscal 2006</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Directors</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Hajime Sawabe</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Representative Director, Chairman  and CEO</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">35</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Takehiro Kamigama</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Representative Director, President and COO</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">26</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Jiro Iwasaki</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director, Executive Vice President</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">19</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Shinji Yoko</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director, Senior Vice President</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">17</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Takeshi Nomura</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director, Senior Vice President</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">17</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Yasuhiro Hagihara</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director (outside)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Seiji Enami</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director and CFO</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">126</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate Officers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Kiyoshi Ito</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Corporate Officer, Senior Executive Vice President</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">24</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Takaya Ishigaki</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Corporate Officer, Senior Vice President</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">16</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Minoru Takahashi</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Corporate Officer, Senior Vice President</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">16</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Michinori Katayama</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Corporate Officer, Senior Vice  President</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Yukio Hirokawa</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Corporate Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Masatoshi Shikanai</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Corporate Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Kenryo Namba</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Corporate Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Raymond Leung</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Corporate Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Shunji Itakura</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Corporate Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Shiro Nomi</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Corporate Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Shinichi Araya</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Corporate Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">130</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">- 54 -
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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. If 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&#146;s
performance. The aggregate amount set aside as lump sum retirement allowance by TDK during
fiscal 2006 and fiscal 2005 for Directors and Corporate Auditors of TDK totaled approximately&nbsp;14
million ($120 thousand) and&nbsp;14&nbsp;million, respectively. In June&nbsp;2002, TDK introduced a Corporate
Officer system to improve management efficiency and expedite decision-making. With the
introduction of a Corporate Officer system (See Item&nbsp;6.C. &#147;Board practices&#148;), the remuneration
system at large was reviewed and a lump sum retirement allowance for Directors was abolished.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On June&nbsp;27, 2002 the Board of Directors resolved that the retirement bonus remuneration system
for Directors should be abolished from the date of the resolution and that the retirement bonus
reserves which had been made for, and had not been paid to, the Directors who are reappointed at
the general meeting of shareholders held on June&nbsp;27, 2002,
should be frozen until their respective
retirements. The payment of any frozen retirement bonuses upon the retirement of a director
shall be subject to the consent of a general meeting of shareholders.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK has a stock option plan for Directors, Corporate Officers and all other employees. See
Item&nbsp;6.E. &#147;Share ownership&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp; C. Board practices
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK&#146;s Articles of Incorporation provide for a Board of Directors of not more than ten members.
Directors are elected at the general meeting of shareholders for a term of office of one year and
may serve any number of consecutive terms. The Board of Directors has the ultimate responsibility
for the administration of the affairs of TDK.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors may appoint from among the Directors referred to above one or more
Representative Directors. Each of the Representative Directors has the authority to represent TDK
generally in the conduct of its affairs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK introduced a Corporate Officer system in June&nbsp;2002 to improve management efficiency and
expedite decision making. Corporate Officers are elected at the meeting of the Board of Directors
held immediately after the ordinary general meeting of shareholders, for a term of one year, but
may serve any number of terms upon appointment of the Board of Directors each time following the
expiration of the term. The Board of Directors may elect from among Corporate Officers one or more
Executive Vice Presidents, Senior Vice Presidents and Corporate Senior Officers. Each of the
Corporate Officers has the authority individually to operate businesses of which he/she is in
charge, under the control of the Board of Directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Corporate Auditors of TDK, who are elected at the general meeting of shareholders and
whose number must not exceed five, are not required to be certified public accountants. One or
more Standing Corporate Auditors is required to be elected from among the Corporate Auditors. Each
Corporate Auditor has the statutory duty to audit the financial statements and business reports to
be submitted by the Representative Director to the ordinary general meeting of shareholders and
also to audit the administration by the Directors. Each of the Corporate Auditors is required to
attend and, if necessary, express his or her opinion at meetings of the Board of Directors, but is
not entitled to vote. TDK established a Board of Corporate Auditors
(at least half of which must be
from outside TDK) and the term of each Corporate Auditor is four years.
</DIV>

<P align="center" style="font-size: 10pt">- 55 -
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the Corporate Auditors, TDK is required to appoint an accounting auditor which
is required to be a certified public accountant or an auditing firm. The primary duty of an
accounting auditor is to audit the financial statements proposed to be submitted by the
Representative Director to the ordinary general meetings of shareholders for approval thereof, and
to report their opinion to the Board of Corporate Auditors if they have found any wrongdoings or
material facts which are in violation of laws and regulations or the Articles of Incorporation with
respect to director&#146;s performance of its duties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are no family relationships between any Director or Corporate Officer or Corporate
Auditor and any other Director or Corporate Officer or Corporate Auditor of TDK.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%"><U><I>Significant differences in corporate governance practices between TDK and U.S. listed
companies on the New York Stock Exchange</I></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">1. Directors&#146; Independence
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Company Law of Japan (the &#147;Company Law&#148;), which became effective on May&nbsp;1, 2006, TDK
is a &#147;Company with Board of Corporate Auditors,&#148; meaning a company which has the board of corporate
auditors (<I>kansayaku-kai</I>). The Company Law allows a company to choose to be a &#147;Company with
Committees,&#148; meaning a company that has a nominating committee, audit committee, compensation
committee and one or more executive officers, without having corporate auditors. However, TDK has
not chosen to be a Company with Committees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the New York Stock Exchange Corporate Governance Rules (the &#147;Rules&#148;), listed companies
must have a majority of independent directors. By contrast, while the Company Law requires
&#147;Companies with a Board of Directors,&#148; meaning a company which has established or is required to
establish a board of the directors, to have a minimum of three directors, it does not require that
a Company with a Board of Corporate Auditors have outside directors. An &#147;outside director&#148; is
defined as &#147;a director who was not a managing director, executive officer, manager or employee of
the company or any of its subsidiaries at any time in the past, and who is not currently a managing
director, executive officer, manager or employee of the company or any of its subsidiary.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK is in compliance with the Company Law and has seven directors. In addition, although TDK
is not required to have outside directors by law, it has voluntarily elected one outside director
(Yasuhiro Hagihara).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2. Definition of &#147;Independent Director&#148;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The meaning of &#147;outside director&#148; under the Company Law is not exactly the same as the meaning
of &#147;independent director&#148; provided under the Rules.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Rules, no director qualifies as &#147;independent&#148; unless the board of directors
affirmatively determines that the director has no material relationship with the listed company,
either directly or as a partner, shareholder or officer of an organization that has a relationship
with the company. Companies must identify which directors are independent and disclose the basis
for that determination. In addition, a director is not independent if:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The director is, or has been within the last three years, an employee of the listed
company, or an immediate family member is, or has been within the last three years, an
executive officer, of the listed company.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The director has received, or has an immediate family member who has received, during
any twelve-month period within the last three years, more than $100,000 in direct
compensation from the listed company, other than director and committee fees and pension or
other forms of deferred compensation for prior service (provided such compensation is not
contingent in any way on continued service).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The director or an immediate family member is a current partner of a firm that is the
company&#146;s internal or external auditor; the director is a current employee of such a firm;
the director has an immediate family member who is a current employee of such a firm and
who participates in the firm&#146;s audit, assurance or tax compliance (but not tax planning)
practice; or the director or an immediate family member was within the last three years
(but is no longer) a partner or employee of such a firm and personally worked on the listed
company&#146;s audit within that time.</TD>
</TR>



</TABLE>
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The director or an immediate family member is, or has been within the last three years,
employed as an executive officer of another company where any of the listed company&#146;s
present executive officers at the same time serves or served on that company&#146;s compensation
committee.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The director is a current employee, or an immediate family member is a current executive
officer, of a company that has made payments to, or received payments from, the listed
company for property or services in an amount which, in any of the last three fiscal years,
exceeds the greater of $1&nbsp;million, or 2&nbsp;percent of such other company&#146;s consolidated gross
revenues.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By contrast, the Company Law provides that an &#147;outside director&#148; is &#147;a director who was not a
managing director, executive officer, manager or employee of the company or any of its subsidiaries
at any time in the past, and who is not currently a managing director or executive officer, manager
or employee of the company or any of its subsidiary.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Yasuhiro Hagihara is an outside director within the meaning of the Company Law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">3. Corporate Auditors
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK, a Company with Board of Corporate Auditors within the meaning of the Company Law, is
required to have at least three corporate auditors. At least half of such corporate auditors must
be outside auditors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company Law provides that an &#147;outside corporate auditor&#148; is &#147;a corporate auditor of the
company who has not been a director, accounting officer (<I>kaikei sanyo</I>), executive officer, manager
or other employee of such company or any of its subsidiaries at any time before their assumption of
office as corporate auditor&#148;. On the other hand, the Rules provide that all audit committee
members satisfy the requirements for director independence.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Of the five TDK corporate auditors, three &#151; Mr.&nbsp;Kazutaka Kubota, Mr.&nbsp;Kaoru Matsumoto and Mr.
Ryoichi Ohno &#151; are outside corporate auditors within the meaning of the Company Law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">4. Regularly Scheduled Sessions without Management
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Japanese law does not require that TDK hold regular meetings without management as mentioned
in the Rules. Since TDK is a Company with Board of Corporate Auditors, each of its corporate
auditors and the board of directors audit/monitor the management, and such auditing/monitoring by
the corporate auditors and the board of directors functions as TDK&#146;s management-check system.
</DIV>

<P align="center" style="font-size: 10pt">- 58 -
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">5. Nominating / Corporate Governance Committee
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Whereas under the Rules, listed companies must have a nominating / corporate governance
committee composed entirely of independent directors, under Japanese law, TDK, as a Company with
Board of Corporate Auditors, is not required to establish a nominating committee. Thus, TDK
currently does not have a nominating committee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Directors and Corporate Auditors of TDK must be appointed at a shareholders&#146; meeting in
accordance with the Company Law. The Company Law requires directors of a Company with Board of
Corporate Auditors to obtain the consent of the board of corporate auditors if the directors desire
to submit to a shareholders&#146; meeting a proposal concerning the appointment of a corporate auditor.
Also, the board of corporate auditors may demand that the directors include the appointment of a
corporate auditor in the agenda of a shareholders&#146; meeting or that the directors submit a proposal
concerning the appointment of a corporate auditor who is recommended by the board of corporate
auditors. In order to dismiss a corporate auditor, any such dismissal must be by special
resolution of a general shareholders meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">6. Compensation Committee
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Rules, listed companies must have a compensation committee composed entirely of
independent directors. On the other hand, Japanese law does not require TDK, a Company with Board
of Corporate Auditors, to set up a compensation committee. TDK has, however, voluntarily
established a compensation advisory committee (the &#147;CAC&#148;). The CAC is responsible for (i)
investigating compensation levels for directors and executive officers, (ii)&nbsp;reviewing compensation
systems, performance evaluation standards and the method of calculating compensation, and (iii)
making proposals for compensation level for certain individuals. The CAC is authorized to make and
submit proposals to the Board of Directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The CAC has three members: one outside director (Yasuhiro Hagihara), one non-outside director
(Jiro Iwasaki) and an outside expert on compensation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the case of TDK, a Company with Board of Corporate Auditors, the Company Law and the
Articles of Incorporation requires the following matters with respect to the amount of compensation
for the Directors to be determined by the resolution of a shareholders&#146; meeting:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>With respect to any item of compensation in a definitive amount, such amount;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>With respect to any item of compensation not in a definitive amount, a concrete
method for the calculation thereof; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>With respect to non-monetary items as compensation, the specific contents
thereof.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">7. Audit Committee
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Japanese law does not require TDK, a Company with Board of Corporate Auditors, to set up an
audit committee, and TDK therefore has not established an audit committee. TDK, however, has
established the board of corporate auditors pursuant to the Company Law (consisting of five
corporate auditors including three outside corporate auditors) and this exempts TDK from Rule&nbsp;10A-3
of the Securities Exchange Act of 1934, as amended, requiring companies to have an audit committee.
This exemption is specifically provided by Rule&nbsp;10A-3(c)(3) of the Securities Exchange Act of
1934, as amended, and applies to TDK because TDK meets all of the following elements that are
enumerated:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>TDK has a Board of Corporate Auditors (<I>kansayaku-kai</I>) established and selected
pursuant to the Company Law;</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">- 59 -
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company Law requires the board of corporate auditors to be separate from
the board of directors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(iii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under the Company Law, the corporate auditors are not elected by management,
but by the shareholders at a shareholders&#146; meeting. In addition, no executive officer
of TDK is a member of the board of corporate auditors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(iv)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company Law prohibits a corporate auditor from serving as a director,
manager or other employee of the company or any of its subsidiaries, or as an
accounting officer (<I>kaikei sanyo</I>) or executive officer of any subsidiary of the
company. The Company Law requires a Company with Board of Corporate Directors to have
at least half of the auditors thereof must be an outside auditor as such term is
defined in the Company Law. As such, the Company Law provide for the standards for
independence of the board of corporate auditors from the management of TDK;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(v)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company Law provides that an accounting auditor (<I>kaikei kansanin</I>) must be
appointed at a shareholders&#146; meeting. However, it also provides that in order to
submit a proposal concerning an appointment of an accounting auditor to a shareholders&#146;
meeting, the directors must obtain the consent of the Board of Corporate Auditors and
that the Board of Corporate Auditors may demand that the directors include the
appointment of an accounting auditor in the agenda of a shareholders&#146; 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. In addition, the
Company Law provides that the Board of Corporate Auditors may dismiss an accounting
auditor for causes such as breach of his or her duties that are enumerated in the
Company Law. Further, pursuant to the Company Law and Company Accounting Regulations
thereunder, the board of corporate auditors audit the financial statements separately
from an audit by the accounting auditor, and if the board believes that the manner or
result of an audit by the accounting auditors is not reasonable, it must indicate its
objections and the reasons therefor in the audit report. To this end, a corporate
auditor may, if necessary for the performance of his/her duties, request the accounting
auditor to provide a report thereon. As such, in accordance with the Company Law, the
Board of Corporate Auditors of TDK is responsible, to the extent permitted by law, for
the appointment, retention and supervision of the work of a registered public
accounting firm engaged for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services for TDK; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(vi)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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. In addition, each Corporate
Auditor of TDK has the authority to engage independent counsel and other advisers if
such engagement is necessary to carry out his/her duties. Furthermore, each Corporate
Auditor may require TDK to pay any and all expenses necessary for carrying out his/her
duties, including compensation of any advisers employed by him/her and ordinary
administrative expenses.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As discussed above, TDK has established a Board of Corporate Auditors pursuant to the Company
Law (consisting of five corporate auditors including three outside corporate auditors), and
therefore does not have an audit committee.
</DIV>

<P align="center" style="font-size: 10pt">- 60 -
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">8. Corporate Governance Guidelines
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Rules, listed companies must adopt and disclose corporate governance guidelines. On
the other hand, Japanese law does not require TDK to either adopt or disclose corporate governance
guidelines, and thus TDK has not established such guidelines. However, TDK has disclosed &#147;The
Status Concerning Corporate Governance&#148; in its Japanese Annual Securities Report in accordance with
the Securities Exchange Law of Japan and regulations thereunder. Furthermore, in conjunction with
the amendment (effective as of March&nbsp;1, 2006) of the Regulations Concerning Listing of Securities
issued by the Tokyo Stock Exchange, TDK has delivered to the Tokyo Stock Exchange a report titled
&#147;Report Concerning Corporate Governance&#148;. Additionally, because the Company Law requires that
Large Companies (a company with paid in capital of Five Hundred Million Japanese Yen (JPY
500,000,000) or more or debt of Twenty Billion Japanese Yen (JPY
20,000,000,000) or more) determine
whether or not to establish internal control systems to ensure that the performance by directors of
their duties comply with applicable laws and regulations and the articles of incorporation of such
Large Company, and the internal control systems provided under the Regulations Concerning
Enforcement of the Company Law to ensure the integrity of the business activities of a company
(collectively referred to as the &#147;Internal Control System&#148;), the Board of Directors of TDK has,
through resolution, determined upon the detailed content of a corporate governance system.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">9. Code of Business Conduct and Ethics
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Listed companies must adopt and disclose a code of business conduct and ethics for directors,
officers and employees, and promptly disclose any waivers of the code for directors or executive
officers under the Rules. By contrast, although Japanese law does not require TDK to adopt or
disclose a code of business conduct and ethics, TDK has voluntarily adopted and disclosed one. See
Item&nbsp;16B. &#147;Code of Ethics&#148;. Furthermore, TDK has incorporated such code of business conduct and
ethics into the Internal Control System indicated in the preceding paragraph.
</DIV>

<P align="center" style="font-size: 10pt">- 61 -
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp; D. Employees
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table lists the number of TDK full-time employees as of March&nbsp;31, 2006, 2005 and
2004.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 0px solid #000000">As of March 31, 2006 </TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Japan</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Overseas</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Total</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Electronic materials and components</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,697</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,116</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Recording media</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,258</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,251</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,516</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,556</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,923</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 0px solid #000000">As of March 31, 2005 </TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Japan</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Overseas</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Total</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Electronic materials and components</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,050</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Recording media</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,593</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,436</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,472</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,502</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,613</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,115</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 0px solid #000000">As of March 31, 2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Japan</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Overseas</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Total</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Electronic materials and components</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,351</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Recording media</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,173</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,734</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,907</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,524</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,546</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,844</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,804</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The increase in the number of employees compared with the previous fiscal year is principally
attributable to the net increase in the number of employees of the electronic materials and
components segment, as Lambda Power Business became subsidiaries of TDK that are included in the
scope of new consolidation, and TDK increased the number of employees in order to respond to the
increased orders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK considers its employee relations to be excellent; there have been no significant strikes
or labor disputes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All full-time employees in Japan, except management and certain other personnel, must become
union members. Approximately 76&nbsp;percent of full-time employees of TDK are members of the TDK Labor
Union, which is affiliated with <U>ZENKIN RENGO</U>. About 45&nbsp;percent of the full-time employees
of TDK and its domestic subsidiaries are members of unions affiliated with <U>ZENKIN RENGO</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As is customary in Japan, TDK negotiates with the TDK Labor Union for annual wage increases,
and twice a year for bonuses. TDK also renews the terms and conditions of labor contracts, other
than those relating to wage and bonuses, every year.
</DIV>

<P align="center" style="font-size: 10pt">- 62 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp; E. Share ownership
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table lists the number of shares (which exclude shares underlying stock
acquisition rights) and shares underlying stock acquisition rights owned by the Directors,
Corporate Officers and Corporate Auditors of TDK as of June&nbsp;29, 2006. The total number of shares
held is 27,500, and the total number of share underlying acquisition rights held is 282,100, as
shown below, and these numbers constituted 0.2&nbsp;percent of all outstanding shares as of such date.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="57%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number of</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">shares</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">underlying</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">stock acquisi-</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Name</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Position</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">shares</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">tion rights</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hajime Sawabe</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Representative Director, Chairman and CEO</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">51,300</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Takehiro Kamigama</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Representative Director, President and COO</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3,300</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">27,000</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Jiro Iwasaki</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director, Executive Vice President</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">17,000</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shinji Yoko</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director, Senior Vice President</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">30,800</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Takeshi Nomura</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director, Senior Vice President</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">31,000</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Yasuhiro Hagihara</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director (outside)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2,500</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Seiji Enami</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director and CFO</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,100</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5,500</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kiyoshi Ito</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Corporate Officer, Senior Executive Vice President</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">29,600</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Takaya Ishigaki</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Corporate Officer, Senior Vice President</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">800</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9,900</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minoru Takahashi</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Corporate Officer, Senior Vice President</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">200</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9,900</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Michinori Katayama</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Corporate Officer, Senior Vice President</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">500</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">12,500</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Yukio Hirokawa</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Corporate Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,400</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">16,700</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Masatoshi Shikanai</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Corporate Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">300</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">12,500</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kenryo Namba</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Corporate Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">16,500</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Raymond Leung</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Corporate Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2,000</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shunji Itakura</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Corporate Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">600</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3,300</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shiro Nomi</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Corporate Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">300</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2,400</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shinichi Araya</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Corporate Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,700</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Masaaki Miyoshi</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Full-time Corporate Auditor</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Takuma Otsuka</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Full-time Corporate Auditor</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kazutaka Kubota</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Corporate Auditor (outside)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kaoru Matsumoto</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Corporate Auditor (outside)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ryoichi Ohno</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Corporate Auditor (outside)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">27,500</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">282,100</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">- 63 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;<U>Stock option plans</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK obtained approval of the Ordinary General Meeting of Shareholders held on June&nbsp;29, 2006
regarding the issuance of stock acquisition rights as stock options for a stock-linked compensation
plan (the Stock Acquisition Rights) to Directors. Upon approval, the Board of Directors adopted
resolutions to issue an aggregate of 176 Stock Acquisition Rights, each representing a stock option
to purchase 100 shares of common stock of TDK, to the 7 Directors. The Stock Acquisition Rights
are exercisable during the period from August&nbsp;6, 2006 to August&nbsp;5, 2026. The amount to be paid by
qualified persons upon the exercise of each Stock Acquisition Rights
is set at &#165;1 per share of
common stock, which is subject to an adjustment in certain events, including but not limited to a
stock split, stock dividend and issue of new shares at a price less than the current market price
of the shares of TDK.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK obtained approval of the Ordinary General Meeting of Shareholders held on June&nbsp;29, 2006
regarding the issuance of stock acquisition rights as stock options for a stock-linked compensation
plan (the Stock Acquisition Rights) to Corporate Officers, pursuant to Articles 236, 238 and 239 of
the Company Law (<I>Kaisha-ho</I>). Upon approval, the Board of Directors adopted resolutions to issue an
aggregate of 153 Stock Acquisition Rights, each representing a stock option to purchase 100 shares
of common stock of TDK, to the 10 Corporate Officers. The Stock Acquisition Rights are exercisable
during the period from August&nbsp;6, 2006 to August&nbsp;5, 2026. The amount to be paid by qualified
persons upon the exercise of each Stock Acquisition Rights is set at &#165;1 per share of common stock,
which is subject to an adjustment in certain events, including but not limited to a stock split,
stock dividend and issue of new shares at a price less than the current market price of the shares
of TDK.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK also obtained approval of the Ordinary General Meeting of Shareholders held on June&nbsp;29,
2006 regarding the issuance of stock acquisition rights as stock options (the Stock Acquisition
Rights) to select senior executives, pursuant to Articles 236, 238 and 239 of the Company Law.
Upon approval, the Board of Directors adopted resolutions to issue an aggregate of 1,200 Stock
Acquisition Rights, each representing a stock option to purchase 100 shares of common stock of TDK,
to select senior executives of TDK, and the Directors and select senior executives of subsidiaries.
The Stock Acquisition Rights are exercisable during the period from August&nbsp;1, 2008 to July&nbsp;31,
2012.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK obtained approval of the Ordinary General Meeting of Shareholders held on June&nbsp;29, 2005
regarding the issuance of stock acquisition rights as share-based compensation stock options (the
Stock Acquisition Rights) to Board members and Corporate Officers, pursuant to Articles 280-20 and
280-21 of the Japanese Commercial Code. Upon approval, the Board of Directors adopted resolutions
to issue an aggregate of 246 Stock Acquisition Rights, each representing an option to purchase 100
shares of common stock of TDK, to the then 17 Directors and Corporate Officers of TDK. The Stock
Acquisition Rights issued on June&nbsp;30, 2005 are fully vested on date of issuance and are exercisable
during the period from July&nbsp;1, 2005 to June&nbsp;30, 2025. The amount to be paid by qualified persons
upon the exercise of each Stock Acquisition Rights is set at &#165;1 ($0.01) per share of common stock.
Stock option related compensation cost of &#165;186&nbsp;million ($1,590 thousand) has been recognized in
fiscal 2006, representing the amount attributed to service rendered during the current period of
the amount by which the market price of the underlying common stock exceeded the exercise price of
stock options approved for issuance at the Ordinary General Meeting of Shareholders held in June
2005.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK obtained approval of the Ordinary General Meeting of Shareholders held on June&nbsp;29, 2005
regarding the issuance of stock acquisition rights as stock options to select senior executives,
pursuant to Articles 280-20 and 280-21 of the Japanese Commercial Code. Upon approval, the Board
of Directors adopted resolutions to issue an aggregate of 906 Stock Acquisition Rights, each
representing an option to purchase 100 shares of common stock of TDK, to the then 172 select senior
executives of TDK, and the Directors and select senior executives of subsidiaries. The Stock
Acquisition Rights issued on August&nbsp;11, 2005 are exercisable during the period from August&nbsp;1, 2007
to July&nbsp;31, 2011. The amount to be paid by qualified persons upon the exercise of each Stock
Acquisition Rights is set at &#165;8,134 ($69.52) per share of common stock, which was calculated by a
formula approved by shareholders at the said annual shareholders meeting and is subject to an
adjustment in certain events, including but not limited to a stock split, stock dividend and issue
of new shares at a price less than the current market price of the shares of TDK. The exercise
price of each Stock Acquisition Rights was equal to or greater than the fair market value of TDK&#146;s
common stock on the date of grant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To cover these options and share-based compensation stock options issued on June&nbsp;30, 2005, TDK
purchased on the Tokyo Stock Exchange (&#147;TSE&#148;) a total of 115,200 common shares with an aggregate
purchase price of &#165;930&nbsp;million ($7,949 thousand) from August&nbsp;17, 2005 through August&nbsp;22, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK obtained approval of the Ordinary General Meeting of Shareholders held on June&nbsp;29, 2004
regarding the issuance of stock acquisition rights as stock options, pursuant to Articles 280-20
and 280-21 of the Japanese Commercial Code. Upon approval, the Board of Directors adopted
resolutions to issue an aggregate of 2,343 Stock Acquisition Rights, each representing a stock
option to purchase 100 shares of common stock of TDK, to the then 187 Directors, Corporate Officers
and select senior executives of TDK, and the Directors and select senior executives of its
subsidiaries. The Stock Acquisition Rights are exercisable during the period from August&nbsp;1, 2006
to July&nbsp;31, 2010. The amount to be paid by qualified persons upon the exercise of each Stock
Acquisition Rights was set at &#165;8,147 per share of common stock. The exercise price of each Stock
Acquisition Rights was equal to or greater than the fair market value of TDK&#146;s common stock on the
date of grant. To cover these options TDK purchased on the TSE a total of 234,300 common shares
with an aggregate purchase price of &#165;1,656&nbsp;million from August&nbsp;9, 2004 through August&nbsp;16, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK obtained approval of the Ordinary General Meeting of Shareholders held on June&nbsp;27, 2003
regarding the issuance of stock acquisition rights as stock options, pursuant to Articles 280-20
and 280-21 of the Japanese Commercial Code. Upon approval, the Board of Directors adopted
resolutions to issue an aggregate of 2,547 Stock Acquisition Rights, each representing a stock
option to purchase 100 shares of common stock of TDK, to the then 179 Directors, Corporate Officers
and select senior executives of TDK, and the Directors and select senior executives of its
subsidiaries. The Stock Acquisition Rights issued on August&nbsp;7, 2003 are exercisable during the
period from August&nbsp;1, 2005 to July&nbsp;31, 2009. The amount to be paid by qualified persons upon the
exercise of each Stock Acquisition Rights was set at &#165;6,954 per share of common stock. The
exercise price of each Stock Acquisition Rights was equal to or greater than the fair market value
of TDK&#146;s common stock on the date of grant. To cover these options TDK purchased on the TSE a
total of 260,000 common shares with an aggregate purchase price of &#165;1,847&nbsp;million from August&nbsp;8,
2003 through August&nbsp;18, 2003.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK obtained approval of the Ordinary General Meeting of Shareholders held on June&nbsp;27, 2002
regarding the issuance of stock acquisition rights as stock options, pursuant to Articles 280-20
and 280-21 of the Japanese Commercial Code, as amended. Upon approval, the Board of Directors
adopted resolutions to issue an aggregate of 2,236 Stock Acquisition Rights, each representing a
stock option to purchase 100 shares of common stock of TDK, to the then 197 Directors, Corporate
Officers and select senior executives of TDK, and the Directors and select senior executives of its
subsidiaries. The Stock Acquisition Rights issued on August&nbsp;9, 2002 are exercisable during the
period from August&nbsp;1, 2004 to July&nbsp;31, 2008. The amount to be paid by qualified persons upon the
exercise of each Stock Acquisition Rights was set at &#165;5,909 per share of common stock. The
exercise price of each Stock Acquisition Rights was equal to or greater than the fair market value
of TDK&#146;s common stock on the date of grant. To cover these options TDK purchased on the TSE a
total of 223,600 common shares with an aggregate purchase price of &#165;1,209&nbsp;million from August&nbsp;12,
2002 through August&nbsp;19, 2002.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Ordinary General Meeting of Shareholders held on June&nbsp;28, 2001 approved the implementation
of TDK&#146;s stock option plan for Directors and certain employees of TDK, and the purchase of TDK&#146;s
own shares for transfer to them under the plan, pursuant to Article&nbsp;210-2 of Japanese Commercial
Code. Stock options were provided to the then 12 Directors on the Board and 184 associate
directors and officials in amounts ranging from 500 to 10,000 common shares each, at an exercise
price of &#165;6,114 per share. The exercise price of each Stock Acquisition Right was equal to or
greater than the fair market value of TDK&#146;s common stock on the date of grant. To cover these
options TDK purchased on the TSE a total of 158,000 common shares with an aggregate purchase price
of &#165;917&nbsp;million from July&nbsp;2, 2001 through July&nbsp;23, 2001.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Ordinary General Meeting of Shareholders held on June&nbsp;29, 2000 approved the implementation
of TDK&#146;s stock option plan for Directors and certain employees of TDK, and the purchase of TDK&#146;s
own shares for transfer to them under the plan, pursuant to Article&nbsp;210-2 of the Japanese
Commercial Code. Stock options were provided to the then 13 Directors on the Board and 191
associate directors and officials in amounts ranging from 500 to 10,000 common shares each, at an
exercise price of &#165;15,640 per share. The exercise price of each Stock Acquisition Right was equal
to or greater than the fair market value of TDK&#146;s common stock on the date of grant. To cover
these options TDK purchased on the TSE a total of 170,400 common shares with an aggregate purchase
price of &#165;2,665&nbsp;million from July&nbsp;3, 2000 through August&nbsp;2, 2000.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Employees (excluding Directors and Corporate Officers) Shareholding Association
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March&nbsp;31, 2006, the number of members of the TDK Employees Shareholding Association
totaled 1,570. The Employees Shareholding Association accepts new memberships in March and
September of every year. Members are entitled to purchase shares of TDK, the maximum amount being
&#165;50,000 a month. In addition, members have received a monthly subsidy equivalent to 5&nbsp;percent of
the purchase price of shares. The subsidy amounted to &#165;18&nbsp;million ($156 thousand) for fiscal 2006.
The total amount of TDK shares having voting rights owned by the TDK Employees Shareholding
Association was as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="34%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Title of class</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Identity of person or group</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Amount owned</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Percent of class</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">TDK Employees Shareholding Association</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center">486,210 shares</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.37 </TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="109"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Item&nbsp;7</B></U><B>. Major Shareholders and Related Party Transaction</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;Major shareholders
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table below lists the number of TDK shares held by holders of 5&nbsp;percent or more of TDK
shares and their percentage ownership as of March&nbsp;31, 2006:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Shares owned</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Name of major shareholder</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(in thousands)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Percentage</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">The Master Trust Bank of Japan, Ltd. (Trust
account)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,660</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">11.00</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Japan Trustee Services Bank, Ltd. (Trust account)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8.39</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Major shareholders do not have voting rights different from other shareholders, subject to the
limitation on exercise as set forth in &#147;Item&nbsp;10. B. Memorandum and Articles of Association &#150; Common
Stock &#150; Voting rights.&#148;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At March&nbsp;31, 2006, there were 1,411,860 registered ADRs outstanding and 359 registered
holders, of which 1,411,341 ADRs were held by 212 registered U.S. holders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Depositary of ADRs of TDK is Citibank N.A. of New York.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK is not, directly or indirectly, owned or controlled by another corporation or by any
foreign government.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;Related party transaction
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since the beginning of TDK&#146;s last full fiscal year, TDK has not transacted with, nor does TDK
currently plan to transact with, a related party, except for transactions among TDK and its
affiliates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;Interests of experts and counsel
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left">
<A name="110"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Item&nbsp;8</B></U><B>. Financial Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;Consolidated statements and other financial information
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Consolidated financial statements</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK&#146;s audited financial statements are included under Item&nbsp;17 &#147;Financial Statements&#148;. Except
for TDK&#146;s financial statements included under Item&nbsp;17, no other information in this Annual Report
has been audited by TDK&#146;s independent auditors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Refer to Consolidated Financial Statements and Notes to Consolidated Financial Statements (See
Item&nbsp;17).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Export sales</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Finished goods and materials sent out of Japan are mainly bound for consolidated subsidiaries
of TDK, and are not, therefore, recorded as exports on a consolidated basis. For this reason, the
proportion of exports to total net sales is not significant.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Legal proceedings</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are no material pending legal proceedings, other than ordinary routine litigation
incidental to the business, to which TDK or any of its subsidiaries is a party or of which any of
their property is the subject.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Dividend policy</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Returning earnings to shareholders is one of TDK&#146;s highest management priorities. Therefore,
TDK&#146;s fundamental policy is to give consideration to a consistent increase in dividends based on
factors such as the return on equity (ROE), dividends as a percentage of equity (DOE)&nbsp;and TDK&#146;s
results of operations on a consolidated basis.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;Significant changes
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No significant change has occurred since the date of the annual consolidated financial
statements.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="111"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Item&nbsp;9</B></U><B>. The Offer and Listing</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;Offer and listing details
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The primary market for TDK&#146;s shares of common stock (Common Stock) is the Tokyo Stock Exchange
(the &#147;TSE&#148;). The shares are traded on the First Section of that exchange and are also listed on
the Osaka Securities Exchange in Japan. In addition, TDK&#146;s shares are listed on the New York Stock
Exchange in the form of American Depositary Receipts (&#147;ADRs&#148;), on the Euronext Brussels Stock
Exchange in the form of Bearer Depositary Receipts, and on the London Stock Exchange in the form of
shares of TDK.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth for the periods indicated the reported high and low sales
prices of TDK&#146;s shares of common stock on the TSE (both in yen and translated into U.S. dollars per
American Depositary Share) and the reported high and low bid prices for American Depositary Shares
of which each represents one share of common stock, as reported by the New York Stock Exchange.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><I>U.S. market</I></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Yen per share of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><I>price per American</I></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Common stock (1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><I>Depositary Share (2)</I></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">High</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Low</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><I>High</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><I>Low</I></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Annual highs and lows</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Year ended March&nbsp;31, 2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,670</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>69.00</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>40.00</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Year ended March&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,380</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>57.00</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>32.95</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Year ended March&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,810</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>77.86</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>32.40</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Year ended March&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,630</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>80.10</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>61.40</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Year ended March&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>85.40</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>62.50</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Quarterly highs and lows</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Year ended March&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">1st quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,630</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>80.10</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>64.50</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">2nd quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>77.05</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>61.40</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">3rd quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,910</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>74.85</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>67.80</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">4th quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>75.93</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>68.40</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Year ended March&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">1st quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,020</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>74.35</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>68.02</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">2nd quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,740</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,480</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>79.25</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>67.05</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">3rd quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>85.40</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>62.50</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">4th quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,070</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,730</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>76.29</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>66.50</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Year ending March&nbsp;31, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">1st quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>89.00</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>69.89</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Monthly highs and lows</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">January&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,760</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,730</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>73.79</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>68.00</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">February&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>72.81</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>66.50</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">March&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,070</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>76.29</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>69.43</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">April&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,760</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>84.13</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>76.22</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">May&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>89.00</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>81.10</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">June&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>84.16</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>69.89</I></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD colspan="3">Notes:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As reported by the Tokyo Stock Exchange.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As reported by the New York Stock Exchange.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">- 69 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;Plan of distribution
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;Markets
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See Item&nbsp;9.A. &#147;Offer and listing details&#148;.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D.&nbsp;Selling shareholders
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E.&nbsp;Dilution
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;F.&nbsp;Expenses of the issue
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>


<P align="center" style="font-size: 10pt">- 70 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="112"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Item&nbsp;10</B></U><B>. Additional Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;Share capital
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;Memorandum and articles of association
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The discussion below reflects the enactment of the Company Law, which became effective on May
1, 2006 and the latest amendments to TDK&#146;s Articles of Incorporation, which reflects the enactment
of the Company Law and was approved by the ordinary general shareholders meeting held on June&nbsp;29,
2006. The Company Law integrated into a single code formerly effective legislation regarding
companies, including Chapters 2, 3 and 4 of the Commercial Code, the Limited Liability Company
(<I>yugen kaisha</I>) Law and the Law for Special Provisions for the Commercial Code concerning Audits,
etc. of Joint Stock Corporations (<I>kabushiki kaisha</I>), all of which were now abolished. In addition,
the Company Law significantly changed traditional concepts and systems under the formerly effective
Commercial Code and other laws in many respects.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Organization</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK is a joint stock corporation <I>(kabushiki kaisha) </I>incorporated in Japan under the Commercial
Code <I>(shoho) </I>of Japan. It is registered in the Commercial Register <I>(shogyo tokibo) </I>maintained by
the Tokyo Legal Affairs Bureau (Registration Number: 0199-01-034849).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Objects and purposes</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Article&nbsp;2 of the Articles of Incorporation of TDK provides that its purpose is to engage in
the following lines of business:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>&#149;</B> Manufacture and sale of electric machinery and appliances;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>&#149;</B> Manufacture and sale of magnetic materials such as ferrite and magnet;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>&#149;</B> Manufacture and sale of electronic machinery and appliances such as automatic inserting
machine for electronic components, automatic mounter for electronic components, and
electronic measuring equipment and of components thereof;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>&#149;</B> Manufacture and sale of recording media such as magnetic tape, floppy disk and optical disk
and of data writing, reading and storage equipment therefor;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>&#149;</B> Manufacture and sale of ceramic materials such as electricity inductive ceramics,
piezoelectric ceramics, semiconductor ceramics and electricity insulating ceramics;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>&#149;</B> Manufacture and sale of circuit components such as coil and transformers;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>&#149;</B> Manufacture and sale of semiconductor;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>&#149;</B> Manufacture and sale of stabilizing power supplies (units to stabilize electric current or
voltage);
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>&#149;</B> Manufacture and sale of machinery and appliances for medical use and medical instruments and
of components thereof;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>&#149;</B> Manufacture and sale of single crystal materials and each product applying the same;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>&#149;</B> Manufacture and sale of precious metals, precious stones, artificial precious stones and
each product applying or utilizing the same;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>&#149;</B> Manufacture and sale of outer wall materials of buildings and structures;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>&#149;</B> Designing and contracting of construction work;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>&#149;</B> Development, production, sale and grant of license of software;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>&#149;</B> Manufacture, sale and contracting of applied product, machinery and tools and equipment of
each of the foregoing; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>&#149;</B> Any and all businesses incidental or relating to each of the foregoing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>With respect to directors, TDK&#146;s Articles of Incorporation, bylaws and associated internal
rules issued pursuant to the Articles provide in summary as follows:</U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a director is not entitled to vote on a proposal or arrangement or contract in
which the director is materially interested;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the remuneration and retirement allowances for directors are determined at a
general meeting of shareholders;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the Board of Directors have authority to approve long-term borrowing of &#165;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 &#165;10&nbsp;billion
and short-term borrowings (including issuance of commercial paper);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>there are no provisions requiring the mandatory retirement of directors at a
specified age; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">(e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>share ownership is not required in order to be eligible to serve as a director.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Common Stock</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>General</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set forth below is information relating to TDK&#146;s Common Stock, including brief summaries of
the relevant provisions of TDK&#146;s Articles of Incorporation and Share Handling Regulations, as
currently in effect, and of the Company Law and related legislation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to assert shareholders&#146; rights against TDK, a shareholder must have its name and
address registered on TDK&#146;s register of shareholders, in accordance with TDK&#146;s Share Handling
Regulations. The registered beneficial holder of deposited shares underlying the ADSs is the
Depositary for the ADSs. Accordingly, holders of ADSs will not be able directly to assert
shareholders&#146; rights against TDK.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Authorized capital</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Article&nbsp;6 of the Articles of Incorporation of TDK provides that the total number of shares
authorized to be issued by TDK is four hundred and eighty million (480,000,000) shares.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March&nbsp;31, 2006, 133,189,659 shares of Common Stock without having any par value were
issued, including 922,831 shares of treasury stock.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There is no concept of &#147;par value&#148; of shares of capital stock under the Company Law.
Thus, all shares of capital stock of TDK have no par value.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Dividends</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Articles of Incorporation of TDK provides that the accounts shall be closed on March&nbsp;31 of
each year and that year-end dividends, if any, shall be paid to shareholders, beneficial
shareholders and pledgees of record as of the end of such day. Under the Company Law and the
Articles of Incorporation of TDK, TDK may fix a record date and, subject to certain limitation on
the distributable surplus, pay dividends on retained earnings, if any, to shareholders, beneficial
shareholders and pledgees of record as of that date from time to time by a resolution of a general
meeting of shareholders. In addition, the Board of Directors may by its resolution declare an
interim dividend pursuant to Article&nbsp;454 paragraph 5 of the Company Law and the Articles of
Incorporation of TDK to shareholders, beneficial shareholders and pledgees of record as of the end
of each September&nbsp;30, without shareholders&#146; approval, but subject to the limitations described
below. Dividends may be distributed in cash or in kind subject to certain conditions being met.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Company Law, TDK is permitted to make a distribution of surplus to the extent that
the aggregate book value of the assets to be distributed to shareholders does not exceed the
distributable amount provided for by the Company Law and the ordinance of the Ministry of Justice
as at the effective date of such distributable surplus.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The amount of surplus at any given time shall be the amount of TDK&#146;s assets and the book value
of TDK&#146;s treasury stock after subtracting and adding the amounts of the items provided for by the
Company Law and the ordinance of the Ministry of Justice.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In Japan, the ex-dividend date and record date for dividends precede the date of determination
of the amount of the dividend. The price of shares generally goes ex-dividend on the third
business day prior to the record date.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Stock splits</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Company Law, the Board of Directors of TDK may at any time make stock splits by its
resolution. Generally, upon stock splits, shareholders will not be required to exchange share
certificates held by them for new share certificates. In respect of shares deposited with the
Japan Securities Depository Center, Inc. (&#147;JASDEC&#148;), new shares resulting from the stock split will
automatically be deposited with JASDEC, and shareholders who directly possess share certificates
will receive additional certificates representing the additional shares resulting from the stock
split. Before a stock split, TDK must give public notice of the stock split, specifying the record
date for the stock split, not less than two weeks prior to the record date.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Company Law, the Board of Directors of TDK may increase the authorized share capital
up to the number reflecting the rate of stock splits and amend the Articles of Incorporation of TDK
without the approval of a shareholders&#146; meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Consolidation of shares</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK may at any time consolidate shares issued into a smaller number of shares by a special
resolution of a general meeting of shareholders. When a consolidation of shares is to be made, TDK
must give public notice or notice to each shareholder that, within a period of not less than one
month specified in the notice, share certificates must be submitted to TDK for exchange. The
Director of TDK must disclose the reason for the consolidation of shares at the general meeting of
shareholders.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>General meeting of shareholders</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The ordinary general meeting of shareholders of TDK for each fiscal year is normally held in
June in each year in Chuo-ku, Tokyo, Japan (address of principal executive office) or any adjacent
place thereto or in Ichikawa-shi, Chiba, Japan. In addition, TDK may hold an extraordinary general
meeting of shareholders whenever necessary by giving notice of convocation thereof at least two
weeks prior to the date set for the meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notice of convocation of a shareholders&#146; meeting setting forth the place, time and purpose
thereof, must be mailed to each shareholder having voting rights (or, in the case of a non-resident
shareholder, to his or her standing proxy or mailing address in Japan) at least two weeks prior to
the date set for the meeting. Under the Company Law, such notice may be given to shareholders by
electronic means, subject to the consent by the relevant shareholders. The record date for an
ordinary general meeting of shareholders is March&nbsp;31 of each year.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any shareholder or group of shareholders holding at least 3&nbsp;percent of the total number of
voting rights for a period of six months or more may require the convocation of a general meeting
of shareholders for a particular purpose. Unless such shareholders&#146; meeting is convened promptly
or a convocation notice of a meeting which is to be held not later than eight weeks from the day of
such demand is dispatched, the requiring shareholder may, upon obtaining a court approval, convene
such shareholders&#146; meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any shareholder or group of shareholders holding at least 300 voting rights or 1&nbsp;percent of
the total number of voting rights for a period of six months or more may propose a matter to be
considered at a general meeting of shareholders by submitting a request to a Representative
Director at least eight weeks prior to the date set for such meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Voting rights</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;So long as TDK maintains the unit share system (see <I>&#147;Unit&#148; share system, below</I>) a holder
of shares constituting one or more whole units is entitled to one voting right per unit of shares
subject to the limitations on voting rights set forth in the following paragraph. Except as
otherwise provided by law or by the Articles of Incorporation, a resolution can be adopted at a
general meeting of shareholders by a majority of the number of voting rights of all the
shareholders represented at the meeting. The Company Law and TDK&#146;s Articles of Incorporation
provide, however, that the quorum for the election of Directors and Corporate Auditors shall not be
less than one-third of the total number of voting rights of the shareholders who can exercise
voting rights. TDK&#146;s shareholders are not entitled to cumulative voting in the election of
Directors and Corporate Auditors. A company, partnership or other similar business enterprise that
holds shares of TDK stock may not exercise its voting rights with respect to such TDK shares if TDK
and its subsidiaries, either alone or together, hold shares or membership interests representing
more than 25&nbsp;percent of the voting power of such shareholder or has any relationship with such
shareholder provided in the ordinance of the Ministry of Justice under which TDK may substantially
control the management of such shareholder. Shareholders may exercise their voting rights through
proxies, provided that the proxies are also shareholders holding voting rights. TDK&#146;s shareholders
also may cast their votes in writing. Shareholders may also exercise their voting rights by
electronic means when TDK decides to permit such method of exercising voting rights.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company Law provides that in order to amend the Articles of Incorporation and in certain
other instances, including a reduction of stated capital, the removal of a Corporate Auditor,
dissolution, merger or consolidation with a certain exception under which shareholders&#146; resolution
is not required, the transfer of the whole or an important part of the business, the taking over of
the whole of the business of any other corporation with a certain exception under which
shareholders resolution is not required, share exchange or share transfer for the purpose of
establishing 100&nbsp;percent parent-subsidiary relationships with a certain exception under which
shareholders resolution is not required, splitting of the corporation into two or more corporations
with a certain exception under which shareholders resolution is not required, or any offering of
new shares at a &#147;specially favorable&#148; price (or any offering of stock acquisition rights to
subscribe for or acquire shares of capital stock (&#147;stock acquisition rights&#148;) or bonds with stock
acquisition rights at a &#147;specially favorable&#148; exercise conditions or price) to any persons other
than shareholders, the quorum shall be one-third of the total voting rights of all the shareholders
and the approval by at least two-thirds of the voting rights of all the shareholders represented at
the meeting is required (the &#147;special shareholders resolutions&#148;).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Issue of additional shares and pre-emptive rights</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders of TDK&#146;s shares of Common Stock have no pre-emptive rights under its Articles of
Incorporation. Authorized but unissued shares may be issued at such times and upon such terms as
the Board of Directors determines, subject to the limitations as to the offering of new shares at a
&#147;specially favorable&#148; price mentioned under <I>&#147;Voting rights&#148; </I>above. The Board of Directors may,
however, determine that shareholders shall be given subscription rights regarding a particular
issue or transfer of shares, in which case such rights must be given on uniform terms to all
shareholders as at a record date of which not less than two weeks&#146; prior public notice must be
given. Such subscription rights are nontransferable. However, a shareholder may be allotted stock
acquisition rights without consideration thereto, and transfer such rights.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to certain requirements, TDK may issue stock acquisition rights by a resolution of the
Board of Directors. Holders of stock acquisition rights may exercise their rights to acquire a
certain number of shares within the exercise period as prescribed in the terms of their stock
acquisition rights. Upon exercise of stock acquisition rights, TDK will be obliged to issue the
relevant number of new shares or alternatively to transfer the necessary number of existing shares
held by it (treasury stock).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Liquidation rights</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event of a liquidation of TDK, the assets remaining after payment of all debts and
liquidation expenses and taxes will be distributed among shareholders in proportion to the
respective numbers of shares of common stock held.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Record date</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;March&nbsp;31 is the record date for TDK&#146;s year-end dividends. So long as TDK maintains in its
Articles of Incorporation a provision for the unit of shares, the shareholders and beneficial
shareholders who are registered as the holders of one unit of shares or more in TDK&#146;s registers of
shareholders and/or beneficial shareholders at the end of each March&nbsp;31 are also entitled to
exercise shareholders&#146; rights at the ordinary general meeting of shareholders with respect to the
fiscal year ending on such March&nbsp;31. September&nbsp;30 is the record date for interim dividends. In
addition, TDK may set a record date for determining the shareholders and/or beneficial shareholders
entitled to other rights and for other purposes by giving at least two weeks&#146; prior public notice.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The price of shares generally goes ex-dividends or ex-rights on Japanese stock exchanges on
the third business day prior to a record date (or if the record date is not a business day, the
fourth business day prior thereto), for the purpose of dividends or rights offerings.
</DIV>




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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Acquisition of TDK&#146;s own shares</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK may acquire its own shares (i)&nbsp;by way of purchase on any Japanese stock exchange on which
its shares are listed or by way of tender offer (pursuant to a resolution of the Board of Directors
in accordance with the Articles of Incorporation of TDK), (ii)&nbsp;from a specific shareholder other
than its subsidiary (pursuant to a special resolution of a general meeting of shareholders), or
(iii)&nbsp;from its subsidiary (pursuant to a resolution of a meeting of the Board of Directors). In
the case of (ii)&nbsp;above, any other shareholder may make a request directly to a representative
director, five days prior to the relevant shareholder&#146;s meeting, to include such other shareholder
as the seller of shares in the proposed purchase. However, the acquisition of its own shares at a
price not exceeding the then market price provided under the ordinance of the Ministry of Justice
will not trigger the right of any shareholder to include him/her as the seller of his shares in
such proposed acquisition.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any such acquisition of TDK&#146;s shares must satisfy certain requirements, including that the
total amount of the purchase price may not exceed the amount of the
distributable dividends. (See <I>Dividend</I>s
above)
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares acquired by TDK may be held by it for any period or may be cancelled by resolution of
the Board of Directors. TDK may also transfer to any person the shares held by it, subject to a
resolution of the Board of Directors, and subject also to other requirements those applicable to
the issuance of new shares including the limitation as to the offering of new shares at a
&#147;specially favorable&#148; price mentioned in &#147;<I>Voting Rights</I>&#148; above. TDK may also utilize its treasury
shares for the purpose of transfer to any person upon exercise of stock acquisition rights or for
the purpose of acquiring another company by merger, share exchange or corporate split through
exchange of treasury shares for shares or assets of the acquired company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company Law generally prohibits any subsidiary of TDK from acquiring shares of TDK.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Unit&#148; share system</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the Articles of Incorporation of TDK, 100 shares of TDK constitute one unit.
Although the number of shares constituting a new unit is included in the Articles of Incorporation,
any amendment to the Articles of Incorporation reducing (but not increasing) the number of shares
constituting a unit or eliminating the provisions for the unit of shares may be made by the
resolution of the Board of Directors rather than by the special shareholders resolution, which is
otherwise required for amending the Articles of Incorporation. The number of shares constituting
one new unit, however, cannot exceed 1,000.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#151;Voting rights under the unit share system</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the unit share system, shareholders shall have one voting right for each unit of shares
that they hold. Any number of shares less than a full unit will carry no voting rights.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#151;Share certificates for less than a unit</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless TDK&#146;s Board of Directors adopts a resolution to eliminate the provision for the unit
shares from the Articles of Incorporation or the shareholders amend the Articles of Incorporation
by a special shareholders resolution to eliminate the provision not to issue share certificates for
less than a unit of shares, a share certificate for any number of shares less than a unit will in
general not be issued. As the transfer of shares normally requires the delivery of the share
certificates therefor, any fraction of a unit for which no share certificates are issued is not
transferable.
</DIV>



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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#151;Repurchase or sale by TDK of shares constituting less than a unit</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A holder of shares constituting less than one unit may require TDK to purchase such shares, or
sell such number of shares which, if combined with the shares already held by such holder, would
constitute one unit of shares, at their market value in accordance with the provisions of the Share
Handling Regulations of TDK.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#151;Effect of the unit share system on holders of ADRs</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A holder who owns ADRs evidencing less than 100 ADSs will indirectly own less than a whole
unit of shares of Common Stock. Although, as discussed above, under the unit share system holders
of less than a unit have the right to require TDK to purchase their shares, holders of ADRs
evidencing ADSs that represent other than integral multiples of whole units are unable to withdraw
the underlying shares of Common Stock representing less than a unit and, therefore, are unable, as
a practical matter, to exercise the rights to require TDK to purchase such underlying shares unless
TDK&#146;s Articles of Incorporation are amended to eliminate the provision not to issue share
certificates for the numbers of shares less than a unit. As a result, access to the Japanese
markets by holders of ADRs through the withdrawal mechanism will not be available for dispositions
of shares of Common Stock in lots less than a unit. The unit share system does not affect the
transferability of ADSs, which may be transferred in lots of any size.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Reporting of substantial shareholdings</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Securities and Exchange Law of Japan and regulations thereunder require any person who has
become, beneficially and solely or jointly, a holder of more than 5&nbsp;percent of the total issued
shares of capital stock of a company listed on any Japanese stock exchange to file with the
Director-General of a competent Local Finance Bureau of the Ministry of Finance within five
business days a report concerning such shareholdings.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A similar report must also be filed in respect of any subsequent change of 1&nbsp;percent or more
in any such holding or any change in material matters set out in reports previously filed, with
certain exceptions. For this purpose, shares issuable to such person upon conversion of
convertible securities or exercise of share subscription warrants or stock acquisition rights are
taken into account in determining both the number of shares held by such holder and the issuer&#146;s
total issued share capital. Copies of such report must also be furnished to the issuer of such
shares and all Japanese stock exchanges on which the shares are listed.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except for the general limitation under Japanese anti-trust and anti-monopoly regulations
against holding of shares of capital stock of a Japanese corporation which leads or may lead to a
restraint of trade or monopoly, and except for general limitations under the Company Law or TDK&#146;s
Articles of Incorporation on the rights of shareholders applicable regardless of residence or
nationality, there is no limitation under Japanese laws and regulations applicable to TDK or under
its Articles of Incorporation on the rights of non-resident or foreign shareholders to hold the
shares of Common Stock of TDK or exercise voting rights thereon.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There is no provision in TDK&#146;s Articles of Incorporation that would have an effect of
delaying, deferring or preventing a change in control of TDK and that would operate only with
respect to merger, consolidation, acquisition or corporate restructuring involving TDK.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;Material contracts
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All contracts entered into by TDK during the two years prior to the date of this annual report
were entered into in the ordinary course of business.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D.&nbsp;Exchange controls
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Japanese Foreign Exchange Regulations
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Foreign Exchange and Foreign Trade Law of Japan, frequently referred to as the Foreign
Exchange Law, and the cabinet orders and ministerial ordinances thereunder govern the issuance of
shares by companies and the acquisition and holding of shares by &#147;exchange non-residents&#148; and
&#147;foreign investors&#148; under the Foreign Exchange Law.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exchange non-residents are:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>individuals who do not reside in Japan; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>corporations whose principal offices are not located in Japan.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Generally, branches and other offices located within Japan of non-resident corporations are
regarded as exchange residents of Japan and branches and other offices of Japanese corporations
located outside Japan are regarded as exchange non-residents of Japan.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign investors are:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>individuals who do not reside in Japan;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>corporations which are organized under the laws of foreign
countries or whose principal offices are located outside
Japan; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>corporations in which more than 50&nbsp;percent 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.</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Any individuals or corporations that do not correspond to any of the above may be regarded
as a foreign investor when they acquire or hold shares on behalf of foreign investor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due to the amendments to the Foreign Exchange Law effective on April&nbsp;1, 1998, all aspects of
foreign exchange and foreign trade transactions that were previously subject to licensing or other
prior notifications or approvals, with minor exceptions, were changed to require only
post-transaction reporting. However, the Minister of Finance of Japan will have the power to
impose licensing requirements for transactions in limited circumstances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Potential Consequences Resulting from an Acquisition of Listed Shares
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event that a foreign investor acquires shares of a Japanese company listed on a
Japanese stock exchange (&#147;listed shares&#148;) and if the foreign investor&#146;s direct and indirect total
holdings are 10&nbsp;percent or more of the issued shares of the company after the acquisition, the
foreign investor must file a report of the acquisition with the Minister of Finance and any other
competent Minister within 15&nbsp;days from and including the date of such acquisition. However, in
certain limited circumstances (including the case where the acquisition of the shares reaches 10
percent), a prior notification of such an acquisition must be filed with the Minister of Finance
and any other competent Minister, who may then modify or prohibit the proposed acquisition. The
acquisition of shares by exchange non-residents as a result of stock splits is not subject to any
of the foregoing requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Potential Consequences Resulting from Dividends and Proceeds of Sales
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the current Foreign Exchange Law, dividends paid on, and the proceeds of sales in Japan
of, shares held by exchange non-residents may, in general, be converted into foreign currency and
repatriated abroad.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Potential Consequences Resulting from the Sale of Securities to Exchange Non-Resident
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A Japanese resident is required to file a report with the Minister of Finance concerning the
transfer of securities for value exceeding &#165;100&nbsp;million to an exchange non-resident within 20&nbsp;days
of the date of the transfer. If an exchange resident issues or offers its securities for value of
&#165;1&nbsp;billion or more outside Japan, the exchange resident must file a report of the issuance or
offering of securities with the Minister of Finance within 20&nbsp;days of the date of the closing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">American Depositary Shares
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The deposit of shares of Common Stock by a non-resident of Japan, the issuance of ADRs in
exchange therefor and the withdrawal of the underlying shares of Common Stock upon surrender of
ADRs are not subject to any formalities or restrictions referred to under &#147;Potential Consequences
Resulting from an Acquisition of Listed Shares&#148; above, except where, as a result of such deposit or
withdrawal, the aggregate number of shares held by the depositary (or its nominee) or the holder
surrendering ADRs, as the case may be, would be 10&nbsp;percent or more of the total outstanding shares
of Common Stock, in which event the reporting to the Minister of Finance of Japan may be required
as outlined in the second sentence under the same heading.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E.&nbsp;Taxation
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends, Stock Splits and Repurchase
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Generally, a non-resident of Japan or a non-Japanese corporation is subject to Japanese
withholding tax on dividends paid by Japanese corporations. Stock splits are not subject to
Japanese income tax.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The rate of Japanese withholding tax applicable to dividends on TDK&#146;s shares paid by TDK to
non-resident shareholders is 7&nbsp;percent for dividends paid on or before March&nbsp;31, 2008 and 15
percent thereafter, except for any individual shareholder who holds 5&nbsp;percent or more of the issued
shares, for whom the applicable rate is 20&nbsp;percent.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Japan has income tax treaties, conventions or agreements which generally provide that the
withholding tax rate may not exceed 15&nbsp;percent for portfolio investors with, among others,
Australia, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, The
Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the
United States. In case of the Japan-U.S. tax treaty, however, as a result of a recent amendment,
the maximum withholding tax rate has been reduced, generally to 10&nbsp;percent for portfolio investors
effective from July&nbsp;1, 2004. Under Japanese tax law, the maximum rate applicable under the tax
treaties, conventions or agreements shall be applicable except when such maximum rate is more than
the Japanese statutory rate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK, as a Japanese corporation, may be obligated to withhold a certain amount from any
payments by TDK to its shareholder that is a non-resident of Japan or a non-Japanese corporation.
Specifically, according to Articles 212-1 and 212-2 of the Income Tax Law of Japan, TDK has the
obligation to withhold the amount determined by the applicable tax rate from its dividends to such
of its shareholders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acquisition or Disposal of Shares or ADRs
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gains derived by a non-resident of Japan or a non-Japanese corporation from the sale outside
Japan of Shares or ADRs, or from the sale of Shares or ADRs within Japan by a non-resident of Japan
or a non-Japanese corporation not having a permanent establishment in Japan are in general not
subject to Japanese income tax.
</DIV>


<P align="center" style="font-size: 10pt">- 79 -
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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Japanese inheritance and gift taxes at progressive rates may be payable by an individual who
has acquired Shares or ADRs as a legatee, heir or donee.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;F.&nbsp;Dividends and paying agents
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;G.&nbsp;Statements by experts
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;H.&nbsp;Documents on display
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According to the Securities Exchange Act of 1934, as amended, TDK is subject to the
requirements of informational disclosure. TDK files various reports and other information,
including Form 20-F and Annual Reports, with the Securities Exchange Commission and the New York
Stock Exchange. These reports may be inspected at the following sites.
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">Securities Exchange Commission:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;100 F Street, NE, Washington D.C. 20549
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">New York Stock Exchange:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;20 Broad Street, New York, New York 10005
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Form&nbsp;20-F is also available at the Electronic Data Gathering, Analysis, Retrieval system
(EDGAR)&nbsp;website maintained by the Securities Exchange Commission.
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">Securities Exchange Commission Home Page:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;http://www.sec.gov
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I.&nbsp;Subsidiary information
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="113"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Item&nbsp;11</B></U><B>. Quantitative and Qualitative Disclosures about Market Risk</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Market risk exposure</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK is subject to market risk associated with changes in stock prices, interest rates and
foreign currency exchange rates. Foreign exchange risk is considered as the primary market risk
exposure. TDK has a policy for the procedures and controls to manage market risk sensitive
instruments. In order to hedge interest rate risk and foreign currency exchange rate risk, TDK
uses derivative financial instruments. TDK does not hold or issue derivative financial instruments
for trading purposes.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Foreign exchange and interest rate risk</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forward exchange contracts and currency swap contracts have been entered into to hedge adverse
effects of foreign currency exchange rate fluctuations mainly on foreign-currency-denominated trade
receivables and foreign-currency-denominated forecasted transactions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At March&nbsp;31, 2006 and 2005, TDK and certain of its subsidiaries had forward exchange contracts
to sell and buy foreign currencies (principally U.S. dollars and Japanese Yen) and currency option
contracts for a contract amount of &#165;17,726&nbsp;million ($151,504 thousand) and &#165;28,990&nbsp;million,
respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK and one of its subsidiaries had currency swaps and interest rate and currency swaps with
certain financial institutions to limit their exposure to fluctuations in foreign exchange rates
and interest rates involved mainly with loans made by TDK to its subsidiaries in a total amount of
&#165;11,067&nbsp;million at March&nbsp;31, 2005. These swaps require TDK and the subsidiary to pay principally
euros and U.S. dollars and to receive Japanese yen at a specified rate on specific dates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table provides information about TDK&#146;s derivative instruments related to foreign
exchange risk as of March&nbsp;31, 2006 and 2005.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">2006</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">(millions of yen)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">(millions of yen)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Contract</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Fair</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">contractual</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Contract</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Fair</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">contractual</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">amounts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">rate</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">amounts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">rate</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="23" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Forward exchange contracts</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">To sell Euro / receive Yen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">5,669</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">141.73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">To sell USD / receive Yen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,295</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(88</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">105.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">To sell CHF / receive Euro</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.54</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">6,852</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">4,349</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(88</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">(millions of yen)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">(millions of yen)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Contract</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Fair</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">contractual</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Contract</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Fair</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">contractual</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">amounts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">rate</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">amounts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">rate</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="23" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Currency option contracts</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">To sell USD / receive USD</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">4,675</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(27</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">23,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(354</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">105.10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">To sell USD / receive Yen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,359</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">To sell Euro / receive Euro</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">840</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">141.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(12</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39.07</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">10,874</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">24,641</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(366</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">(millions of yen)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">(millions of yen)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Contract</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Fair</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">contractual</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Contract</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Fair</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">contractual</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">amounts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">rate</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">amounts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">rate</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="23" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Currency and interest rate swaps
contracts</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">To receive Euro / pay GBP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">2,041</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(10</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.69</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">To receive Yen / pay Euro</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,026</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(302</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">134.75</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">11,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#165;</TD>
    <TD align="right">(312</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">- 81 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK&#146;s exposure to market risk related to changes in interest rates relates primarily to
its debt securities. TDK has debt securities with fixed rates. TDK, to the extent possible, plans
to limit debt securities to short-term debt securities. TDK believes that the fair values of
interest rate sensitive instruments as of March&nbsp;31, 2006 and 2005, and potential, near-term losses
affecting future earnings, fair values, and/or cash flows from reasonable near-term changes in
interest rates are immaterial.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Stock price risk</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK&#146;s exposure to market risk involving changes in stock prices relates only to its equity
securities categorized as available-for-sale securities. TDK purchases equity securities for the
purpose of acquiring technological information and as part of its sales strategy, and not as a
means of investing surplus funds. The aggregate cost and fair value of these equity securities
were &#165;9.2&nbsp;billion ($79&nbsp;million) and &#165;12.1&nbsp;billion ($103&nbsp;million) as of March&nbsp;31, 2006, and &#165;6.0
billion and &#165;7.0&nbsp;billion as of March&nbsp;31, 2005, respectively. As of March&nbsp;31, 2006, these
securities mainly represented investments in companies in the transportation, communications and
electronic equipment industries, and the cost and fair value of these equity securities were &#165;8.8
billion ($75&nbsp;million) and &#165;11.1&nbsp;billion ($95&nbsp;million), respectively. As of March&nbsp;31, 2005, these
securities mainly represented investments in companies in the transportation, communications and
electronic equipment industries, and the cost and fair value of the equity securities were &#165;5.6
billion and &#165;6.5&nbsp;billion, respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK&#146;s portfolio of equity securities, including available-for-sale securities, at March&nbsp;31,
2006 and 2005, is as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" colspan="12" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" colspan="12" style="border-bottom: 1px solid #000000">Yen (Millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000">Yen (Millions)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">Gross</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">Gross</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">Gross</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">Gross</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">unrealized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">unrealized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">unrealized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">unrealized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">holding</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">holding</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">holding</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">holding</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Cost</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">gains</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">losses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">Fair value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">Cost</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">gains</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">losses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">Fair value</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#165;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9,246</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,859</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,951</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,054</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left">
<A name="114"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Item&nbsp;12</B></U><B>. Description of Securities Other than Equity Securities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;Debt securities
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;Warrants and rights
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;Other securities
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D.&nbsp;American depositary shares
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>


<P align="center" style="font-size: 10pt">- 82 -
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="115"></A>
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART 2</B>
</DIV>


<DIV align="left">
<A name="116"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><u><B>Item&nbsp;13</B></u><B>. Defaults, Dividend Arrearages and Delinquencies</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>

<DIV align="left">
<A name="117"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Item&nbsp;14</B></U><B>. Material Modifications to the Rights of Security Holders and Use of Proceeds</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>

<DIV align="left">
<A name="118"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Item&nbsp;15</B></U><B>. Controls and Procedures</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Disclosure controls and procedures
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK&#146;s Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness
of its &#147;disclosure controls and procedures&#148; (as defined in Exchange Act Rules&nbsp;13a-15(e) and
15d-15(e)) as of March&nbsp;31, 2006 (the &#147;Evaluation Date&#148;), the end of the period covered by this
Annual Report, have concluded that, as of the Evaluation Date, TDK&#146;s disclosure controls and
procedures were adequate and effective and designed to ensure that material information relating to
TDK and its consolidated subsidiaries is made known to the Chief Executive Officer and the Chief
Financial Officer by others within TDK and its consolidated subsidiaries.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Management&#146;s annual report on internal control over financial reporting
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This requirement was &#147;intentionally omitted pursuant to SEC Release No.&nbsp;33-8345 dated March&nbsp;2,
2005&#148; and SEC Release No.&nbsp;33-8618 dated September&nbsp;22,
2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Attestation report of the registered public accounting firm
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This requirement was &#147;intentionally omitted pursuant to SEC Release No.&nbsp;33-8345 dated March&nbsp;2,
2005&#148; and SEC Release No.&nbsp;33-8618 dated September&nbsp;22,
2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Changes in internal control over financial reporting
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There were no changes in TDK&#146;s internal control over financial reporting that occurred during
the period covered by this Annual Report that has materially affected, or is reasonably likely to
materially affect, the issuer&#146;s internal control over financial reporting.
</DIV>

<DIV align="left">
<A name="119"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Item&nbsp;16A</B></U><B>. Audit Committee Financial Expert</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registrant, a foreign private issuer, has at least one &#147;audit committee financial expert&#148;
serving on its audit committee. TDK&#146;s board of auditors has determined that Ryoichi Ohno qualifies
as an &#147;audit committee financial expert&#148; as defined by the rules of SEC. Mr.&nbsp;Ohno is an outside
corporate auditor within the meaning of the Special Audit Law. See <I>Significant differences in
corporate governance practices between TDK and U.S. listed companies on the New York Stock Exchange</I>
in Item&nbsp;6.C. &#147;Board practices&#148;. Mr.&nbsp;Ohno was registered as a U.S. Certified Public Accountant in
1988 and elected as one of TDK&#146;s corporate auditors at an Ordinary General Meeting of Shareholders
held in June&nbsp;2004. See Item&nbsp;6.A. for additional information regarding Mr.&nbsp;Ohno.
</DIV>


<P align="center" style="font-size: 10pt">- 83 -
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="120"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Item&nbsp;16B.</b></U> <b>Code of Ethics</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK has established a code of business ethics (&#147;TDK Code of Ethics&#148;) that applies to TDK&#146;s
corporate officers and all TDK employees and is actively promoting ethical business practices on a
worldwide basis. TDK amended the TDK Code of Ethics as of May&nbsp;25, 2005 to revise the section
pertaining to the civil rights of its employees and to add a new section regarding employment
conditions. Both sections apply to TDK&#146;s corporate officers and all TDK employees. Please see
Sections&nbsp;2.2.3 and 2.2.4 of the TDK Code of Ethics. The TDK Business Ethics &#038; CSR Committee
(formerly named &#147;TDK Business Ethics Committee&#148;) has been charged with the oversight of the ethics
program at TDK. It has built a global ethics framework which encompasses domestic and overseas
consolidated subsidiaries. Built into the framework is a direct communication means called the
&#147;helpline&#148; for employees to report matters relating to business ethics issues and offer
suggestions. The TDK Code of Ethics is attached as Exhibit&nbsp;11.1 to this annual report. TDK has
not granted a waiver or implicit waiver from any provision of the TDK Code of Ethics in the most
recent fiscal year.
</DIV>

<DIV align="left">
<A name="121"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Item&nbsp;16C.</b></U> <b>Principal Accountant Fees and Services</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table discloses the aggregate fees accrued or paid to KPMG AZSA &#038; Co. and KPMG
International member firms for each of the last two fiscal years and briefly describes the services
performed:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(Yen in millions)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Years ended March 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2006</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Audit fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">323</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Audit-related fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">279</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">211</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">All other fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">575</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Audit fees consist of fees for &#147;Audit Services&#148;. &#147;Audit Services&#148; are professional services
rendered by the Principal Auditor for the audit of TDK&#146;s annual financial statements and services
that are normally provided by the Principal Auditor in connection with statutory and regulatory
filings or engagements: (i)&nbsp;Services associated with statutory audits; and (ii)&nbsp;Services associated
with U.S. SEC registration statements or other periodic filings.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Audit-related fees consist of fees for &#147;Audit-Related Services&#148;. &#147;Audit-Related Services&#148; are
professional services relating to the Audit Services: (i)&nbsp;Audits of employee benefit plans; (ii)
Sarbanes-Oxley Act related assistance; and (iii)&nbsp;Financial due diligence.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tax fees consist of fees for &#147;Tax Services&#148;: (i)&nbsp;Federal and local tax compliance; (ii)&nbsp;Review
of federal, local and international income, franchise, and other tax returns; (iii)&nbsp;Transfer
pricing documentation assistance; and (iv)&nbsp;Domestic and foreign indirect taxes.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Audit and Non-Audit Services Pre-Approval Policy</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to the confirmation as stipulated below, no pre-approval of the Board of Directors, in
the context of the United States Sarbanes-Oxley Act of 2002 (&#147;Sarbox Act&#148;) or the U.S. SEC rules,
is required for any non-audit services rendered by any Non-Outside Auditor. Any contracts
involving such services shall be processed in the usual manner in accordance with the applicable
laws, in-house rules or any other regulations.
</DIV>


<P align="center" style="font-size: 10pt">- 84 -
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Any person who wishes to retain a Non-Outside Auditor for non-audit services (&#147;Retainer&#148;) is
not allowed to do so unless both of the following conditions are met:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Retainer has received a letter of confirmation from such public accounting
firm that the public accounting firm is neither the Outside Auditor nor a person
associated with the Outside Auditor; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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 (&#147;Pre-Approval Database&#148;) within the TDK intranet system.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The foregoing letter of confirmation shall be regularly renewed at least once every 12&nbsp;months
and the manager of the Pre-Approval Database described in that Database shall update the list of
associated persons to reflect changes or modifications as reported by the Outside Auditor.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The types of services generally described in above explanation for audit fees, audit-related
fees and tax fees shall be pre-approved by the Board of Directors. Those services described are
provided for the sake of establishing general criteria as to the types of services requiring
pre-approval. The Board of Directors shall evaluate and determine whether or not to pre-approve
each application for such services.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK is prohibited from causing the Outside Auditor to provide, and the Outside Auditor is
prohibited from rendering such services generally described as follows: (i)&nbsp;Bookkeeping or other
services related to the accounting records or financial statements of the audit client; (ii)
Financial information systems design and implementation; (iii)&nbsp;Appraisal or valuation services,
fairness opinions or contribution-in-kind reports; (iv)&nbsp;Actuarial services; (v)&nbsp;Internal audit
outsourcing services; (vi)&nbsp;Management functions or human resources; (vii)&nbsp;Broker or dealer,
investment adviser or investment banking services; (viii)&nbsp;Legal services and expert services
unrelated to the audit; and (ix)&nbsp;Any other service that the Board of Directors determines, by
regulation, is impermissible. When such an application is received, the Board of Directors must
not pre-approve the application.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In accordance with the Sarbox Act and related SEC Rules, audit or non-audit services which do
not fit in with any of the types generally described in above explanation for audit fees,
audit-related fees and tax fees may have to be pre-approved by the Board of Directors. The Board
of Directors shall evaluate and determine whether or not to pre-approve each application for such
services.
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">TDK may engage the Outside Auditor to render an audit or non-audit service pursuant to this
policy without obtaining individual pre-approval by the Board of Directors, provided that all
of the following conditions are met:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the engagement to render the service shall commence within one year from the time
when the Board of Directors adopts this Policy;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(iii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the fee for the service to be rendered shall be less than 20,000,000 yen
(&#147;Individual Fee Limit&#148;); and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(iv)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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 (&#147;Overall Fee
Limit&#148;).</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">- 85 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Appointed Director must confirm whether an audit or non-audit service to be rendered by
the Outside Auditor meets the foregoing conditions. The Appointed Director also shall report to
the Board of Directors all audit and non-audit services in which the Outside Auditor is engaged in
accordance with this Section. The Board of Directors must appoint a director as the Appointed
Director and after the appointment the Appointed Director must be listed in the Pre-Approval
Database.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any divisions or departments of TDK, which contemplate or attempt to receive audit or
non-audit services from an Outside Auditor or Non-Outside Auditor, shall report its intention and
submit designated information, using the Pre-Approval Database.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Appointed Director must evaluate such audit or non-audit services to be rendered either by
the Outside Auditor or Non-Outside Auditor reported electronically through the Pre-Approval
Database and must confirm whether any given reported services requires pre-approval by the Board of
Directors. The Appointed Director shall request pre-approval to the Board of Directors if
pre-approval by the Board of Directors is required.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In making determination, the Board of Directors is required to consider the following:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Whether the Outside Auditor cannot function in the role of management;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Whether the Outside Auditor cannot audit its own work; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(iii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Whether the Outside Auditor cannot serve in an advocacy role for its client.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors must not pre-approve, in the absence of strong countervailing
considerations, non-audit services proposed to be performed by the Outside Auditor if the total
amount of fees payable to the Outside Auditor by TDK on account of non-audit services with respect
to any fiscal year exceeds the total amount of audit fees payable to the Outside Auditor by TDK
with respect to such year.
</DIV>

<DIV align="left">
<A name="122"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Item&nbsp;16D.</b></U> <b>Exemptions from Listing Standards for Audit Committees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK is relying on the general exemption contained in Rule&nbsp;10A-3(c)(3) under the Exchange Act.
Because of such reliance, TDK does not have an audit committee which can act independently and
satisfy the other requirements of Rule&nbsp;10A-3 under the Exchange Act.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According to Rule&nbsp;10A-3 under the Exchange Act and NYSE listing standards, TDK&#146;s Board of
Corporate Auditors acts in place of an audit committee. The Board of Corporate Auditors meets the
following requirements of the general exemption contained in Rule&nbsp;10A-3(c)(3):
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the Board of Corporate Auditors is established pursuant to the Company Law;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>as required by the Company Law, the Board of Corporate Auditors is separate from the
Board of Directors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the Board of Corporate Auditors is not elected by the management of TDK and no executive
officer of TDK is a member of the Board of Corporate Auditors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the Company Law provides for the standards for independence of the Board of Corporate
Auditors from the management of TDK;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in accordance with the Company Law, the Board of Corporate Auditors of TDK is
responsible, to the extent permitted by law, for the appointment, retention and supervision
of the work of a registered public accounting firm engaged for the purpose of preparing or
issuing an audit report or performing other audit, review or attest services for TDK; and</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">- 86 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under the Company 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.
In addition, each Corporate Auditor of TDK has the authority to engage independent counsel
and other advisers if such engagement is necessary to carry out his/her duties.
Furthermore, each Corporate Auditor may require TDK to pay any and all expenses necessary
for carrying out his/her duties, including compensation of any advisers employed by him/her
and ordinary administrative expenses.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK&#146;s reliance on Rule&nbsp;10A-3(c)(3) does not, in its opinion, materially adversely affect the
ability of its Board of Corporate Auditors to act independently and to satisfy the other
requirements of Rule&nbsp;10A-3.
</DIV>

<DIV align="left">
<A name="123"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Item&nbsp;16E.</b></U> <b>Purchases of Equity Securities by the Issuer and Affiliated Purchasers</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth certain information with respect to TDK&#146;s purchases of our own
shares during the year ended March&nbsp;31, 2006.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(c) Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(d) Maximum</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Purchased as</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Shares that May</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(a) Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(b) Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Part of Publicly</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Yet Be</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Price Paid</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Announced</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Purchased Under</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">of Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">per Share</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Plans or</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">the Plans or</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center">Period</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Purchased</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(Yen)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Programs</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Programs</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">April 1 to April&nbsp;30, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,497.89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">May 1 to May&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">146</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,551.51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">June 1 to June&nbsp;30, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,824.31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">July 1 to July&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,727.31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">August 1 to August&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,049.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">September 1 to September&nbsp;30, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">296</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,382.84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">October 1 to October&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">273</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,055.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">November 1 to November&nbsp;30, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,401.52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">December 1 to December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,542.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">January 1 to January&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">February 1 to February&nbsp;28, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">246</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,234.43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">March 1 to March&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,711.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,066</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,343.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">Note:</TD>
    <TD>&nbsp;</TD>
    <TD>Under the Company Law, a holder of shares constituting less than one full unit may
request TDK to purchase such shares at their market value (See Item&nbsp;10. Additional Information
&#147;Common Stock&#148; <I>&#147;Unit&#148; share system</I>). All purchases described in the above table were made
pursuant to such requests by shareholders excluding the reserve for stock option plans of the
amount of 115,200 shares in August&nbsp;2005.</TD>
</TR>
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">- 87 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left">
<A name="124"></A>
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART 3</B>
</DIV>


<DIV align="left">
<A name="125"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Item&nbsp;17.</b></U> <b>Financial Statements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Index of Consolidated Financial Statements of TDK Corporation and subsidiaries:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Page</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Report of Independent Registered Public Accounting Firm</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Consolidated Statements of Income
for the years ended March&nbsp;31, 2006, 2005 and 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Consolidated Balance Sheets as of March&nbsp;31, 2006 and 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Consolidated Statements of Stockholders&#146; Equity
for the years ended March&nbsp;31, 2006, 2005 and 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Consolidated Statements of Cash Flows
for the years ended March&nbsp;31, 2006, 2005 and 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Notes to Consolidated Financial Statements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Schedule for the years ended March&nbsp;31, 2006, 2005 and 2004:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Schedule&nbsp;II &#150; Valuation and Qualifying Accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Schedules other than those listed above have been omitted as they are not applicable or the
information is presented in the consolidated financial statements and related notes.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial statements of 50&nbsp;percent or less owned persons accounted for by the equity method
have been omitted as, in the aggregate, they do not meet the tests of a significant subsidiary at a
20&nbsp;percent level as of or for the years ended March&nbsp;31, 2006, 2005 and 2004.
</DIV>


<P align="center" style="font-size: 10pt">- 88 -
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U>Report of Independent Registered Public Accounting Firm</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Board of Directors and Stockholders<BR>
TDK Corporation:

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have audited the consolidated financial statements of TDK Corporation and subsidiaries as
listed in the accompanying index. In connection with our audits of the consolidated financial
statements, we also have audited the financial statement schedule as listed in the accompanying
index. These consolidated financial statements and financial statement schedule are the
responsibility of the Company&#146;s management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company declined to present segment information for each of the years in the three-year
period ended March&nbsp;31, 2006. In our opinion, disclosures of segment and related information about
the different types of business activities in which the company engages and the different economic
environments in which it operates is required by U.S. generally accepted accounting principles.
The omission of segment information results in an incomplete presentation of the Company&#146;s
consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In our opinion, except for the omission of the segment information as discussed in the
preceding paragraph, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of TDK Corporation and subsidiaries as of March&nbsp;31, 2006
and 2005, and the results of their operations and their cash flows for each of the years in the
three-year period ended March&nbsp;31, 2006, in conformity with U.S. generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The accompanying consolidated financial statements as of and for the year ended March&nbsp;31,
2006, have been translated into United States dollars solely for the convenience of the reader. We
have audited the translation and, in our opinion, the consolidated financial statements expressed
in yen have been translated into United States dollars on the basis set forth in Note 2 to the
consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">/s/ KPMG AZSA &#038; Co.

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Tokyo, Japan<BR>
May&nbsp;23, 2006

</DIV>


<P align="center" style="font-size: 10pt">- 89 -
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Consolidated statements of income</B><br>
For the years ended March&nbsp;31, 2006, 2005 and 2004
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Millions)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Note 2)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net sales (Notes 20 and 24)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>795,180</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">657,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">655,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>6,796,410</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cost of sales (Note 24)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>585,780</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">484,323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">476,407</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,006,666</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>209,400</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173,530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">179,385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,789,744</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Selling, general and administrative expenses (Note 24)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>142,052</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,886</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,214,120</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Transfer to the government of the substitutional
portion of Employees&#146; Pension Fund (Note 8):</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Subsidy from the government</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(33,533</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss on settlement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Restructuring cost (Note 16)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,825</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>58,333</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>60,523</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>517,291</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Other income (deductions):</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest and dividend income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,605</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>30,812</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(149</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(967</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(323</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(1,274</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Equity in earnings of affiliates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,368</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,765</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,639</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11,692</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gain (loss)&nbsp;on securities, net (Note 4)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(286</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(142</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,093</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(2,444</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign exchange gain (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>948</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(856</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,064</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,103</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other &#151; net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>94</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(594</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">989</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>803</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,580</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">898</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(663</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>47,692</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Income from continuing operations
before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>66,103</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,847</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>564,983</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Income taxes (Note 7)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>21,057</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,284</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>179,974</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Income from continuing operations
before minority interests</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>45,046</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,714</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>385,009</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Minority interests, net of tax</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>635</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">479</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">359</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,428</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Income from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>44,411</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,965</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>379,581</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Discontinued operations (Note 21):</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss from operations of discontinued business
(including loss on disposal of &#165;224&nbsp;million in 2006)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>310</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,509</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">244</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,649</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">156</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss from discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>310</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,665</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,649</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>44,101</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>376,932</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11">Yen (except number of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11">common shares outstanding)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(Note 2)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Amounts per share:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income from continuing operations per share (Note 19):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>335.84</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">279.41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">327.27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>2.87</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>335.54</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">279.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">327.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.87</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss from discontinued operations per share (Note 19):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>&#165;</B></TD>
    <TD align="right"><B>(2.34</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(27.70</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9.47</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(0.02</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(2.34</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(27.69</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9.46</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(0.02</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income per share (Note 19):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>333.50</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">251.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">317.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>2.85</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>333.20</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">251.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">317.69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.85</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Weighted average basic common shares
outstanding (in thousands) (Note 19)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>132,239</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,293</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

    <TD><DIV style="margin-left:30px; text-indent:-15px">Weighted
average diluted common shares outstanding (in thousands) (Note 19)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>132,355</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,523</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash dividends paid during the year (Note 9)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>80.00</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.68</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>See accompanying notes to consolidated financial statements.</I>
</DIV>


<P align="center" style="font-size: 10pt">- 90 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Consolidated balance sheets</B><br>
As of March&nbsp;31, 2006 and 2005
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Millions)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Note 2)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current assets:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>239,017</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">251,508</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>2,042,880</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Marketable securities (Note 4)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>56</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>479</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Trade receivables (Note 20):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Notes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,899</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>67,513</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accounts (Note 24)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>185,224</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">144,426</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,583,111</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Allowance for doubtful receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(4,064</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,560</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(34,735</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net trade receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>189,059</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">147,999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,615,889</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventories (Note 5)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>88,968</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,924</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>760,410</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income tax receivables (Note 7)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>265</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,265</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Assets held for sale (Note 17)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,110</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>35,128</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepaid expenses
and other current assets (Notes 7 and 24)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>45,278</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,366</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>386,992</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>566,753</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">510,603</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,844,043</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Investments in securities </B>(Note 4)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>28,757</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>245,786</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Property, plant and equipment, at cost:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Land</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>21,790</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,097</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>186,239</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Buildings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>187,810</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">181,581</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,605,214</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Machinery and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>482,398</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">445,636</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,123,060</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Construction in progress</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12,687</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>108,436</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>704,685</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">662,520</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,022,949</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less accumulated depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(461,020</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(445,551</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(3,940,342</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>243,665</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">216,969</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,082,607</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Goodwill </B>(Note 18)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>19,453</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>166,265</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Intangible assets </B>(Note 18)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>29,478</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,247</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>251,949</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Deferred income taxes </B>(Note 7)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,287</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>62,282</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Other assets </B>(Notes 8 and 12)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>28,110</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,641</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>240,256</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>923,503</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">808,001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>7,893,188</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>See accompanying notes to consolidated financial statements.</I>
</DIV>


<P align="center" style="font-size: 10pt">- 91 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Millions)</TD>

    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Note 2)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current liabilities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term debt (Note 6)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>4,469</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>38,197</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current installments of long-term debt (Note 6)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,958</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>16,735</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Trade payables:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Notes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,353</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>37,205</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accounts (Note 24)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>80,336</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,454</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>686,632</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued salaries and wages</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>19,010</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,915</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>162,479</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued expenses (Notes 16 and 24)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>43,524</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>372,000</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income taxes payables (Note 7)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9,155</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>78,248</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Liabilities held for sale (Note 17)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other current liabilities (Note 7)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,817</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>58,265</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>169,622</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">130,857</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,449,761</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Long-term debt, excluding current installments </B>(Note 6)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>405</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,462</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Retirement and severance benefits </B>(Note 8)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>26,790</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,839</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>228,974</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Deferred income taxes </B>(Note 7)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,314</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">751</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>45,419</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Other noncurrent liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,979</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,244</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>42,555</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>207,110</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">163,772</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,770,171</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Minority interests</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>13,974</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,162</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>119,436</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Commitments and contingent liabilities </B>(Notes 12 and 13)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Stockholders&#146; equity:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Authorized 480,000,000 shares;
issued 133,189,659 shares in 2006 and 2005;
outstanding 132,266,828 shares in 2006
and 132,244,587 shares in 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>32,641</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,641</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>278,983</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>63,237</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>540,487</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Legal reserve (Note 9)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>17,517</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>149,718</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Retained earnings (Note 9)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>618,259</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">585,557</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,284,265</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated other comprehensive income (loss)
(Notes 7, 8 and 11)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(21,946</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(51,657</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(187,573</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Treasury stock at cost; 922,831 shares in 2006
and 945,072 shares in 2005 (Note 10)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(7,289</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,443</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(62,299</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>702,419</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">639,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,003,581</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>923,503</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">808,001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>7,893,188</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">- 92 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Consolidated statements of stockholders&#146; equity</B><br>
For the years ended March&nbsp;31, 2006, 2005 and 2004
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Millions)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Note 2)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Common stock:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Balance at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>32,641</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,641</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,641</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>278,983</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Balance at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>32,641</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,641</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,641</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>278,983</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Additional paid-in capital:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Balance at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>63,051</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>538,897</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Non-cash compensation charges under a stock option plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>186</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,590</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Balance at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>63,237</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>540,487</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Legal reserve </B>(Note 9)<B>:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Balance at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>16,918</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,953</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>144,598</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Transferred from retained earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>599</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">421</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">544</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,120</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Balance at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>17,517</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>149,718</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Retained earnings </B>(Note 9)<B>:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Balance at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>585,557</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">560,756</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">525,919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,004,761</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>44,101</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>376,932</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(10,578</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,938</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,625</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(90,410</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Losses on sales of treasury stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(222</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(140</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(95</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(1,898</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Transferred to legal reserve</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(599</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(421</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(544</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(5,120</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Balance at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>618,259</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">585,557</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">560,756</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,284,265</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Accumulated other comprehensive income (loss)</B>
(Notes 7, 8 and 11)<B>:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Balance at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(51,657</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(90,387</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(78,824</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(441,513</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other comprehensive income (loss)&nbsp;for the period, net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>29,711</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,730</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11,563</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>253,940</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Balance at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(21,946</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(51,657</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(90,387</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(187,573</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Treasury stock </B>(Note 10)<B>:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Balance at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(7,443</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,339</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,855</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(63,615</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Acquisition of treasury stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(955</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,672</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,865</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(8,162</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exercise of stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,109</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">568</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">381</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9,478</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Balance at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(7,289</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,443</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,339</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(62,299</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total stockholders&#146; equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>702,419</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">639,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">576,219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>6,003,581</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Disclosure of comprehensive income:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income for the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>44,101</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>376,932</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other comprehensive income (loss)&nbsp;for the period,
net of tax (Note 11)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>29,711</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,730</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11,563</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>253,940</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total comprehensive income for the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>73,812</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,538</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>630,872</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>See accompanying notes to consolidated financial statements.</I>
</DIV>



<P align="center" style="font-size: 10pt">- 93 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Consolidated statements of cash flows</B><br>
For the years ended March&nbsp;31, 2006, 2005 and 2004
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Millions)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Note 2)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from operating activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>44,101</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>376,932</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss from discontinued operations, net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>310</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,665</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,649</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>44,411</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,965</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>379,581</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Adjustments to reconcile net income to net cash provided
by operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>58,540</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,726</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>500,342</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on disposal of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,220</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>27,521</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(696</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,532</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,858</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(5,949</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss (gain)&nbsp;on securities, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>286</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,093</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,445</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gain on sale of a subsidiary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,799</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(567</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Changes in assets and liabilities, net of effects of acquisition of businesses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Increase in trade receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(16,886</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,343</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,680</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(144,325</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Decrease (increase)&nbsp;in inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(287</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,868</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(2,453</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Decrease (increase)&nbsp;in other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(8,748</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,149</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,387</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(74,769</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Increase in trade payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,101</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>60,692</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Increase (decrease)&nbsp;in accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12,347</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,496</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,878</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>105,530</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Increase (decrease)&nbsp;in income taxes payables, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(10,689</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(91,359</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Increase (decrease)&nbsp;in retirement and severance benefits, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>981</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,519</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,285</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,385</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other &#151; net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(462</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(522</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,059</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(3,949</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>89,118</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95,249</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>761,692</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from investing activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(73,911</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(61,005</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(44,471</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(631,718</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from sale and maturity of investments in securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,263</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,788</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>36,436</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payment for purchase of investments in securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(4,227</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,424</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(36,128</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Acquisition of businesses, net of cash acquired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(32,868</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,496</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(280,923</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from sale of property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,373</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>28,829</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Acquisition of minority interests</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(2,587</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(366</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(22,111</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from sale of a subsidiary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,523</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from sale of discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,538</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>13,145</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other &#151; net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(363</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(221</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(445</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(3,103</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash used in investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(104,782</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(62,359</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(37,647</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(895,573</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from financing activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>269</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,299</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Repayment of long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(218</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(164</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(479</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(1,863</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Increase (decrease)&nbsp;in short-term debt, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,688</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(330</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,047</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>31,521</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from exercise of stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>887</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">428</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,581</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash paid to acquire treasury stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(955</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,672</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,865</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(8,162</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dividends paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(10,578</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,938</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,625</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(90,410</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other &#151; net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(218</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(171</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(199</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(1,863</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash used in financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(7,125</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9,629</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9,860</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(60,897</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows of discontinued operations (Revised &#151; Note 1(v))</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Opearting cash flows:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(407</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,458</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">885</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(3,478</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investing cash flows:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(166</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(123</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(34</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Financing cash flows:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Effect of exchange rate changes on
cash and cash equivalents from discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(3</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(26</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by (used in) discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(414</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,625</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">761</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(3,538</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Effect of exchange rate changes on cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,712</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10,669</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>91,555</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net increse (decrease)&nbsp;in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(12,491</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,604</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(106,761</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>251,508</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">227,155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">170,551</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,149,641</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>239,017</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">251,508</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">227,155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>2,042,880</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>See accompanying notes to consolidated financial statements.</I>
</DIV>



<P align="center" style="font-size: 10pt">- 94 -
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 12pt">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>1. Nature of Operations and Summary of Significant Accounting Policies</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>(a)&nbsp;Nature of Operations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK, a Tokyo-based company founded in 1935, is a multinational manufacturer of ferrite
products and a producer of inductor, ceramic capacitors, magnetic head and other components and
recording media. TDK&#146;s two business segments are electronic materials and components, and
recording media, which accounted for 86.5&nbsp;percent and 13.5&nbsp;percent of net sales, respectively, for
the year ended March&nbsp;31, 2006. The main products which are manufactured and sold by the two
business segments are as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(i)&nbsp;Electronic materials and components products:</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 5%">Ferrite cores, Multilayer chip capacitors, High-frequency components, Inductors, GMR
heads, and Organic electroluminescent (EL)&nbsp;display
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(ii)&nbsp;Recording media products:</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 5%">Audio tapes, Video tapes, CD-Rs, MDs, DVDs, and Tape-based data storage media for
computers
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK sells electronic materials and components products to electric and communication equipment
manufacturers and audio equipment manufacturers, mainly in Asia and Japan, and recording media
products to distribution agents and audio equipment manufacturers, mainly in Japan, Europe, and
North America.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(b)&nbsp;Basis of Presentation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK and its domestic subsidiaries maintain their books of account in conformity with financial
accounting standards of Japan, and its foreign subsidiaries in conformity with those of the
countries of their domicile.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consolidated financial statements presented herein reflect certain adjustments, not
recorded on the primary books of TDK and subsidiaries, to present the financial position, results
of operations, and cash flows in conformity with U.S. generally accepted accounting principles (the
&#147;U.S. GAAP&#148;). Such adjustments relate principally to accounting for retirement and severance
benefits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(c)&nbsp;Consolidation Policy</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consolidated financial statements include the accounts of TDK, its subsidiaries and those
variable interest entities where TDK is the primary beneficiary under Financial Accounting
Standards Board (&#147;FASB&#148;) Interpretation No.&nbsp;46 (revised December&nbsp;2003) (&#147;FIN 46R&#148;), &#147;Consolidation
of Variable Interest Entities&#148;. All significant intercompany accounts and transactions have been
eliminated in consolidation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The investments in affiliates in which TDK&#146;s ownership is 20&nbsp;percent to 50&nbsp;percent and where
TDK exercises significant influence over their operating and financial policies are accounted for
by the equity method. All significant intercompany profits from these affiliates have been
eliminated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(d)&nbsp;Cash Equivalents</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash equivalents include all highly liquid debt instruments purchased with an original
maturity of three months or less.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(e)&nbsp;Allowance for Doubtful Receivables</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The allowance for doubtful receivables is TDK&#146;s best estimate of the amount of probable credit
losses in TDK&#146;s existing trade receivables. An additional reserve for individual receivables is
recorded when TDK becomes aware of a customer&#146;s inability to meet its financial obligations, such
as in the case of bankruptcy filings or deterioration in a customer&#146;s operating results or
financial position. If customer circumstances change, estimates of the recoverability of
receivables would be further adjusted.
</DIV>

<P align="center" style="font-size: 10pt">- 95 -
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(f)&nbsp;Investments in Securities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK classifies its debt and equity securities into one of three categories: trading,
available-for-sale, or held-to-maturity. Trading securities are bought and held principally for
the purpose of selling them in the near term. Held-to-maturity securities are those securities in
which TDK has the ability and intent to hold the security until maturity. All securities not
included in trading or held-to-maturity are classified as available-for-sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trading and available-for-sale securities are recorded at fair value. Held-to-maturity
securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums
or discounts. Unrealized holding gains and losses on trading securities are included in earnings.
Unrealized holding gains and losses, net of the related tax effect, on available-for-sale
securities are excluded from earnings and are reported as a separate component of accumulated other
comprehensive income (loss)&nbsp;until realized. As of March&nbsp;31, 2006 and 2005, TDK did not hold any
trading or held-to-maturity securities. Available-for sale securities, which mature or are
expected to be sold in less than one year, are classified as current assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A decline in the fair value of any available-for-sale security below cost that is deemed to be
other-than-temporary results in a reduction in carrying amount to fair value. The impairment is
charged to earnings and a new cost basis for the security is established. To determine whether an
impairment is other-than-temporary, TDK periodically reviews the fair value of available-for-sale
securities for possible impairment by taking into consideration the financial and operating
conditions of the issuer, the general market conditions in the issuer&#146;s industry, degree and period
of the decline in fair value and other relevant factors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nonmarketable securities are recorded at cost, as fair value is not readily determinable. TDK
periodically evaluates whether an event or change in circumstances may have a significant adverse
effect on the fair value of the investment. Factors considered in accessing whether an indication
of impairment exists include the financial and operating conditions of the issuer, the general
market conditions in the issuer&#146;s industry and other relevant factors. If an indication of
impairment is present, TDK estimates the fair value of nonmarketable securities. If the fair value
is less than cost and the impairment is determined to be other-than-temporary, a nonmarketable
security is written down to its impaired value through a charge to earnings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(g)&nbsp;Inventories</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories are stated at the lower of cost or market. Cost is determined principally by the
average cost method.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(h)&nbsp;Property, Plant and Equipment</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation of property, plant and equipment is principally computed by the declining-balance
method for assets located in Japan and of certain foreign subsidiaries and by the straight-line
method for assets of other foreign subsidiaries based on the following estimated useful lives:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Buildings
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">3 to 60&nbsp;years</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Machinery and equipment
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">2 to 22&nbsp;years</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(i)&nbsp;Income Taxes</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income taxes are accounted for under the asset and liability method. Deferred tax assets and
liabilities are recognized for the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date. TDK uses a specific identification
method to release the residual tax effects associated with components of accumulated other
comprehensive income resulting from a change in tax law or rate.
</DIV>

<P align="center" style="font-size: 10pt">- 96 -
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(j)&nbsp;Stock Option Plan</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2002, the FASB issued Statement of Financial Accounting Standards No.&nbsp;148 (&#147;SFAS
148&#148;), &#147;Accounting for Stock-Based Compensation &#151; Transition and Disclosure&#148;, which amends FASB
Statement No.&nbsp;123 (&#147;SFAS 123&#148;), &#147;Accounting for Stock-Based Compensation&#148;. SFAS 148 provides
alternative methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SAFS 148 amends the disclosure
requirements of SFAS 123 to require more prominent and more frequent disclosures in financial
statements about the effects of stock-based compensation. However, it gives an entity a choice of
recognizing related compensation expense by adopting the fair value method or to continue to
measure compensation using the intrinsic value-based method prescribed under Accounting Principles
Board Opinion No.&nbsp;25 (&#147;APB 25&#148;), &#147;Accounting for Stock Issued to Employees&#148;, the former standard.
TDK has chosen to use the measurement principle prescribed by APB 25. As such, stock-based
compensation cost is recognized by TDK only if the market price of the underlying common stock
exceeds the exercise price on the date of grant. Accordingly, stock option related compensation
cost of &#165;186&nbsp;million ($1,590 thousand) has been recognized in fiscal 2006, representing the amount
attributed to service rendered during the current period of the amount by which the market price of
the underlying common stock exceeded the exercise price of stock options approved for issuance at
the Ordinary General Meeting of Shareholders held in June&nbsp;2005 (note 10). No compensation cost has
been recognized in fiscal 2005 and fiscal 2004 for TDK&#146;s stock based compensation plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table illustrates the effects on both income from continuing operations and net
income if the fair-value-based method had been applied to all outstanding and unvested stock based
awards with such costs recognized ratably over the vesting period of the underlying instruments.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11">Yen</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">(Millions)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from continuing
operations, as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>44,411</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,965</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>379,581</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Add compensation expense
recognized under intrinsic
value method</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>186</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,590</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deduct total stock-based
employee compensation
expense determined under
fair-value-based method for
all awards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(607</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(438</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(330</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(5,188</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pro forma income from
continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>43,990</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,527</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,025</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>375,983</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic income from continuing
operations per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">As reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>335.84</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">279.41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">327.27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>2.87</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>332.66</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">276.11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">324.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.84</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted income from
continuing operations per
share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">As reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>335.54</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">279.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">327.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>2.87</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>332.39</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">275.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">324.74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.84</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">- 97 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11">Yen</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">(Millions)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income, as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>44,101</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>376,932</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Add compensation expense
recognized under intrinsic
value method</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>186</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,590</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deduct total stock-based
employee compensation
expense determined under
fair-value-based method for
all awards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(607</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(438</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(330</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(5,188</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pro forma net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>43,680</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,862</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,771</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>373,334</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic net income per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">As reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>333.50</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">251.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">317.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>2.85</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>330.32</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">248.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">315.31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.82</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted net income per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">As reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>333.20</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">251.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">317.69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>2.85</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>330.05</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">248.29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">315.27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.82</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(k)&nbsp;Research and Development Expenses</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and development costs are expensed as incurred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(l)&nbsp;Advertising Costs</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Advertising costs are expensed as incurred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(m)&nbsp;Shipping and Handling Fees and Costs</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shipping and handling costs amounted to &#165;15,326&nbsp;million ($130,991 thousand), &#165;13,397&nbsp;million
and &#165;12,163&nbsp;million for the years ended March&nbsp;31, 2006, 2005 and 2004, respectively, and are
included in selling, general and administrative expenses in the consolidated statements of income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(n)&nbsp;Foreign Currency Translation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign currency financial statements have been translated in accordance with Statement of
Financial Accounting Standards No.&nbsp;52 (&#147;SFAS 52&#148;), &#147;Foreign Currency Translation&#148;. Under SFAS 52,
the assets and liabilities of TDK&#146;s subsidiaries located outside Japan are translated into Japanese
yen at the rates of exchange in effect at the balance sheet date. Revenue and expense items are
translated at the average exchange rates prevailing during the year. Gains and losses resulting
from foreign currency transactions are included in other income (deductions), and those resulting
from translation of financial statements are excluded from the statements of income and are
accumulated in stockholders&#146; equity as a component of accumulated other comprehensive income
(loss).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(o)&nbsp;Use of Estimates</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management of TDK has made a number of estimates and assumptions relating to the reporting of
assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities
to prepare these consolidated financial statements in conformity with the U.S. GAAP. Significant
items subject to such estimates and assumptions include the valuation of intangible assets,
property, plant and equipment, trade receivables, inventories, and deferred income tax assets, and
assumptions related to the estimation of actuarial determined employee benefit obligations. Actual
results could differ from those estimates.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(p)&nbsp;Accounting for the Impairment or Disposal of Long-Lived Assets</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property, plant and equipment and certain identifiable intangibles with finite useful lives
are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to future net cash flows (undiscounted
and without interest charges) expected to be generated by the asset. If such assets are considered
to be impaired, the impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be disposed of are reported at
the lower of the carrying amount or fair value less costs to sell.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(q)&nbsp;Goodwill and Other Intangible Assets</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill is not amortized, but instead is tested for impairment at least annually or more
frequently if certain indicators arise. Intangible assets with finite useful lives are amortized
over their respective estimated useful lives. Intangible assets determined to have an indefinite
useful life are not amortized, but instead are tested for impairment until the life is determined
to no longer be indefinite.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK conducts its annual impairment test in the fourth quarter of each fiscal year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(r)&nbsp;Derivative Financial Instruments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK has elected not to apply hedge accounting. Accordingly, changes in the fair value of
derivatives are recognized in earnings in the period of the changes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(s)&nbsp;Net Income per Share</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic net income per share has been computed by dividing net income available to common
stockholders by the weighted-average number of common shares outstanding during each year. Diluted
net income per share reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or resulted in the
issuance of common stock of TDK. For the years ended March&nbsp;31, 2006, 2005 and 2004, stock options
to purchase 116,100 shares, 364,300 shares and 156,500 shares, respectively, were excluded from the
calculation of diluted earnings per share as the effect would have been antidilutive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(t)&nbsp;Revenue Recognition</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK generates revenue principally through the sale of electronic materials &#038; components and
recording media under separate contractual arrangements for each. TDK recognizes revenue when
persuasive evidence of an arrangement exists, delivery has occurred and title and risk of loss have
been transferred to the customer, the sales price is fixed or determinable, and collectibility is
probable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue from sales of electronic materials &#038; components including electronic materials,
electronic devices and recording devices is recognized when the products are received by customers
based on the free-on board destination sales term. With regards to sales of electronic materials &#038;
components, TDK&#146;s policy is not to accept product returns unless the products are defective. The
conditions of acceptance are governed by the terms of the contract or customer arrangement and
those not meeting the predetermined specification are not recorded as revenue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue from sales of recording media products such as videotape and DVDs is also recognized
when the products are received by customers based on the free-on board destination sales term.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK offers sales incentives through various programs to certain resellers and retailers.
These sales incentives include product discounts, volume-based discounts, marketing development
funds (&#147;MDFs&#148;), rebates and coupons, and are accounted for in accordance with the Emerging Issues
Task Force Issue No.&nbsp;01-9 &#147;Accounting for Consideration Given by a Vendor to a Customer (Including
a Reseller of Vendor&#146;s Product)&#148; (&#147;EITF 01-9&#148;). Generally, under EITF 01-9, consideration given by
a vendor to a customer is presumed to be a reduction of the selling price of goods and services,
and, therefore, should be recognized as a reduction of revenue in the vendor&#146;s income statement.
The presumption may be overcome based on certain factors. These sales incentives totaled to
&#165;13,479&nbsp;million ($115,205 thousand), &#165;14,292&nbsp;million and &#165;15,089&nbsp;million for the years ended March
31, 2006, 2005 and 2004, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A number of product discounts are based on a certain percentage off the invoice price
predetermined by spot contracts or based on contractually agreed upon amounts with resellers and
retailers. Product discounts are recognized as a reduction of revenue at the time the related
revenue is recognized and amounted to &#165;7,415&nbsp;million ($63,376 thousand), &#165;7,194&nbsp;million and &#165;5,993
million for the years ended March&nbsp;31, 2006, 2005 and 2004, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Volume-based discounts are provided only if the resellers and retailers achieve a specified
cumulative level of revenue transactions in a year or less period. Liabilities are recognized as a
reduction of revenue for the expected sales incentive at the time the related revenue is recognized
and are initially based on the estimation of sales volume by using historical experience on an
individual customer basis. Estimates of expected sales incentives are evaluated and adjusted
periodically based on actual revenue transactions and forecasts for the balance of the year or
incentive period. Volume-based discounts recognized as a reduction of revenue amounted to &#165;2,646
million ($22,615 thousand), &#165;3,005&nbsp;million and &#165;2,982&nbsp;million for the years ended March&nbsp;31, 2006,
2005 and 2004, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MDFs are provided to certain resellers and retailers as a contribution to or a sponsored fund
for customers&#146; marketing programs, such as customers&#146; coupons, catalog, sales contests and
advertisements, mostly in the form of a subsidy. Under this program, we do not receive an
identifiable benefit sufficiently separable from our customers. Accordingly, MDFs are accounted
for as a reduction of revenue based on the annual contract or at the time TDK has incurred the
obligation, if earlier, and amounted to &#165;1,970&nbsp;million ($16,838 thousand), &#165;2,631&nbsp;million and
&#165;2,923&nbsp;million for the years ended March&nbsp;31, 2006, 2005 and 2004, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consumer promotions mainly consist of coupons and mail-in rebates offered to end users, who
are reimbursed by TDK to retailers or end users for the coupons or mail-in rebates redeemed.
Liabilities are recognized at the time related revenue is recognized (or at the time of the offer
if the sale to retailers occurs before the offer) for the expected number of coupons or mail-in
rebates to be redeemed. TDK uses historical rates of redemption on similar offers for similar
products to estimate redemption rates for current incentive offerings. Consumer promotions
recognized as a reduction of revenue amounted to &#165;995&nbsp;million ($8,504 thousand), &#165;1,061&nbsp;million and
&#165;2,446&nbsp;million for the years ended March&nbsp;31, 2006, 2005 and 2004, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK also provides slotting fees paid to certain retailers for putting TDK products at
attractive areas or shelves in the store. Slotting fees are recognized as a reduction of revenue
at the time TDK has incurred the obligation. Slotting fees recognized as a reduction of revenue
amounted to &#165;274&nbsp;million ($2,342 thousand), &#165;205&nbsp;million and &#165;451&nbsp;million for the years ended March
31, 2006, 2005 and 2004, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally, TDK has advertising programs with certain resellers and retailers where TDK
agrees to reimburse them for advertising cost incurred by them to put TDK products on their flyers,
catalogs and billboards. TDK receives an identifiable benefit (advertising)&nbsp;in return for the
consideration and that benefit is sufficiently separable because TDK could have purchased that
advertising from other parties. Also, TDK can reasonably estimate the fair value of the benefit
through obtaining sufficient evidence from the resellers and retailers in the form of the invoice
issued by the third party providing the service to the resellers and retailers. Therefore, such
advertising programs are expensed as selling, general and administrative expenses at the time TDK
has incurred the obligation and amounted to &#165;179&nbsp;million ($1,530 thousand), &#165;196&nbsp;million and &#165;293
million for the years ended March&nbsp;31, 2006, 2005 and 2004, respectively.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK allows limited right of returns in certain cases and reduces revenue for estimated future
returns based upon historical experience at the time the related revenue is recorded.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warranties offered on TDK&#146;s products are insignificant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(u)&nbsp;New Accounting Standards Not Yet Adopted</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November&nbsp;2004, the FASB issued Statement of Financial Accounting Standards No.&nbsp;151 (&#147;SFAS
151&#148;), &#147;Inventory Costs &#150; an amendment of Accounting Research Bulletin No.&nbsp;43 (&#147;ARB 43&#148;), Chapter
4&#148;. SFAS 151 amends the guidance in ARB 43, Chapter&nbsp;4, &#147;Inventory Pricing&#148;, to clarify the
accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted
material (spoilage). SFAS 151 requires that items such as idle facility expense, excessive
spoilage, double freight and rehandling costs be recognized as current-period charges regardless of
whether they meet the criterion of &#147;so abnormal&#148; as stated in ARB 43. In addition, SFAS 151
requires that allocation of fixed production overheads to the costs of conversion be based on the
normal capacity of the production facilities. SFAS 151 is effective for inventory costs incurred
in fiscal periods beginning after June&nbsp;15, 2005. TDK does not expect the adoption of SFAS 151 to
have a material effect on TDK&#146;s consolidated financial position and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2004, the FASB issued Statement of Financial Accounting Standards No.&nbsp;123 (revised
2004), &#147;Share Based Payment&#148; (&#147;SFAS 123R&#148;). SFAS 123R is a revision of SFAS 123, &#147;Accounting for
Stock Based Compensation&#148;, and supersedes APB 25. SFAS 123R requires TDK to measure the cost of
employee services received in exchange for equity awards based on the grant date fair value of the
awards. The cost will be recognized as compensation expense over the vesting period of the awards.
In April&nbsp;2005, the Securities and Exchange Commission deferred the effective date of SFAS 123R to
the beginning of the first annual period after June&nbsp;15, 2005. TDK adopted SFAS 123R in the first
quarter of fiscal 2007 and will continue to evaluate the impact of SFAS 123R on TDK&#146;s consolidated
financial position and results of operations. The pro forma information presented in Note 1(j) and
Note 10 presents the estimated compensation charges under SFAS 123. TDK&#146;s assessment of the
estimated compensation charges is affected by TDK&#146;s stock price as well as assumptions regarding a
number of complex and subjective variables and the related tax impact. These variables include,
but are not limited to, TDK&#146;s stock price volatility and employee stock option exercise behaviors.
TDK will recognize the compensation cost for stock-based awards issued after April&nbsp;1, 2006 on a
straight-line basis over the requisite service period for the entire award. In addition, TDK will
recognize the unvested portion of the grant date fair value of awards issued prior to adoption
based on the fair values previously calculated for disclosure purposes. At March&nbsp;31, 2006, the
aggregate value of unvested options, as determined using a Black-Scholes option pricing model, was
&#165;227&nbsp;million. Upon adoption of SFAS 123R, this amount will be recognized over the remaining
vesting period of these options.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;2005, the FASB issued Statement of Financial Accounting Standards No.&nbsp;154 (&#147;SFAS 154&#148;),
&#147;Accounting Changes and Error Corrections &#150; a replacement of Opinion of the Accounting Principle
Board No.&nbsp;20 (&#147;APB 20&#148;) and Statement of Financial Accounting Standards No.&nbsp;3 (&#147;SFAS 3&#148;)&#148;. SFAS
154 replaces APB 20, &#147;Accounting Changes&#148; and SFAS 3, &#147;Reporting Accounting Changes in Interim
Financial Statements&#148;, and provides guidance on the accounting for and reporting of accounting
changes and error corrections. SFAS 154 establishes retrospective application, or the latest
practicable date, as the required method for reporting a change in accounting principle and the
reporting of a correction of an error. SFAS 154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after December&nbsp;15, 2005. TDK does not expect
the adoption of SFAS 154 to have a material effect on TDK&#146;s consolidated financial position and
results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(v)&nbsp;Reclassifications</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain reclassifications have been made to the prior year&#146;s consolidated financial statements
to conform to the presentation used for the year ended March&nbsp;31, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2006 TDK has separately disclosed the operating, investing and financing portions of the
cash flows attributable to its discontinued operations, which in prior periods were reported on a
combined basis as a single amount.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2. Financial Statement Translation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consolidated financial statements are expressed in Japanese yen, the functional currency
of TDK. Supplementally, the Japanese yen amounts as of and for the year ended March&nbsp;31, 2006, have
also been translated into U.S. dollar amounts, solely for the convenience of the reader, at the
rate of &#165;117=U.S.$1, the approximate exchange rate on the Tokyo Foreign Exchange Market on March
31, 2006. This translation should not be construed as a representation that the amounts shown
could be converted into U.S. dollars at such rate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>3. Foreign Operations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amounts included in the consolidated financial statements relating to subsidiaries operating
in foreign countries are summarized as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="12" style="border-bottom: 1px solid #000000">Yen (Millions)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>435,381</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">360,925</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">318,915</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>3,721,205</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>626,626</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">498,366</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">494,184</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,355,778</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>28,582</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,362</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,731</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>244,291</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>4. Marketable Securities and Investments in Securities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Marketable securities and investments in securities at March&nbsp;31, 2006 and 2005, are as
follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Yen (Millions)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Short-term marketable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>56</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>479</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term marketable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>13,042</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,094</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>111,470</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nonmarketable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>596</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,094</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Investments in affiliates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>15,119</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,049</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>129,222</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>28,813</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>246,265</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">- 102 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Marketable securities and investments in securities include available-for-sale securities.
Information with respect to such securities at March&nbsp;31, 2006 and 2005, is as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><u>As of March&nbsp;31, 2006</u>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Gross</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Gross</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Holding</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Holding</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Cost</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Gains</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Losses</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Fair Value</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Yen (Millions):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>9,246</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,859</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12,103</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,002</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>995</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>10,248</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,859</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>13,098</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><u>As of March&nbsp;31, 2005</u>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Gross</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Gross</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Holding</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Holding</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Cost</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Gains</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Losses</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Fair Value</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Yen (Millions):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">5,951</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,054</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,698</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">7,649</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,054</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,703</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><u>As of March&nbsp;31, 2006</u>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Gross</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Gross</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Holding</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Holding</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Cost</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Gains</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Losses</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Fair Value</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">U.S. Dollars (Thousands):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>79,026</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>24,436</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>17</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>103,445</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,564</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>60</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,504</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>87,590</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>24,436</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>77</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>111,949</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debt securities classified as available-for-sale at March&nbsp;31, 2006 mature in fiscal 2008
(weighted average remaining term of 1.7&nbsp;years).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The proceeds from sale and settlement of available-for-sale securities are &#165;4,263&nbsp;million
($36,436 thousand), &#165;1,788&nbsp;million and &#165;1,814&nbsp;million for the years ended March&nbsp;31, 2006, 2005 and
2004, respectively. The gross realized gains on the sale and settlement of available-for-sale
securities are &#165;714&nbsp;million ($6,103 thousand), &#165;377&nbsp;million and &#165;135&nbsp;million for the years ended
March&nbsp;31, 2006, 2005 and 2004, respectively. TDK recorded a write-down of &#165;1,000&nbsp;million ($8,547
thousand), &#165;519&nbsp;million and &#165;1,228&nbsp;million on certain available-for-sale securities and
nonmarketable securities representing other-than-temporary declines in the fair value for the years
ended March&nbsp;31, 2006, 2005 and 2004, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At March&nbsp;31, 2006, all of the available-for-sale securities with unrealized losses had been in
a continuous unrealized loss position for less than 12&nbsp;months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The aggregate cost of nonmarketable securities accounted for under the cost method at March
31, 2006 and 2005 totaled &#165;596&nbsp;million ($5,094 thousand) and &#165;1,555&nbsp;million, respectively, and, as
of March&nbsp;31, 2006 and 2005, those securities were not evaluated for impairment because (a)&nbsp;TDK did
not estimate the fair value of those investments as it was not practicable to estimate the fair
value of the investment and (b)&nbsp;TDK did not identify any events or changes in circumstances that
might have had significant adverse effect on the fair value of those investments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investments in affiliates accounted for by the equity method consist of 26.1&nbsp;percent of the
common stock of Semiconductor Energy Laboratory Co., Ltd., a research and development company, 50.0
percent of the common stock of TMP Co., Ltd., a magnetic products manufacturing company, and five
other affiliated companies, collectively, which are not significant. The difference between TDK&#146;s
carrying value of investments in affiliates and its share of the underlying net equity in such
affiliates substantially consists of unamortized amounts of equity-method goodwill of &#165;1,231
million ($10,521 thousand) as of both March&nbsp;31, 2006 and 2005.
</DIV>

<P align="center" style="font-size: 10pt">- 103 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March&nbsp;31, 2006 and 2005, certain debt securities in the amount of &#165;989&nbsp;million and
&#165;1,695&nbsp;million, respectively were pledged as collateral for extended custom duty payments to Tokyo
Customs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>5. Inventories</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories at March&nbsp;31, 2006 and 2005, are summarized as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Yen</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">(Millions)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finished goods</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>36,826</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,819</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>314,752</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Work in process</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>23,490</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>200,769</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Raw materials</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>28,652</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>244,889</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>88,968</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,924</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>760,410</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The cost elements for finished goods and work in process include direct costs for materials
such as primary materials and purchased semi-finished products, direct labor costs such as basic
salaries, bonuses, and legal welfare expenses, direct costs such as expenses paid to
subcontractors, and indirect manufacturing costs comprising material costs, labor costs and other
overhead costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>6. Short-Term and Long-Term Debt</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Short-term debt and weighted average interest rates at March&nbsp;31, 2006 and 2005, are as
follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Yen</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Weighted average</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">(Millions)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Thousands)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">interest rate</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Short-term bank
loans &#151; unsecured</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>4,469</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>38,197</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>1.63</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Long-term debt at March&nbsp;31, 2006 and 2005, is set forth below:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Yen</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">(Millions)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loans from banks, unsecured, due fiscal 2007
(weighted average: 2006-0.96%)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>1,700</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>14,530</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loans from banks, secured, due fiscal 2009-2012
(weighted average: 2006-0.95%)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>345</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,949</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Lease obligation (weighted average: 2006-5.78%,
2005-4.05%)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>318</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">184</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,718</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,363</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">184</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>20,197</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less current installments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,958</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>16,735</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>405</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>3,462</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">- 104 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The aggregate annual maturities of long-term debt outstanding at March&nbsp;31, 2006, are as
follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Yen (Millions)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(Thousands)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Year ending March&nbsp;31,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">1,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">16,735</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">196</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,675</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,086</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">308</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">265</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Later years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">2,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">20,197</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Short-term and long-term bank loans were made under general agreements that provide that under
certain circumstances security and guarantees for present and future indebtedness will be given
upon request of the bank, and that the bank shall have the right, as the obligations become due, or
in the event of their default, to offset cash deposits against such obligations due to the bank.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property, plant and equipment having a net book value of &#165;2,264&nbsp;million ($19,350 thousand) is
pledged as a collateral for long-term debt from banks.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There were no debt covenants, or cross-default provisions under TDK&#146;s financing arrangements.
Furthermore, there were no subsidiary level dividend restrictions under the financing arrangements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>7. Income Taxes</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK and its domestic subsidiaries are subject to a national corporate tax of 30&nbsp;percent, an
inhabitants tax of between 5.2&nbsp;percent and 6.2&nbsp;percent and a deductible enterprise tax of between
7.7&nbsp;percent and 8.0&nbsp;percent, which in the aggregate resulted in a statutory rate of approximately
40&nbsp;percent for the years ended March&nbsp;31, 2006 and 2005. For the year ended March&nbsp;31, 2004, the
deductible enterprise tax rate was between 9.6&nbsp;percent and 10.1&nbsp;percent, which in the aggregate
resulted in statutory rate of approximately 41&nbsp;percent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amendments to Japanese tax regulations were enacted into law on March&nbsp;24, 2003. As a result
of this amendment, the statutory income tax rate was reduced from approximately 41&nbsp;percent to 40
percent effective from April&nbsp;1, 2004. Current income taxes were calculated at the rate of 40
percent, in effect for the years ended March&nbsp;31, 2006 and 2005, respectively, and 41&nbsp;percent in the
year 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the year ended March&nbsp;31, 2005, residual tax effects of &#165;4,571&nbsp;million previously recorded
in accumulated other comprehensive income (minimum pension liability adjustments) were released and
recorded as a reduction to income tax expense in the consolidated statements of income as a result
of the elimination of the minimum pension liability adjustment.
</DIV>

<P align="center" style="font-size: 10pt">- 105 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The effective tax rates of TDK for the years ended March&nbsp;31, 2006, 2005 and 2004, are
reconciled with the Japanese statutory tax rate in the following table:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2004</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Japanese statutory tax rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>40.4</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">40.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">41.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expenses not deductible for tax purposes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non taxable income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(0.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Difference in statutory tax rates of foreign
subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(13.9</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(23.0</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Change in the valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Investment tax credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(0.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development tax credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(1.4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Residual tax effect in minimum pension liability
adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additional tax related to prior years income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(1.0</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Effective tax rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>31.9</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">38.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">21.7</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;29, 2005, TDK received a notification and assessment of additional tax from the Tokyo
Regional Tax Bureau (Nihonbashi Tax Office) asserting that prices charged and paid by TDK in
connection with sales and purchases of products involving its overseas subsidiaries have not been
commensurate with the prices of similar transactions involving unrelated third parties. The period
of additional assessments covers the tax years ending from March&nbsp;1999 through March&nbsp;2003. The
additional tax assessed by the Tokyo Regional Tax Bureau amounts to &#165;11,960&nbsp;million including
interest and penalty, which has been reflected as additional tax expense and other expense, net of
deferred income tax benefits in the accompanying consolidated statements of income for the year
ended March&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total income taxes for the years ended March&nbsp;31, 2006, 2005 and 2004 are allocated as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11">Yen</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S.Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">(Millions)</TD>
    <TD  style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>21,057</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,284</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>179,974</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss from discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">156</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stockholders&#146; equity, accumulated other
comprehensive income (loss):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign currency translation adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>68</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net unrealized gains (losses)&nbsp;on
securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>849</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(148</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,256</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Minimum pension liability adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,074</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,538</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>17,727</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>23,988</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>205,025</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">- 106 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income from continuing operations before income taxes and income taxes for the years ended
March&nbsp;31, 2006, 2005 and 2004, are summarized as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Income From</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Continuing</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Operations</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000">Before Income</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">Income Taxes</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Taxes</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Current</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Deferred</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Total</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Yen (Millions):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Japanese</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>28,004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11,160</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>657</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11,817</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>38,099</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,593</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(1,353</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9,240</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>66,103</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>21,753</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(696</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>21,057</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Japanese</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,836</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,261</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,026</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,235</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,892</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(506</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,049</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,816</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,532</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,284</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Japanese</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,611</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,411</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,404</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,236</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,864</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,729</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,847</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,858</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,133</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="5" align="left">U.S. Dollars (Thousands):</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Japanese</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>239,350</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>95,385</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,615</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>101,000</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>325,633</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>90,538</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(11,564</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>78,974</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>564,983</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>185,923</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(5,949</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>179,974</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">- 107 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The tax effects of temporary differences that give rise to significant portions of the
deferred tax assets and deferred tax liabilities at March&nbsp;31, 2006 and 2005, are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Yen</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">(Millions)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Trade accounts receivable, principally due to
allowance for doubtful receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>433</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>3,701</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,590</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accrued business tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>370</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,330</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,162</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,145</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>43,974</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Retirement and severance benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11,884</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,648</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>101,573</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net operating loss carryforwards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>20,116</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,631</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>171,932</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Tax credit carryforwards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>684</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,846</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Minimum pension liability adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,269</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>19,393</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Property, plant and equipment, principally due
to differences in depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,153</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,523</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>26,949</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,835</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,867</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>15,684</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total gross deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>46,894</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>400,804</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Less valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(20,298</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(15,409</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(173,487</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>26,596</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,061</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>227,317</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Investments, principally due to differences
in valuation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(6,030</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,034</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(51,538</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Undistributed earnings of foreign subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(3,948</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,656</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(33,744</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net unrealized gains on securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(1,223</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(272</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(10,453</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Acquired intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(4,990</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(374</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(42,650</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(1,086</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,220</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(9,282</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total gross deferred tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(17,277</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10,556</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(147,667</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>9,319</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>79,650</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The net changes in the total valuation allowance for the years ended March&nbsp;31, 2006, 2005 and
2004, are an increase of &#165;4,889&nbsp;million ($41,786 thousand), &#165;4,381&nbsp;million and &#165;1,338&nbsp;million,
respectively. The valuation allowance primarily relates to deferred tax assets associated with net
operating loss carryforwards incurred by certain foreign subsidiaries. The decrease in the
valuation allowance attributable to preacquisition tax benefits recognized during the years ended
March&nbsp;31, 2006 and 2005 amounted to &#165;154&nbsp;million and &#165;119&nbsp;million, respectively. The reversal of
the valuation allowance upon realization of tax benefits resulted in a reduction of goodwill. In
assessing the realizability of deferred tax assets, management considers whether it is more likely
than not that some portion or all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of future taxable income during
the periods in which those temporary differences become deductible and tax carryforwards are
utilized. Management considered the scheduled reversal of deferred tax liabilities, projected
future taxable income, and tax planning strategies in making this assessment. Based upon the level
of historical taxable income and projections for future taxable income over the periods which the
deferred tax assets are deductible, management believes it is more likely than not TDK will realize
the benefits of these deductible differences and tax carryforwards, net of the existing valuation
allowance at March&nbsp;31, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At March&nbsp;31, 2006, certain subsidiaries have net operating loss carryforwards for income tax
purposes of &#165;65,398&nbsp;million ($558,957 thousand) which are available to offset future taxable
income, if any.
</DIV>

<P align="center" style="font-size: 10pt">- 108 -
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Periods available to offset future taxable income vary in each tax jurisdiction and range from
one year to an indefinite period as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Yen (Millions)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(Thousands)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Within 1&nbsp;year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,222</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1 to 5&nbsp;years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,966</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">5 to 20&nbsp;years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,626</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">159,196</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Indefinite periods</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">352,573</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">65,398</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">558,957</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At March&nbsp;31, 2006, certain subsidiaries have tax credit carryforwards for income tax purposes
of &#165;684&nbsp;million ($5,846 thousand) which are available to reduce future income taxes, if any.
Approximately &#165;44&nbsp;million ($376 thousand) of the tax credit carryforwards expire through 2019,
while the remainder have an indefinite carryforward period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net deferred income tax assets and liabilities at March&nbsp;31, 2006 and 2005, are reflected in
the accompanying consolidated balance sheets under the following captions:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Yen</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">(Millions)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepaid expenses and other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>7,401</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>63,257</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income taxes (noncurrent assets)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,287</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>62,282</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(55</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(31</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(470</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income taxes (noncurrent
liabilities)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(5,314</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(751</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(45,419</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>9,319</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(79,650</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March&nbsp;31, 2006 and 2005, TDK did not recognize deferred tax liabilities of approximately
&#165;61,144&nbsp;million ($522,598 thousand) and &#165;61,663&nbsp;million, respectively, for certain portions of
undistributed earnings of foreign subsidiaries because TDK currently does not expect those
unremitted earnings to reverse and become taxable to TDK in the foreseeable future. A deferred tax
liability will be recognized when TDK expects that it will recover those undistributed earnings in
a taxable manner, such as through receipt of dividends or sale of the investments. As of March&nbsp;31,
2006 and 2005, the undistributed earnings of these subsidiaries are approximately &#165;258,881&nbsp;million
($2,212,658 thousand) and &#165;244,341&nbsp;million, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>8. Retirement and Severance Benefits</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK and certain of its subsidiaries sponsor contributory and noncontributory retirement and
severance plans that provide for pension or lump-sum benefit payments, based on length of service,
employee salary and certain other factors, to substantially all employees who retire or terminate
their employment for reasons other than dismissal for cause. Corporate statutory auditors
participate in an unfunded retirement plan sponsored by TDK.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The contributory plan in Japan mainly represents the Employees&#146; Pension Fund plan (&#147;EPF&#148;),
comprised of the substitutional portion based on the pay related part of the old age pension
benefits prescribed by the Welfare Pension Insurance Law (similar to Social Security benefits in
the United States) and the corporate portion based on contributory defined pension arrangements
established at the discretion of TDK. The substitutional portions of the EPF represent a welfare
pension plan carried out on behalf of the Japanese government. The contributory plan is funded in
conformity with the funding requirements of the applicable Japanese governmental regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK had been exempted from contributing to the Japanese Pension Insurance (&#147;JPI&#148;) program that
would otherwise have been required if it had not elected to fund the government substitutional
portion of the benefit through an EPF arrangement. The plan assets of the EPF were invested and
managed as a single portfolio for the entire EPF and were not separately attributed to the
substitutional and corporate portions.
</DIV>

<P align="center" style="font-size: 10pt">- 109 -
</DIV>


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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In June&nbsp;2001, the Contributed Benefit Pension Plan Law was newly enacted. This law permits an
employer to elect to transfer the entire substitutional portion benefit obligation from the EPF to
the government together with a specified amount of plan assets pursuant to a government formula.
After such transfer, the employer would be required to make periodic contribution to JPI, and the
Japanese government would be responsible for all benefit payments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the new law, TDK received an approval of exemption from the Minister of Health,
Labor and Welfare, effective September&nbsp;25, 2003, from the obligation for benefits related to future
employee service with respect to the substitutional portion of its EPF. TDK received governmental
approval of exemption from the obligation for benefits related to past employee service in October
2004 with respect to the substantial portion of its domestic contributory plan. The transfer to
the government was completed on January&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK accounted for the transfer in accordance with EITF Issue No.&nbsp;03-2 &#147;Accounting for the
Transfer to the Japanese Government of the Substitutional Portion of Employee Pension Fund
Liabilities&#148; (&#147;EITF 03-2&#148;). As specified in EITF 03-2, the entire separation process is to be
accounted for at the time of completion of the transfer to the government of the substitutional
portion of the benefit obligation and related plan assets as a settlement in accordance with SFAS
No.&nbsp;88, &#147;Employers&#146; Accounting for Settlements and Curtailments of Defined Benefit Pension Plans
and for Termination Benefits&#148;. As a result of the transfer, TDK recognized as a subsidy from the
Japanese government an amount equal to the difference between the fair value of the obligation
deemed &#147;settled&#148; with the Japanese government and the assets required to be transferred to the
government. The subsidy that TDK recognized amounted to &#165;33,533&nbsp;million. In addition, TDK
recognized a settlement loss equal to the amount calculated as the ratio of the obligation settled
to the total EPF obligation immediately prior to settlement, both of which exclude the effect of
future salary progression relating to the substitutional portion, times the net unrecognized
gain/loss immediately prior to settlement, which amounted to &#165;27,347&nbsp;million. This gain and loss
is included in operating income in the accompanying consolidated statements of income for the year
ended March&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective October&nbsp;1, 2004, the corporate portion of the EPF was replaced by a new defined
benefit plan that provides benefits based on length of service, employee salary and other factors
in a manner similar to the predecessor corporate defined benefit plan but, at a reduced rate. The
reduction in the pension benefit obligation as of the effective date in the amount of &#165;10,925
million has been accounted for as a negative plan amendment and included in prior service cost and
is amortized into net periodic benefit cost over the weighted average remaining service period of
the plan participants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK and its subsidiaries use a December&nbsp;31 measurement date for the majority of the plans.
</DIV>

<P align="center" style="font-size: 10pt">- 110 -
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net periodic benefit cost for TDK&#146;s employee retirement and severance defined benefit plans
for the years ended March&nbsp;31, 2006, 2005 and 2004 consisted of the following components:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11">Yen</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">(Millions)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Service cost-benefits earned during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>6,587</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>56,299</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest cost on projected benefit obligation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,050</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,359</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,271</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>34,615</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected return on plan assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(3,386</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,180</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,640</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(28,940</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of transition assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(1,331</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,331</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,331</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(11,376</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Recognized actuarial loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,445</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,480</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>29,444</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of unrecognized prior service
benefit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(2,041</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,522</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,353</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(17,444</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Settlement gain, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,186</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>7,324</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,642</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,768</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>62,598</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">- 111 -
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reconciliations of beginning and ending balances of the benefit obligations and the fair value
of the plan assets are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">(Millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Change in benefit obligations:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Benefit obligations at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>184,997</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">258,991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>1,581,171</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,587</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>56,299</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,050</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,359</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>34,615</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Plan amendments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10,925</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Actuarial loss (gain)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(336</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(727</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(2,872</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Benefits paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(6,447</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,646</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(55,102</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Transfer of substitutional portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(67,862</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Acquisition</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,600</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>30,769</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(63</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(437</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(538</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Translation adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>904</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,726</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Benefit obligations at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>193,292</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">184,997</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,652,068</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Change in plan assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fair value of plan assets at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>142,648</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">168,913</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,219,214</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Actual return on plan assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>28,124</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,053</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>240,376</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Employer contributions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,050</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,596</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>51,710</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Benefits paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(5,815</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,046</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(49,701</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Transfer of substitutional portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(31,985</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Acquisition</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,467</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12,538</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Translation adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>386</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,299</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fair value of plan assets at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>172,860</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">142,648</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,477,436</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Funded status</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(20,432</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(42,349</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(174,632</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrecognized net transition obligation being
recognized over 18&nbsp;years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(1,276</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,607</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(10,906</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrecognized net actuarial loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>45,280</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>387,008</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrecognized prior service benefit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(26,254</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(28,295</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(224,393</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net amount recognized</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(2,682</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(601</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(22,923</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amounts recognized in consolidated balance sheets
consist of:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepaid pension cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>18,289</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,669</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>156,316</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Retirement and severance benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(26,790</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(28,839</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(228,974</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>99</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>846</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated other comprehensive loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,720</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>48,889</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net amount recognized</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(2,682</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(601</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(22,923</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Actuarial present value of accumulated benefit
obligations at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>175,073</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">167,834</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>1,496,350</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The projected benefit obligations and the fair value of plan assets for the pension plans with
projected benefit obligations in excess of plan assets, and the accumulated benefit obligations and
the fair value of plan assets for the pension plans with accumulated benefit obligations in excess
of plan assets are as follows.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Yen</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">(Millions)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Plans with projected benefit
obligations in excess of plan assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Projected benefit obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>66,613</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">184,997</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>569,342</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fair value of plan assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>37,405</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">142,648</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>319,701</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Plans with accumulated benefit
obligations in excess of plan assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated benefit obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>60,200</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>514,530</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fair value of plan assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>36,584</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,531</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>312,684</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">- 112 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Assumptions</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Weighted-average assumptions used to determine
benefit obligations at March&nbsp;31:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Discount rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>2.2</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.2</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Assumed rate of increase in future compensation levels</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>3.0</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Weighted-average assumptions used to determine
net periodic benefit cost for the years ended March&nbsp;31:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2004</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Discount rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>2.2</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.1</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Assumed rate of increase in future compensation levels</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>3.0</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected long-term rate of return on plan assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>2.7</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.2</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK determines the expected long-term rate of return based on the expected long-term return of
the various asset categories in which it invests. TDK considers the current expectations for
future returns and the actual historical returns of each plan asset category.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Plan assets</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The weighted-average asset allocations of TDK&#146;s benefit plans at March&nbsp;31, 2006 and 2005 by
asset category are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>65.4</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">26.2</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>26.1</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.9</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>2.2</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">62.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>6.3</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.4</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>100.0</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK&#146;s investment policies are designed to ensure adequate plan assets are available to provide
future payments of pension benefits to eligible participants. Taking into account the expected
long-term rate of return on plan assets, TDK formulates a &#147;model&#148; portfolio comprised of the
optimal combination of equity securities and debt securities. Plan assets are invested in
individual equity and debt securities using the guidelines of the &#147;model&#148; portfolio in order to
produce a total return that will match the expected return on a mid-term to long-term basis. TDK
evaluates the gap between expected return and actual return of invested plan assets on an annual
basis to determine if such differences necessitate a revision in the formulation of the &#147;model&#148;
portfolio. TDK revises the &#147;model&#148; portfolio when and to the extent considered necessary to
achieve the expected long-term rate of return on plan assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the year ended March&nbsp;31, 2005, the EPF sold certain assets to facilitate the funding of
the payment to the Japanese government for the transfer of the substitutional portion of the plan.
In addition, the strategic mix for domestic pension plans had increased asset allocation to cash
based on the unclear outlook for the bond and equity market in Japan during the middle of 2004.
During the year ended March&nbsp;31, 2006, the strategic mix for domestic pension plans resulted in
increase of asset allocation to the equity and debt securities to reflect the completion of the
payment to the Japanese government for the transfer of the substitutional portion of the EPF, and
the upturn of the equity and debt securities market in Japan. As a result, the relative portion of
the equity and debt securities in pension assets at March&nbsp;31, 2006 increased compared to March&nbsp;31,
2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Contributions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK expects to contribute &#165;6,315&nbsp;million ($53,974 thousand) to its defined benefit plans for
the year ending March&nbsp;31, 2007.
</DIV>

<P align="center" style="font-size: 10pt">- 113 -
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Estimated future benefit payments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The benefits expected to be paid from the pension plans in each year 2007 through 2016 are as
follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Yen</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(Millions)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(Thousands)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Year ending March&nbsp;31,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">5,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">51,120</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,887</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,863</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,457</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,735</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,393</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,049</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,795</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2012 - 2016</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">41,320</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">353,162</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>9. Legal Reserve and Dividends</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Japanese Company Law provides that an amount equal to 10&nbsp;percent of cash dividends and
other distributions from retained earnings paid by TDK and its Japanese subsidiaries be
appropriated as a legal reserve. No further appropriations are required when the total amount of
the additional paid-in capital and the legal reserve equals 25&nbsp;percent of their respective stated
capital. The Japanese Company Law also provides that to the extent that the sum of the additional
paid-in capital and the legal reserve exceeds 25 percent of the stated capital, the amount of the
excess (if any) is available for appropriations by resolution of the shareholders. Certain foreign
subsidiaries are also required to appropriate their earnings to legal reserves under the laws of
the respective countries. Cash dividends and appropriations to the legal reserve charged to
retained earnings for the years ended March&nbsp;31, 2006, 2005 and 2004 represent dividends paid out
during those years and the related appropriations to the legal reserve. The accompanying
consolidated financial statements do not include any provision for the dividend proposed by the
Board of Directors of &#165;50 ($0.43) per share aggregating &#165;6,613&nbsp;million ($56,521 thousand) in
respect of the year ended March&nbsp;31, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash dividends per common share are computed based on dividends paid for the year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>10. Stock Option Plan</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>(a)&nbsp;TDK</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK obtained approval of the Ordinary General Meeting of Shareholders held on June&nbsp;29, 2005
regarding the issuance of stock acquisition rights as share-based compensation stock options (the
Stock Acquisition Rights) to Board members and Corporate Officers, pursuant to Articles 280-20 and
280-21 of the Japanese Commercial Code. Upon approval, the Board of Directors adopted resolutions
to issue an aggregate of 246 Stock Acquisition Rights, each representing an option to purchase 100
shares of common stock of TDK, to the then 17 Directors and Corporate Officers of TDK. The Stock
Acquisition Rights issued on June&nbsp;30, 2005 are fully vested on date of issuance and are exercisable
during the period from July&nbsp;1, 2005 to June&nbsp;30, 2025. The amount to be paid by qualified persons
upon the exercise of each Stock Acquisition Rights is set at &#165;1 ($0.01) per share of common stock.
Stock option related compensation cost of &#165;186&nbsp;million ($1,590 thousand) has been recognized in
fiscal 2006, representing the amount attributed to service rendered during the current period of
the amount by which the market price of the underlying common stock exceeded the exercise
price of stock options approved for issuance at the Ordinary General Meeting of Shareholders
held in June&nbsp;2005.
</DIV>

<P align="center" style="font-size: 10pt">- 114 -
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK obtained approval of the Ordinary General Meeting of Shareholders held on June&nbsp;29, 2005
regarding the issuance of stock acquisition rights as stock options to select senior executives,
pursuant to Articles 280-20 and 280-21 of the Japanese Commercial Code. Upon approval, the Board
of Directors adopted resolutions to issue an aggregate of 906 Stock Acquisition Rights, each
representing an option to purchase 100 shares of common stock of TDK, to the then 172 select senior
executives of TDK, and the Directors and select senior executives of subsidiaries. The Stock
Acquisition Rights issued on August&nbsp;11, 2005 are exercisable during the period from August&nbsp;1, 2007
to July&nbsp;31, 2011. The amount to be paid by qualified persons upon the exercise of each Stock
Acquisition Rights is set at &#165;8,134 ($69.52) per share of common stock, which was calculated by a
formula approved by shareholders at the said annual shareholders meeting and is subject to an
adjustment in certain events, including but not limited to a stock split, stock dividend and issue
of new shares at a price less than the current market price of the shares of TDK. The exercise
price of each Stock Acquisition Rights was equal to or greater than the fair market value of TDK&#146;s
common stock on the date of grant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To cover these options and the share-based compensation stock options issued on June&nbsp;30, 2005,
TDK purchased on the Tokyo Stock Exchange (&#147;TSE&#148;) a total of 115,200 common shares with an
aggregate purchase price of &#165;930&nbsp;million ($7,949 thousand) from August&nbsp;17, 2005 through August&nbsp;22,
2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK obtained approval of the Ordinary General Meeting of Shareholders held in June&nbsp;2004, 2003
and 2002 regarding the issuance of stock acquisition rights as stock options, pursuant to Articles
280-20 and 280-21 of the Japanese Commercial Code. Upon approval, the Board of Directors adopted
resolutions to issue an aggregate of 2,343, 2,547 and 2,236 Stock Acquisition Rights, each
representing a stock option to purchase 100 shares of common stock of TDK, to the then 187, 179 and
197 Directors, Corporate Officers and selected senior executives of TDK, and the Directors and
select senior executives of its subsidiaries, respectively. The amount to be paid by qualified
persons upon the exercise of each Stock Acquisition Rights was set at &#165;8,147, &#165;6,954 and &#165;5,909 per
share of common stock, respectively. The exercise price of each Stock Acquisition Rights was equal
to or greater than the fair market value of TDK&#146;s common stock on the date of grant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Ordinary General Meeting of Shareholders held in June&nbsp;2001 and 2000 approved to implement
TDK&#146;s stock option plan for Directors and certain employees of TDK, and the purchase of TDK&#146;s own
shares for transfer to them under the plan, pursuant to Article&nbsp;210-2 of Japanese Commercial Code.
Stock options were provided to the then 196 and 204 Directors on the Board and associate directors
and officials in amounts ranging from 500 to 10,000 common shares each, at an exercise price of
&#165;6,114 and &#165;15,640 per share. The exercise price of each Stock Acquisition Rights was equal to or
greater than the fair market value of TDK&#146;s common stock on the date of grant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK currently accounts for these stock option plans as fixed plans pursuant to APB 25.
</DIV>

<P align="center" style="font-size: 10pt">- 115 -
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A summary of the status of TDK&#146;s stock option plans as of March&nbsp;31, 2006, 2005 and 2004, and
of the activity during the years ending on those dates, is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Weighted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Weighted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Weighted</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Weighted</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">average</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">average</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">average</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">average</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">exercise</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">exercise</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">exercise</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">exercise</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">shares</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">price</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">shares</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">price</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">shares</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">price</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">price</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Yen</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at
beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>868,600</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>8,293</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">739,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">8,358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">548,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">8,967</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>70.88</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>115,200</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,397</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">234,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">254,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,954</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>54.68</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>139,700</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,308</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,979</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>53.90</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeited or
Expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>15,900</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>14,563</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,695</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,276</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>124.47</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at
end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>828,200</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,244</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">868,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,293</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">739,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>70.46</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercisable at
end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>504,300</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,308</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">380,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">264,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,755</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>71.01</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Information about stock options outstanding at March&nbsp;31, 2006 is as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">Options Outstanding</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Weighted</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">average</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">outstanding at</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">remaining</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Weighted average</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Range of exercise prices</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">March 31, 2006</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">contractual life</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">exercise price</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(years)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Yen</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>24,600</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.01</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">5,909</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>105,700</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,909</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50.50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">6,114</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>52,400</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52.26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">6,954</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>205,500</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,954</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59.44</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">8,134</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>90,600</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69.52</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">8,147</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>233,300</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69.63</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">15,640</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>116,100</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133.68</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">1 to 15,640</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>828,200</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,244</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70.46</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The fair value of these stock options was estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions:
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The Stock Acquisition Rights &#150; the exercise price is equal to or greater than the market price of
the stock on the grant date</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2004</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Grant-date fair value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>2,325</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">2,223</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">2,290</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>($</B></TD>
    <TD align="right"><B>19.87</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected life</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center"><B>4.0 years</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">4.0 years</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">4.0 years</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Risk-free interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>0.54</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.59</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.26</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected volatility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>38.93</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">46.30</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">51.36</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected dividend yield</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>0.96</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.85</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.71</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">- 116 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>The Stock Acquisition Rights &#150; the exercise price is less than the market price of the stock on the
grant date</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Grant-date fair value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>7,235</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>($</B></TD>
    <TD align="right"><B>61.84</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected life</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center"><B>5.5 years</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Risk-free interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>0.47</B></TD>
    <TD nowrap><B>%</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected volatility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>44.46</B></TD>
    <TD nowrap><B>%</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected dividend yield</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>0.80</B></TD>
    <TD nowrap><B>%</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(b)&nbsp;Densei-Lambda</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Densei-Lambda K. K. (&#147;Densei-Lambda&#148;), a subsidiary of TDK, obtained approval of the Ordinary
General Meeting of Shareholders held in June&nbsp;2002 regarding the issuance of stock acquisition
rights as stock options, pursuant to Articles 280-20 and 280-21 of the Japanese Commercial Code.
Upon approval, the Board of Directors adopted resolutions to issue an aggregate of 1,147 Stock
Acquisition Rights, each representing a stock option to purchase 100 shares of common stock of
Densei-Lambda, to the then 201 Directors, Corporate Auditors, Corporate Officers and certain
employees of Densei-Lambda, respectively. The Stock Acquisition Rights issued on January&nbsp;10, 2003
are exercisable during the period from January&nbsp;11, 2006 to January&nbsp;10, 2013. The amount to be paid
by qualified persons upon the exercise of each Stock Acquisition Rights was set at &#165;789 per share
of common stock. The exercise price of each Stock Acquisition Rights was equal to or greater than
the fair market value of Densei-Lambda&#146;s common stock on the date of grant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Ordinary General Meeting of Shareholders held in June&nbsp;2001 and 2000 approved to implement
Densei-Lambda&#146;s stock option plan for Directors, Corporate Officers and certain employees of
Densei-Lambda, and the purchase of Densei-Lambda&#146;s own shares for transfer to them under the plan,
pursuant to Article&nbsp;210-2 of Japanese Commercial Code. Stock options were provided to the then 97
Directors, Corporate Officers and certain employees, and 10 Directors and Corporate Officers at an
exercise price of &#165;1,817 and &#165;2,229 per share, respectively. The exercise price of each Stock
Acquisition Rights was equal to or greater than the fair market value of Densei-Lambda&#146;s common
stock on the date of grant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Densei-Lambda currently accounts for these stock option plans, which are immaterial, as fixed
plans pursuant to APB 25.
</DIV>

<P align="center" style="font-size: 10pt">- 117 -
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>11. Other Comprehensive Income (Loss)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change in accumulated other comprehensive income (loss)&nbsp;for the years ended March&nbsp;31, 2006,
2005 and 2004, are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Yen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>


<TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation adjustments:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Balance at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>&#165;</B></TD>
    <TD align="right"><B>(47,171</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(52,807</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(26,520</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(403,171</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Adjustments for period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>26,100</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,636</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(26,287</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>223,077</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Balance at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(21,071</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(47,171</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(52,807</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(180,094</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net unrealized gains (losses)&nbsp;on
securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Balance at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>801</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">648</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,846</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Adjustments for period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>892</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">153</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">538</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,624</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Balance at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,693</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">801</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">648</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>14,470</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minimum pension liability adjustments:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Balance at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(5,287</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(38,228</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(52,414</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(45,188</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Adjustments for period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,719</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,941</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>23,239</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Balance at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(2,568</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,287</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(38,228</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(21,949</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total accumulated other comprehensive
income (loss):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Balance at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(51,657</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(90,387</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(78,824</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(441,513</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Adjustments for period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>29,711</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,730</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11,563</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>253,940</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Balance at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>&#165;</B></TD>
    <TD align="right"><B>(21,946</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(51,657</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(90,387</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(187,573</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">- 118 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tax effects allocated to each component of other comprehensive income (loss)&nbsp;and
reclassification adjustments for the years ended March&nbsp;31, 2006, 2005 and 2004, are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11">Yen</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">(Millions)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Tax</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Before tax</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(expense)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Net-of-tax</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">amount</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">or benefit</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">amount</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign currency translation adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>26,108</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(8</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>26,100</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized gains (losses)&nbsp;on securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Unrealized holding gains arising for period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,128</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(856</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,272</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Reclassification adjustments for (gains)
losses realized in net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(387</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(380</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net unrealized gains (losses)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,741</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(849</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>892</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Minimum pension liability adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,793</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(2,074</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,719</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other comprehensive income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>32,642</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(2,931</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>29,711</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>2005</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign currency translation adjustments:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Amount arising during the year on
investments in foreign entities held at
end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">5,870</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,862</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Reclassification adjustments for the
portion of gains and losses realized upon
liquidation and sale of investments in
foreign entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(226</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(226</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net foreign currency translation
adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,644</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,636</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized gains (losses)&nbsp;on securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Unrealized holding gains arising for period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(119</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">557</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Reclassification adjustments for (gains)
losses realized in net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(671</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">267</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(404</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net unrealized gains (losses)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">153</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Minimum pension liability adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,479</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(29,538</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,941</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other comprehensive income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">68,128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(29,398</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,730</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>2004</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign currency translation adjustments:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Amount arising during the year on
investments in foreign entities held at
end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#165;</TD>
    <TD align="right">(26,464</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(245</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(26,709</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Reclassification adjustments for the
portion of gains and losses realized upon
liquidation of investments in foreign
entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">422</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net foreign currency translation
adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(26,042</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(245</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(26,287</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized gains (losses)&nbsp;on securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Unrealized holding gains arising for period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">886</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(348</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">538</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Minimum pension liability adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,608</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9,422</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,186</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other comprehensive income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#165;</TD>
    <TD align="right">(1,548</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10,015</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11,563</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">- 119 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">(Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Tax</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Before tax</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(expense)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Net-of-tax</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">amount</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">or benefit</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">amount</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign currency translation adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>223,145</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(68</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>223,077</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized gains (losses)&nbsp;on securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Unrealized holding gains arising for period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>18,188</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(7,316</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,872</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Reclassification adjustments for (gains)
losses realized in net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(3,308</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>60</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(3,248</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net unrealized gains (losses)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>14,880</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(7,256</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,624</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Minimum pension liability adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>40,966</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(17,727</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>23,239</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other comprehensive income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>278,991</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(25,051</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>253,940</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>12. Leases</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK and its subsidiaries occupy offices and other facilities under various cancellable lease
agreements expiring in fiscal 2007 through 2008. Lease deposits made under such agreements,
aggregating &#165;1,827&nbsp;million ($15,615 thousand) and &#165;1,900&nbsp;million, at March&nbsp;31, 2006 and 2005,
respectively, are included in other assets on the accompanying consolidated balance sheets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a schedule by years of future minimum rental payments required under
operating leases that have initial or remaining noncancellable lease terms in excess of one year as
of March&nbsp;31, 2006:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Yen</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(Millions)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(Thousands)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Year ending March&nbsp;31,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">2,499</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">21,359</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,188</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,437</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,282</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,316</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">791</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,761</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Later years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,103</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">11,584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">99,009</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">- 120 -
</DIV>


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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>13. Commitments and Contingent Liabilities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At March&nbsp;31, 2006, commitments outstanding for the purchase of property, plant and equipment
approximated &#165;13,088&nbsp;million ($111,863 thousand). TDK has entered into several purchase agreements
with certain suppliers whereby TDK committed to purchase a minimum amount of raw materials to be
used in the manufacture of its products. Future minimum purchases remaining under the agreements
approximated &#165;4,539&nbsp;million ($38,795 thousand) at March&nbsp;31, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK and certain of its subsidiaries provide guarantees to third parties on bank loans of its
employees. The guarantees on behalf of the employees are made for their housing loans. For each
guarantee issued, in the event the employee defaults on payment, TDK would be required to make
payments under its guarantee. The maximum amount of undiscounted payments TDK would have to make
in the event of default is &#165;5,740&nbsp;million ($49,060 thousand) and &#165;6,296&nbsp;million at March&nbsp;31, 2006
and 2005, respectively. As of March&nbsp;31, 2006, the liability recognized for the estimated fair
value of TDK&#146;s obligation under the guarantee arrangement is not material.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Several claims against TDK and certain subsidiaries are pending. Provision has been made for
the estimated liabilities for the items. In the opinion of management, based upon discussion with
counsel, any additional liability not currently provided for will not materially affect the
consolidated financial position and results of operations of TDK.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>14. Risk Management Activities and Derivative Financial Instruments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK and its subsidiaries operate internationally which exposes them to the risk of changes in
foreign exchange rates and interest rates; derivative financial instruments are utilized to reduce
these risks. TDK and its subsidiaries do not hold or issue financial instruments for trading
purposes. TDK and its subsidiaries are exposed to credit related losses in the event of
nonperformance by the counterparties to those financial instruments, but does not expect any
counterparties to fail to meet their obligations given their high credit ratings. The credit
exposure of currency swaps, interest rate and currency swaps, forward foreign exchange contracts
and currency option contracts is represented by the fair values of contracts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK and one of its subsidiaries had currency swaps and interest rate and currency swaps with
certain financial institutions to limit their exposure to fluctuations in foreign exchange rates
and interest rates related primarily to loans made by TDK to its subsidiaries in a total amount of
&#165;11,067&nbsp;million at March&nbsp;31, 2005. During the year ended March&nbsp;31, 2006, TDK decided to use
forward exchange contracts to limit the aforementioned exposure. As a result, no currency swaps or
interest and currency swaps were outstanding at March&nbsp;31, 2006. These swaps required TDK and the
subsidiary to pay principally euros and U.S. dollars and to receive Japanese yen at a specified
rate on specific dates. Gains or losses on interest and currency swaps and currency swaps were
included in interest expense and foreign exchange gain (loss)&nbsp;in the consolidated statements of
income, respectively. The swap contracts were measured at fair value and were included in prepaid
expenses and other current assets or other current liabilities, as the case may be, in the
consolidated balance sheets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forward exchange contracts and currency option contracts have been entered into to hedge
adverse effects of foreign currency exchange rate fluctuations mainly on
foreign-currency-denominated trade receivables and foreign-currency-denominated forecasted
transactions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At March&nbsp;31, 2006 and 2005, TDK and certain of its subsidiaries had forward exchange contracts
to sell and buy foreign currencies (principally U.S. dollars and Japanese yen) and currency option
contracts for a contract amount of &#165;17,726&nbsp;million ($151,504 thousand) and &#165;28,990&nbsp;million,
respectively. Gains or losses on forward exchange contracts and currency option contracts were
included in foreign exchange gain (loss)&nbsp;in the consolidated statements of income. These contracts
were measured at fair value and were
included in prepaid expenses and other current assets or other current liabilities, as the
case may be, in the consolidated balance sheets.
</DIV>

<P align="center" style="font-size: 10pt"> - 121 -
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>15. Fair Value of Financial Instruments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following methods and assumptions were used to estimate the fair value of financial
instruments in cases for which it is practicable:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(a)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>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></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The carrying amount approximates fair value because of the short maturity of these
instruments.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(b)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Marketable securities and Investments in securities</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The fair values of marketable securities and investments in securities are estimated based on
quoted market prices for these instruments. For other securities for which there are no quoted
market prices, a reasonable estimate of fair values could not be made without incurring excessive
costs. Additional information pertinent to the value of unquoted investments is provided below.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(c)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Long-term debt</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The fair value of TDK&#146;s long-term debt is estimated based on the amount of future cash flows
associated with the instrument discounted using TDK&#146;s current borrowing rate for similar debt of
comparable maturity, or based on the quoted market prices for the same or similar issues.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(d)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Currency Swaps, Currency and Interest Rate Swaps, Forward Foreign Exchange Contracts and
Foreign Currency Option Contracts</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The fair values of currency swaps, currency and interest rate swaps, forward foreign exchange
contracts and foreign currency option contracts are estimated by obtaining quotes from financial
institutions.
</DIV>

<P align="center" style="font-size: 10pt"> - 122 -
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The carrying amounts and estimated fair values of TDK&#146;s financial instruments at March&nbsp;31,
2006 and 2005, are summarized as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="6%">&nbsp;</TD>
    <TD width="75%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Yen (Millions)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>As of March 31, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Carrying amount</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Estimated fair value</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nonderivatives:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap><DIV style="margin-left:75px; text-indent:-15px">Investments in
securities and
other assets
for which it
is:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Practicable to estimate fair value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>20,497</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>20,497</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Not practicable to estimate fair value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>801</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Liability:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Long-term debt, including current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(2,363</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(2,363</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Derivatives:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Forward foreign exchange contracts in a:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Gain position</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Loss position</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Currency option contracts in a:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Gain position</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Loss position</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(8</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(8</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="6%">&nbsp;</TD>
    <TD width="75%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Yen (Millions)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center">As of March 31, 2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Carrying amount</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Estimated fair value</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nonderivatives:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap><DIV style="margin-left:75px; text-indent:-15px">Investments in securities and other assets
for which it is:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Practicable to estimate fair value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">12,684</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,684</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Not practicable to estimate fair value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,741</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Liability:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Long-term debt, including current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(184</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(184</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Derivatives:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Currency and interest rate swaps in a:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Gain position</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Loss position</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(312</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(312</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Forward foreign exchange contracts in a:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Gain position</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Loss position</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(88</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(88</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Currency option contracts in a:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Gain position</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Loss position</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(366</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(366</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"> - 123 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="6%">&nbsp;</TD>
    <TD width="75%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">U.S. Dollars (Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>As of March 31, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Carrying amount</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Estimated fair value</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nonderivatives:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap><DIV style="margin-left:30px; text-indent:-15px">Investments in securities and other assets
for which it is:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Practicable to estimate fair value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>175,188</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>175,188</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Not practicable to estimate fair value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,846</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Liability:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Long-term debt, including current
portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(20,197</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(20,197</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Derivatives:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Forward foreign exchange contracts in a:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Gain position</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>68</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>68</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Loss position</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Currency option contracts in a:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Gain position</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Loss position</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(68</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(68</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The carrying amounts of the nonderivative assets and liabilities are included in the
consolidated balance sheets under the indicated captions. The carrying amounts of the currency
swaps, the currency and interest rate swaps, forward foreign exchange contracts and foreign
currency option contracts in a gain position are included in prepaid expenses and other current
assets, while those in a loss position are included in other current liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It is not practicable to estimate the fair value of investments in untraded companies.
Management believes that the carrying amounts approximate fair value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Limitations</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fair value estimates are made at a specific point in time, based on relevant market
information and information about the financial instrument. These estimates are subjective in
nature and involve uncertainties and matters of significant judgment and therefore cannot be
determined with precision. Changes in assumptions could significantly affect the estimates.
</DIV>

<P align="center" style="font-size: 10pt"> - 124 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>16. Restructuring Cost</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;8, 2006, TDK&#146;s board of directors decided to restructure certain of its recording
media business, including the withdrawal from the manufacturing of recordable CD and DVDs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to that decision, TDK shut down the production facilities at its European subsidiary,
TDK Recording Media Europe S.A. in Luxembourg in April&nbsp;2006. In March&nbsp;2006, TDK recorded a
restructuring cost of &#165;6,825&nbsp;million ($58,333 thousand) which included a charge of &#165;3,309&nbsp;million
($28,282 thousand) relating to employee termination benefits. As a result of the restructuring, a
total of 350 regular employees were terminated through May&nbsp;31, 2006. In addition, TDK recorded a
restructuring cost of &#165;2,594&nbsp;million ($22,171 thousand) relating to an impairment of property,
plant and equipment in connection with the decision to shut down production facilities at its
European subsidiary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The change of the restructuring liabilities for the year ended March&nbsp;31, 2006 is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">Yen (Millions)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Impairment on</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Workforce</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">property, plant</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">reduction</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">and equipment</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Other</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Total</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Beginning balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Costs and expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,309</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,594</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>922</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,825</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>286</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>242</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>528</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-cash adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,594</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,594</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ending balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>3,023</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>680</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,703</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="center">U.S. Dollars (Thousands)<BR></TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Beginning balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Costs and expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>28,282</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>22,171</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,880</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>58,333</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,444</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,068</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,512</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-cash adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>22,171</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>22,171</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ending balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>25,838</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,812</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>31,650</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restructuring liabilities were included in Accrued expenses in the consolidated balance sheets
as of March&nbsp;31, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TDK expects that the entire accrued liabilities of &#165;3,703&nbsp;million ($31,650 thousand)
recognized at March&nbsp;31, 2006 will be paid by September&nbsp;30, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>17. Assets Held for Sale</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At March&nbsp;31, 2006, assets held for sale consists of certain property, plant and equipment,
which were classified as held for sale in connection with the restructuring activities in Europe
(Note 16) and certain property, plant and equipment in Japan in accordance with FASB Statement of
Financial Accounting Standards No.&nbsp;144, &#147;Accounting for the Impairment or Disposal of Long-Lived
Assets&#148;. TDK recorded write-downs to fair value less cost to sell in the amount of &#165;2,594&nbsp;million
($22,171 thousand) in 2006, which was included in restructuring cost in the consolidated statements
of income. TDK expects these assets to be sold during the year ended March&nbsp;31, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At March&nbsp;31, 2005, assets and liabilities held for sale consists of assets and liabilities of
TDK&#146;s former subsidiary TDK Semiconductor Corporation (&#147;TSC&#148;), which was sold during the year ended
March&nbsp;31, 2006 (Note 21).
</DIV>

<P align="center" style="font-size: 10pt"> - 125 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The components of the assets and liabilities held for sale at March&nbsp;31, 2006 and 2005 are as
follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Yen</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000">(Millions)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(Thousands)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Assets held for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,110</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>35,128</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,110</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>35,128</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Liabilities held for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>18. Goodwill and Other Intangible Assets</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The components of acquired intangible assets excluding goodwill at March&nbsp;31, 2006 and 2005,
are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">Yen (Millions)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Gross Carrying</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Accumulated</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Amount</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Amortization</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Net Amount</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortized intangible assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Patent</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>10,350</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,226</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,124</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Customer relationships</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,673</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>441</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,232</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Software</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9,268</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,389</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,879</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,024</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,658</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,366</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>37,315</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,714</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>26,601</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unamortized intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>2,877</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,877</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">Yen (Millions)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Gross Carrying</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Accumulated</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Amount</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Amortization</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Net Amount</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortized intangible assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Patent</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">10,347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,105</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Software</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,271</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,399</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,872</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,346</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">715</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,631</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,964</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,608</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unamortized intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">639</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">639</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">U.S. Dollars (Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Gross Carrying</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Accumulated</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Amount</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Amortization</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Net Amount</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortized intangible assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Patent</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>88,462</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>27,573</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>60,889</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Customer relationships</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>91,222</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,769</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>87,453</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Software</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>79,214</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>46,060</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>33,154</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>60,034</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>14,171</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>45,863</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>318,932</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>91,573</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>227,359</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unamortized intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>24,590</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>24,590</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"> - 126 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Intangible assets subject to amortization are amortized using the straight-line method
over their estimated useful lives to their estimated residual value of zero. The useful lives are
11&nbsp;years for the Patents, 5 to 17&nbsp;years for Customer relationships, 2 to 10&nbsp;years for Internal-use
Software, and 8 to 10&nbsp;years for Other intangible assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aggregate amortization expense for the years ended March&nbsp;31, 2006, 2005 and 2004 was &#165;3,618
million ($30,923 thousand), &#165;2,467&nbsp;million and &#165;2,626&nbsp;million, respectively. Estimated
amortization expense for the next five years is: &#165;3,779&nbsp;million in 2007, &#165;3,217&nbsp;million in 2008,
&#165;2,888&nbsp;million in 2009, &#165;2,730&nbsp;million in 2010, and &#165;2,440&nbsp;million in 2011.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The changes in the carrying amount of goodwill by segment for the year ended March&nbsp;31, 2006 is
as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">Yen (Millions)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Electronic</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">materials and</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Recording</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">components</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">media</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Total</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>March&nbsp;31, 2004</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">10,029</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,029</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">991</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deductions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,975</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,975</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Translation adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>March&nbsp;31, 2005</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,210</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,782</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,782</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deductions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(401</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(401</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Translation adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">862</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">862</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>March&nbsp;31, 2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">19,453</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,453</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">U.S. Dollars (Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Electronic</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">materials and</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Recording</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">components</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">media</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Total</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>March&nbsp;31, 2005</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">78,718</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78,718</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,607</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,607</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deductions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,427</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,427</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Translation adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,367</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,367</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>March&nbsp;31, 2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">166,265</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">166,265</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill additions during the year ended March&nbsp;31, 2006 represent the excess of purchase price
over the fair value of assets acquired and liabilities assumed in connection with the acquisition
of Lambda Power Business in the amount of &#165;4,854&nbsp;million (Note 23) and &#165;4,928&nbsp;million in connection
with an immaterial acquisition made during the year. Goodwill deductions during the year ended
March&nbsp;31, 2006 primarily consist of an impairment loss in the amount of &#165;159&nbsp;million and the
reclassification to deferred income taxes in the amount of &#165;154&nbsp;million related to post-acquisition
adjustment resulting from recognition of preacquisition tax benefits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill additions during the year ended March&nbsp;31, 2005 represent the excess of purchase price
over the fair value of assets acquired and liabilities assumed for a certain immaterial acquisition
made during the year. Goodwill deductions during the year ended March&nbsp;31, 2005 primarily consist
of an impairment loss from discontinued operations in the amount of &#165;1,856&nbsp;million in connection
with the discontinuation of TDK&#146;s semiconductor business (Note 21) and a reclassification to
deferred income taxes in the amount of &#165;119&nbsp;million related to post-acquisition adjustment
resulting from recognition of preacquisition tax benefits.
</DIV>

<P align="center" style="font-size: 10pt">- 127 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>19. Net Income per Share</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A reconciliation of the numerators and denominators of the basic and diluted net income per
share computations is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11">Yen</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">(Millions)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from continuing
operations available to common
stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>44,411</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,965</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>379,581</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss from discontinued
operations available to common
stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>310</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,665</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,649</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income available to common
stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>44,101</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>376,932</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">Number of shares (Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2004</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average common shares
outstanding &#151; Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>132,239</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,293</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,475</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of dilutive stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>116</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average common shares
outstanding &#151; Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>132,355</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,523</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">Yen</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from
continuing
operations per
share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>335.84</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">279.41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">327.27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>2.87</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>335.54</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">279.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">327.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.87</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss from
discontinued
operations per
share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>&#165;</B></TD>
    <TD align="right"><B>(2.34</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(27.70</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9.47</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(0.02</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(2.34</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(27.69</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9.46</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(0.02</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>333.50</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">251.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">317.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>2.85</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>333.20</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">251.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">317.69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.85</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>20. Business and Credit Concentrations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;One significant customer, Maxtor Peripherals (S)&nbsp;Pte. Ltd., related to electronic materials
and components business accounted for 11.5&nbsp;percent, 12.6&nbsp;percent and 12.1&nbsp;percent of TDK&#146;s net
sales for the years ended March&nbsp;31, 2006, 2005 and 2004, respectively, and 12.7&nbsp;percent and 13.2
percent of trade receivables at March&nbsp;31, 2006 and 2005, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the year ended March&nbsp;31, 2006, the said customer agreed to be acquired by a competitor.
The acquisition was completed in May&nbsp;2006. During the year ended March&nbsp;31, 2007, TDK will be
losing the majority of the sales from this customer that it recorded in the year ended March&nbsp;31, 2006.
</DIV>

<P align="center" style="font-size: 10pt">- 128 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>21. Discontinued Operations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;31, 2005, TDK entered into an agreement to sell all outstanding stock of its wholly
owned subsidiary, TSC for $14,028 thousand to Golden Gates Capital (&#147;Buyer&#148;). The sale of TSC is
part of TDK&#146;s continuing shift away from non-core products and technologies. The sale agreement
also includes earn-out payments, to be made by the Buyer to TDK, of up to $32,500 thousand. No
earn-out payments were made through March&nbsp;31, 2006. The payments are contingent upon certain
milestones being met related to future revenue targets extending through 2007. The transaction was
completed on April&nbsp;8, 2005. TDK has accounted for the sale of TSC as a discontinued operation
pursuant to FASB Statement No.&nbsp;144, &#147;Accounting for the Impairment or Disposal of Long-Lived
Assets&#148;, as TSC meets the definition of a &#147;component of an entity&#148;. The results of operations for
this subsidiary have been reported as discontinued operations for all periods presented.
Accordingly, certain financial statement information and related footnote disclosures related to
prior periods have been reclassified.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selected financial information for the years ended March&nbsp;31, 2006, 2005 and 2004 for the
discontinued operations, are summarized as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">Yen (Millions)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>45</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,070</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>385</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss from operations before
income taxes (including loss on
disposal of &#165;224&nbsp;million in
2006)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>310</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,509</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">244</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,649</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">156</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss from discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>310</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,665</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>2,649</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Included in loss from discontinued operations for the year ended March&nbsp;31, 2004, is patent
infringement settlement income in the amount of &#165;1,933&nbsp;million which, prior to being reclassified,
was previously included in income before income taxes for the year. This patent infringement
settlement income has been reflected as a component of loss from discontinued operations as it
directly relates to the TSC business being disposed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On August&nbsp;6, 2001, TSC filed suit against Silicon Laboratories, Inc. (&#147;SiLabs&#148;) alleging
infringement by SiLabs of U.S. Patent No.&nbsp;5,654,984 entitled &#147;Signal Modulation Across Capacitors&#148;
(&#147;the &#146;984 patent&#148;) owned by TSC. The patent relates to novel methods and circuitry for
communicating a signal across an isolation barrier using capacitors. The patented technology is
principally useful in modem applications. TDK&#146;s lawsuit alleged that SiLabs integrated the
patented technology into its competing modem products. SiLabs counterclaimed alleging (1)&nbsp;unfair
competition and (2)&nbsp;intentional and negligent interference with economic relations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April&nbsp;2003, the parties resolved the dispute with the execution of a Settlement Agreement
wherein both parties agreed to dismiss all litigation between them without admitting any liability.
In exchange for the payment of $17&nbsp;million to TSC, SiLabs was granted a fully paid-up, exclusive
perpetual license to use the &#146;984 patent, as well as three ancillary patents owned by TSC.
Pursuant to the Settlement Agreement, TDK has no further obligation to provide additional services,
product deliverables or enhancements to the licensed technology. TSC did reserve for itself and
other TDK companies the right to use the patents with regard to TDK-branded products. In addition,
TSC agreed that neither it or any TDK entity would pursue a claim against SiLabs for a period of 20
years for patent infringement related to any SiLabs product in existence at the time of the
settlement or any capacitive-based digital access arrangement (&#147;DAA&#148;) product subsequently
introduced by SiLabs.
</DIV>

<P align="center" style="font-size: 10pt">- 129 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>22. Sale of a Subsidiary</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;1, 2004, TDK Logistics Corporation (&#147;TDK Logistics&#148;), a wholly owned subsidiary
which provided warehousing and transportation services to only TDK, was acquired in a share for
share exchange by Alps Logistics Co., Ltd. (&#147;ALPS&#148;), a third party listed company on the Tokyo
Stock Exchange. The share exchange ratio was 0.82 of an ALPS share for one TDK Logistics share.
The fair value of shares issued to effect this transaction was determined based on the market value
of ALPS common shares at the consummation date and amounted to &#165;3,365&nbsp;million. As a result of the
acquisition, TDK owns approximately 7.9&nbsp;percent of the outstanding common stock of ALPS. TDK
continues to use warehousing and transportation services which are now provided by ALPS. The sale
of TDK Logistics does not meet the criteria for reporting as discontinued operations as the
operations and cash flows of the former subsidiary will not be eliminated from the cash flows of
TDK. TDK recorded a gain on sale of &#165;1,799&nbsp;million which is included in operating income in the
consolidated statement of income for the year ended March&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>23. Acquisition</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;1, 2005, TDK acquired 59&nbsp;percent of the issued and outstanding common shares of
Lambda Power Business from U.K.-based Invensys plc. The results of Lambda Power Business&#146;s
operations have been included in the accompanying consolidated financial statements of TDK since
that date. The acquisition is intended to establish a more resilient operating base for TDK in the
power supply field, which is expected to continue to grow in the years ahead, by combining TDK&#146;s
strengths with those of the various businesses of Lambda Power Business. The total purchase price
was &#165;24,202&nbsp;million, net of cash acquired of &#165;4,305&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The purchase price has been allocated based on the fair value of the assets acquired,
including identifiable intangible assets and liabilities assumed, at the date of acquisition. The
excess of the cost of the acquisition over the net of amounts assigned to the fair value of the
tangible and identifiable intangible assets acquired and the liabilities assumed is recorded as
goodwill. Goodwill is not deductible for tax purposes. The following table summarizes the
estimated fair value of the assets acquired and liabilities assumed at the date of the acquisition.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Yen</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(Millions)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(Thousands)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">23,176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">198,086</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,673</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,675</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116,974</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,487</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,504</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total assets acquired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,479</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">482,726</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13,429</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(114,777</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Noncurrent liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9,583</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(81,906</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minority interests</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9,265</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(79,188</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total liabilities assumed</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(32,277</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(275,871</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net assets acquired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">24,202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">206,855</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The acquired intangible assets which are being amortized have a weighted average useful life
of approximately 15&nbsp;years. The intangible assets include customer relationships of &#165;9,778&nbsp;million
(16-years weighted average useful life), patented technology of &#165;1,134&nbsp;million (8-years weighted
average useful life), and other intangible assets of &#165;550&nbsp;million (1-year weighted average useful
life). The acquired intangible assets which are not being amortized include trademarks of &#165;2,132
million and other intangible assets of &#165;92&nbsp;million.
</DIV>

<P align="center" style="font-size: 10pt">- 130 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Pro Forma Results
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following unaudited pro forma financial information presents the combined results of
operations of TDK and Lambda Power Business as if the acquisition had occurred as of April&nbsp;1, 2005
and 2004. The results of Lambda Power Business have been included in the historical financial
statements of TDK since the date of acquisition. The unaudited pro forma financial information is
not intended to represent or be indicative of TDK&#146;s consolidated results of operations or financial
condition that would have been reported had the acquisition been completed as of the beginning of
the periods presented and should not be taken as indicative of the TDK&#146;s future consolidated
results of operations or financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(Unaudited)
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Yen</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">(Millions)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>816,431</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#165;</TD>
    <TD align="right">702,566</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>6,978,043</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>44,188</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,354</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>377,675</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss from discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>310</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,665</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,650</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>43,878</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,689</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>375,026</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Yen</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from continuing operations
per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>334.15</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">267.24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>2.86</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>333.86</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">267.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.85</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss from discontinued operations
per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>&#165;</B></TD>
    <TD align="right"><B>(2.34</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(27.70</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(0.02</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(2.34</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(27.69</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(0.02</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>331.81</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">239.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>2.84</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>331.52</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">239.38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.83</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unaudited pro forma net income for 2006 and 2005 includes &#165;698&nbsp;million (net of tax effect) for
the amortization of acquired intangibles.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;17, 2005, TDK acquired 100&nbsp;percent of the issued and outstanding shares of Amperex
Technology Limited (&#147;ATL&#148;), a Hong Kong based company engaged in the production and sale of Polymer
Lithium Batteries with about 3,000 employees, for the total purchase price of approximately &#165;8,666
million, net of cash acquired. In connection with this transaction, TDK recognized goodwill of
&#165;3,803&nbsp;million and intangible assets of &#165;3,497&nbsp;million.
</DIV>

<P align="center" style="font-size: 10pt">- 131 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>24. Related party transaction</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Receivables and payables include the following balances with affiliated companies at March&nbsp;31,
2006 and 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Yen</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">(Millions)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Due from</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>5,515</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>47,137</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Due to</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,169</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,068</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>44,179</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchases, research and development expenses, and sales include the following transactions
with affiliated companies for the years ended March&nbsp;31, 2006, 2005 and 2004:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11">Yen</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">(Millions)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross purchase</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>55,963</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,608</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>478,316</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less raw materials
sold with no
mark-up</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(46,580</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(43,786</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(38,133</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>398,120</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net purchases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9,383</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>80,196</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and
development
expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,141</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>18,299</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>249</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,128</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>25. Supplementary Information</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11">Yen</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">(Millions)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>(a)&nbsp;Statement of Income</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>45,528</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,948</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>389,128</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rent</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,739</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,349</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,037</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>66,145</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Maintenance and repairs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>13,732</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>117,368</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advertising costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,828</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,926</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,261</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>41,265</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>(b)&nbsp;Statement of Cash Flows</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash paid during year for:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>749</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>6,402</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>32,789</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,740</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>280,248</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Noncash activities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In fiscal 2006, noncash investing activities related to the purchase of subsidiaries were as
follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Yen</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">U.S. Dollars</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(Millions)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(Thousands)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Short-term debt assumed in connection with
business acquisition</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#165;</B></TD>
    <TD align="right"><B>781</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>6,675</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt assumed in connection with
business acquisition</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,107</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>18,009</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In fiscal 2005, TDK received a 7.9&nbsp;percent ownership interest in ALPS having a fair value of
&#165;3,365&nbsp;million in exchange for all issued and outstanding shares of TDK Logistics in a
share-to-share exchange transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In fiscal 2004, there were no material noncash investing and financing activities.
</DIV>

<P align="center" style="font-size: 10pt">- 132 -
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Schedule&nbsp;II</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">TDK CORPORATION AND SUBSIDIARIES<BR>
Valuation and Qualifying Accounts<BR>
(In millions of yen)<BR>
Years ended March&nbsp;31, 2006, 2005 and 2004
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Balance at</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">beginning of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Charged to</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Bad debts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Translation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Balance at</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">period</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">earnings</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">written off</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">adjustment</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">end of period</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Year ended
March&nbsp;31, 2006:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Allowance for
doubtful receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">2,560</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,064</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Year ended
March&nbsp;31, 2005:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Allowance for
doubtful receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">2,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">598</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,560</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Year ended
March&nbsp;31, 2004:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Allowance for
doubtful receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#165;</TD>
    <TD align="right">2,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(227</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(250</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">- 133 -
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="126"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Item&nbsp;18.</B></U><B> Financial Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<DIV align="left">
<A name="127"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Item&nbsp;19.</B></U><B> Exhibits</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Documents filed as exhibits to this annual report are as follows:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">1.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>ARTICLES OF INCORPORATION (English translation)</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">1.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>REGULATIONS OF THE BOARD OF DIRECTORS (English translation)</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">2.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>SHARE HANDLING REGULATIONS (English translation)</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">8.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>List of Significant Subsidiaries</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">11.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>TDK CODE OF ETHICS (English translation)</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">12.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Certification pursuant to Section&nbsp;302 of the Sarbanes-Oxley Act of 2002 of CEO of the
Company</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">12.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Certification pursuant to Section&nbsp;302 of the Sarbanes-Oxley Act of 2002 of CFO of the
Company</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">13.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Certification pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002 of CEO of the
Company</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">13.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Certification pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002 of CFO of the
Company</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">- 134 -
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U>SIGNATURES</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of Section&nbsp;12 of the Securities Exchange Act of 1934, the
Registrant certifies that it meets all the requirements for filing of Form 20-F and has duly caused
this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.
</DIV>
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="90%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
 <TD>&nbsp;</TD>
 <TD>&nbsp;</TD>

    <TD  valign="top" align="left"><U>TDK Corporation</U></TD>

</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
 <TD>&nbsp;</TD>
 <TD>&nbsp;</TD>

    <TD  valign="top" align="left">(Registrant)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Date: July&nbsp;27, 2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/Hajime Sawabe</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Hajime Sawabe</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Representative Director,</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman and CEO</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">- 135 -
</DIV>

</BODY>
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TDK CORPORATION
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, 2006
Commission file number
2-76735
TDK KABUSHIKI KAISHA
(Exact name of Registrant as specified in its charter)
TDK CORPORATION
(Translation of Registrant's name into English)
Japan
(Jurisdiction of incorporation or organization)
13-1,
Nihonbashi 1-chome, Chuo-ku, Tokyo 103-8272
Japan
(Address of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act.
Title of each class
Name of each exchange on which registered
American Depositary Shares
New York Stock Exchange
Common stock
New York Stock Exchange
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)
Indicate the number of outstanding shares of the issuer's classes of capital or common stock
as of the close of the period covered by the annual report.
Common stock
Outstanding as of March 31, 2006: 132,266,828 shares (excluding treasury stock)
- 1 -
Table of Contents
Indicate by check mark whether if the registrant is a well-known seasoned issuer, as defined
in Rule 405 of the securities act.
Yes
þ
No
o
.
Indicate by a check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes
þ
No
o
.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated
filer" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
þ
Accelerated filer
o
Non-accelerated filer
o
.
Indicate by a check mark which financial statement item the registrant has elected to follow.
Item 17
þ
Item 18
o
.
If this is an annual report, indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes
o
No
þ
.
All information contained in this Report is as of March 31, 2006 unless otherwise specified.
Fiscal 2006, fiscal 2005, fiscal 2004, fiscal 2003 and fiscal 2002 of this Report indicate TDK
Corporation's fiscal period of the fiscal years ended March 31, 2006, 2005, 2004, 2003 and 2002,
respectively.
The figures in this Report are expressed in yen and, solely for the convenience of the reader,
are translated into United States dollars at the rate of ¥117 = U.S.$1, the approximate exchange
rate prevailing on the Tokyo Foreign Exchange Market as of March 31, 2006. (See Note 2 of the
Notes to Consolidated Financial Statements.) On July 14, 2006 the noon buying rate for yen cable
transfers in New York City as reported by the Federal Reserve Bank of New York was ¥116.33 = $1.
This translation should not be construed as a representation that the amounts shown could be
converted into U.S. dollars at such rate.
Forward-Looking Statements
This material contains forward-looking statements, including projections, plans, policies,
management strategies, targets, schedules, understandings and evaluations, about TDK Corporation
("TDK") and its group companies (TDK and its group companies are referred to also as "TDK" where
the context so requires). These forward-looking statements are based on the current forecasts,
estimates, assumptions, plans, beliefs and evaluations of TDK in light of information currently
available to it, and contain known and unknown risks, uncertainties and other factors. TDK
therefore wishes to caution readers that, being subject to risks, uncertainties and other factors,
TDK's actual results, performance, achievements or financial position could be materially different
from any future results, performance, achievements or financial position expressed or implied by
these forward-looking statements, and TDK undertakes no obligation to publicly update or revise any
forward-looking statements after the issue of this material.
The electronics markets in which TDK operates are highly susceptible to rapid changes. Risks,
uncertainties and other factors that can have significant effects on TDK include, but are not
limited to, shifts in technology, fluctuations in demand, prices, interest and foreign exchange
rates, and changes in economic environments, conditions of competition, laws and regulations.
- 2 -
PART 1
Item 1.
Identity of Directors, Senior Management and Advisers
3
Item 2.
Offer Statistics and Expected Timetable
3
Item 3.
Key Information
4
Item 4.
Information on the Company
11
Item 4A.
Unresolved Staff Comments
18
Item 5.
Operating and Financial Review and Prospects
19
Item 6.
Directors, Senior Management and Employees
48
Item 7.
Major Shareholders and Related Party Transaction
67
Item 8.
Financial Information
68
Item 9.
The Offer and Listing
69
Item 10.
Additional Information
71
Item 11.
Quantitative and Qualitative Disclosures about Market Risk
81
Item 12.
Description of Securities Other than Equity Securities
82
PART 2
Item 13.
Defaults, Dividend Arrearages and Delinquencies
83
Item 14.
Material Modifications to the Rights of Security Holders and Use of Proceeds
83
Item 15.
Controls and Procedures
83
Item 16A.
Audit Committee Financial Expert
83
Item 16B.
Code of Ethics
84
Item 16C.
Principal Accountant Fees and Services
84
Item 16D.
Exemptions from Listing Standards for Audit Committees
86
Item 16E.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
87
PART 3
Item 17.
Financial Statements
88
Independent Auditors' Report
89
Consolidated Financial Statements
90
Notes to Consolidated Financial Statements
95
Schedule II – Valuation and Qualifying Accounts
133
Item 18.
Financial Statements
134
Item 19.
Exhibits
134
1.1 Articles of Incorporation (English translation)
1.2 Regulations of the Board of Directors (English translation)
2.1 Share Handling Regulations (English translation)
8.1 List of Significant Subsidiaries
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 Company
12.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of CFO of the Company
13.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of CEO of the Company
13.2 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of CFO of the Company
EX-1.1 ARTICLES OF INCORPORATION (ENGLISH TRANSLATION)
EX-1.2 REGULATION OF THE BOARD OF DIRECTORS (ENGLISH TRANSLATION)
EX-2.1 SHARE HANDLING REGULATIONS (ENGLISH TRANSLATION)
EX-8.1 LIST OF SIGNIFICANT SUBSIDIARIES
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 COMPANY
EX-12.2 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 OF CFO OF THE COMPANY
EX-13.1 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 OF CEO OF THE COMPANY
EX-13.2 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 OF CFO OF THE COMPANY
Table of Contents
PART 1
Item 1
. Identity of Directors, Senior Management and Advisers
A.
Directors and senior management
Not applicable.
B.
Advisers
Not applicable.
C.
Auditors
Not applicable.
Item 2
. Offer Statistics and Expected Timetable
A.
Offer statistics
Not applicable.
B.
Method and expected timetable
Not applicable.
- 3 -
Table of Contents
Item 3
. Key Information
A.
Selected financial data
Thousands of
U.S. dollars,
except per
share
Millions of yen, except per share amounts
amounts (1)
2006
2005
2004
2003
2002
2006
Net sales
¥
795,180
¥
657,853
¥
655,792
¥
604,865
¥
564,286
$
6,796,410
Cost of sales
585,780
484,323
476,407
459,552
463,331
5,006,666
Gross profit
209,400
173,530
179,385
145,313
100,955
1,789,744
Selling, general and
administrative expenses
142,052
119,886
122,875
115,569
115,696
1,214,120
Transfer to the government
of the substitutional portion
of Employees' Pension Fund:
Subsidy from the government
—
(33,533
)
—
—
—
—
Loss on settlement
—
27,347
—
—
—
—
Restructuring cost
6,825
—
—
5,197
25,489
58,333
Operating income (loss)
60,523
59,830
56,510
24,547
(40,230
)
517,291
Income (loss) from continuing operations before
income taxes
66,103
60,728
55,847
20,552
(40,230
)
564,983
Income (loss) from continuing
operations
44,411
36,965
43,355
13,593
(23,619
)
379,581
Loss from discontinued
operations
310
3,665
1,254
1,574
2,152
2,649
Net income (loss)
44,101
33,300
42,101
12,019
(25,771
)
376,932
Per Common Share:
Income (loss) from continuing
operations per share:
Basic
¥
335.84
¥
279.41
¥
327.27
¥
102.42
¥
(177.72
)
$
2.87
Diluted
335.54
279.25
327.15
102.42
(177.72
)
2.87
Loss from discontinued
operations per share:
Basic
¥
(2.34
)
¥
(27.70
)
¥
(9.47
)
¥
(11.86
)
¥
(16.19
)
$
(0.02
)
Diluted
(2.34
)
(27.69
)
(9.46
)
(11.86
)
(16.19
)
(0.02
)
Net income (loss) per share:
Basic
¥
333.50
¥
251.71
¥
317.80
¥
90.56
¥
(193.91
)
$
2.85
Diluted
333.20
251.56
317.69
90.56
(193.91
)
2.85
Cash dividends
¥
80.00
¥
60.00
¥
50.00
¥
45.00
¥
60.00
U.S. Dollar equivalents (2)
$
0.68
$
0.56
$
0.47
$
0.38
$
0.45
- 4 -
Table of Contents
Millions of yen, except per share amounts
Thousands of
and exchange rate for yen
U.S. dollars (1)
2006
2005
2004
2003
2002
2006
Net working
capital (3)
¥
397,131
¥
379,746
¥
360,555
¥
315,948
¥
288,865
$
3,394,282
Total assets
923,503
808,001
770,319
747,337
749,910
7,893,188
Short-term indebtedness
6,427
103
416
1,919
2,312
54,932
Long-term indebtedness
405
81
27
94
459
3,462
Retirement
and severance benefits
26,790
28,839
73,521
84,971
49,992
228,974
Stockholders' equity
702,419
639,067
576,219
553,885
583,927
6,003,581
Number of
shares outstanding (in thousands)
132,267
132,245
132,409
132,625
132,860
Yen exchange rates per U.S. dollar (4)
Average
Term end
High
Low
Year ended March 31:
2002
125.64
132.70
134.77
115.89
2003
121.10
118.07
133.40
115.71
2004
112.75
104.18
120.55
104.18
2005
107.28
107.22
114.30
102.26
2006
113.67
117.48
120.93
104.64
2007 (through July 14, 2006)
114.22
116.33
118.66
110.07
January, 2006
117.55
113.96
February, 2006
118.95
115.82
March, 2006
119.07
115.89
April, 2006
118.66
113.79
May, 2006
113.46
110.07
June, 2006
116.42
111.66
Notes:
(1)
Translated, except for cash dividend amounts, for convenience of the reader
into U.S. dollars at the rate of ¥117 = $1, the approximate rate on the
Tokyo Foreign Exchange Market on March 31, 2006.
(2)
Translated based on the rates specified in Note (4) below on the respective
dates of semi-annual payments for each year.
(3)
Net working capital is defined as current assets less current liabilities.
(4)
Based on the noon buying rate in New York City for cable transfers in
foreign currencies as certified for customs purposes by the Federal Reserve
Bank of New York. The average rates are computed based on the exchange
rates on the last day of each month during the year.
B.
Capitalization and indebtedness
Not applicable.
C.
Reasons for the offer and use of proceeds
Not applicable.
- 5 -
Table of Contents
D.
Risk factors
Our business is exposed to fluctuations in economic conditions that may adversely affect our
business results and financial condition.
The electronics industry, our field of operations, is highly susceptible to economic trends in
the U.S., Europe, China and Japan, which are the main markets of end products. In addition, these
countries are constantly grappling with various risk factors such as international issues and
economic fluctuations. Furthermore, the digital consumer products field is significantly affected
by the extremely fast pace of technological innovation and competition in the development of new
products as well as changes in economic conditions. Changes in the economic environments from our
expectations could significantly affect our business results and financial condition.
Fluctuations in currency exchange rates could adversely affect our business results and
financial condition.
We import and export products between different regions of the world as we conduct our
business activities in countries around the globe. Sudden changes in foreign currency exchange
rates affect company transactions between regions and costs and prices of our products and services
at overseas bases, which consequently have effects on our business results such as sales and
income. Such fluctuations also give rise to conversion differences with respect to our investments
in overseas assets and liabilities, which are converted into Japanese yen in our consolidated
financial statements.
Therefore,
significant fluctuations in foreign currency exchange rates could have a significant adverse
effect on our business results and financial condition.
We are susceptible to risks involved with selling our products in markets outside of
Japan.
One of our corporate strategies is to expand in markets outside Japan as we conduct business
in countries around the world. Overseas sales account for more than 70 percent of total sales on a
consolidated basis.
However, in many of these markets, we may be exposed to international political risks, such as
war, terrorism and other events; economic risks, such as fluctuations in foreign currency exchange
rates and trade friction; and social risks, including disease, labor problems stemming from
differences in cultures and customs. Such risks may give rise to changes of a far greater
magnitude than we anticipate. We may also face unexpected barriers in building relationships with
trading partners due to differences in commercial and business customs. Manifestation of these
risks could lower productivity in manufacturing processes, undermining the competitiveness of
products and also hinder sales activities and result in other negative consequences. These
outcomes could in turn have a significant adverse effect on our business results and financial
condition.
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
have many production bases in China for mainstay products, such as
HDD heads. China is a country in
the midst of strong economic growth. We have also established a system for supplying both local
companies and customers that have been setting up operations in China. Furthermore, we plan to
expand business further in this country.
However, in the event that political factors (such as changes in laws and regulations),
economic factors (such as the continuity of high growth, fluctuations in Renminbi (RMB) against
U.S. dollars and problems with electric power supply and other infrastructure) and social factors
cause unexpected events in China, there could be a material adverse effect on our growth and
profitability.
- 6 -
Table of Contents
We may not be able to compete effectively with respect to prices, which would have a material
adverse effect on our profitability.
We supply products in a broad range of fields in an electronics industry defined by intense
competition. These fields include IT and communications devices such as digital home appliances,
PCs and mobiles phones. In this industry, price is one of the main competitive factors
differentiating us from other companies, while leading Japanese companies and Asian companies in
South Korea and Taiwan have fueled intense price-based competition.
However, pressure continues to mount from customers for price discounts. In the event that
the fall in prices far exceeds our expectations or becomes protracted, there could be a material
adverse effect on our profitability.
Rapid changes in technology could adversely affect our business and hurt our competitive
position.
We believe that our ability to increase sales by developing appealing, innovative products has
an important role to play in our growth. However, it is extremely difficult to predict future
demand in the rapidly changing electronics industry and develop new technologies to meet that
demand. We may fail to develop and supply in a timely manner attractive, new products with
innovative technologies for this industry and our markets. In the event that we misread the
industry and market and/or are slow in developing innovative technologies on a cost competitive
basis, actual earnings could differ significantly from our forecasts. At the same time, we may
cease to be able to compete in markets, resulting in a significant adverse effect on our business
results and growth prospects.
Claims of product liability and other issues associated with the quality of our products
could adversely affect our business results and brand name.
We manufacture various products at overseas manufacturing bases that we are developing
globally in accordance with ISO (International Organization for Standardization) quality management
standards (ISO 9001) and the strict standards required by customers in the electronics industry,
where technological innovation is remarkable.
We cannot be fully certain, however, that all of our products are defect-free and immune from
recalls at some later date. A product recall or a product liability claim against us caused by
product defects could result in recall costs or damage claims, lower sales and have a negative
impact on our reputation and brand, endangering our continued existence. A situation resulting
from poor product quality due to a major product defect could have a materially adverse effect on
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.
Our growth depends to a great extent on our ability to obtain patents, licenses and other
intellectual property rights covering our products, product designs and manufacturing processes.
However, there are cases where our intellectual property rights cannot be fully protected in a
particular region for reasons unique to that region. Furthermore, we may suffer damages resulting
from the manufacture by a third party of similar products to our own with the unauthorized use of
our intellectual property rights. The failure to protect intellectual property rights of others
could reduce the value of our products and brand and impair our ability to compete effectively.
- 7 -
Table of Contents
Our business may suffer if we are sued for infringing upon the intellectual property rights
of third parties.
There may be cases where it is alleged that our products infringe on the intellectual property
rights of third parties. Regarding problems relating to the infringement of such intellectual
property rights, we may suffer damages or may be sued for damages. In either case, settlement
negotiations and legal procedures would be inevitable and could be expected to be lengthy and
expensive. If our assertions are not accepted in such disputes, we may have to pay damages and
royalties and suffer losses such as the loss of markets.
The failure to prevent infringement on the rights of others could have a materially adverse
effect on our business development and business results and financial condition.
Our success depends on attracting and retaining highly-skilled employees, and we would
suffer material adverse effects if we are unable to do so.
To prevail against fierce competition in the electronics industry, we believe that it is
necessary to recruit and retain staff possessing advanced technical skills. Regarding personnel
with superior management ability, such as with respect to the ability to formulate strategy and
organizational management, we believe that it is necessary to upgrade skills at an advanced level.
However, intense competition to recruit such skilled employees is not limited to the
industries where we are active. Moreover, in Japan, there is increasing fluidity in the labor
market caused by revisions to the life-time employment system and other developments. These and
other factors mean there is no guarantee that we will continue to be able to recruit and retain
skilled employees. The inability to recruit and train personnel as planned could have a materially
adverse effect on the our operations, business results and growth prospects.
We are dependent on certain raw materials and other products, and our business will
suffer if we are unable to procure such materials.
Our manufacturing system is premised on deliveries of raw materials, components, equipment and
other supplies in adequate quality and quantity in a timely manner from many external suppliers.
In new product development, we may rely on certain irreplaceable suppliers for materials.
Because of this, there may be cases where supplies of raw materials and other products to us
are interrupted by an accident or some other event at a supplier, supply is suspended due to
quality or other issues, or there is a shortage of or instability in supply due to a rapid increase
in demand for finished products that use certain materials and products. If any of these
situations becomes protracted, we may have difficulty finding substitutes in a timely manner from
other suppliers, which could have a significant, adverse effect on our production and prevent us
from fulfilling our responsibilities to supply products to our customers. Furthermore, if an
imbalance arises in the supply-demand equation, there could be a spike in the price of raw
materials. In the event of these or other similar occurrences, there could be a material adverse
effect on our business results and financial condition.
Increased government regulation of our industry or changes in those regulations, whether in
Japan or overseas, may limit our ability to compete effectively.
We are subject to various regulations in Japan and other countries where we conduct business.
These include approval for conducting business and making investments, laws and regulations
governing the safety of electric and electronic products, laws and regulations relating to national
security between nations, and export/import laws and regulations. We are also subject to
commercial, antitrust, patent, product liability, environmental, consumer and business taxation
laws and regulations.
In the event that these laws and regulations become more stringent in the future, our business
development could be affected in no small way and we may incur various additional operating costs.
Furthermore, in the event that we are unable to respond appropriately to these laws and
regulations, we may be forced to partially withdraw from certain businesses or take other actions.
Government laws and regulations in their various forms may limit our ability to compete
effectively.
- 8 -
Table of Contents
Fluctuations in interest rates may have an adverse effect on our profitability.
Although we attempt to limit our borrowings from third parties, from time to time, we or our
subsidiaries may need to borrow funds from such third parties. To the extent that interest rates
increase, we or our subsidiaries may be subject to higher interest expenses. In contrast, a
protracted period of low interest rates also may have an adverse effect on us by limiting our
interest income from investments. Low interest rates also may require us to make additional
contributions to pension benefit funds since the assets of those funds may become under funded.
Either of these changes could have a material adverse effect on our business results and financial
condition.
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.
We are developing on a global scale an OEM business, whereby we supply mainly electronic
components to electronics manufacturers, personal computer (PC) makers and other customers.
However, supplies to these customers are significantly affected by various factors that are
beyond our control such as changes in each customer's business results and management strategies.
A drop-off in purchasing demand due to poor business results at major customers, changes in
customers' purchasing plans and policies, the unexpected termination of contracts and other
occurrences could result in our profit margins being reduced due to discounting pressure from
customers or our being left holding large amounts of inventory.
During fiscal 2006, Maxtor Peripherals (S) Pte. Ltd., our major customer related to the
electronic materials and components business with sales of 11.5 percent of consolidated net sales
in 2006, agreed to be acquired by a competitor. The acquisition was
completed in May 2006. During the year ended March 31, 2007. TDK
will be losing the majority of the sales from this customer that it
recorded in the year ended March 31, 2006.
Customers' business results, changes in management strategy or other factors could thus have a
material adverse effect on our business results and financial condition.
Our operations depend on facilities throughout the world and are subject to forces of nature
that could disrupt our ability to serve our customers.
We have many production sites and R&D facilities in Japan and overseas. These facilities and
plants have taken measures to prevent damage caused by natural disasters. However, these
facilities and plants could still suffer significant damage due to a force majeure event such as a
large earthquake, typhoon or flood that far exceeds any level expected. In the event of
interruption to manufacturing, disruption of transportation routes, damage to or disconnection of
information and communications infrastructure, our ability to supply our customers could be
affected for a long period of time. This situation could have a material adverse effect on our
business results and financial condition.
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.
We are subject to various environmental laws and regulations with respect to industrial waste
and emissions into the atmosphere and water from our production processes in Japan and overseas,
and specified hazardous chemical substances used in the products. From the perspective of
environmental protection, environmental regulations are expected to become increasingly stringent
in the future, and expenses are expected to increase for responding to these regulations.
We are engaged in various activities to help protect the environment, including complying with
environmental regulations. However, if we have difficulty responding appropriately to these
demands and laws and regulations, we may be forced to withdraw from certain business activities
impacting our brand name, and in consequence could have a material adverse effect on our business
results and financial condition.
- 9 -
Table of Contents
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.
Pursuant to our Articles of Incorporation, 100 of our shares constitute one unit. A holder
who owns ADRs evidencing less than 100 ADSs will indirectly own less than a whole unit of shares of
Common Stock. Although, under the unit share system holders of less than a unit have the right to
require us to purchase their shares, holders of ADRs evidencing ADSs that represent other than
integral multiples of whole units are unable to withdraw the underlying shares of Common Stock
representing less than a unit and, therefore, are unable to exercise the rights to require us to
purchase such underlying shares at this time. As a result, access to the Japanese markets by
holders of ADRs through the withdrawal mechanism will not be available for dispositions of shares
of Common Stock in lots less than a unit. The unit share system does not affect the
transferability of ADSs, which may be transferred in lots of any size.
Holders of American Depositary Shares have limited rights, which could adversely affect the
price of our shares.
The rights of shareholders under Japanese law to take actions, including voting their shares,
receiving dividends and distributions, bringing derivative actions, examining our accounting books
and records and exercising appraisal rights are available only to shareholders of record.
Citibank, N.A., through its custodian agent, is the record holder of the shares underlying the
ADSs, and therefore only it can exercise the rights of shareholders in connection with the
deposited shares. The depositary has agreed to endeavor to vote the shares underlying ADSs in
accordance with the instructions of ADS holders and to pay the dividends and distributions
collected from us. However, ADS holders will not be able to bring a derivative action, examine our
accounting books and records or exercise appraisal rights through the depositary.
We are incorporated in Japan and a substantial portion of our assets are located outside of
the United States (U.S.). As a result, it may be more difficult for investors to enforce against
us judgments obtained in U.S. courts predicated upon the civil liability provisions of the Federal
securities laws of the United States, including the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, or judgments obtained in other courts outside of
Japan. In addition, there is doubt as to the enforceability in Japanese courts, in original
actions or in actions for enforcements of judgments of U.S. courts, of civil liabilities based
solely upon violation of these Federal securities laws of the United States.
Because
we have not yet completed the implementation of the SEC's
requirements with respect to internal controls over financial
reporting, we might not be aware of weaknesses in our internal
controls over financial reporting that could adversely affect our
ability to report our financial results timely and
accurately.
The
Sarbanes-Oxley Act requires that management maintain, evaluate and
report on internal controls over financial reporting. As a foreign
private issuer, we will be required to comply with this requirement
for our fiscal year ending March 31, 2007. Currently, we are
engaged in the process of assessing our existing internal controls
over financial reporting to ensure our compliance with the new
requirements. As a result, we might not be aware of weaknesses that
could exist and that might be identified once the evaluation of the
effectiveness of our internal controls over financial reporting has
been completed. In addition, there is a risk that we may not be able
to implement our internal controls and procedures over financial
reporting in the time frame allowed by the Sarbanes-Oxley
requirements.
- 10 -
Table of Contents
Item 4
. Information on the Company
A. History and development of the Company
History
TDK Corporation (TDK Kabushiki Kaisha) is a corporation formed under the Commercial Code of
Japan. TDK's principal place of business is at 13-1, Nihonbashi 1-chome, Chuo-ku, Tokyo 103-8272
Japan and the telephone number is +81-3-5201-7102. The agent in the U.S. for purposes of this Item
4 is TDK U.S.A. Corporation, 901 Franklin Avenue, P.O. Box 9302, Garden City, New York, NY 11530.
TDK is the world's leading manufacturer of recording media, ferrite products and recording
device products, and a major producer of inductor, ceramic capacitor, magnet, HDD head and other
components. TDK is a Tokyo-based company founded on December 7, 1935 to commercialize ferrite.
Historically, TDK's growth has been centered on ferrite, a material invented in 1933 by Doctor
Yogoro Kato and Doctor Takeshi Takei. Ferrite is indispensable as a magnetic substance in the
manufacture of electronic equipment. It is a magnetic material with a ceramic structure composed
of iron oxide and other metallic oxides. Its advantages over other magnetic materials include
higher resistivity and thus lower eddy current loss while maintaining superior permeability and
flux density. Based on its strong materials knowledge and production technology, TDK expanded into
ceramic capacitors and magnetic recording tapes in the early 1950s, and ferrite magnets and coil
components in the early 1960s. In the early 1980s, TDK began production of a magnetic head,
continuing development to its modern day product the "HDD head". Since the 1990s, TDK has promoted
the establishment of world-wide research and development organizations and environmental management
efforts. TDK has continued to broaden its product development programs by building up expertise in
materials technology and new recording-related products.
In the years ended March 31, 2006, 2005 and 2004, TDK's capital expenditures were ¥73.9
billion ($632 million), ¥61.0 billion and ¥44.5 billion, respectively. For further information of
TDK's capital expenditures, see "Capital Expenditures" included in Item 5.B. "Liquidity and capital
resources".
TDK is planning capital expenditures of ¥70.0 billion ($598 million) in fiscal 2007, primarily
for the expansion of production facilities and upgrading of facilities. Regarding TDK's capital
expenditure plans, TDK's policy is to invest actively in targeted strategic fields to drive growth.
- 11 -
Table of Contents
B. Business overview
Sales by product category
TDK's sales are generated by two business segments: electronic materials and components, and
recording media. In fiscal 2006, "Semiconductors and others" and "Recording Media and Systems"
were renamed "Other electronic components" and "Recording Media", respectively. There were no
changes in product classifications.
The following is a breakdown of consolidated net sales of TDK and its consolidated
subsidiaries by business segment for fiscal 2006, 2005 and 2004:
Years ended March 31
2006
2005
2004
2006
(millions of yen)
(millions of U.S.
(%)
dollars)
Electronic Materials and Components:
Electronic materials
¥
180,766
¥174,800
¥
166,818
$
1,545.0
(22.7
)
(26.6
)
(25.4
)
Electronic devices
154,680
116,387
107,999
1,322.1
(19.5
)
(17.7
)
(16.5
)
Recording devices
315,928
234,578
230,105
2,700.2
(39.7
)
(35.7
)
(35.1
)
Other
electronic components
36,376
19,449
14,870
310.9
(4.6
)
(2.9
)
(2.3
)
Sub total
687,750
545,214
519,792
5,878.2
(86.5
)
(82.9
)
(79.3
)
Recording Media
107,430
112,639
136,000
918.2
(13.5
)
(17.1
)
(20.7
)
Total
¥
795,180
¥657,853
¥
655,792
$
6,796.4
(100.0
)
(100.0
)
(100.0
)
Notes:
The business segment information is required by the Japanese Securities
Exchange Law. Segment information is unaudited.
Electronic Materials and Components
TDK's electronic materials and components are divided
into four principal categories: (i) electronic materials; (ii) electronic devices; (iii) recording
devices; and (iv) other electronic components. Overall business results of each category in fiscal
2006 compared to fiscal 2005 are as follows.
(i) Electronic materials
The electronics materials sector is broken down into two product
categories: capacitors, and ferrite cores and magnets.
Sales of capacitors increased marginally year over year, as the impact on sales of sluggish
demand in the communications market and falling prices was offset by higher sales to the car
electronics market. A weaker yen also supported sales.
Sales of ferrite cores and magnets rose year over year. Sales of ferrite cores were largely
unchanged, as higher sales from increasing demand for power supply cores was negated by lower sales
of cores used in CRT TVs. Ferrite magnet sales were also largely unchanged, with lower demand
stemming from customer inventory cutbacks offset by higher sales of products to the car electronics
market. Sales of rare-earth magnets rose on increasing HDD demand.
- 12 -
Table of Contents
(ii) Electronic devices
The electronic devices sector has three product categories: inductive
devices, high-frequency components and other products.
The growth of sales in this sector was mainly due to the inclusion of the operating results of
Lambda Power Business from the second half of the fiscal year. Lambda Power Business was acquired
by TDK from U.K.-based Invensys plc. on October 1, 2005. However, even excluding these sales,
existing businesses in this sector posted year over year growth.
Sales of inductive devices increased mainly due to growth in sales of power line coils for use
in mobile phones and HDDs, and in sales of products for use in car electronics.
Sales of high-frequency components were down year over year. While sales of wireless LAN
components rose, total category sales were brought down by further declines in sales prices of some
components for mobile phones.
Sales of other products rose year over year. The main factors were growth in sales of DC-AC
inverters for use in LCD panels and of sensors and actuators for HDDs and mobile phones. The
inclusion of six months' sales of Lambda Power Business in this category also boosted sales.
(iii) Recording devices
The recording devices sector has two product categories: HDD heads and
other heads.
Sales of HDD heads increased year over year. Amid rising demand for HDDs used in PCs and
consumer electronics, HDD head shipments increased. This higher volume outweighed a drop in sales
prices, resulting in an increase in overall sales.
Sales of other heads declined due to inventory reductions of optical pickups.
(iv) Other electronic components
The other electronic components sector includes all other
products in the electronic materials and components segment not included in the three sectors
above. The main products are organic EL displays, anechoic chambers and manufacturing equipment.
Sales of this sector surged due to higher sales of anechoic chambers, which block external
electromagnetic radiation to permit the measurement of electromagnetic noise, and due to sales
growth in new businesses.
Recording Media
The recording media segment has three product categories: audiotapes and
videotapes, optical media and other products. In March 2006, TDK decided to restructure certain of
its recording media business, including the withdrawal from the manufacturing of recordable CD and
DVDs. With this decision, TDK shut down the production facilities at its European subsidiary, TDK
Recording Media Europe S.A. in Luxembourg in April 2006.
Sales of audiotape and videotapes declined year over year. While TDK maintained a high market
share, demand is declining for these products as a whole.
Sales of optical media increased year over year. CD-R demand has peaked and is declining
slowly. However, lower CD-R sales caused by the downturn in demand and discounting pressure were
offset by higher sales of DVDs driven by increasing demand.
Sales of other products decreased year over year. Sales of LTO-standard* (Linear Tape-Open)
tape-based data storage media for computers rose on higher demand. However, sales of recording
equipment and accessory products declined as TDK made progress with efforts to create a more
tightly focused product lineup.
* Linear Tape-Open, LTO, LTO logo, Ultrium and Ultrium logo are trademarks of HP, IBM and
Quantum Corporation in the U.S. and other countries.
- 13 -
Table of Contents
Marketing and Distribution
Marketing channels in Japan
TDK markets electronic materials and components in Japan through its sales division, which had
approximately 304 sales representatives at March 31, 2006.
In Japan, TDK markets magnetic recording tapes and optical disks through 5 district sales
offices with a staff of 88. Approximately 50 percent of domestic sales of TDK brand products are
made to approximately 116 distribution agents. These agents in turn sell TDK brand products to
over 40,000 retailers in Japan. Remaining TDK brand products are sold directly to approximately
5,500 retail stores in Japan. OEM sales are made to certain manufacturers as well.
Operations outside Japan
TDK has 70 direct and indirect foreign subsidiaries as follows: 29 manufacture various product
lines and distribute their products in their country of operation and other countries; 20 are sales
subsidiaries which exclusively handle products manufactured by TDK; 1 is a holding company for the
administration of TDK's U.S. operations; 1 is a holding company for the administration of TDK's
European operations; 1 is a company for research and development in Ireland; 2 are companies for
research and development in the U.S.; 1 is a company for engineering service for magnetic heads in
Singapore; 1 is a local management company for the administration of TDK's Chinese operations; 1 is
a company for engineering service for magnetic heads in China; 1 is a company for engineering
service for magnetic heads in Korea; 1 is a holding company for the administration of Lambda's U.S.
operations; 1 is a company for the administration in Canada; 1 is a holding company for the
administration of Lambda's European operations; 1 is a company for engineering service for
switching power supplies; 3 are dormant companies and 5 are companies in the course of liquidation.
Principal manufacturing or assembly operations are conducted by subsidiaries in the following
countries:
China
-
GMR heads, inductors, ferrite cores, capacitors, transformer, power supplies and ferrite magnets
United States
-
GMR heads, capacitors, ferrite magnets and power supplies
Luxembourg
-
Videotapes, CD-Rs and DVDs
Taiwan
-
Capacitors, ferrite cores and power supplies
Philippines
-
GMR heads
Thailand
-
Audiotapes, rare-earth metal magnets and power supplies
Malaysia
-
Capacitors and high-frequency components
Korea
-
Capacitors and inductors
Hungary
-
Capacitors and ferrite cores
Hong Kong
-
Ferrite cores
A manufacturing subsidiary in Luxembourg has ceased operation in April 2006.
In addition, TDK has sales subsidiaries in Germany, the United Kingdom, the United States,
Hong Kong, Singapore, Australia, Brazil, Poland, China, Philippines, France, Italy and Sweden.
TDK is pursuing a policy of expanding overseas production, which enables TDK to more easily
adapt to fluctuating exchange rates and potential trade barriers. Production outside Japan as a
percentage of sales outside Japan was 79.0 percent in fiscal 2006, 81.9 percent in fiscal 2005 and
78.9 percent in fiscal 2004.
Outside of Japan, TDK relies on a combination of its sales force, distribution agents,
retailers and directed sales efforts to market its products.
- 14 -
Table of Contents
Consolidated net sales of TDK and consolidated subsidiaries by geographical area for fiscal
2006, 2005 and 2004 were as follows:
Years ended March 31
2006
2005
2004
2006
(millions of yen)
(%)
(millions of
U.S. dollars)
Japan
¥
168,554
(21.2
)
¥159,487
(24.2
)
¥
161,607
(24.6
)
$
1,440.6
North America
65,931
(8.3
)
58,850
(9.0
)
71,224
(10.9
)
563.5
Europe
74,846
(9.4
)
71,085
(10.8
)
80,233
(12.2
)
639.7
Asia and others
485,849
(61.1
)
368,431
(56.0
)
342,728
(52.3
)
4,152.6
Total
¥
795,180
(100.0
)
¥657,853
(100.0
)
¥
655,792
(100.0
)
$
6,796.4
Notes:
Net sales in each geographic area are based on the location of TDK entities
where the external sales are generated.
Patents and Licenses
TDK has a variety of patents in Japan and other countries, and also has licenses from other
companies. It believes that expiration of any one of its patents or licenses or related group of
patents or licenses would not materially adversely affect its business activities. TDK does not
believe that acquisition of new proprietary patents or other companies' patents would have a
material effect on operating results in the future.
Competition
In electronic materials and components, rapid technological innovation makes technological
improvement a particularly significant competitive factor in the industry. Product performance
characteristics, reliability, price, and the diversity of product line-ups are also significant
competitive factors. In general, TDK's ferrite and other products compete with similar products
made of other materials. For many applications in which specific performance characteristics are
required, however, competition with other materials is not significant.
In Japan and elsewhere, the markets in which TDK sells its products are highly competitive.
TDK believes that the principal elements of competition in recording media are price, brand
recognition, product quality, and marketing strategy. While the Japanese, American and European
optical disks markets have grown in terms of volume, they have continued to be plagued by severe
price competition. However, TDK has consistently promoted internationalization in manufacturing
and marketing and has maintained strategic sales in regions where high profitability is expected.
Meanwhile, TDK has implemented further cost-reduction programs and is increasing its competitive
strength in other ways, notably through the expansion of overseas production.
- 15 -
Table of Contents
Raw Materials and Sources of Supply
TDK purchases a wide variety of raw materials, machines, tools and parts for use in the
manufacture of its products. The principal raw materials purchased include plastic resin, used to
mould tape cassette shell and in packaging, magnetic powder of iron oxide, base film for magnetic
tape and various electronic and mechanical parts. For products manufactured in Japan, TDK
purchases such raw materials from approximately 1,900 different sources, primarily in Japan.
However, TDK purchases base tape from mainly three suppliers in Japan, although alternative sources
of supply exist. Recently TDK increased its purchases from overseas and also increased local
procurement of raw materials. No single source accounted for more than 10 percent of total
purchases for fiscal 2006.
TDK monitors the availability of raw materials on a regular basis to ensure that it will not
encounter any shortages. TDK has not experienced any significant difficulty in obtaining raw
materials and believes that it will be able to continue to obtain comparable raw materials in
sufficient quantities to meet its manufacturing needs in the future. TDK also believes that the
effect of price volatility with respect to raw materials that it uses in manufacturing its products
can be managed.
C. Organizational structure
As of March 31, 2006, TDK had 70 overseas subsidiaries and 20 Japanese subsidiaries. See
Exhibit 8.1 "List of Significant Subsidiaries" for further information.
- 16 -
Table of Contents
D. Property, plants and equipment
TDK's manufacturing operations are conducted primarily at 35 plants in Japan and 28 plants
overseas.
The following table sets forth information, as of March 31, 2006, with respect to TDK's
manufacturing facilities, approximately 76 percent (in terms of floor space) of which are owned by
TDK.
Number of
Floor space
principal
(thousands of
Location
factories
square feet)
Principal products manufactured
Japan
Akita
16
2,065
Capacitors, ferrite cores,
inductors and high-frequency
components
Nagano
4
1,150
GMR heads and optical disks
Chiba
1
663
Rare-earth metal magnets,
ferrite cores and power
supplies
Yamanashi
3
603
GMR heads and data storage tapes
Oita
1
471
Videotapes
Shizuoka
2
465
Ferrite magnets
Yamagata
3
345
Inductors
Iwate
1
298
Capacitors
Ibaraki
3
219
Display and power supplies
Niigata
1
54
Power supplies
Overseas
China
9
4,155
GMR heads, inductors, ferrite
cores, capacitors,
transformer, power supplies
and ferrite magnets
United States of
America
7
746
GMR heads, capacitors,
ferrite magnets and power
supplies
Luxembourg
1
494
Videotapes, CD-Rs and DVDs
Philippines
1
441
GMR heads
Thailand
2
435
Audiotapes, rare-earth metal
magnets and power supplies
Malaysia
2
364
Capacitors and high-frequency
components
Taiwan
1
345
Capacitors, ferrite cores and
power supplies
Korea
1
164
Capacitors and inductors
Hungary
1
160
Capacitors and ferrite cores
England
1
42
Power supplies
Hong Kong
1
42
Ferrite cores
Israel
1
28
Power supplies
Total
63
13,749
TDK considers all of its principal manufacturing facilities and other significant properties
to be in good condition and adequate to meet the needs of its operations. TDK owns each of its
significant properties.
Though TDK included 1 plant in Luxembourg (494 thousand square feet) in the above table, this
plant has ceased operation in April 2006.
- 17 -
Table of Contents
In addition, TDK utilizes additional floor space at the above plants and elsewhere for
laboratories, office buildings, and employee housing and welfare facilities, with an aggregate
floor space of 6,530 thousand square feet, of which approximately 51 percent is owned by TDK and
the balance is leased to TDK.
Item 4A
. Unresolved Staff Comments
None.
- 18 -
Table of Contents
Item 5
. Operating and Financial Review and Prospects
Overview
TDK was established in 1935 as the world's first company to commercialize a magnetic material
called ferrite. In the ensuing years, TDK has developed and commercialized a host of other
materials and products. This drive is based on TDK's founding spirit of "Contribute to culture and
industry through creativity."
Looking ahead, TDK is determined to further refine its materials, process, and evaluation &
simulation technologies-its core technologies-aiming to be an Exciting Company, a consummate
e-material solution provider that delivers products imbuing value that customers want with perfect
timing.
TDK's operations are affected by the economies of various regions of the world, including
Japan, the United States, Europe and Asia. Looking at economic conditions worldwide during the
past fiscal year, the U.S. economy grew on the back of steadily rising consumer spending, which was
supported by a strong job market, and higher levels of capital expenditures in the corporate
sector. Meanwhile, European economies tended toward recovery due to a strong corporate sector, led
by German companies, and the add-on effects of this recovery on employment and consumer spending.
In Asia, China maintained a high economic growth rate and economies elsewhere in the region grew as
well. Expansion was also evident in the Japanese economy, with capital expenditures rising due to
increased production activity in the corporate sector and personal spending increasing as the job
market improved.
In the electronics industry, to which TDK belongs, there was growth in the market for digital
home appliances such as LCD and plasma flat-screen TVs and DVD recorders during the past fiscal
year. The notebook PC, HDD and mobile phone markets also remained robust. There was rapid
expansion, too, in the market for MP3 digital audio players, which store music using semiconductors
or HDDs. The market for car electronics also remained firm. Strength in these markets, along with
the beneficial effects of an increase in the number of components used in these products, produced
solid demand in fiscal 2006 for TDK's electronic components. Amid this operating environment, TDK
made two corporate acquisitions and executed reforms to improve its profit structure in the
recording media segment. In these and other ways, TDK thus actively invested to accelerate growth
and increase its earnings.
The
electronic components business is constantly subject to two sources of
downward pressure on prices. One is price discounting pressure from
finished products manufacturers, the customers of electronic
component manufacturers. The other is competition among manufacturers
of electronic components.
Demands
for price discounts are the result of competition among finished
product manufacturers being passed on to component manufacturers. As
they compete with each other, consumer electronics manufacturers,
customers of TDK, are constantly seeking ways to establish a
competitive advantage. For example, these companies pursue strategies
such as differentiating products by adding new functions to existing
products, as well as securing a competitive edge through pricing.
This sort of competition involving finished products tends to force
companies to compete by launching new products, resulting in shorter
product lifecycles and a greater risk of price declines.
TDK's
electronic materials and components segment supplies products that
are used mainly in digital home appliances, mobile phones and other
consumer electronics as well as in automotive electronics. As such,
this business is directly exposed to the effects of the competition
outlined above. No change is foreseen in discounting pressure from
customers in the coming years.
Electronic
component manufacturers, as with other industries, compete with peer
companies. Consumer electronics manufacturers commonly certify
several suppliers so that companies need to compete for orders. A
company's pricing strategy is a key element in determining the
share of electronic components it supplies to finished product
manufacturers. As a consequence, there is constantly downward
pressure on prices.
- 19 -
Table of Contents
The electronic components business thus requires
the constant execution of initiatives to mitigate the effect of these
pricing pressures. Actions to reduce costs are an obvious response.
But it is also necessary to establish a position as a components
manufacturer that can supply key components when customers launch new
products. There is no substitute for product development activities
aimed at supplying these key components. Price declines are thus
inevitable in the electronic components business, but it is possible
to reduce or absorb the effects of lower prices by implementing the
above measures appropriately, when required. We believe that these
actions are an inherently vital element that will ultimately
determine the competitiveness of an electronic components business.
TDK posted consolidated net sales of ¥795,180 million ($6,796,410 thousand) in fiscal 2006, up
20.9 percent from ¥657,853 million in fiscal 2005. Operating income rose 1.2 percent from ¥59,830
million in fiscal 2005 to ¥60,523 million ($517,291 thousand) in fiscal 2006. Income from
continuing operations before income taxes increased 8.9 percent from ¥60,728 million in fiscal 2005
to ¥66,103 million ($564,983 thousand) in fiscal 2006. Net income rose 32.4 percent from ¥33,300
million in fiscal 2005 to ¥44,101 million ($376,932 thousand) in fiscal 2006. Basic net income per
common share was ¥333.50 in fiscal 2006, up from ¥251.71 in fiscal 2005.
On October 1, 2005, TDK purchased shares of Lambda Power Business (power supply business)
owned by U.K.-based Invensys plc. Consequently, the operating results of 20 companies that form
Lambda Power Business have been included in the TDK's consolidated operating results beginning with
the second half of fiscal 2006.
TDK's businesses are broadly classified into two business segments: the electronic materials
and components segment and the recording media segment.
Electronic Materials and Components Segment is made up of four product sectors: (1) electronic
materials, (2) electronic devices, (3) recording devices, and (4) other electronic components,
which we previously referred to as semiconductors and others. Segment net sales climbed 26.1
percent to ¥687,750 million ($5,878,205 thousand) in fiscal 2006, from ¥545,214 million in fiscal
2005, while segment operating income rose 10.1 percent to ¥74,333 million ($635,325 thousand) in
fiscal 2006, from ¥67,520 million in fiscal 2005.
Recording Media Segment, which we previously referred to as Recording Media & Systems, has
three product categories: audiotapes and videotapes, optical media and other products. Segment
sales declined 4.6 percent from ¥112,639 million in fiscal 2005 to ¥107,430 million ($918,205
thousand) in fiscal 2006. Operating loss of the recording media segment in fiscal 2006 was ¥13,810
million ($118,034 thousand), up ¥6,120 million from fiscal 2005. In March 2006, TDK decided to
restructure certain of its recording media business, including the withdrawal from the
manufacturing of recordable CD and DVDs, and recorded a restructuring cost of ¥6,825 million
($58,333 thousand).
- 20 -
Table of Contents
A. Operating Results
Results of Operations
Years ended March 31
2006
2005
2004
2006
(millions of yen)
(thousands
(%)
of dollars)
Net sales
¥
795,180
¥
657,853
¥
655,792
$
6,796,410
(100.0
)
(100.0
)
(100.0
)
Cost of sales
585,780
484,323
476,407
5,006,666
(73.7
)
(73.6
)
(72.6
)
Gross profit
209,400
173,530
179,385
1,789,744
(26.3
)
(26.4
)
(27.4
)
Selling,
general and administrative expenses
142,052
119,886
122,875
1,214,120
(17.9
)
(18.2
)
(18.8
)
Transfer to the government of
the substitutional portion of
Employees' Pension Fund:
Subsidy from the government
—
(33,533
)
—
—
—
(-5.1
)
—
Loss on settlement
—
27,347
—
—
—
(4.2
)
—
Restructuring cost
6,825
—
—
58,333
(0.8
)
—
—
Operating income
60,523
59,830
56,510
517,291
(7.6
)
(9.1
)
(8.6
)
Other income (other deductions)
5,580
898
(663
)
47,692
(0.7
)
(0.1
)
(-0.1
)
Income taxes
and minority interests, net of tax
21,692
23,763
12,492
185,402
(2.7
)
(3.6
)
(1.9
)
Loss from discontinued operations
310
3,665
1,254
2,649
(0.1
)
(0.5
)
(0.2
)
Net income
¥
44,101
¥
33,300
¥
42,101
$
376,932
(5.5
)
(5.1
)
(6.4
)
Sales by Region
Years ended March 31
2006
2005
2004
2006
(millions of yen)
(millions
(%)
of dollars)
Japan
¥
173,658
¥
184,025
¥
168,623
$
1,484,256
(21.8
)
(28.0
)
(25.7
)
Americas
90,192
77,813
88,734
770,872
(11.4
)
(11.8
)
(13.5
)
Europe
75,895
71,702
80,710
648,675
(9.5
)
(10.9
)
(12.3
)
Asia (excluding Japan) and Oceania
451,710
321,612
314,875
3,860,769
(56.8
)
(48.9
)
(48.0
)
Middle East and Africa
3,725
2,701
2,850
31,838
(0.5
)
(0.4
)
(0.5
)
Net sales
¥
795,180
¥
657,853
¥
655,792
$
6,796,410
(100.0
)
(100.0
)
(100.0
)
This summary of sales by region is based on the location of the customer.
- 21 -
Table of Contents
Segment Information
The following industry and geographic segment information is required by the Japanese
Securities Exchange Law. Segment information is unaudited.
Industry Segment Information
Years ended March 31
2006
2005
2004
2006
(millions of yen)
(thousands
of dollars)
ELECTRONIC MATERIALS AND COMPONENTS
Net sales
External sales
¥
687,750
¥
545,214
¥
519,792
$
5,878,205
Intersegment
—
—
—
—
Total revenue
687,750
545,214
519,792
5,878,205
(100.0
%)
(100.0
%)
(100.0
%)
(100.0
%)
Operating expenses
613,417
477,694
461,077
5,242,880
(89.2
%)
(87.6
%)
(88.7
%)
(89.2
%)
Operating income
¥
74,333
¥
67,520
¥
58,715
$
635,325
(10.8
%)
(12.4
%)
(11.3
%)
(10.8
%)
Identifiable assets
672,596
537,593
505,178
5,748,684
Depreciation and amortization
53,599
47,409
46,293
458,111
Capital expenditures
71,070
57,192
40,084
607,436
RECORDING MEDIA
Net sales
External sales
¥
107,430
¥
112,639
¥
136,000
$
918,205
Intersegment
—
—
—
—
Total revenue
107,430
112,639
136,000
918,205
(100.0
%)
(100.0
%)
(100.0
%)
(100.0
%)
Operating expenses
121,240
120,329
138,205
1,036,239
(112.9
%)
(106.8
%)
(101.6
%)
(112.9
%)
Operating income (loss)
¥
(13,810
)
¥
(7,690
)
¥
(2,205
)
$
(118,034
)
(-12.9
%)
(-6.8
%)
(-1.6
%)
(-12.9
%)
Identifiable assets
79,109
84,160
97,186
676,145
Depreciation and amortization
4,941
5,397
4,433
42,231
Capital expenditures
2,841
3,813
4,387
24,282
ELIMINATIONS AND CORPORATE
Corporate assets
¥
171,798
¥
186,248
¥
167,955
$
1,468,359
TOTAL
Net sales
External sales
¥
795,180
¥
657,853
¥
655,792
$
6,796,410
Intersegment
—
—
—
—
Total revenue
795,180
657,853
655,792
6,796,410
(100.0
%)
(100.0
%)
(100.0
%)
(100.0
%)
Operating expenses
734,657
598,023
599,282
6,279,119
(92.4
%)
(90.9
%)
(91.4
%)
(92.4
%)
Operating income
¥
60,523
¥
59,830
¥
56,510
$
517,291
(7.6
%)
(9.1
%)
(8.6
%)
(7.6
%)
Identifiable and corporate assets
923,503
808,001
770,319
7,893,188
Depreciation and amortization
58,540
52,806
50,726
500,342
Capital expenditures
73,911
61,005
44,471
631,718
- 22 -
Table of Contents
Geographic Segment Information
Years ended March 31
2006
2005
2004
2006
(millions of yen)
(thousands
of dollars)
JAPAN
Net sales (1)
¥
360,210
¥
339,493
¥
329,782
$
3,078,718
Operating income
49,437
26,382
8,538
422,539
Identifiable assets
347,942
305,717
316,695
2,973,863
AMERICAS
Net sales (1)
105,979
87,594
100,971
905,803
Operating income
9,995
5,496
4,985
85,427
Identifiable assets
100,611
70,844
65,584
859,923
EUROPE
Net sales (1)
76,240
71,682
80,641
651,624
Operating income (loss)
(9,996
)
(5,125
)
(115
)
(85,436
)
Identifiable assets
45,729
44,961
51,797
390,846
ASIA AND OTHERS
Net sales (1)
531,824
400,866
380,781
4,545,504
Operating income
12,607
33,551
42,912
107,752
Identifiable assets
348,008
263,621
228,058
2,974,428
ELIMINATIONS AND CORPORATE
Net sales (1)
279,073
241,782
236,383
2,385,239
Operating income (loss)
1,520
474
(190
)
12,991
Identifiable assets
81,213
122,858
108,185
694,128
TOTAL
Net sales
¥
795,180
¥
657,853
¥
655,792
$
6,796,410
Operating income
60,523
59,830
56,510
517,291
Identifiable and corporate assets
923,503
808,001
770,319
7,893,188
OVERSEAS SALES (2)
Americas
¥
90,192
¥
77,813
¥
88,734
$
770,872
Europe
75,895
71,702
80,710
648,675
Asia and others
455,435
324,313
317,725
3,892,607
Overseas sales total
¥
621,522
¥
473,828
¥
487,169
$
5,312,154
Percentage of consolidated sales
78.2
%
72.0
%
74.3
%
78.2
%
Notes:
(1)
Net sales in each geographic area are based on the location of TDK
entities where the sales are generated.
(2)
Overseas sales are based on the location of the customers.
- 23 -
Table of Contents
Fiscal 2006 Compared to Fiscal 2005
Sales
Consolidated net sales increased 20.9 percent from ¥657.9 billion to ¥795.2 billion ($6,796.4
million) for the fiscal year ended March 31, 2006.
Looking at economic conditions worldwide during the past fiscal year, the U.S. economy grew on
the back of steadily rising consumer spending, which was supported by a strong job market, and
higher levels of capital expenditures in the corporate sector. Meanwhile, European economies
tended toward recovery due to a strong corporate sector, led by German companies, and the knock-on
effects of this recovery on employment and consumer spending. In Asia, China maintained a high
economic growth rate and economies elsewhere in the region grew as well. Expansion was also
evident in the Japanese economy, with capital expenditures rising due to increased production
activity in the corporate sector and personal spending increasing as the job market improved.
In the electronics industry, to which TDK belongs, there was growth in the market for digital
home appliances such as LCD and plasma flat-screen TVs and DVD recorders during the past fiscal
year. The notebook PC, HDD and mobile phone markets also remained robust. There was rapid
expansion, too, in the market for MP3 digital audio players, which store music using semiconductors
or HDDs. The market for car electronics also remained firm. Strength in these markets, along with
the beneficial effects of an increase in the number of components used in these products, produced
solid demand in fiscal 2006 for TDK's electronic components. Amid this operating environment, TDK
made two corporate acquisitions and executed reforms to improve its profit structure in the
recording media segment. In these and other ways, TDK thus actively invested to accelerate growth
and increase its earnings.
As
a result, the electronic materials and components segment posted net
sales of ¥687.8
billion ($5,878.2 million), up 26.1 percent from ¥545.2 billion in the previous fiscal year.
Sales in the electronic materials sector rose 3.4 percent from ¥174.8 billion to ¥180.8
billion ($1,545.0 million). Sales of multilayer chip capacitors, a mainstay of capacitor products,
increased marginally year over year, as the impact on sales of sluggish demand in the
communications market and falling prices was offset by higher sales to the car electronics market.
A weaker yen also supported sales. Sales of ferrite cores and magnets rose year over year. Sales
of ferrite cores were largely unchanged, as higher sales from increasing demand for power supply
cores was negated by lower sales of cores used in CRT TVs. Ferrite magnet sales were also largely
unchanged, with lower demand stemming from customer inventory cutbacks offset by higher sales of
products to the car electronics market. Sales of rare-earth magnets rose on increasing HDD demand.
Sales in the electronic devices sector leapt 32.9 percent to ¥154.7 billion ($1,322.1
million), from ¥116.4 billion. This growth was mainly due to the inclusion of the operating
results of Lambda Power Business from the second half of the fiscal year. However, even excluding
these sales, existing business in this sector posted
10.8 percent year over year sales growth. Sales of
inductive devices increased mainly due to growth in sales of SMD power line coils for use in mobile
phones and HDDs, and in sales of products for use in car electronics. Sales of high-frequency
components were down year over year. While sales of wireless LAN components rose, total category
sales were brought down by further declines in sales prices of some components for mobile phones.
Sales of other products rose year over year. The main factors were growth in sales of DC-AC
inverters for use in LCD panels and of sensors and actuators for HDDs and mobile phones. The
inclusion of six months' sales of Lambda Power Business in this category also boosted sales.
In the recording devices sector, sales rose 34.7 percent from ¥234.6 billion to ¥315.9 billion
($2,700.2 million). Sales of HDD heads increased year over year. Amid arising demand for HDDs
used in PCs and consumer electronics, HDD head shipments increased. This higher volume outweighed
a drop in sales prices, resulting in an increase in overall sales. Sales of other heads declined
due to inventory reductions of optical pickups.
- 24 -
Table of Contents
Maxtor Peripherals (S) Pte. Ltd., TDK's major customer related to electronic materials and components business with sales of 11.5 percent of
consolidated net sales for the year ended March 31, 2006, was acquired by a company in the same industry in
May 2006. During the year ended March 31, 2007, TDK will be losing the majority of sales from Maxtor Peripherals (S) Pte.
Ltd. that it recorded for the year ended March 31, 2006. TDK, however, plans to set off the loss with other businesses
in the electronic materials and components segment and to raise its sales further, due mainly to growing demand for
digital home appliances and cell phones.
Sales in the other electronic components sector surged 87.0 percent from ¥19.4 billion to
¥36.4 billion ($310.9 million) due to higher sales of anechoic chambers, which block external
electromagnetic radiation to permit the measurement of electromagnetic noise, and due to sales
growth in new businesses.
Operating income of the electronic materials and components segment in fiscal 2006 was ¥74.3
billion ($635.3 million), up ¥6.8 billion from fiscal 2005. In spite of the deep-rooted pressure
for sales price discounts, operating income increased due to higher sales of HDD heads and
inductive devices, discounts in raw materials and cost improvements by rationalization.
In the recording media segment, sales declined 4.6 percent from ¥112.6 billion to ¥107.4
billion ($918.2 million). Sales of audiotapes and videotapes declined year over year. While TDK
maintained a high market share, demand is declining for these products as a whole. Sales of
optical media increased year over year. CD-R demand has peaked and is declining slowly. However,
lower CD-R sales caused by the downturn in demand and discounting pressure were offset by higher
sales of DVDs driven by increasing demand. Sales of other products decreased year over year.
Sales of LTO-standard* (Linear Tape-Open) tape-based data storage media for computers rose on
higher demand. However, sales of recording equipment and accessory products declined as TDK made
progress with efforts to create a more tightly focused product lineup.
Operating loss of the recording media segment in fiscal 2006 was ¥13.8 billion (118.0
million), up ¥6.1 billion from fiscal 2005. Operating loss increased due to a decline in demand of
audiotapes and videotapes as a whole, and continuous drop in sales prices mainly in optical media.
In March 2006, TDK decided to restructure certain of its recording media business, including the
withdrawal from the manufacturing of recordable CD and DVDs, and recorded a restructuring cost of
¥6.8 billion ($58.3 million).
*Linear Tape-Open, LTO, LTO logo, Ultrium and Ultrium logo are trademarks of HP, IBM and
Quantum Corporation in the U.S. and other countries.
By region, sales in Japan declined 5.6 percent from ¥184.0 billion to ¥173.7 billion ($1,484.3
million). Overseas sales climbed 31.2 percent from ¥473.8 billion to ¥621.5 billion ($5,312.2
million). Overseas sales accounted for 78.2 percent of consolidated net sales.
In Japan, sales in the recording devices sector and recording media segment declined, while
higher sales were recorded in the electronic materials, electronic devices and other electronic
components sectors. Operating income of the electronic materials and components segment increased
by ¥24.4 billion to ¥53.4 billion. This increase was mainly due to the payment made by its
subsidiary in Asia to TDK in the amount of ¥24.0 billion relating to the assessment of additional
tax in fiscal 2005 on prices charged and paid by TDK in connection with sales and purchases of
products involving the subsidiary. Recognition of operating expense in the subsidiary resulted in
reduction of operating expenses in Japan. Operating loss of the recording media segment increased
slightly, resulting in operating loss in fiscal 2006 of ¥4.6 billion, up ¥1.5 billion from fiscal
2005.
- 25 -
Table of Contents
In Asia (excluding Japan) and Oceania, sales increased in the electronic materials, electronic
devices, recording devices and other electronic components sectors, but sales declined in the
recording media segment slightly. The operating income of the electronic materials and components
segment decreased by ¥21.3 billion to ¥11.6 billion. This decrease was mainly due to the payment
made by its subsidiary in Asia to TDK in the amount of ¥24.0 billion relating to the assessment of
additional tax in fiscal 2005 on prices charged and paid by TDK in connection with sales and
purchases of products involving the subsidiary. Recognition of operating expense in the subsidiary
resulted in increase of operating expenses in recording devices. Operating income of the recording
media segment increased slightly, resulting in operating income for fiscal 2006 of ¥0.8 billion,
¥0.1 billion more than fiscal 2005.
In the Americas, sales increased mainly in the electronic devices and recording devices
sectors. The lower yen versus the U.S. dollar also led to increased sales in the Americas. The
operating income of the electronic materials and components segment increased by ¥3.0 billion to
¥9.0 billion from fiscal 2005 due to increase in sales mainly in the recording devices sector.
However, operating income of the recording media segment in fiscal 2006 was ¥0.3 billion, up ¥0.8
billion from fiscal 2005.
In Europe, sales increased in the electronic devices sector and the recording media segment.
While operating loss of the electronic materials and components reversed to the operating income of
¥0.3 billion, up ¥0.7 billion from fiscal 2005, operating loss of the recording media segment in
fiscal 2006 was ¥10.3 billion, up ¥5.6 billion from fiscal 2005, mainly due to restructuring cost
of ¥6.8 billion.
Effect of foreign exchange movements
In fiscal 2006, overseas sales accounted for 78.2 percent of consolidated net sales, up 6.2
percentage points. As a result, fluctuations in foreign exchange rates had a significant effect on
TDK's consolidated sales and income. During fiscal 2006, the yen's value declined 5.4 percent
against the U.S. dollar and 2.0 percent against the euro, based on TDK's average internal exchange
rates. Overall, exchange rate movements had the effect of increasing net sales by approximately
¥31.3 billion and operating income by approximately ¥7.7 billion in fiscal 2006.
By region, foreign exchange fluctuations increased sales in Japan by about ¥8.6 billion, in
Asia (excluding Japan) and Oceania by about ¥32.5 billion, in the Americas by about ¥6.0 billion
and in Europe by about ¥3.1 billion. The effect of foreign exchange fluctuations on consolidated
net sales after the elimination of intersegment transactions was about ¥31.3 billion.
TDK conducts a large share of business activities outside Japan as one way to offset the
impact of exchange-rate fluctuations. Such activities include manufacturing and sales, as well as
research, design and procurement. In-region production in fiscal 2006 represented 102.2 percent
compared with 112.1 percent one year earlier of sales in Asia (excluding Japan) and Oceania, 22.0
percent compared with 20.9 percent one year earlier in the Americas, and 19.1 percent compared with
23.9 percent one year earlier in Europe. Overseas production accounted for 61.7 percent of total
sales in fiscal 2006, compared with 59.0 percent one year earlier, and for 79.0 percent of overseas
sales, compared with 81.9 percent one year earlier. The rise in the percentage of overseas
production in fiscal 2006 is mainly due to higher production in Asia in the electronic materials
and components segment.
TDK and certain overseas consolidated subsidiaries hedge exposure to foreign exchange
movements by entering into forward foreign exchange contracts and swaps for some foreign
currency-denominated obligations. Foreign exchange risk arising in operating activities is hedged
by using forward foreign exchange contracts. In principle, TDK's policy is to hedge up to 50
percent of expected foreign currency-denominated accounts receivable for each month for the next
six months. Due to the global nature of operations, management realizes that currency movements
continue to have the potential to exert a material influence on consolidated performance.
- 26 -
Table of Contents
Cost and expenses
The cost of sales increased 20.9 percent from ¥484.3 billion in fiscal 2005 to ¥585.8 billion
in fiscal 2006 due primarily to higher sales. Cost of sales increased from 73.6 percent to 73.7
percent of net sales, respectively. This reflected the negative effects on earnings of strong
discounting pressure in all segments, which were positively offset by cost reductions from
structural reforms and numerous other actions to cut costs, including the receipt of discounts on
purchased materials. As a result, gross profit was 26.3 percent in fiscal 2006, compared to gross
profit of 26.4 percent in fiscal 2005.
Selling, general and administrative expenses increased ¥22.2 billion from ¥119.9 billion in
fiscal 2005 to ¥142.1 billion in fiscal 2006, but decreased from 18.2 percent to 17.9 percent of
net sales, respectively. Selling, general and administrative expenses as a percentage of net sales
reduced due to a 20.9 percent rise in net sales and to the improvements of sales productivity. The
main components of this increase were personnel expenses of ¥4.8 billion, shipping and handling
costs of ¥1.9 billion, and loss on disposal of property, plant and equipment of ¥2.0 billion.
Research and development expenses included in selling, general and administrative expenses
increased by ¥9.2 billion from ¥36.3 billion in fiscal 2005 to ¥45.5 billion in fiscal 2006, and
increased from 5.5 percent to 5.7 percent of net sales, respectively.
In addition, TDK decided to restructure certain of its recording media business in March 2006,
including the withdrawal from the manufacturing of recordable CD and DVDs, and recorded a
restructuring cost of ¥6.8 billion ($58.3 million).
Other income and deductions
Other income (deductions) improved ¥4.7 billion from the previous fiscal year, reflecting a
¥1.9 billion increase in interest and dividend income due to upturn in overseas interest rates and
a ¥1.8 billion increase in foreign exchange gain (loss), as well as other factors.
Income taxes and minority interests
The ratio of income taxes to income from continuing operations before income taxes (the
effective tax rate) decreased from 38.3 percent in fiscal 2005 to 31.9 percent in fiscal 2006. The
decrease reflects mainly the fact that in fiscal 2005 TDK received a notification and assessment of
additional tax from the Tokyo Regional Tax Bureau (Nihonbashi Tax Office) asserting that prices
charged and paid by TDK in connection with sales and purchases of products involving its overseas
subsidiaries have not been commensurate with the prices of similar transactions involving unrelated
third parties. The period of additional assessments covers tax years ending March 1999 through
March 2003. The additional tax assessed by the Tokyo Regional Tax Bureau amounted to ¥12.0 billion
including interest and penalty, which has been reflected as additional tax expense and other
expense, net of deferred income tax benefits, in the accompanying consolidated statements of income
for the year ended March 31, 2005. In addition, the residual tax effects of ¥4,571 million
previously recorded in accumulated other comprehensive income (minimum pension liability
adjustments) were released and recorded as a reduction to income tax expense in the consolidated
statements of income as a result of the elimination of the minimum pension liability adjustment for
the year ended March 31, 2005.
Net income
TDK posted net income of ¥44.1 billion, resulting in net income per diluted share of ¥333.20,
compared with ¥251.56 in the previous fiscal year. Return on Equity, which is net income divided by average total stockholders' equity, increased from 5.5
percent to 6.6 percent. This was mainly due to a ¥10.8 billion increase in net income.
Cash dividends per share paid during the fiscal year totaled ¥80. This dividend is the sum of
the June 2005 year-end dividend of ¥40 and the December 2005 interim dividend of ¥40. Shareholders
of record on March 31, 2006 received a cash dividend of ¥50 per share at the end of June 2006.
- 27 -
Table of Contents
In fiscal 2006, consolidated net income included loss from discontinued operations of ¥310
million related to TDK Semiconductor Corporation ("TSC"). See discussion at Discontinued
Operations.
- 28 -
Table of Contents
Fiscal 2005 Compared to Fiscal 2004
Sales
Consolidated net sales rose 0.3 percent from ¥655.8 billion to ¥657.9 billion in fiscal 2005,
the year ended March 31, 2005.
TDK's operations are affected by the economies of various regions of the world, including
Japan, the United States, Europe and China. Despite rising crude oil prices and other factors that
restricted growth, the U.S. economy generally expanded steadily due in part to an upturn in capital
expenditures and improvements in employment statistics and household incomes. European economies,
while resilient in the first half of fiscal 2005, suffered a slowdown in the second half due to the
effects of a strengthening euro, rising crude oil prices and other negative factors. China,
meanwhile, maintained a high economic growth rate. In comparison, the Japanese economy slowed due
to a drop-off in exports, the result of second-half production cutbacks by manufacturers of IT and
digital products, despite strength in capital expenditures that was supported by strong corporate
earnings.
In the electronics industry in the first half of fiscal 2005, demand for digital home
appliances, such as LCD and plasma TVs and DVD recorders, was boosted by the Summer Olympic Games
in Athens and other factors. This resulted in strong demand for the TDK's electronic components in
the first half. However, demand for these components began to cool in the second half in line with
production cutbacks of finished products that use them.
In this business environment, TDK continued to implement cost structure reforms, for example,
the improvement of variable expenses by reviewing terms of supply and requesting discounts from
purchased materials vendors. TDK also actively made investments to drive growth, such as by
ramping up production capacity of capacitors and forging a strategic alliance in HDD heads.
As a result, the electronic materials and components segment posted net sales of ¥545.2
billion, up 4.9 percent from ¥519.8 billion in the previous fiscal year.
Sales in the electronic materials sector rose 4.8 percent from ¥166.8 billion to ¥174.8
billion. Sales of multilayer chip capacitors, a mainstay of capacitor products, increased year
over year. In the first half of fiscal 2005, the Athens Olympics propelled demand for digital home
appliances higher, which had an add-on effect for components used in them. In the second half,
however, demand for components cooled, this time the result of cutbacks in the production of
digital home appliances, and prices also dropped. But, against this market backdrop, TDK absorbed
the sales price declines and the effect of unfavorable foreign exchange movements through
improvements to its product mix. In ferrite cores, sales declined from the previous fiscal year,
despite higher demand for general-purpose power supply cores for digital home appliances and cores
for communications equipment. This decrease was due to a reduction in output of deflection yoke
cores and flyback transformer cores used in CRT TVs. Magnet sales increased year over year, the
result of steadily rising demand for use in automotive and HDD applications.
Sales in the electronic devices sector increased 7.8 percent from ¥108.0 billion to ¥116.4
billion. Inductive devices, the largest product category in this sector, posted higher sales,
despite lower sales prices and the negative effect of foreign exchange movements. This increase
was attributable to higher demand spurred by acceleration in the pace at which automobiles are
incorporating electronics and the increasing sophistication of mobile phones, as well as by new
product launches. Sales of high-frequency components declined marginally year over year because
higher sales volume and an improved product mix failed to completely offset persistently strong
discounting pressure from mobile phone handset manufacturers, the main customer for these
components. In power systems, sales of DC-DC converters and DC-AC inverters were healthy. Sensors
and actuators recorded higher sales due to growth in demand for use in PCs and peripherals and
communications equipment.
- 29 -
Table of Contents
In the recording devices sector, sales rose 1.9 percent from ¥230.1 billion to ¥234.6 billion.
Sales of HDD heads, the main product in this sector, rose year over year. However, TDK had to
overcome the loss of business from a major customer that started producing heads in house in 2004,
as well as the impact of falling sales prices and unfavorable foreign exchange movements. Cutbacks
in HDD inventories at customers in the first half of fiscal 2005 also affected the sector's
performance. However, demand for HDD heads rose in the second half of the fiscal year following
the end of these cutbacks. Sales of other heads declined year over year due to sluggish sales of
optical pickups.
Sales in the other electronic components sector climbed 30.8 percent from ¥14.9 billion to
¥19.4 billion. TDK recorded slightly higher sales of anechoic chambers for electromagnetic noise
control and equipment used in these chambers. There was also growth in external sales of
manufacturing equipment due to higher investments in semiconductor facilities and equipment by
customers.
Operating income of the electronic materials and components segment in fiscal 2005 was ¥67.5
billion, up ¥8.8 billion from fiscal 2004. In spite of the deep-rooted pressure for sales price
discounts, operating income increased due to higher sales of capacitors and inductive devices,
discounts in raw materials and cost improvements by rationalization.
In the recording media segment, sales declined 17.2 percent from ¥136.0 billion to ¥112.6
billion. Sales of audiotapes and videotapes declined year over year. While TDK maintained a high
market share, demand is declining for these products as a whole. Sales of optical media increased,
with higher DVD sales volume offsetting a sharp fall in DVD prices and lower CD-R sales. Sales of
other products decreased year over year. There was an increase in sales of LTO-standard* (Linear
Tape-Open) tape-based data storage media for computers. However, a decline in sales caused by the
sale in the previous fiscal year of a U.S. software development subsidiary and lower sales of
recording equipment brought overall sales of other products down year over year.
Operating loss of the recording media segment in fiscal 2005 was ¥7.7 billion, up ¥5.5 billion
from fiscal 2004. Operating loss increased due to a decline in demand of audiotapes and videotapes
as a whole, decrease in sales as a result of sale of a subsidiary in the United States of America
in fiscal 2004, and continuous drop in sales prices mainly in optical media.
*Linear Tape-Open, LTO, LTO logo, Ultrium and Ultrium logo are trademarks of HP, IBM and
Quantum Corporation in the U.S. and other countries.
By region, sales in Japan rose 9.1 percent from ¥168.6 billion to ¥184.0 billion. Overseas
sales declined 2.7 percent from ¥487.2 billion to ¥473.8 billion. Overseas sales accounted for
72.0 percent of consolidated net sales.
In Japan, sales in the electronic devices sector and recording media segment declined, while
higher sales were recorded in the electronic materials, recording devices and other electronic
components sectors. The electronics materials and components segment saw its operating income
increase by ¥17.6 billion due to increase in operating ratio, discount in raw materials and
decrease in cost by rationalization. Although operating loss of the recording media segment
increased slightly, operating income in fiscal 2005 was ¥25.8 billion, up ¥16.9 billion from fiscal
2004.
In Asia (excluding Japan) and Oceania, sales declined in the recording devices sector and
recording media segment, but sales increased in the electronic materials and electronic devices
sectors. The operating income of the electronic materials and components segment decreased by ¥8.8
billion. This decrease is due to a significant decline in sales prices mainly in recording devices
and capacitors. Operating income of the recording media segment also decreased slightly, resulting
in operating income for fiscal 2005 of ¥33.6 billion, ¥9.5 billion less than fiscal 2004.
In the Americas, sales decreased in the electronic materials and recording devices sectors as
well as the recording media segment. The higher yen versus the U.S. dollar also impacted sales in
the Americas. The operating income of the electronic materials and components segment decreased by
¥0.9 billion from fiscal 2004. However, operating income in fiscal 2005 was ¥5.5 billion, up ¥0.9
billion from fiscal 2004, due to decrease in operating loss of the recording media segment as a
result of sale of a subsidiary engaged in software development.
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Table of Contents
In Europe, lower sales were recorded in the electronic materials and other electronic
components sectors as well as the recording media segment. While operating loss of the electronic
materials and components decreased, operating loss of the recording media segment in fiscal 2005
reversed from operating income in fiscal 2004 to operating loss of ¥4.7 billion by decrease of ¥5.8
billion, due to a significant decline in sales prices mainly in optical media. As a result,
operating loss in fiscal 2005 was ¥5.1 billion, ¥5.0 billion up from fiscal 2004.
Effect of foreign exchange movements
In fiscal 2005, overseas sales accounted for 72.0 percent of consolidated net sales, down 2.3
percentage points. As a result, fluctuations in foreign exchange rates have a significant effect
on TDK's consolidated sales and income. During fiscal 2005, the yen appreciated 5.0 percent in
relation to the U.S. dollar and depreciated 1.9 percent in relation to the euro, based on TDK's
average internal exchange rates. Overall, TDK estimates that each ¥1 movement in the exchange
rates during fiscal 2005 had the effect of reducing net sales by about ¥4.0 billion and operating
income by about ¥1.0 billion, in relation to the prior fiscal year.
By region, foreign exchange fluctuations reduced sales in Japan by about ¥3.8 billion, in Asia
(excluding Japan) and Oceania by about ¥23.6 billion and in the Americas by about ¥5.5 billion, but
increased sales in Europe by about ¥1.4 billion. The effect of foreign exchange fluctuations on
consolidated net sales after the elimination of intersegment transactions was about ¥20.6 billion.
TDK conducts a large share of business activities outside Japan as one way to offset the
impact of exchange-rate fluctuations. Such activities include manufacturing and sales, as well as
research, design and procurement. In-region production in fiscal 2005 represented 112.1 percent
compared with 111.6 percent one year earlier of sales in Asia (excluding Japan) and Oceania, 20.9
percent compared with 22.5 percent one year earlier in the Americas, and 23.9 percent compared with
23.8 percent one year earlier in Europe. Overseas production accounted for 59.0 percent of total
sales in fiscal 2005, compared with 58.6 percent one year earlier, and for 81.9 percent of overseas
sales, compared with 78.9 percent one year earlier. The rise in the percentage of overseas
production in fiscal 2005 is mainly due to higher production in Asia in the electronic materials
and components segment.
TDK and certain overseas consolidated subsidiaries hedge exposure to foreign exchange
movements by entering into forward foreign exchange contracts and swaps for some foreign
currency-denominated obligations. Foreign exchange risk arising in operating activities is hedged
by using forward foreign exchange contracts. In principle, TDK's policy is to hedge up to 50
percent of expected foreign currency-denominated accounts receivable for each month for the next
six months. Due to the global nature of operations, management realizes that currency movements
continue to have the potential to exert a material influence on consolidated performance.
Cost and expenses
The cost of sales increased 1.7 percent from ¥476.4 billion in fiscal 2004 to ¥484.3 billion
in fiscal 2005 due to higher sales. Cost of sales increased from 72.6 percent to 73.6 percent of
net sales, respectively. This reflected the negative effects on earnings of strong discounting
pressure in all segments and foreign exchange movements, mainly the appreciation of the yen
relative to the U.S. dollar. These factors outweighed positive influences such as cost reductions
from structural reforms and numerous other actions to cut costs, including the receipt of discounts
on purchased materials. As a result, gross profit was 26.4 percent in fiscal 2005, compared to
gross profit of 27.4 percent in fiscal 2004.
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Selling, general and administrative expenses decreased ¥3.0 billion from ¥122.9 billion in
fiscal 2004 to ¥119.9 billion in fiscal 2005, and decreased from 18.8 percent to 18.2 percent of
net sales, respectively. Selling, general and administrative expenses decreased despite a 0.3
percent rise in net sales due to efforts to strictly manage fixed expenses, such as by lowering
personnel expenses through greater operational efficiency. The main components of this decrease
were personnel expenses of ¥3.1 billion and marketing expenses of ¥1.3 billion. Research and
development expenses included in selling, general and administrative expenses increased ¥3.4
billion from ¥32.9 billion in fiscal 2004 to ¥36.3 billion in fiscal 2005, and increased from 5.0
percent to 5.5 percent of net sales, respectively.
In addition, pursuant to the newly enacted Contributed Benefit Pension Plan Law, TDK received
an exemption from the Minister of Health, Labor and Welfare, effective September 25, 2003, from the
obligation to pay benefits related to future employee services with respect to the substitutional
portion of its Employees' Pension Fund (EPF). TDK was also granted an exemption from the
obligation to pay benefits in relation to past employee services in October 2004 with respect to
the substitutional portion of its domestic contributory plan. The transfer of the substitutional
portion of TDK's EPF liabilities to the government was completed on January 31, 2005. As a result
of the transfer, TDK recognized as a subsidy from the Japanese government an amount equal to the
difference between the fair value of the obligation deemed "settled" with the Japanese government
and the assets required to be transferred to the government. The subsidy that TDK recognized
amounted to ¥33.5 billion. In addition, TDK recognized a settlement loss in an amount equal to the
product of (i) the ratio of the obligation settled to the total EPF obligation outstanding
immediately prior to settlement, both of which exclude the effect of future salary progression
relating to the substitutional portion of the EPF obligation, and (ii) the net unrecognized
gain/loss immediately prior to settlement, which amounted to ¥27.3 billion. This gain and loss is
included in operating income in the accompanying consolidated statements of income for the year
ended March 31, 2005.
Other income and deductions
Other income (deductions) improved ¥1.6 billion from the previous fiscal year, reflecting a
¥2.2 billion decline in foreign exchange losses and a ¥1.0 billion decrease in loss on securities,
net, as well as other factors.
Income taxes and minority interests
The ratio of income taxes to income from continuing operations before income taxes (the
effective tax rate) increased from 21.7 percent in fiscal 2004 to 38.3 percent in fiscal 2005. The
increase reflects mainly the fact that TDK received a notification and assessment of additional tax
from the Tokyo Regional Tax Bureau (Nihonbashi Tax Office) asserting that prices charged and paid
by TDK in connection with sales and purchases of products involving its overseas subsidiaries have
not been commensurate with the prices of similar transactions involving unrelated third parties.
The period of additional assessments covers tax years ending March 1999 through March 2003. The
additional tax assessed by the Tokyo Regional Tax Bureau amounted to ¥12.0 billion including
interest and penalty, which has been reflected as additional tax expense and other expense, net of
deferred income tax benefits, in the accompanying consolidated statements of income for the year
ended March 31, 2005.
Net income
TDK posted net income of ¥33.3 billion, resulting in net income per diluted share of ¥251.56,
compared with ¥317.69 in the previous fiscal year. Return on Equity, which is net income divided by average total stockholders' equity, decreased from 7.5
percent to 5.5 percent. This was due to an approximate ¥62.8 billion increase in stockholders'
equity, which reflected a decrease of about ¥38.7 billion in accumulated other comprehensive loss
due to such factors as a decrease of about ¥32.9 billion in minimum pension liability adjustments
following the transfer of the substitutional portion of EPF liabilities, as well as an increase in
retained earnings.
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Table of Contents
Cash dividends per share paid during the fiscal year totaled ¥60. This dividend is the sum of
the June 2004 year-end dividend of ¥30 and the December 2004 interim dividend of ¥30. Shareholders
of record on March 31, 2005 received a cash dividend of ¥40 per share at the end of June 2005.
In fiscal 2005, consolidated net income included loss from discontinued operations of ¥3,665
million related to TSC. See discussion at Discontinued Operations.
- 33 -
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Discontinued Operations
On March 31, 2005, TDK entered into an agreement to sell all outstanding stock of its wholly
owned subsidiary, TSC for $14,028 thousand to Golden Gates Capital ("Buyer"). The sale of TSC is
part of TDK's continuing shift away from non-core products and technologies. The sale agreement
also includes earn-out payments, to be made by the Buyer to TDK, of up to $32,500 thousand. No
earn-out payments were made through March 31, 2006. The payments are contingent upon certain
milestones being met related to future revenue targets extending through 2007. The transaction was
completed on April 8, 2005. TDK has accounted for the sale of TSC as a discontinued operation
pursuant to FASB Statement No. 144, "Accounting for the impairment or Disposal of Long-Lived
Assets", as TSC meets the definition of a "component of an entity". The results of operations for
this subsidiary have been reported as discontinued operations for all periods presented and
selected financial information for the years ended March 31, 2006, 2005 and 2004 for the
discontinued operations, are summarized as follows:
U.S. Dollars
Yen (Millions)
(Thousands)
2006
2005
2004
2006
Net sales
¥
45
2,242
3,070
$
385
Loss from operations before
income taxes (including loss on
disposal of ¥224 million in
2006)
310
3,509
244
2,650
Income tax expense
—
156
1,010
—
Loss from discontinued operations
¥
310
3,665
1,254
$
2,650
Loss from discontinued operations per share:
Basic
¥
(2.34
)
(27.70
)
(9.47
)
$
(0.02
)
Diluted
(2.34
)
(27.69
)
(9.46
)
(0.02
)
See Note 21 to the Consolidated Financial Statements for further discussion.
- 34 -
Table of Contents
B. Liquidity and capital resources
Operating capital requirements
TDK's requirements for operating capital primarily are for the purchase of raw materials and
parts for use in the manufacture of its products. These purchases are booked as manufacturing
costs and selling, general and administrative expenses. The payment of payroll expenses,
marketing expenses accompanying sales activities, and distribution-related expenses account for a
significant portion of operating expenses. Personnel expenses account for a significant portion of
R&D expenses. The necessary funds for these expenses are provided from cash generated by
operations.
Capital Expenditures
In fiscal 2006, capital expenditures on a cash basis rose ¥12.9 billion from ¥61.0 billion to
¥73.9 billion ($631.7 million). This was the result of aggressive investment in IT home
electronics appliances; high-speed, large-capacity networks; and car electronics, which are fields
TDK regards as strategically important for growth.
In the electronic materials and components segment, capital expenditures totaled ¥71.1
billion. The bulk of the capital expenditures were for facilities to develop and produce HDD heads
with higher areal density mainly in China, the U.S. and the Philippines, and for facilities to
increase production and rationalize operations for multilayer chip capacitors mainly in Japan and
China.
In the recording media segment, capital expenditures totaled ¥2.8 billion, mainly for
facilities to increase production of LTO-standard tapes.
In principle, the funds for these capital expenditures are provided from cash generated by
operations. In addition, TDK paid ¥32.9 billion to acquire Lambda Power Business and Amperex
Technology Limited. The funds for these acquisitions were also provided from cash generated by
operations.
Capital expenditures for fiscal 2005, which are described in detail below, increased by ¥16.5
billion, from ¥44.5 billion for fiscal 2004 to ¥61.0 billion.
In the electronic materials and components segment, capital expenditures in 2005 totaled ¥57.2
billion. TDK invested in the expansion of production capacity of HDD heads, facilities for
rationalizing these activities and the development of technology for coping with increasing areal
density. These investments centered mainly on China, the U.S. and the Philippines. Furthermore,
investments were made to increase production and rationalize operations in multilayer chip
capacitors and inductors, where growth in sales is expected due to acceleration in the pace at
which electronics are being incorporated in automobiles, the increasingly sophisticated nature of
mobile phones and other factors. These investments were made mainly in Japan and China.
In the recording media segment, capital expenditures totaled ¥3.8 billion, mainly for
facilities to increase LTO production.
Capital expenditures for fiscal 2004, which are described in detail below, increased by ¥3.5
billion, from ¥41.0 billion for fiscal 2003 to ¥44.5 billion.
In the electronic materials and components segment, due to the expansion of the market for
recording devices, TDK made investments principally in Asia, but also in the Americas and Japan, to
increase production and rationalization for its recording devices. Other major expenditures
include investments to increase production and rationalization for electronic materials and
electronic devices (principally capacitors), and investments into the development of new products.
Capital expenditures of this segment increased by ¥1.7 billion from ¥38.4 billion to ¥40.1 billion.
In the recording media segment, investments have been made in Europe and Japan to increase
production and develop optical media products, whose market was expanding. Capital expenditures of
this segment increased by ¥1.8 billion from ¥2.6 billion to ¥4.4 billion.
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Table of Contents
Financial Management
Operating capital and capital expenditures are, in principle, funded by cash generated through
operating activities. To improve capital efficiency, to the extent possible, TDK centralizes
financial management in the Head Office, having introduced a cash management system (CMS) in Japan,
the U.S. and Europe. Surplus funds are invested with an emphasis on low risk and liquidity. Funds
from within the group will be utilized, to the extent possible, to extend financing to subsidiaries
that cannot procure operating capital or funds for capital expenditures themselves.
Cash flows for fiscal 2006, 2005 and 2004 are summarized as follows:
Years ended March 31
2006
2005
2004
2006
(millions of yen)
(millions
of dollars)
Income from continuing operations
¥
44,411
¥
36,965
¥
43,355
$
379.6
Adjustments to reconcile net income to
net cash provided by operating
activities
44,707
58,284
70,664
382.1
Net cash provided by operating activities
89,118
95,249
114,019
761.7
Net cash used in investing activities
(104,782
)
(62,359
)
(37,647
)
(895.6
)
Net cash used in financing activities
(7,125
)
(9,629
)
(9,860
)
(60.9
)
Net cash provided by (used in)
discontinued operations
(414
)
(1,625
)
761
(3.5
)
Effect of exchange rate changes on cash
and cash equivalents
10,712
2,717
(10,669
)
91.5
Net change in cash and cash equivalents
¥
(12,491
)
¥
24,353
¥
56,604
$
(106.8
)
Fiscal 2006 cash and cash equivalents decreased ¥12.5 billion from ¥251.5 billion to
¥239.0 billion ($2,043 million). Operating activities provided net cash of ¥89.1 billion ($761.7
million), ¥6.1 billion less than in fiscal 2005. Income from continuing operations rose ¥7.4
billion to ¥44.4 billion ($380 million) and depreciation and amortization increased ¥5.7 billion to
¥58.5 billion ($500 million) mainly due to increase in the recording devices segment. In terms of
changes in assets and liabilities, the increase in trade receivables climbed ¥9.5 billion, changes
in inventories increased ¥3.7 billion, changes in trade payables increased ¥6.9 billion, and
changes in accrued expenses increased ¥14.8 billion, while changes in income taxes payables, net
declined ¥25.1 billion.
Regarding research and development expenses, TDK's policy is to focus investments in the
strategic fields of IT home electronic appliances, high-speed and large-capacity networks and car
electronics. Funds for research and development are appropriated from internal funds.
Investing activities used net cash of ¥104.8 billion ($896 million), ¥42.4 billion more than
the ¥62.4 billion used in the previous fiscal year. TDK used ¥73.9 billion for capital
expenditures, ¥12.9 billion more than in fiscal 2005, as a result of making aggressive investments
to drive growth. Furthermore, acquisition of businesses, net of cash acquired increased ¥31.4
billion and proceeds from sale and maturity of investments in securities increased ¥2.5 billion
year over year, respectively.
Financing activities used net cash of ¥7.1 billion ($60.9 million),
a decrease of ¥2.5 billion from the ¥9.6 billion used in fiscal 2005. Dividends paid increased
¥2.6 billion due to a ¥20 per common share increase in the year-end dividend. On the other hand,
there were an increase of ¥4.0 billion in increase (decrease) in short-term debt, net mainly in
newly consolidated subsidiaries, and a decrease of ¥0.7 billion in cash paid to acquire treasury
stock for stock options.
Regarding
financing costs, TDK has long-term corporate credit ratings of AA- and A1 from
Standard & Poor's and Moody's, respectively. Furthermore, Standard & Poor's gives TDK their
highest short-term credit rating, A-1+. These ratings allow TDK
to procure funds if needed relatively at low
interest rates.
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Table of Contents
TDK's
fundamental treasury management policy is to give consideration to a consistent increase in dividends based
on factors such as the return on equity (ROE), dividends as a percentage of equity (DOE) and TDK's
results of operations on a consolidated basis. Funds for paying dividends are allocated from
internal funds.
In the dynamically changing electronics industry, it is necessary to make well-timed
investments. Given this need, and the possibility that unstable financial conditions will continue
in Japan, TDK's policy is to maintain an adequate level of liquidity, considering risk factors as
well as a capital requirement forecast. Based on the current liquidity, TDK does not have
immediate plans of repurchasing its stock for the purpose of extinguishment.
TDK estimates that operating cash flows and other internal resources will provide adequate
liquidity in fiscal 2007. Regarding cash flows for the fiscal years ending March 31, 2007 and
onward, TDK expects to provide the necessary funds from operating cash flows by increasing
profitability and improving the return on assets.
Fiscal 2005 cash and cash equivalents increased ¥24.3 billion from ¥227.2 billion to ¥251.5
billion in the previous fiscal year. Operating activities provided net cash of ¥95.2 billion, a
year-on-year decrease of ¥18.8 billion. The major component of cash provided by operating
activities was depreciation and amortization of ¥52.8 billion, up ¥2.1 billion. In terms of
changes in assets and liabilities, inventories decreased ¥11.3 billion, the result of efforts to
reduce inventories, while retirement and severance benefits declined ¥6.8 billion due to the
transfer of the substitutional portion of EPF liabilities and changes to the pension system. In
addition, the decrease in changes in trade payables and accrued expenses decreased ¥8.0 billion and
¥11.4 billion, respectively, and income taxes payables, net increased ¥8.8 billion.
Investing activities used net cash of ¥62.4 billion, ¥24.7 billion more than the ¥37.6 billion
used in the previous fiscal year. TDK used ¥61.0 billion for capital expenditures, ¥16.5 billion
more than in fiscal 2004, as a result of making aggressive investments to drive growth.
Furthermore, payment for purchase of investments in securities increased ¥2.4 billion year over
year.
Financing activities used net cash of ¥9.6 billion, a decrease of ¥0.2 billion from the ¥9.8
billion used in fiscal 2004. There was an increase of ¥1.3 billion in dividends paid due to the
increase in the dividend. On the other hand, there was a decline in the repayment of debt because
debt has been virtually eliminated.
Fiscal 2004 cash and cash equivalents increased ¥56.6 billion to ¥227.2 billion from ¥170.6
billion in the previous fiscal year. Operating activities provided net cash of ¥114.0 billion, a
year-on-year increase of ¥8.1 billion. This reflected mainly a ¥30.1 billion increase in net
income to ¥42.1 billion and a ¥6.4 billion decrease in depreciation and amortization to ¥50.7
billion, as well as decreases in changes in trade receivables and inventories of ¥5.0 billion and
¥21.4 billion, respectively. Regarding the shortfall in pension assets, TDK planned to take action
in response to certain recent reforms to the pension system, including transferring the
substitutional portion of Employees' Pension Fund ("EPF") liabilities.
Investing activities used net cash of ¥37.6 billion, a decrease of ¥8.6 billion from ¥46.2
billion in the previous fiscal year. The main factor was a ¥6.2 billion decrease in payment for
purchase of other investments to ¥0.4 billion.
Financing activities used net cash of ¥9.8 billion, ¥1.9 billion more than the ¥7.9 billion in
cash used in the previous fiscal year. This mainly represented an increase of ¥0.8 billion in
repayments of short-term debt and a ¥0.7 billion increase in dividends paid.
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Table of Contents
Capital resources as of March 31, 2006, 2005 and 2004 are summarized as follows:
Years ended March 31
2006
2005
2004
2006
(millions of yen)
(millions
(%)
of dollars)
Short-term debt
¥
4,469
¥
—
¥
315
$
38.2
(0.6
)
(—
)
(0.1
)
Current installments of long term debt
1,958
103
101
16.7
(0.3
)
(0.0
)
(0.0
)
Long-term debt,
405
81
27
3.5
excluding current installments
(0.1
)
(0.0
)
(0.0
)
Stockholders' equity
702,419
639,067
576,219
6,003.6
(99.0
)
(100.0
)
(99.9
)
Total capital
¥
709,251
¥
639,251
¥
576,662
$
6,062.0
(100.0
)
(100.0
)
(100.0
)
TDK currently has no capital market debt outstanding. However, TDK maintains long-term
corporate credit ratings of AA- and A1 from Standard & Poor's and Moody's, respectively.
Furthermore, Standard & Poor's gives TDK their highest short-term credit rating, A-1+.
Total assets amounted to ¥923.5 billion ($7,893 million) as of March 31, 2006, up ¥115.5
billion from ¥808.0 billion at the previous fiscal year-end. As of March 31, 2006, trade
receivables were ¥189.1 billion ($1,616 million), ¥41.1 billion higher than ¥148.0 billion and
inventories were ¥89.0 billion ($760 million), ¥14.1 billion more than ¥74.9 billion a year ago,
respectively. Property, plant and equipment increased ¥26.7 billion from ¥217.0 billion to ¥243.7
billion ($2,083 million), investments in securities increased ¥6.1 billion from ¥22.7 billion to
¥28.8 billion ($246 million). In addition, goodwill increased ¥10.3 billion from ¥9.2 billion to
¥19.5 billion ($166 million) and intangible assets increased ¥16.3 billion from ¥13.2 billion to
¥29.5 billion ($252 million) due to the acquisition of businesses.
Total liabilities increased ¥43.3 billion from ¥163.8 billion to ¥207.1 billion ($1,770
million). Income taxes payables decreased ¥10.1 billion from ¥19.3 billion to ¥9.2 billion ($78
million), while trade payables rose ¥22.6 billion from ¥62.1 billion to ¥84.7 billion ($724
million), accrued expenses increased ¥12.4 billion from ¥31.1 billion to ¥43.5 billion ($372
million), and deferred income taxes increased ¥4.5 billion from ¥0.8 billion to ¥5.3 billion ($45
million).
Total stockholders' equity increased ¥63.3 billion from ¥639.1 billion to ¥702.4 billion
($6,004 million). Retained earnings increased ¥32.7 billion from ¥585.6 billion to ¥618.3 billion
($5,284 million) and accumulated other comprehensive loss decreased ¥29.7 billion from ¥51.7
billion to ¥21.9 billion ($188 million).
Total assets amounted to ¥808.0 billion as of March 31, 2005, up ¥37.7 billion from ¥770.3
billion at the previous fiscal year-end. As of March 31, 2005, cash and cash equivalents were
¥251.5 billion, ¥24.3 billion higher than ¥227.2 billion a year ago. Trade receivables were ¥148.0
billion, ¥9.7 billion higher than ¥138.3 billion a year ago. Property, plant and equipment
increased ¥8.1 billion from ¥208.9 billion to ¥217.0 billion and noncurrent deferred income taxes
decreased ¥25.5 billion from ¥34.1 billion to ¥8.6 billion.
Total liabilities decreased ¥27.0 billion from ¥190.8 billion to ¥163.8 billion. Trade
payables rose ¥2.2 billion from ¥59.9 billion to ¥62.1 billion, and income taxes payables increased
¥14.6 billion from ¥4.7 billion to ¥19.3 billion. However, retirement and severance benefits
declined ¥44.7 billion from ¥73.5 billion to ¥28.8 billion due to the transfer of the
substitutional portion of EPF liabilities and changes to the pension system. Accrued expenses
decreased ¥2.4 billion from ¥33.4 billion to ¥31.0 billion.
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Table of Contents
Total stockholders' equity increased ¥62.9 billion from ¥576.2 billion to ¥639.1 billion.
Retained earnings increased ¥24.8 billion from ¥560.8 billion to ¥585.6 billion and accumulated
other comprehensive loss decreased ¥38.7 billion from ¥90.4 billion to ¥51.7 billion.
Total assets amounted to ¥770.3 billion as of March 31, 2004, up ¥23.0 billion from ¥747.3
billion at the previous fiscal year-end. As of March 31, 2004, cash and cash equivalents were
¥227.2 billion, ¥56.6 billion higher than ¥170.6 billion a year ago. However, property, plant and
equipment decreased ¥17.0 billion to ¥208.9 billion from ¥225.9 billion, and noncurrent deferred
income taxes decreased ¥9.8 billion to ¥34.1 billion from ¥43.9 billion.
Total liabilities increased ¥0.7 billion, from ¥190.1 billion to ¥190.8 billion. Trade
payables increased ¥2.9 billion, from ¥57.0 billion to ¥59.9 billion, accrued expenses increased
¥5.3 billion from ¥28.1 billion to ¥33.4 billion, and income taxes payables increased ¥3.6 billion,
from ¥1.1 billion to ¥4.7 billion. Retirement and severance benefits decreased ¥11.5 billion, from
¥85.0 billion to ¥73.5 billion.
Total stockholders' equity increased ¥22.3 billion, from ¥553.9 billion to ¥576.2 billion.
Retained earnings rose ¥34.9 billion, from ¥525.9 billion to ¥560.8 billion, while accumulated
other comprehensive loss rose ¥11.6 billion, from ¥78.8 billion to ¥90.4 billion.
TDK has various pension plans covering its employees. The unfunded amount as of March 31,
2006 was ¥20.4 billion ($175 million). As of March 31, 2006, ¥26.8 billion was accrued on the
balance sheet as retirement and severance benefits, ¥2.0 billion less than a year ago.
TDK's policy is to utilize group funds for the development of its business, and to use loans
from banks or other sources, if necessary, as a secondary method of financing.
Regarding TDK's capital expenditure plans, TDK's policy is to invest actively in targeted
strategic fields to drive growth. Capital expenditures will be funded using internally generated
funds.
TDK is planning capital expenditures of ¥70.0 billion in fiscal 2007, primarily for the
expansion of production facilities and upgrading of facilities. Actual capital expenditures could
differ from this forecast as a result of factors such as shifts in technology, demand, prices,
competition, economic environments and foreign exchange rates.
Restructuring Costs
During the year ended March 31, 2006, TDK was fundamentally restructuring the recording media
business. While reviewing the progress of the restructuring and future strategies of the recording
media business, TDK looked for ways to re-strengthen the manufacturing of recordable CD & DVD
foundations from various perspectives. However, a sharp drop in market prices of recordable CD &
DVDs as well as the increased cost of natural resources has a material impact on
the recording media business of TDK. Following further study,
at a board meeting held on March 8, 2006, TDK management decided to withdraw from the
manufacturing of recordable CD & DVDs, which should lead to an
improvement and reform of its recording
media business.
TDK accelerated its ODM business model for the current generation of recordable CD & DVD
products and the third-party supply of such products following
TDK's withdrawal. TDK also continued its R&D and
manufacturing activities in Japan of the blue laser disc, a highly value-added product expected to
grow in the near future. TDK has also concentrated its resources on strengthening data storage
tape business, which is another core business.
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Table of Contents
With this decision, TDK shut down the production facilities at its European subsidiary, TDK
Recording Media Europe S.A. in Luxembourg in April 2006. TDK recorded a restructuring charge of
¥6,825 million ($58,333 thousand) which included a charge of ¥3,309 million ($28,282 thousand)
relating to employee termination benefits. As a result of the restructuring, a total of 350
regular employees were terminated through May 31, 2006. In addition, TDK recorded a restructuring
charge of ¥2,594 million ($22,171 thousand) relating to an impairment on property, plant and
equipment in connection with the decision to shut down production facilities at its European
subsidiary.
For a discussion of financial instruments, see Note 14 "Risk Management Activities and
Derivative Financial Instruments", Note 15 "Fair Value of Financial Instruments" and Note 6
"Short-Term and Long-Term Debt" in Item 17 "Financial Statements".
C. Research and development, patents and licenses, etc.
R&D expenditures amounted to ¥45.5 billion ($389 million), 5.7 percent of net sales in fiscal
2006; ¥36.3 billion, 5.5 percent of net sales in fiscal 2005; and ¥32.9 billion, 5.0 percent of net
sales in fiscal 2004.
In its R&D activities, TDK continues to work on strengthening and expanding development of new
products that respond to diversification in the electronics market. In particular, TDK is
concentrating on next-generation recording-related products, micro electronics modules for mobile
communications-related applications, and energy-efficient, environmentally friendly devices based
on materials and design technologies. Furthermore, TDK is using its reservoir of technologies to
conduct efficient R&D activities concentrating in three strategic areas: IT home electronic
appliances; high-speed and large-capacity networks and car electronics.
In the electronic materials and components field, development themes include commercialization
of Polymer PTC thermistor with TDK's materials technologies, commercialization of 130Gbpsi PMR
heads for HDDs and 100Gbpsi TMR heads for mobile communications applications. In the recording
media field, TDK has made progress with research on post DVD generation products, including
commercialization of Blu-ray discs. Furthermore, TDK commercialized thin-film Common-mode Filter
with TDK's thin-film technologies.
R&D at TDK is conducted by the Materials R&D Center, Advanced Process Technology Center,
Devices Development Center, Production Engineering Development Center, Materials Analysis Center,
Application Center, SQ Research Center and the R&D functions of each operating group. Each
facility is developing new products and technologies in its respective area of responsibility. The
Application Center devises the necessary application technologies with the aim of keeping TDK in
step with market trends and customer needs. The Materials R&D Center is responsible for research
in magnetic and dielectric materials that use powder metallurgy. The Advanced Process Technology
Center facilitates the use of cutting-edge process technologies. The Devices Development Center
conducts research in next-generation recording and communications technologies as well as new
devices.
In terms of overseas R&D activities, TDK is conducting R&D in collaboration with leading
universities in the U.S. and U.K., and overseas R&D subsidiaries are making use of local
technological resources. In China, where TDK is aiming to establish and develop an operating base
capable of supporting growth, R&D activities are being carried out in the area of electronic
components and materials. In addition, consolidated subsidiary Headway Technologies, Inc. is
developing next-generation HDD heads.
Although TDK has a variety of patents in Japan and other countries, and licenses from other
companies, it believes that expiration of any one of its patents or licenses or related group of
patents or licenses would not materially adversely affect its business activities. Total income
from patents and licenses was ¥0.1 billion ($1 million) in fiscal 2006, ¥0.5 billion in fiscal 2005
and ¥0.1 billion in fiscal 2004. TDK paid ¥7.1 billion ($60 million) in fiscal 2006, ¥9.3 billion
in fiscal 2005 and ¥8.1 billion in fiscal 2004 for patents and licenses, mainly royalties for
licenses related to the recording devices business. TDK does not believe that acquisition of new
proprietary patents or other companies' patents would have a material effect on operating results
in the future.
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D. Trend information
Economic environment
While the world economy is expected to continue growing for the medium-term, it is relatively
unstable for the short-term, largely influenced by the U.S., where the economy continues to grow
despite the backdrop of a burdensome current account deficit, and China, which continues to
implement a high-growth policy. Among these risk factors are the specter of inflation caused by
persistently high crude oil prices and raw materials costs, trade imbalances among major countries
and volatile foreign exchange rates.
Under these economic circumstances, from a medium-term perspective, the electronics industry
is expected to see the growth of digital home appliances; the convergence of information and
communications, as typified by the increasingly diverse functions offered by mobile phones and
advances in portable devices; and the greater use of electronics in motor vehicles. These trends
are expected to result in a continued increase in demand for electronics components. TDK believes
that this increase will create a large number of opportunities for its electronic components
business and potential for growth.
The electronic components business is constantly subject to two sources of downward pressure
on prices. One is price discounting pressure from finished products manufacturers, the customers
of electronic component manufacturers. The other is competition among manufacturers of electronic
components.
Demands for price discounts are the result of competition among finished product manufacturers
being passed on to component manufacturers. As they compete with each other, consumer electronics
manufacturers, customers of TDK, are constantly seeking ways to establish a competitive advantage.
For example, these companies pursue strategies such as differentiating products by adding new
functions to existing products, as well as securing a competitive edge through pricing. This sort
of competition involving finished products tends to force companies to compete by launching new
products, resulting in shorter product lifecycles and a greater risk of price declines.
TDK's electronic materials and components segment supplies products that are used mainly in
digital home appliances, mobile phones and other consumer electronics as well as in automotive
electronics. As such, this business is directly exposed to the effects of the competition outlined
above. No change is foreseen in discounting pressure from customers in the coming years.
Electronic component manufacturers, as with other industries, compete with peer companies.
Consumer electronics manufacturers commonly certify several suppliers so that companies need to
compete for orders. A company's pricing strategy is a key element in determining the share of
electronic components it supplies to finished product manufacturers. As a consequence, there is
constantly downward pressure on prices.
The electronic components business thus requires the constant execution of initiatives to
mitigate the effect of these pricing pressures. Actions to reduce costs are an obvious response.
But it is also necessary to establish a position as a components manufacturer that can supply key
components when customers launch new products. There is no substitute for product development
activities aimed at supplying these key components.
Price declines are thus inevitable in the electronic components business, but it is possible
to reduce or absorb the effects of lower prices by implementing the above measures appropriately,
when required. We believe that these actions are an inherently vital element that will ultimately
determine the competitiveness of an electronic components business.
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Critical accounting policies
Critical accounting policies are those that require application of management's most
difficult, subjective or complex judgments, often as a result of the need to make estimates about
the effect of matters that are inherently uncertain and may change in subsequent periods.
The following is not intended to be a comprehensive list of all of TDK's accounting policies.
TDK's significant accounting policies are more fully described in Note 1 to the Consolidated
Financial Statements. In many cases, the accounting treatment of a particular transaction is
specifically dictated by U.S. generally accepted accounting principles, with no need for
management's judgment in their application. There are also areas in which management's judgment in
selecting an available alternative would not produce a materially different result.
TDK has identified the following as critical accounting policies: impairment of long-lived
assets, valuation of inventories, goodwill and other intangible assets, pension benefit costs, and
deferred tax assets.
Impairment of long-lived assets
As of March 31, 2006 and 2005, the aggregate of TDK's property, plant and equipment and
amortized intangible assets was ¥270.3 billion
($2,310 million) and ¥229.6 billion, which accounted
for 29.3 percent and 28.4 percent of the total assets, respectively. TDK believes that impairment
of long-lived assets are critical to TDK's financial statements because the recoverability of the
amounts or lack thereof, could significantly affect its results of operations.
TDK's long-lived assets and certain identifiable intangibles are reviewed for impairment when
events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. This review is performed using estimates of future cash flows. If the carrying
amount of the asset is considered to be impaired, an impairment charge is recorded for the amount
by which the carrying value of an asset exceeds its fair value. Management believes that the
estimates of future cash flows and fair values are reasonable; however, changes in estimates
resulting in lower future cash flows and fair value due to unforeseen changes in business
assumptions could negatively affect the valuation of those long-lived assets and significantly
affect TDK's financial position and results of operations. TDK makes investments with due
prudence, taking sufficiently into consideration the future profitability of products and the
recoverability of investments.
Valuation of inventories
Inventories are stated at the lower of cost or market, with cost determined on the average
cost method. The carrying value of inventory is reduced for estimated obsolescence by the
difference between its cost and the estimated market value based upon assumptions about future
demand. TDK evaluates the inventory carrying value for potential excess and obsolete inventory
exposures by analyzing historical and anticipated demand. In addition, known and anticipated
engineering change orders are evaluated against on-hand quantities for their potential obsolescence
affects. As fluctuations in estimates, which become a standard in recognizing adjustments in the
carrying values of inventory for expected obsolescence, are influential to business results of TDK,
we conclude it as a critical accounting policy. If actual demand were to be substantially lower
than estimated, additional inventory adjustments for excess or obsolete inventory may be required,
which could have a material adverse effect on TDK's business, financial condition and results of
operations.
Regarding the appropriateness of estimates in the past, TDK does not use a method based on
various scenarios, but a method to reconsider every quarter by comparing estimate and actual
results. For example, in the operation management of product sector with rapid development in
technological innovation such as the recording devices sector, TDK revises the estimates of
valuation of obsolete inventories arising from the timely response to customers' demands for
high-efficiency products on a quarterly basis.
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Purchase Accounting
We account for acquired businesses using the purchase method of accounting which requires that
the assets acquired and liabilities assumed be recorded at the date of acquisition at their
respective fair values. The judgments made in determining the estimated fair value assigned to
each class of assets acquired, as well as asset lives, can materially impact net income of the
periods subsequent to the acquisition through depreciation and amortization, and in certain
instances by impairment charges, if the asset becomes impaired in the future.
In determining the estimated fair value for intangible assets, we typically utilize the income
approach, which employs discounting of the projected future net cash flow using an appropriate
discount rate that reflects the risk factors associated with the cash flow streams.
Determining the useful life of an intangible asset also requires judgment as different types
of intangible assets will have different useful lives and certain assets may even be considered to
have indefinite useful lives. Intangible assets determined to have an indefinite useful life have
been reassessed periodically based on the factors prescribed in SFAS No. 142 including, but not
limited to, the expected use of the asset by us, legal or contractual provisions that may affect
the useful life or renewal or extension of the asset's contractual life without substantial cost,
and the effects of demand, competition and other economic factors.
Goodwill and other intangible assets
Goodwill and other intangible assets that are determined to have an indefinite life are not
amortized and are tested for impairment on an annual basis and between annual tests if an event
occurs or circumstances change that would more likely than not reduce the fair value of these
assets below their carrying amount. Fair value for these assets is determined using a discounted
cash flow analysis, which is based on an authorized business plan. Management believes that the
estimates of future cash flows and fair value are reasonable; however, changes in estimates
resulting in lower future cash flows and fair value due to unforeseen changes in business
assumptions could negatively affect the valuations.
Pension benefit costs
Employee pension benefit costs and obligations are dependent on assumptions used by actuaries
in calculating such amounts. These assumptions include discount rates, retirement rates and
mortality rates which are based upon current statistical data, as well as salary growth, long-term
return on plan assets and other factors. Actual results that differ from the assumptions are
accumulated and amortized over future periods and, therefore, generally affect TDK's recognized
expense and recorded obligation in future periods. While TDK believes that its assumptions used
are appropriate, differences in actual experience or changes in assumptions may affect TDK's
benefit obligations and future expense.
In preparing its financial statements for fiscal 2006, TDK established a discount rate of 2.2
percent and an expected long-term rate of return of 2.7 percent on plan assets. In estimating the
discount rate, TDK uses available information about rates of return on long-term corporate bonds
currently available and expected to be available during the period to the maturity of the pension
benefits. TDK established the expected long-term rate of return on plan assets based on
management's expectations in respect of the long-term returns of the various plan asset categories
in which it invests. Management developed expectations with respect to each plan asset category
based on actual historical returns and its current expectations for future returns.
A decrease in the discount rate leads to an increase in actuarial pension benefit obligations
that could lead to an increase in net periodic pension cost through amortization of unrecognized
actuarial gain or losses. A 50 basis point decrease in the discount rate would increase the
projected benefit obligation by approximately 10 percent.
An increase in the expected return on plan assets may decrease net periodic pension cost in
the current year. For fiscal 2006, a 50 basis point decrease in the long-term rate of return would
increase net benefit cost by approximately ¥0.9 billion. However, the difference between the
expected return and the actual return on those assets could negatively affect net income in future
years.
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Deferred tax assets
TDK has significant deferred tax assets, which are subject to realizability assessment. In
assessing the realizability of deferred tax assets, management considers whether it is more likely
than not that some portion or all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of future taxable income during
the periods in which those temporary differences become deductible. Management considers the
planned reversal of deferred tax liabilities, projected future taxable income, and tax planning
strategies in making this assessment. Based upon the level of historical taxable income and
projections for future taxable income over the periods in which the deferred tax assets are
deductible, management believes that it is more likely than not that all of the deferred tax assets
less valuation allowance, will be realized. However, in the event future projections for income
are not realized or are realized in lesser amounts, or in cases where management revises the
assessment of the potential for realization of deferred tax assets based on other factors, deferred
tax assets may be determined not to be realizable, which then would require TDK to increase a
valuation allowance against the deferred tax assets resulting in additional income tax expenses.
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New accounting pronouncements
New Accounting Standards
In November 2004, the FASB issued Statement of Financial Accounting Standards No. 151 ("SFAS
151"), "Inventory Costs – an amendment of Accounting Research Bulletin No. 43 ("ARB 43"), Chapter
4". SFAS 151 amends the guidance in ARB 43, Chapter 4, "Inventory Pricing", to clarify the
accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted
material (spoilage). SFAS 151 requires that items such as idle facility expense, excessive
spoilage, double freight and rehandling costs be recognized as current-period charges regardless of
whether they meet the criterion of "so abnormal" as stated in ARB 43. In addition, SFAS 151
requires that allocation of fixed production overheads to the costs of conversion be based on the
normal capacity of the production facilities. SFAS 151 is effective for inventory costs incurred
in fiscal periods beginning after June 15, 2005. TDK does not expect the adoption of SFAS 151 to
have a material effect on TDK's consolidated financial position and results of operations.
In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised
2004), "Share Based Payment" ("SFAS 123R"). SFAS 123R is a revision of SFAS 123, "Accounting for
Stock Based Compensation", and supersedes APB 25. SFAS 123R requires TDK to measure the cost of
employee services received in exchange for equity awards based on the grant date fair value of the
awards. The cost will be recognized as compensation expense over the vesting period of the awards.
In April 2005, the Securities and Exchange Commission deferred the effective date of SFAS 123R to
the beginning of the first annual period after June 15, 2005. TDK adopted SFAS 123R in the first
quarter of fiscal 2007 and will continue to evaluate the impact of SFAS 123R on TDK's consolidated
financial position and results of operations. The pro forma information presented in Note 1(j) and
Note 10 presents the estimated compensation charges under SFAS 123. TDK's assessment of the
estimated compensation charges is affected by TDK's stock price as well as assumptions regarding a
number of complex and subjective variables and the related tax impact. These variables include,
but are not limited to, TDK's stock price volatility and employee stock option exercise behaviors.
TDK will recognize the compensation cost for stock-based awards issued after April 1, 2006 on a
straight-line basis over the requisite service period for the entire award. In addition, TDK will
recognize the unvested portion of the grant date fair value of awards issued prior to adoption
based on the fair values previously calculated for disclosure purposes. At March 31, 2006, the
aggregate value of unvested options, as determined using a Black-Scholes option pricing model, was
¥227 million. Upon adoption of SFAS 123R, this amount will be recognized over the remaining
vesting period of these options.
In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154 ("SFAS 154"),
"Accounting Changes and Error Corrections – a replacement of Opinion of the Accounting Principle
Board No. 20 ("APB 20") and Statement of Financial Accounting Standards No. 3 ("SFAS 3")". SFAS
154 replaces APB 20, "Accounting Changes" and SFAS 3, "Reporting Accounting Changes in Interim
Financial Statements", and provides guidance on the accounting for and reporting of accounting
changes and error corrections. SFAS 154 establishes retrospective application, or the latest
practicable date, as the required method for reporting a change in accounting principle and the
reporting of a correction of an error. SFAS 154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15, 2005.
In July 2006, the FASB issued FASB Interpretation No. 48 ("FIN 48"), "Accounting for
Uncertainty in Income Taxes". FIN 48 establishes the threshold for recognizing the benefits of
tax-return positions in the consolidated financial statements as "more-likely-than-not" to be
sustained by the taxing authority, and prescribes a measurement methodology for those positions
meeting the recognition threshold. FIN 48 is effective the fiscal year beginning after December 15,
2006. TDK is currently evaluating the effect that the adoption of FIN 48 will have on TDK's
consolidated financial position and results of operations.
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E. Off-Balance Sheet Arrangements
As part of its ongoing business, TDK does not conduct transactions with unconsolidated
entities or financial partnerships, such as entities often referred to as structured finance or
special purpose entities, which have been established for the purpose of facilitating off-balance
sheet arrangements or other limited purposes.
F. Tabular Disclosure of Contractual Obligations
On March 31, 2006, commitments outstanding for the purchase of property, plant and equipment
approximated ¥13.1 billion ($112 million). TDK has entered into several purchase agreements with
certain suppliers whereby TDK is committed to purchase a minimum amount of raw materials to be used
in the manufacture of its products. Future minimum purchases remaining under the agreements
approximated ¥4.5 billion ($39 million) at March 31, 2006. Contingent liabilities for guarantees
of loans of TDK's employees and affiliates amounted to approximately ¥5.7 billion ($49 million).
Contractual obligations on March 31, 2006 are summarized as follows:
Payments Due by Period (Yen in millions)
Less than
1 to 3
3 to 5
After 5
Total
1 year
years
years
years
Contractual obligations:
Long-term debt
¥
2,363
1,958
323
67
15
Operating leases
11,584
2,499
3,331
1,881
3,873
Contributions to
defined benefit plans
6,315
6,315
—
—
—
Purchase commitment
of raw materials
4,539
4,061
231
204
43
Purchase commitment
of property, plant and
equipment
13,088
13,088
—
—
—
Total
37,889
27,921
3,885
2,152
3,931
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G. Safe Harbor
This material contains forward-looking statements, including projections, plans, policies,
management strategies, targets, schedules, understandings and evaluations, about TDK Corporation
("TDK") and its group companies (TDK and its group companies are referred to also as "TDK" where
the context so requires). These forward-looking statements are based on the current forecasts,
estimates, assumptions, plans, beliefs and evaluations of TDK in light of information currently
available to it, and contain known and unknown risks, uncertainties and other factors. TDK
therefore wishes to caution readers that, being subject to risks, uncertainties and other factors,
TDK's actual results, performance, achievements or financial position could be materially different
from any future results, performance, achievements or financial position expressed or implied by
these forward-looking statements, and TDK undertakes no obligations to publicly update or revise
any forward-looking statements after the issue of this material.
The electronics markets in which TDK operates are highly susceptible to rapid changes. Risks,
uncertainties and other factors that can have significant effects on TDK include, but are not
limited to, shifts in technology, fluctuations in demand, prices, interest and foreign exchange
rates, and change in economic environments, conditions of competition, laws and regulations.
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Item 6
. Directors, Senior Management and Employees
A. Directors and senior management
Directors, corporate officers and corporate auditors of TDK as of June 29, 2006 and their
respective business experience are listed below.
Directors
Name (Date of birth)
Position, responsibility and brief personal record
Hajime Sawabe
Representative Director, Chairman and CEO – since June 2006
(Jan. 9, 1942)
- Director of TDK since June 1996
- Appointed Representative Director, President and CEO in June 1998
Takehiro Kamigama
Representative Director, President and COO – since June 2006
(Jan. 12, 1958)
- Appointed
General Manager of Data Storage Components Business Group in October 2001
- Corporate Officer of TDK since June 2002
- Appointed Senior Vice President of TDK in June 2003
- Appointed General Manager of Data Storage and Thin Film Technology Components Business Group in June 2003
- Appointed Director, Executive Vice President in June 2004
Jiro Iwasaki
Director, Executive Vice President – since June 2006
(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 2002
- Appointed Senior Vice President in June 2002
Shinji 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 2002
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Name (Date of birth)
Position, responsibility and brief personal record
Takeshi 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 2005
Yasuhiro Hagihara
Director* – since June 2002
(Oct. 19, 1937)
- Admitted to the bar in Washington D.C., U.S.A. in April 1971
- Elected Partner of Graham & James L.L.P. in January 1979
- Partner of Squire, Sanders & Dempsey L.L.P. since July 2000
- Partner of Squire Sanders Gaikokuho Kyodo Jigyo Horitsu Jimusho since April 2005
Seiji 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
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Corporate Officers
Name (Date of birth)
Position, responsibility and brief personal record
Kiyoshi Ito
Corporate Officer, Senior Executive Vice President – since June 2006
(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
- Appointed Executive Vice President in June 2004
- General Manager of SCM Group and Production since April 2005
Takaya 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
Minoru 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
- Appointed Corporate Officer of TDK in 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 2005
Michinori Katayama
Corporate Officer, Senior Vice President – since June 2006
(Dec. 9, 1946)
In charge of General Manager of Corporate Communications Department
- General Manager of Corporate Communications Department since January 1999
- Appointed Corporate Officer in June 2002
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Name (Date of birth)
Position, responsibility and brief personal record
Yukio 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 2002
Masatoshi 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 2001
Kenryo 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
Raymond 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 2005
Shunji 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 2001
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Name (Date of birth)
Position, responsibility and brief personal record
Shiro 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 2001
- General Manager of Corporate Strategy Management Review & Support Department since April 2006
Shinichi 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
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Corporate Auditors
Name (Date of birth)
Position, responsibility and brief personal record
Masaaki Miyoshi
Corporate Auditor – since June 2003
(Sep. 3, 1947)
- Appointed President of Korea TDK Co., Ltd. in July 2000
Takuma Otsuka
Corporate Auditor – since June 2000
(Feb. 23, 1944)
- Appointed Director of TDK in June 1998
Kazutaka Kubota
Corporate Auditor* – since June 2003
(Oct. 11, 1942)
- 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 2002
Kaoru Matsumoto
Corporate Auditor* – since June 2003
(Dec. 8, 1947)
- Registration as a Certified Public Accountant in March 1976
- Establishment of Kaoru Matsumoto & Co. since November 1977
Ryoichi Ohno
Corporate Auditor* – since June 2004
(Nov. 3, 1958)
- Registration as a U.S. Certified Public Accountant in November 1988
- Appointed Senior Vice President and Chief Financial Officer of The Gibraltar Life Insurance Co., Ltd. in September 2001
- Finance Vice President of Prudential Financial Inc. since September 2001
- Executive Vice President and Chief Financial Officer of The Gibraltar Life Insurance Co., Ltd. since July 2005
Notes(*)
All of TDK's Directors (except Yasuhiro Hagihara), Corporate Officers and Corporate
Auditors (except Kazutaka Kubota, Kaoru Matsumoto and Ryoichi Ohno) have been engaged on a
full-time basis.
All Directors and Corporate Auditors are elected by the general meeting of shareholders.
The term of office of Directors is one year. The current term of all Directors expires in June
2007. The term of office of Corporate Auditors is four years. The current terms for Mr.
Miyoshi, Mr. Otsuka, Mr. Kubota, Mr. Matsumoto and Mr. Ohno expire in June 2007.
There are no family relationships between any Director or Corporate Officer or Corporate
Auditor and any other Director or Corporate Officer or Corporate Auditor of TDK.
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B. Compensation
(1)
The aggregate direct remuneration, including bonuses but excluding retirement allowances,
paid by TDK during the years ended March 31, 2006 and 2005 to all Directors and Corporate
Auditors of TDK who served during each of those years was approximately 250 million ($2,137
thousand) and 254 million, respectively. During fiscal 2006, TDK's Directors and Corporate
Officers as of June 29, 2006 received 126 and 130 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. Corporate Auditors do not receive stock acquisition rights.
Number of stock
acquisition rights
granted individually
Name
Position
during fiscal 2006
Directors
Hajime Sawabe
Representative Director, Chairman  and CEO
35
Takehiro Kamigama
Representative Director, President and COO
26
Jiro Iwasaki
Director, Executive Vice President
19
Shinji Yoko
Director, Senior Vice President
17
Takeshi Nomura
Director, Senior Vice President
17
Yasuhiro Hagihara
Director (outside)
2
Seiji Enami
Director and CFO
10
126
Corporate Officers
Kiyoshi Ito
Corporate Officer, Senior Executive Vice President
24
Takaya Ishigaki
Corporate Officer, Senior Vice President
16
Minoru Takahashi
Corporate Officer, Senior Vice President
16
Michinori Katayama
Corporate Officer, Senior Vice  President
10
Yukio Hirokawa
Corporate Officer
9
Masatoshi Shikanai
Corporate Officer
9
Kenryo Namba
Corporate Officer
9
Raymond Leung
Corporate Officer
10
Shunji Itakura
Corporate Officer
9
Shiro Nomi
Corporate Officer
9
Shinichi Araya
Corporate Officer
9
130
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(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. If 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 2006 and fiscal 2005 for Directors and Corporate Auditors of TDK totaled approximately 14
million ($120 thousand) and 14 million, respectively. In June 2002, TDK introduced a Corporate
Officer system to improve management efficiency and expedite decision-making. With the
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.
On June 27, 2002 the Board of Directors resolved that the retirement bonus remuneration system
for Directors should be abolished from the date of the resolution and that the retirement bonus
reserves which had been made for, and had not been paid to, the Directors who are reappointed at
the general meeting of shareholders held on June 27, 2002,
should be frozen until their respective
retirements. The payment of any frozen retirement bonuses upon the retirement of a director
shall be subject to the consent of a general meeting of shareholders.
TDK has a stock option plan for Directors, Corporate Officers and all other employees. See
Item 6.E. "Share ownership".
C. Board practices
TDK's Articles of Incorporation provide for a Board of Directors of not more than ten members.
Directors are elected at the general meeting of shareholders for a term of office of one year and
may serve any number of consecutive terms. The Board of Directors has the ultimate responsibility
for the administration of the affairs of TDK.
The Board of Directors may appoint from among the Directors referred to above one or more
Representative Directors. Each of the Representative Directors has the authority to represent TDK
generally in the conduct of its affairs.
TDK introduced a Corporate Officer system in June 2002 to improve management efficiency and
expedite decision making. Corporate Officers are elected at the meeting of the Board of Directors
held immediately after the ordinary general meeting of shareholders, for a term of one year, but
may serve any number of terms upon appointment of the Board of Directors each time following the
expiration of the term. The Board of Directors may elect from among Corporate Officers one or more
Executive Vice Presidents, Senior Vice Presidents and Corporate Senior Officers. Each of the
Corporate Officers has the authority individually to operate businesses of which he/she is in
charge, under the control of the Board of Directors.
The Corporate Auditors of TDK, who are elected at the general meeting of shareholders and
whose number must not exceed five, are not required to be certified public accountants. One or
more Standing Corporate Auditors is required to be elected from among the Corporate Auditors. Each
Corporate Auditor has the statutory duty to audit the financial statements and business reports to
be submitted by the Representative Director to the ordinary general meeting of shareholders and
also to audit the administration by the Directors. Each of the Corporate Auditors is required to
attend and, if necessary, express his or her opinion at meetings of the Board of Directors, but is
not entitled to vote. TDK established a Board of Corporate Auditors
(at least half of which must be
from outside TDK) and the term of each Corporate Auditor is four years.
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In addition to the Corporate Auditors, TDK is required to appoint an accounting auditor which
is required to be a certified public accountant or an auditing firm. The primary duty of an
accounting auditor is to audit the financial statements proposed to be submitted by the
Representative Director to the ordinary general meetings of shareholders for approval thereof, and
to report their opinion to the Board of Corporate Auditors if they have found any wrongdoings or
material facts which are in violation of laws and regulations or the Articles of Incorporation with
respect to director's performance of its duties.
There are no family relationships between any Director or Corporate Officer or Corporate
Auditor and any other Director or Corporate Officer or Corporate Auditor of TDK.
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Significant differences in corporate governance practices between TDK and U.S. listed
companies on the New York Stock Exchange
1. Directors' Independence
Under the Company Law of Japan (the "Company Law"), which became effective on May 1, 2006, TDK
is a "Company with Board of Corporate Auditors," meaning a company which has the board of corporate
auditors (
kansayaku-kai
). The Company Law allows a company to choose to be a "Company with
Committees," meaning a company that has a nominating committee, audit committee, compensation
committee and one or more executive officers, without having corporate auditors. However, TDK has
not chosen to be a Company with Committees.
Under the New York Stock Exchange Corporate Governance Rules (the "Rules"), listed companies
must have a majority of independent directors. By contrast, while the Company Law requires
"Companies with a Board of Directors," meaning a company which has established or is required to
establish a board of the directors, to have a minimum of three directors, it does not require that
a Company with a Board of Corporate Auditors have outside directors. An "outside director" is
defined as "a director who was not a managing director, executive officer, manager or employee of
the company or any of its subsidiaries at any time in the past, and who is not currently a managing
director, executive officer, manager or employee of the company or any of its subsidiary."
TDK is in compliance with the Company Law and has seven directors. In addition, although TDK
is not required to have outside directors by law, it has voluntarily elected one outside director
(Yasuhiro Hagihara).
2. Definition of "Independent Director"
The meaning of "outside director" under the Company Law is not exactly the same as the meaning
of "independent director" provided under the Rules.
Under the Rules, no director qualifies as "independent" unless the board of directors
affirmatively determines that the director has no material relationship with the listed company,
either directly or as a partner, shareholder or officer of an organization that has a relationship
with the company. Companies must identify which directors are independent and disclose the basis
for that determination. In addition, a director is not independent if:
•
The director is, or has been within the last three years, an employee of the listed
company, or an immediate family member is, or has been within the last three years, an
executive officer, of the listed company.
•
The director has received, or has an immediate family member who has received, during
any twelve-month period within the last three years, more than $100,000 in direct
compensation from the listed company, other than director and committee fees and pension or
other forms of deferred compensation for prior service (provided such compensation is not
contingent in any way on continued service).
•
The director or an immediate family member is a current partner of a firm that is the
company's internal or external auditor; the director is a current employee of such a firm;
the director has an immediate family member who is a current employee of such a firm and
who participates in the firm's audit, assurance or tax compliance (but not tax planning)
practice; or the director or an immediate family member was within the last three years
(but is no longer) a partner or employee of such a firm and personally worked on the listed
company's audit within that time.
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•
The director or an immediate family member is, or has been within the last three years,
employed as an executive officer of another company where any of the listed company's
present executive officers at the same time serves or served on that company's compensation
committee.
•
The director is a current employee, or an immediate family member is a current executive
officer, of a company that has made payments to, or received payments from, the listed
company for property or services in an amount which, in any of the last three fiscal years,
exceeds the greater of $1 million, or 2 percent of such other company's consolidated gross
revenues.
By contrast, the Company Law provides that an "outside director" is "a director who was not a
managing director, executive officer, manager or employee of the company or any of its subsidiaries
at any time in the past, and who is not currently a managing director or executive officer, manager
or employee of the company or any of its subsidiary."
Mr. Yasuhiro Hagihara is an outside director within the meaning of the Company Law.
3. Corporate Auditors
TDK, a Company with Board of Corporate Auditors within the meaning of the Company Law, is
required to have at least three corporate auditors. At least half of such corporate auditors must
be outside auditors.
The Company Law provides that an "outside corporate auditor" is "a corporate auditor of the
company who has not been a director, accounting officer (
kaikei sanyo
), executive officer, manager
or other employee of such company or any of its subsidiaries at any time before their assumption of
office as corporate auditor". On the other hand, the Rules provide that all audit committee
members satisfy the requirements for director independence.
Of the five TDK corporate auditors, three — Mr. Kazutaka Kubota, Mr. Kaoru Matsumoto and Mr.
Ryoichi Ohno — are outside corporate auditors within the meaning of the Company Law.
4. Regularly Scheduled Sessions without Management
Japanese law does not require that TDK hold regular meetings without management as mentioned
in the Rules. Since TDK is a Company with Board of Corporate Auditors, each of its corporate
auditors and the board of directors audit/monitor the management, and such auditing/monitoring by
the corporate auditors and the board of directors functions as TDK's management-check system.
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5. Nominating / Corporate Governance Committee
Whereas under the Rules, listed companies must have a nominating / corporate governance
committee composed entirely of independent directors, under Japanese law, TDK, as a Company with
Board of Corporate Auditors, is not required to establish a nominating committee. Thus, TDK
currently does not have a nominating committee.
The Directors and Corporate Auditors of TDK must be appointed at a shareholders' meeting in
accordance with the Company Law. The Company Law requires directors of a Company with Board of
Corporate Auditors to obtain the consent of the board of corporate auditors if the directors desire
to submit to a shareholders' meeting a proposal concerning the appointment of a corporate auditor.
Also, the board of corporate auditors may demand that the directors include the appointment of a
corporate auditor in the agenda of a shareholders' meeting or that the directors submit a proposal
concerning the appointment of a corporate auditor who is recommended by the board of corporate
auditors. In order to dismiss a corporate auditor, any such dismissal must be by special
resolution of a general shareholders meeting.
6. Compensation Committee
Under the Rules, listed companies must have a compensation committee composed entirely of
independent directors. On the other hand, Japanese law does not require TDK, a Company with Board
of Corporate Auditors, to set up a compensation committee. TDK has, however, voluntarily
established a compensation advisory committee (the "CAC"). The CAC is responsible for (i)
investigating compensation levels for directors and executive officers, (ii) reviewing compensation
systems, performance evaluation standards and the method of calculating compensation, and (iii)
making proposals for compensation level for certain individuals. The CAC is authorized to make and
submit proposals to the Board of Directors.
The CAC has three members: one outside director (Yasuhiro Hagihara), one non-outside director
(Jiro Iwasaki) and an outside expert on compensation.
In the case of TDK, a Company with Board of Corporate Auditors, the Company Law and the
Articles of Incorporation requires the following matters with respect to the amount of compensation
for the Directors to be determined by the resolution of a shareholders' meeting:
(1)
With respect to any item of compensation in a definitive amount, such amount;
(2)
With respect to any item of compensation not in a definitive amount, a concrete
method for the calculation thereof; and
(3)
With respect to non-monetary items as compensation, the specific contents
thereof.
7. Audit Committee
Japanese law does not require TDK, a Company with Board of Corporate Auditors, to set up an
audit committee, and TDK therefore has not established an audit committee. TDK, however, has
established the board of corporate auditors pursuant to the Company Law (consisting of five
corporate auditors including three outside corporate auditors) and this exempts TDK from Rule 10A-3
of the Securities Exchange Act of 1934, as amended, requiring companies to have an audit committee.
This exemption is specifically provided by Rule 10A-3(c)(3) of the Securities Exchange Act of
1934, as amended, and applies to TDK because TDK meets all of the following elements that are
enumerated:
(i)
TDK has a Board of Corporate Auditors (
kansayaku-kai
) established and selected
pursuant to the Company Law;
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(ii)
The Company Law requires the board of corporate auditors to be separate from
the board of directors;
(iii)
Under the Company Law, the corporate auditors are not elected by management,
but by the shareholders at a shareholders' meeting. In addition, no executive officer
of TDK is a member of the board of corporate auditors;
(iv)
The Company Law prohibits a corporate auditor from serving as a director,
manager or other employee of the company or any of its subsidiaries, or as an
accounting officer (
kaikei sanyo
) or executive officer of any subsidiary of the
company. The Company Law requires a Company with Board of Corporate Directors to have
at least half of the auditors thereof must be an outside auditor as such term is
defined in the Company Law. As such, the Company Law provide for the standards for
independence of the board of corporate auditors from the management of TDK;
(v)
The Company Law provides that an accounting auditor (
kaikei kansanin
) must be
appointed at a shareholders' meeting. However, it also provides that in order to
submit a proposal concerning an appointment of an accounting auditor to a shareholders'
meeting, the directors must obtain the consent of the Board of Corporate Auditors and
that the Board of Corporate Auditors may demand that the directors include the
appointment of an accounting auditor in the agenda of a shareholders' meeting 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. In addition, the
Company Law provides that the Board of Corporate Auditors may dismiss an accounting
auditor for causes such as breach of his or her duties that are enumerated in the
Company Law. Further, pursuant to the Company Law and Company Accounting Regulations
thereunder, the board of corporate auditors audit the financial statements separately
from an audit by the accounting auditor, and if the board believes that the manner or
result of an audit by the accounting auditors is not reasonable, it must indicate its
objections and the reasons therefor in the audit report. To this end, a corporate
auditor may, if necessary for the performance of his/her duties, request the accounting
auditor to provide a report thereon. As such, in accordance with the Company Law, the
Board of Corporate Auditors of TDK is responsible, to the extent permitted by law, for
the appointment, retention and supervision of the work of a registered public
accounting firm engaged for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services for TDK; and
(vi)
Under Japanese law, the establishment of the procedures for the receipt,
retention, and treatment of complaints and 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. In addition, each Corporate
Auditor of TDK has the authority to engage independent counsel and other advisers if
such engagement is necessary to carry out his/her duties. Furthermore, each Corporate
Auditor may require TDK to pay any and all expenses necessary for carrying out his/her
duties, including compensation of any advisers employed by him/her and ordinary
administrative expenses.
As discussed above, TDK has established a Board of Corporate Auditors pursuant to the Company
Law (consisting of five corporate auditors including three outside corporate auditors), and
therefore does not have an audit committee.
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8. Corporate Governance Guidelines
Under the Rules, listed companies must adopt and disclose corporate governance guidelines. On
the other hand, Japanese law does not require TDK to either adopt or disclose corporate governance
guidelines, and thus TDK has not established such guidelines. However, TDK has disclosed "The
Status Concerning Corporate Governance" in its Japanese Annual Securities Report in accordance with
the Securities Exchange Law of Japan and regulations thereunder. Furthermore, in conjunction with
the amendment (effective as of March 1, 2006) of the Regulations Concerning Listing of Securities
issued by the Tokyo Stock Exchange, TDK has delivered to the Tokyo Stock Exchange a report titled
"Report Concerning Corporate Governance". Additionally, because the Company Law requires that
Large Companies (a company with paid in capital of Five Hundred Million Japanese Yen (JPY
500,000,000) or more or debt of Twenty Billion Japanese Yen (JPY
20,000,000,000) or more) determine
whether or not to establish internal control systems to ensure that the performance by directors of
their duties comply with applicable laws and regulations and the articles of incorporation of such
Large Company, and the internal control systems provided under the Regulations Concerning
Enforcement of the Company Law to ensure the integrity of the business activities of a company
(collectively referred to as the "Internal Control System"), the Board of Directors of TDK has,
through resolution, determined upon the detailed content of a corporate governance system.
9. Code of Business Conduct and Ethics
Listed companies must adopt and disclose a code of business conduct and ethics for directors,
officers and employees, and promptly disclose any waivers of the code for directors or executive
officers under the Rules. By contrast, although Japanese law does not require TDK to adopt or
disclose a code of business conduct and ethics, TDK has voluntarily adopted and disclosed one. See
Item 16B. "Code of Ethics". Furthermore, TDK has incorporated such code of business conduct and
ethics into the Internal Control System indicated in the preceding paragraph.
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D. Employees
The following table lists the number of TDK full-time employees as of March 31, 2006, 2005 and
2004.
As of March 31, 2006
Japan
Overseas
Total
Electronic materials and components
7,697
42,419
50,116
Recording media
993
1,258
2,251
Corporate
1,516
40
1,556
Total
10,206
43,717
53,923
As of March 31, 2005
Japan
Overseas
Total
Electronic materials and components
6,938
26,112
33,050
Recording media
1,128
1,465
2,593
Corporate
1,436
36
1,472
Total
9,502
27,613
37,115
As of March 31, 2004
Japan
Overseas
Total
Electronic materials and components
7,147
25,204
32,351
Recording media
1,173
1,734
2,907
Corporate
1,524
22
1,546
Total
9,844
26,960
36,804
The increase in the number of employees compared with the previous fiscal year is principally
attributable to the net increase in the number of employees of the electronic materials and
components segment, as Lambda Power Business became subsidiaries of TDK that are included in the
scope of new consolidation, and TDK increased the number of employees in order to respond to the
increased orders.
TDK considers its employee relations to be excellent; there have been no significant strikes
or labor disputes.
All full-time employees in Japan, except management and certain other personnel, must become
union members. Approximately 76 percent of full-time employees of TDK are members of the TDK Labor
Union, which is affiliated with
ZENKIN RENGO
. About 45 percent of the full-time employees
of TDK and its domestic subsidiaries are members of unions affiliated with
ZENKIN RENGO
.
As is customary in Japan, TDK negotiates with the TDK Labor Union for annual wage increases,
and twice a year for bonuses. TDK also renews the terms and conditions of labor contracts, other
than those relating to wage and bonuses, every year.
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E. Share ownership
The following table lists the number of shares (which exclude shares underlying stock
acquisition rights) and shares underlying stock acquisition rights owned by the Directors,
Corporate Officers and Corporate Auditors of TDK as of June 29, 2006. The total number of shares
held is 27,500, and the total number of share underlying acquisition rights held is 282,100, as
shown below, and these numbers constituted 0.2 percent of all outstanding shares as of such date.
Number of
shares
underlying
Number of
stock acquisi-
Name
Position
shares
tion rights
Hajime Sawabe
Representative Director, Chairman and CEO
9,000
51,300
Takehiro Kamigama
Representative Director, President and COO
3,300
27,000
Jiro Iwasaki
Director, Executive Vice President
2,000
17,000
Shinji Yoko
Director, Senior Vice President
1,000
30,800
Takeshi Nomura
Director, Senior Vice President
1,000
31,000
Yasuhiro Hagihara
Director (outside)
1,000
2,500
Seiji Enami
Director and CFO
1,100
5,500
Kiyoshi Ito
Corporate Officer, Senior Executive Vice President
1,000
29,600
Takaya Ishigaki
Corporate Officer, Senior Vice President
800
9,900
Minoru Takahashi
Corporate Officer, Senior Vice President
200
9,900
Michinori Katayama
Corporate Officer, Senior Vice President
500
12,500
Yukio Hirokawa
Corporate Officer
1,400
16,700
Masatoshi Shikanai
Corporate Officer
300
12,500
Kenryo Namba
Corporate Officer
2,000
16,500
Raymond Leung
Corporate Officer
0
2,000
Shunji Itakura
Corporate Officer
600
3,300
Shiro Nomi
Corporate Officer
300
2,400
Shinichi Araya
Corporate Officer
0
1,700
Masaaki Miyoshi
Full-time Corporate Auditor
1,000
—
Takuma Otsuka
Full-time Corporate Auditor
1,000
—
Kazutaka Kubota
Corporate Auditor (outside)
0
—
Kaoru Matsumoto
Corporate Auditor (outside)
0
—
Ryoichi Ohno
Corporate Auditor (outside)
0
—
Total
27,500
282,100
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Stock option plans
TDK obtained approval of the Ordinary General Meeting of Shareholders held on June 29, 2006
regarding the issuance of stock acquisition rights as stock options for a stock-linked compensation
plan (the Stock Acquisition Rights) to Directors. Upon approval, the Board of Directors adopted
resolutions to issue an aggregate of 176 Stock Acquisition Rights, each representing a stock option
to purchase 100 shares of common stock of TDK, to the 7 Directors. The Stock Acquisition Rights
are exercisable during the period from August 6, 2006 to August 5, 2026. The amount to be paid by
qualified persons upon the exercise of each Stock Acquisition Rights
is set at ¥1 per share of
common stock, which is subject to an adjustment in certain events, including but not limited to a
stock split, stock dividend and issue of new shares at a price less than the current market price
of the shares of TDK.
TDK obtained approval of the Ordinary General Meeting of Shareholders held on June 29, 2006
regarding the issuance of stock acquisition rights as stock options for a stock-linked compensation
plan (the Stock Acquisition Rights) to Corporate Officers, pursuant to Articles 236, 238 and 239 of
the Company Law (
Kaisha-ho
). Upon approval, the Board of Directors adopted resolutions to issue an
aggregate of 153 Stock Acquisition Rights, each representing a stock option to purchase 100 shares
of common stock of TDK, to the 10 Corporate Officers. The Stock Acquisition Rights are exercisable
during the period from August 6, 2006 to August 5, 2026. The amount to be paid by qualified
persons upon the exercise of each Stock Acquisition Rights is set at ¥1 per share of common stock,
which is subject to an adjustment in certain events, including but not limited to a stock split,
stock dividend and issue of new shares at a price less than the current market price of the shares
of TDK.
TDK also obtained approval of the Ordinary General Meeting of Shareholders held on June 29,
2006 regarding the issuance of stock acquisition rights as stock options (the Stock Acquisition
Rights) to select senior executives, pursuant to Articles 236, 238 and 239 of the Company Law.
Upon approval, the Board of Directors adopted resolutions to issue an aggregate of 1,200 Stock
Acquisition Rights, each representing a stock option to purchase 100 shares of common stock of TDK,
to select senior executives of TDK, and the Directors and select senior executives of subsidiaries.
The Stock Acquisition Rights are exercisable during the period from August 1, 2008 to July 31,
2012.
TDK obtained approval of the Ordinary General Meeting of Shareholders held on June 29, 2005
regarding the issuance of stock acquisition rights as share-based compensation stock options (the
Stock Acquisition Rights) to Board members and Corporate Officers, pursuant to Articles 280-20 and
280-21 of the Japanese Commercial Code. Upon approval, the Board of Directors adopted resolutions
to issue an aggregate of 246 Stock Acquisition Rights, each representing an option to purchase 100
shares of common stock of TDK, to the then 17 Directors and Corporate Officers of TDK. The Stock
Acquisition Rights issued on June 30, 2005 are fully vested on date of issuance and are exercisable
during the period from July 1, 2005 to June 30, 2025. The amount to be paid by qualified persons
upon the exercise of each Stock Acquisition Rights is set at ¥1 ($0.01) per share of common stock.
Stock option related compensation cost of ¥186 million ($1,590 thousand) has been recognized in
fiscal 2006, representing the amount attributed to service rendered during the current period of
the amount by which the market price of the underlying common stock exceeded the exercise price of
stock options approved for issuance at the Ordinary General Meeting of Shareholders held in June
2005.
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TDK obtained approval of the Ordinary General Meeting of Shareholders held on June 29, 2005
regarding the issuance of stock acquisition rights as stock options to select senior executives,
pursuant to Articles 280-20 and 280-21 of the Japanese Commercial Code. Upon approval, the Board
of Directors adopted resolutions to issue an aggregate of 906 Stock Acquisition Rights, each
representing an option to purchase 100 shares of common stock of TDK, to the then 172 select senior
executives of TDK, and the Directors and select senior executives of subsidiaries. The Stock
Acquisition Rights issued on August 11, 2005 are exercisable during the period from August 1, 2007
to July 31, 2011. The amount to be paid by qualified persons upon the exercise of each Stock
Acquisition Rights is set at ¥8,134 ($69.52) per share of common stock, which was calculated by a
formula approved by shareholders at the said annual shareholders meeting and is subject to an
adjustment in certain events, including but not limited to a stock split, stock dividend and issue
of new shares at a price less than the current market price of the shares of TDK. The exercise
price of each Stock Acquisition Rights was equal to or greater than the fair market value of TDK's
common stock on the date of grant.
To cover these options and share-based compensation stock options issued on June 30, 2005, TDK
purchased on the Tokyo Stock Exchange ("TSE") a total of 115,200 common shares with an aggregate
purchase price of ¥930 million ($7,949 thousand) from August 17, 2005 through August 22, 2005.
TDK obtained approval of the Ordinary General Meeting of Shareholders held on June 29, 2004
regarding the issuance of stock acquisition rights as stock options, pursuant to Articles 280-20
and 280-21 of the Japanese Commercial Code. Upon approval, the Board of Directors adopted
resolutions to issue an aggregate of 2,343 Stock Acquisition Rights, each representing a stock
option to purchase 100 shares of common stock of TDK, to the then 187 Directors, Corporate Officers
and select senior executives of TDK, and the Directors and select senior executives of its
subsidiaries. The Stock Acquisition Rights are exercisable during the period from August 1, 2006
to July 31, 2010. The amount to be paid by qualified persons upon the exercise of each Stock
Acquisition Rights was set at ¥8,147 per share of common stock. The exercise price of each Stock
Acquisition Rights was equal to or greater than the fair market value of TDK's common stock on the
date of grant. To cover these options TDK purchased on the TSE a total of 234,300 common shares
with an aggregate purchase price of ¥1,656 million from August 9, 2004 through August 16, 2004.
TDK obtained approval of the Ordinary General Meeting of Shareholders held on June 27, 2003
regarding the issuance of stock acquisition rights as stock options, pursuant to Articles 280-20
and 280-21 of the Japanese Commercial Code. Upon approval, the Board of Directors adopted
resolutions to issue an aggregate of 2,547 Stock Acquisition Rights, each representing a stock
option to purchase 100 shares of common stock of TDK, to the then 179 Directors, Corporate Officers
and select senior executives of TDK, and the Directors and select senior executives of its
subsidiaries. The Stock Acquisition Rights issued on August 7, 2003 are exercisable during the
period from August 1, 2005 to July 31, 2009. The amount to be paid by qualified persons upon the
exercise of each Stock Acquisition Rights was set at ¥6,954 per share of common stock. The
exercise price of each Stock Acquisition Rights was equal to or greater than the fair market value
of TDK's common stock on the date of grant. To cover these options TDK purchased on the TSE a
total of 260,000 common shares with an aggregate purchase price of ¥1,847 million from August 8,
2003 through August 18, 2003.
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TDK obtained approval of the Ordinary General Meeting of Shareholders held on June 27, 2002
regarding the issuance of stock acquisition rights as stock options, pursuant to Articles 280-20
and 280-21 of the Japanese Commercial Code, as amended. Upon approval, the Board of Directors
adopted resolutions to issue an aggregate of 2,236 Stock Acquisition Rights, each representing a
stock option to purchase 100 shares of common stock of TDK, to the then 197 Directors, Corporate
Officers and select senior executives of TDK, and the Directors and select senior executives of its
subsidiaries. The Stock Acquisition Rights issued on August 9, 2002 are exercisable during the
period from August 1, 2004 to July 31, 2008. The amount to be paid by qualified persons upon the
exercise of each Stock Acquisition Rights was set at ¥5,909 per share of common stock. The
exercise price of each Stock Acquisition Rights was equal to or greater than the fair market value
of TDK's common stock on the date of grant. To cover these options TDK purchased on the TSE a
total of 223,600 common shares with an aggregate purchase price of ¥1,209 million from August 12,
2002 through August 19, 2002.
The Ordinary General Meeting of Shareholders held on June 28, 2001 approved the implementation
of TDK's stock option plan for Directors and certain employees of TDK, and the purchase of TDK's
own shares for transfer to them under the plan, pursuant to Article 210-2 of Japanese Commercial
Code. Stock options were provided to the then 12 Directors on the Board and 184 associate
directors and officials in amounts ranging from 500 to 10,000 common shares each, at an exercise
price of ¥6,114 per share. The exercise price of each Stock Acquisition Right was equal to or
greater than the fair market value of TDK's common stock on the date of grant. To cover these
options TDK purchased on the TSE a total of 158,000 common shares with an aggregate purchase price
of ¥917 million from July 2, 2001 through July 23, 2001.
The Ordinary General Meeting of Shareholders held on June 29, 2000 approved the implementation
of TDK's stock option plan for Directors and certain employees of TDK, and the purchase of TDK's
own shares for transfer to them under the plan, pursuant to Article 210-2 of the Japanese
Commercial Code. Stock options were provided to the then 13 Directors on the Board and 191
associate directors and officials in amounts ranging from 500 to 10,000 common shares each, at an
exercise price of ¥15,640 per share. The exercise price of each Stock Acquisition Right was equal
to or greater than the fair market value of TDK's common stock on the date of grant. To cover
these options TDK purchased on the TSE a total of 170,400 common shares with an aggregate purchase
price of ¥2,665 million from July 3, 2000 through August 2, 2000.
Employees (excluding Directors and Corporate Officers) Shareholding Association
As of March 31, 2006, the number of members of the TDK Employees Shareholding Association
totaled 1,570. The Employees Shareholding Association accepts new memberships in March and
September of every year. Members are entitled to purchase shares of TDK, the maximum amount being
¥50,000 a month. In addition, members have received a monthly subsidy equivalent to 5 percent of
the purchase price of shares. The subsidy amounted to ¥18 million ($156 thousand) for fiscal 2006.
The total amount of TDK shares having voting rights owned by the TDK Employees Shareholding
Association was as follows:
Title of class
Identity of person or group
Amount owned
Percent of class
Common stock
TDK Employees Shareholding Association
486,210 shares
0.37
%
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Table of Contents
Item 7
. Major Shareholders and Related Party Transaction
A. Major shareholders
The table below lists the number of TDK shares held by holders of 5 percent or more of TDK
shares and their percentage ownership as of March 31, 2006:
Shares owned
Name of major shareholder
(in thousands)
Percentage
The Master Trust Bank of Japan, Ltd. (Trust
account)
14,660
11.00
%
Japan Trustee Services Bank, Ltd. (Trust account)
11,176
8.39
%
Major shareholders do not have voting rights different from other shareholders, subject to the
limitation on exercise as set forth in "Item 10. B. Memorandum and Articles of Association – Common
Stock – Voting rights."
At March 31, 2006, there were 1,411,860 registered ADRs outstanding and 359 registered
holders, of which 1,411,341 ADRs were held by 212 registered U.S. holders.
The Depositary of ADRs of TDK is Citibank N.A. of New York.
TDK is not, directly or indirectly, owned or controlled by another corporation or by any
foreign government.
B. Related party transaction
Since the beginning of TDK's last full fiscal year, TDK has not transacted with, nor does TDK
currently plan to transact with, a related party, except for transactions among TDK and its
affiliates.
C. Interests of experts and counsel
Not applicable.
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Item 8
. Financial Information
A. Consolidated statements and other financial information
Consolidated financial statements
TDK's audited financial statements are included under Item 17 "Financial Statements". Except
for TDK's financial statements included under Item 17, no other information in this Annual Report
has been audited by TDK's independent auditors.
Refer to Consolidated Financial Statements and Notes to Consolidated Financial Statements (See
Item 17).
Export sales
Finished goods and materials sent out of Japan are mainly bound for consolidated subsidiaries
of TDK, and are not, therefore, recorded as exports on a consolidated basis. For this reason, the
proportion of exports to total net sales is not significant.
Legal proceedings
There are no material pending legal proceedings, other than ordinary routine litigation
incidental to the business, to which TDK or any of its subsidiaries is a party or of which any of
their property is the subject.
Dividend policy
Returning earnings to shareholders is one of TDK's highest management priorities. Therefore,
TDK's fundamental policy is to give consideration to a consistent increase in dividends based on
factors such as the return on equity (ROE), dividends as a percentage of equity (DOE) and TDK's
results of operations on a consolidated basis.
B. Significant changes
No significant change has occurred since the date of the annual consolidated financial
statements.
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Item 9
. The Offer and Listing
A. Offer and listing details
The primary market for TDK's shares of common stock (Common Stock) is the Tokyo Stock Exchange
(the "TSE"). The shares are traded on the First Section of that exchange and are also listed on
the Osaka Securities Exchange in Japan. In addition, TDK's shares are listed on the New York Stock
Exchange in the form of American Depositary Receipts ("ADRs"), on the Euronext Brussels Stock
Exchange in the form of Bearer Depositary Receipts, and on the London Stock Exchange in the form of
shares of TDK.
The following table sets forth for the periods indicated the reported high and low sales
prices of TDK's shares of common stock on the TSE (both in yen and translated into U.S. dollars per
American Depositary Share) and the reported high and low bid prices for American Depositary Shares
of which each represents one share of common stock, as reported by the New York Stock Exchange.
U.S. market
Yen per share of
price per American
Common stock (1)
Depositary Share (2)
High
Low
High
Low
Annual highs and lows
Year ended March 31, 2002
8,670
4,800
69.00
40.00
Year ended March 31, 2003
7,380
4,060
57.00
32.95
Year ended March 31, 2004
8,350
3,810
77.86
32.40
Year ended March 31, 2005
8,630
6,790
80.10
61.40
Year ended March 31, 2006
10,230
7,250
85.40
62.50
Quarterly highs and lows
Year ended March 31, 2005
1st quarter
8,630
7,130
80.10
64.50
2nd quarter
8,390
6,790
77.05
61.40
3rd quarter
7,910
7,160
74.85
67.80
4th quarter
7,880
7,050
75.93
68.40
Year ended March 31, 2006
1st quarter
8,020
7,250
74.35
68.02
2nd quarter
8,740
7,480
79.25
67.05
3rd quarter
10,230
7,530
85.40
62.50
4th quarter
9,070
7,730
76.29
66.50
Year ending March 31, 2007
1st quarter
10,000
7,990
89.00
69.89
Monthly highs and lows
January 2006
8,760
7,730
73.79
68.00
February 2006
8,600
7,750
72.81
66.50
March 2006
9,070
8,030
76.29
69.43
April 2006
9,760
8,960
84.13
76.22
May 2006
10,000
9,010
89.00
81.10
June 2006
9,400
7,990
84.16
69.89
Notes:
(1)
As reported by the Tokyo Stock Exchange.
(2)
As reported by the New York Stock Exchange.
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B. Plan of distribution
Not applicable.
C. Markets
See Item 9.A. "Offer and listing details".
D. Selling shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the issue
Not applicable.
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Table of Contents
Item 10
. Additional Information
A. Share capital
Not applicable.
B. Memorandum and articles of association
The discussion below reflects the enactment of the Company Law, which became effective on May
1, 2006 and the latest amendments to TDK's Articles of Incorporation, which reflects the enactment
of the Company Law and was approved by the ordinary general shareholders meeting held on June 29,
2006. The Company Law integrated into a single code formerly effective legislation regarding
companies, including Chapters 2, 3 and 4 of the Commercial Code, the Limited Liability Company
(
yugen kaisha
) Law and the Law for Special Provisions for the Commercial Code concerning Audits,
etc. of Joint Stock Corporations (
kabushiki kaisha
), all of which were now abolished. In addition,
the Company Law significantly changed traditional concepts and systems under the formerly effective
Commercial Code and other laws in many respects.
Organization
TDK is a joint stock corporation
(kabushiki kaisha)
incorporated in Japan under the Commercial
Code
(shoho)
of Japan. It is registered in the Commercial Register
(shogyo tokibo)
maintained by
the Tokyo Legal Affairs Bureau (Registration Number: 0199-01-034849).
Objects and purposes
Article 2 of the Articles of Incorporation of TDK provides that its purpose is to engage in
the following lines of business:
•
Manufacture and sale of electric machinery and appliances;
•
Manufacture and sale of magnetic materials such as ferrite and magnet;
•
Manufacture and sale of electronic machinery and appliances such as automatic inserting
machine for electronic components, automatic mounter for electronic components, and
electronic measuring equipment and of components thereof;
•
Manufacture and sale of recording media such as magnetic tape, floppy disk and optical disk
and of data writing, reading and storage equipment therefor;
•
Manufacture and sale of ceramic materials such as electricity inductive ceramics,
piezoelectric ceramics, semiconductor ceramics and electricity insulating ceramics;
•
Manufacture and sale of circuit components such as coil and transformers;
•
Manufacture and sale of semiconductor;
•
Manufacture and sale of stabilizing power supplies (units to stabilize electric current or
voltage);
•
Manufacture and sale of machinery and appliances for medical use and medical instruments and
of components thereof;
•
Manufacture and sale of single crystal materials and each product applying the same;
•
Manufacture and sale of precious metals, precious stones, artificial precious stones and
each product applying or utilizing the same;
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•
Manufacture and sale of outer wall materials of buildings and structures;
•
Designing and contracting of construction work;
•
Development, production, sale and grant of license of software;
•
Manufacture, sale and contracting of applied product, machinery and tools and equipment of
each of the foregoing; and
•
Any and all businesses incidental or relating to each of the foregoing.
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; and
(e)
share ownership is not required in order to be eligible to serve as a director.
Common Stock
General
Set forth below is information relating to TDK's Common Stock, including brief summaries of
the relevant provisions of TDK's Articles of Incorporation and Share Handling Regulations, as
currently in effect, and of the Company Law and related legislation.
In order to assert shareholders' rights against TDK, a shareholder must have its name and
address registered on TDK's register of shareholders, in accordance with TDK's Share Handling
Regulations. The registered beneficial holder of deposited shares underlying the ADSs is the
Depositary for the ADSs. Accordingly, holders of ADSs will not be able directly to assert
shareholders' rights against TDK.
Authorized capital
Article 6 of the Articles of Incorporation of TDK provides that the total number of shares
authorized to be issued by TDK is four hundred and eighty million (480,000,000) shares.
As of March 31, 2006, 133,189,659 shares of Common Stock without having any par value were
issued, including 922,831 shares of treasury stock.
There is no concept of "par value" of shares of capital stock under the Company Law.
Thus, all shares of capital stock of TDK have no par value.
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Dividends
The Articles of Incorporation of TDK provides that the accounts shall be closed on March 31 of
each year and that year-end dividends, if any, shall be paid to shareholders, beneficial
shareholders and pledgees of record as of the end of such day. Under the Company Law and the
Articles of Incorporation of TDK, TDK may fix a record date and, subject to certain limitation on
the distributable surplus, pay dividends on retained earnings, if any, to shareholders, beneficial
shareholders and pledgees of record as of that date from time to time by a resolution of a general
meeting of shareholders. In addition, the Board of Directors may by its resolution declare an
interim dividend pursuant to Article 454 paragraph 5 of the Company Law and the Articles of
Incorporation of TDK to shareholders, beneficial shareholders and pledgees of record as of the end
of each September 30, without shareholders' approval, but subject to the limitations described
below. Dividends may be distributed in cash or in kind subject to certain conditions being met.
Under the Company Law, TDK is permitted to make a distribution of surplus to the extent that
the aggregate book value of the assets to be distributed to shareholders does not exceed the
distributable amount provided for by the Company Law and the ordinance of the Ministry of Justice
as at the effective date of such distributable surplus.
The amount of surplus at any given time shall be the amount of TDK's assets and the book value
of TDK's treasury stock after subtracting and adding the amounts of the items provided for by the
Company Law and the ordinance of the Ministry of Justice.
In Japan, the ex-dividend date and record date for dividends precede the date of determination
of the amount of the dividend. The price of shares generally goes ex-dividend on the third
business day prior to the record date.
Stock splits
Under the Company Law, the Board of Directors of TDK may at any time make stock splits by its
resolution. Generally, upon stock splits, shareholders will not be required to exchange share
certificates held by them for new share certificates. In respect of shares deposited with the
Japan Securities Depository Center, Inc. ("JASDEC"), new shares resulting from the stock split will
automatically be deposited with JASDEC, and shareholders who directly possess share certificates
will receive additional certificates representing the additional shares resulting from the stock
split. Before a stock split, TDK must give public notice of the stock split, specifying the record
date for the stock split, not less than two weeks prior to the record date.
Under the Company Law, the Board of Directors of TDK may increase the authorized share capital
up to the number reflecting the rate of stock splits and amend the Articles of Incorporation of TDK
without the approval of a shareholders' meeting.
Consolidation of shares
TDK may at any time consolidate shares issued into a smaller number of shares by a special
resolution of a general meeting of shareholders. When a consolidation of shares is to be made, TDK
must give public notice or notice to each shareholder that, within a period of not less than one
month specified in the notice, share certificates must be submitted to TDK for exchange. The
Director of TDK must disclose the reason for the consolidation of shares at the general meeting of
shareholders.
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General meeting of shareholders
The ordinary general meeting of shareholders of TDK for each fiscal year is normally held in
June in each year in Chuo-ku, Tokyo, Japan (address of principal executive office) or any adjacent
place thereto or in Ichikawa-shi, Chiba, Japan. In addition, TDK may hold an extraordinary general
meeting of shareholders whenever necessary by giving notice of convocation thereof at least two
weeks prior to the date set for the meeting.
Notice of convocation of a shareholders' meeting setting forth the place, time and purpose
thereof, must be mailed to each shareholder having voting rights (or, in the case of a non-resident
shareholder, to his or her standing proxy or mailing address in Japan) at least two weeks prior to
the date set for the meeting. Under the Company Law, such notice may be given to shareholders by
electronic means, subject to the consent by the relevant shareholders. The record date for an
ordinary general meeting of shareholders is March 31 of each year.
Any shareholder or group of shareholders holding at least 3 percent of the total number of
voting rights for a period of six months or more may require the convocation of a general meeting
of shareholders for a particular purpose. Unless such shareholders' meeting is convened promptly
or a convocation notice of a meeting which is to be held not later than eight weeks from the day of
such demand is dispatched, the requiring shareholder may, upon obtaining a court approval, convene
such shareholders' meeting.
Any shareholder or group of shareholders holding at least 300 voting rights or 1 percent of
the total number of voting rights for a period of six months or more may propose a matter to be
considered at a general meeting of shareholders by submitting a request to a Representative
Director at least eight weeks prior to the date set for such meeting.
Voting rights
So long as TDK maintains the unit share system (see
"Unit" share system, below
) a holder
of shares constituting one or more whole units is entitled to one voting right per unit of shares
subject to the limitations on voting rights set forth in the following paragraph. Except as
otherwise provided by law or by the Articles of Incorporation, a resolution can be adopted at a
general meeting of shareholders by a majority of the number of voting rights of all the
shareholders represented at the meeting. The Company Law and TDK's Articles of Incorporation
provide, however, that the quorum for the election of Directors and Corporate Auditors shall not be
less than one-third of the total number of voting rights of the shareholders who can exercise
voting rights. TDK's shareholders are not entitled to cumulative voting in the election of
Directors and Corporate Auditors. A company, partnership or other similar business enterprise that
holds shares of TDK stock may not exercise its voting rights with respect to such TDK shares if TDK
and its subsidiaries, either alone or together, hold shares or membership interests representing
more than 25 percent of the voting power of such shareholder or has any relationship with such
shareholder provided in the ordinance of the Ministry of Justice under which TDK may substantially
control the management of such shareholder. Shareholders may exercise their voting rights through
proxies, provided that the proxies are also shareholders holding voting rights. TDK's shareholders
also may cast their votes in writing. Shareholders may also exercise their voting rights by
electronic means when TDK decides to permit such method of exercising voting rights.
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The Company Law provides that in order to amend the Articles of Incorporation and in certain
other instances, including a reduction of stated capital, the removal of a Corporate Auditor,
dissolution, merger or consolidation with a certain exception under which shareholders' resolution
is not required, the transfer of the whole or an important part of the business, the taking over of
the whole of the business of any other corporation with a certain exception under which
shareholders resolution is not required, share exchange or share transfer for the purpose of
establishing 100 percent parent-subsidiary relationships with a certain exception under which
shareholders resolution is not required, splitting of the corporation into two or more corporations
with a certain exception under which shareholders resolution is not required, or any offering of
new shares at a "specially favorable" price (or any offering of stock acquisition rights to
subscribe for or acquire shares of capital stock ("stock acquisition rights") or bonds with stock
acquisition rights at a "specially favorable" exercise conditions or price) to any persons other
than shareholders, the quorum shall be one-third of the total voting rights of all the shareholders
and the approval by at least two-thirds of the voting rights of all the shareholders represented at
the meeting is required (the "special shareholders resolutions").
Issue of additional shares and pre-emptive rights
Holders of TDK's shares of Common Stock have no pre-emptive rights under its Articles of
Incorporation. Authorized but unissued shares may be issued at such times and upon such terms as
the Board of Directors determines, subject to the limitations as to the offering of new shares at a
"specially favorable" price mentioned under
"Voting rights"
above. The Board of Directors may,
however, determine that shareholders shall be given subscription rights regarding a particular
issue or transfer of shares, in which case such rights must be given on uniform terms to all
shareholders as at a record date of which not less than two weeks' prior public notice must be
given. Such subscription rights are nontransferable. However, a shareholder may be allotted stock
acquisition rights without consideration thereto, and transfer such rights.
Subject to certain requirements, TDK may issue stock acquisition rights by a resolution of the
Board of Directors. Holders of stock acquisition rights may exercise their rights to acquire a
certain number of shares within the exercise period as prescribed in the terms of their stock
acquisition rights. Upon exercise of stock acquisition rights, TDK will be obliged to issue the
relevant number of new shares or alternatively to transfer the necessary number of existing shares
held by it (treasury stock).
Liquidation rights
In the event of a liquidation of TDK, the assets remaining after payment of all debts and
liquidation expenses and taxes will be distributed among shareholders in proportion to the
respective numbers of shares of common stock held.
Record date
March 31 is the record date for TDK's year-end dividends. So long as TDK maintains in its
Articles of Incorporation a provision for the unit of shares, the shareholders and beneficial
shareholders who are registered as the holders of one unit of shares or more in TDK's registers of
shareholders and/or beneficial shareholders at the end of each March 31 are also entitled to
exercise shareholders' rights at the ordinary general meeting of shareholders with respect to the
fiscal year ending on such March 31. September 30 is the record date for interim dividends. In
addition, TDK may set a record date for determining the shareholders and/or beneficial shareholders
entitled to other rights and for other purposes by giving at least two weeks' prior public notice.
The price of shares generally goes ex-dividends or ex-rights on Japanese stock exchanges on
the third business day prior to a record date (or if the record date is not a business day, the
fourth business day prior thereto), for the purpose of dividends or rights offerings.
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Acquisition of TDK's own shares
TDK may acquire its own shares (i) by way of purchase on any Japanese stock exchange on which
its shares are listed or by way of tender offer (pursuant to a resolution of the Board of Directors
in accordance with the Articles of Incorporation of TDK), (ii) from a specific shareholder other
than its subsidiary (pursuant to a special resolution of a general meeting of shareholders), or
(iii) from its subsidiary (pursuant to a resolution of a meeting of the Board of Directors). In
the case of (ii) above, any other shareholder may make a request directly to a representative
director, five days prior to the relevant shareholder's meeting, to include such other shareholder
as the seller of shares in the proposed purchase. However, the acquisition of its own shares at a
price not exceeding the then market price provided under the ordinance of the Ministry of Justice
will not trigger the right of any shareholder to include him/her as the seller of his shares in
such proposed acquisition.
Any such acquisition of TDK's shares must satisfy certain requirements, including that the
total amount of the purchase price may not exceed the amount of the
distributable dividends. (See
Dividend
s
above)
Shares acquired by TDK may be held by it for any period or may be cancelled by resolution of
the Board of Directors. TDK may also transfer to any person the shares held by it, subject to a
resolution of the Board of Directors, and subject also to other requirements those applicable to
the issuance of new shares including the limitation as to the offering of new shares at a
"specially favorable" price mentioned in "
Voting Rights
" above. TDK may also utilize its treasury
shares for the purpose of transfer to any person upon exercise of stock acquisition rights or for
the purpose of acquiring another company by merger, share exchange or corporate split through
exchange of treasury shares for shares or assets of the acquired company.
The Company Law generally prohibits any subsidiary of TDK from acquiring shares of TDK.
"Unit" share system
Pursuant to the Articles of Incorporation of TDK, 100 shares of TDK constitute one unit.
Although the number of shares constituting a new unit is included in the Articles of Incorporation,
any amendment to the Articles of Incorporation reducing (but not increasing) the number of shares
constituting a unit or eliminating the provisions for the unit of shares may be made by the
resolution of the Board of Directors rather than by the special shareholders resolution, which is
otherwise required for amending the Articles of Incorporation. The number of shares constituting
one new unit, however, cannot exceed 1,000.
—Voting rights under the unit share system
Under the unit share system, shareholders shall have one voting right for each unit of shares
that they hold. Any number of shares less than a full unit will carry no voting rights.
—Share certificates for less than a unit
Unless TDK's Board of Directors adopts a resolution to eliminate the provision for the unit
shares from the Articles of Incorporation or the shareholders amend the Articles of Incorporation
by a special shareholders resolution to eliminate the provision not to issue share certificates for
less than a unit of shares, a share certificate for any number of shares less than a unit will in
general not be issued. As the transfer of shares normally requires the delivery of the share
certificates therefor, any fraction of a unit for which no share certificates are issued is not
transferable.
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—Repurchase or sale by TDK of shares constituting less than a unit
A holder of shares constituting less than one unit may require TDK to purchase such shares, or
sell such number of shares which, if combined with the shares already held by such holder, would
constitute one unit of shares, at their market value in accordance with the provisions of the Share
Handling Regulations of TDK.
—Effect of the unit share system on holders of ADRs
A holder who owns ADRs evidencing less than 100 ADSs will indirectly own less than a whole
unit of shares of Common Stock. Although, as discussed above, under the unit share system holders
of less than a unit have the right to require TDK to purchase their shares, holders of ADRs
evidencing ADSs that represent other than integral multiples of whole units are unable to withdraw
the underlying shares of Common Stock representing less than a unit and, therefore, are unable, as
a practical matter, to exercise the rights to require TDK to purchase such underlying shares unless
TDK's Articles of Incorporation are amended to eliminate the provision not to issue share
certificates for the numbers of shares less than a unit. As a result, access to the Japanese
markets by holders of ADRs through the withdrawal mechanism will not be available for dispositions
of shares of Common Stock in lots less than a unit. The unit share system does not affect the
transferability of ADSs, which may be transferred in lots of any size.
Reporting of substantial shareholdings
The Securities and Exchange Law of Japan and regulations thereunder require any person who has
become, beneficially and solely or jointly, a holder of more than 5 percent of the total issued
shares of capital stock of a company listed on any Japanese stock exchange to file with the
Director-General of a competent Local Finance Bureau of the Ministry of Finance within five
business days a report concerning such shareholdings.
A similar report must also be filed in respect of any subsequent change of 1 percent or more
in any such holding or any change in material matters set out in reports previously filed, with
certain exceptions. For this purpose, shares issuable to such person upon conversion of
convertible securities or exercise of share subscription warrants or stock acquisition rights are
taken into account in determining both the number of shares held by such holder and the issuer's
total issued share capital. Copies of such report must also be furnished to the issuer of such
shares and all Japanese stock exchanges on which the shares are listed.
Except for the general limitation under Japanese anti-trust and anti-monopoly regulations
against holding of shares of capital stock of a Japanese corporation which leads or may lead to a
restraint of trade or monopoly, and except for general limitations under the Company Law or TDK's
Articles of Incorporation on the rights of shareholders applicable regardless of residence or
nationality, there is no limitation under Japanese laws and regulations applicable to TDK or under
its Articles of Incorporation on the rights of non-resident or foreign shareholders to hold the
shares of Common Stock of TDK or exercise voting rights thereon.
There is no provision in TDK's Articles of Incorporation that would have an effect of
delaying, deferring or preventing a change in control of TDK and that would operate only with
respect to merger, consolidation, acquisition or corporate restructuring involving TDK.
C. Material contracts
All contracts entered into by TDK during the two years prior to the date of this annual report
were entered into in the ordinary course of business.
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D. Exchange controls
Japanese Foreign Exchange Regulations
The Foreign Exchange and Foreign Trade Law of Japan, frequently referred to as the Foreign
Exchange Law, and the cabinet orders and ministerial ordinances thereunder govern the issuance of
shares by companies and the acquisition and holding of shares by "exchange non-residents" and
"foreign investors" under the Foreign Exchange Law.
Exchange non-residents are:
•
individuals who do not reside in Japan; and
•
corporations whose principal offices are not located in Japan.
Generally, branches and other offices located within Japan of non-resident corporations are
regarded as exchange residents of Japan and branches and other offices of Japanese corporations
located outside Japan are regarded as exchange non-residents of Japan.
Foreign investors are:
•
individuals who do not reside in Japan;
•
corporations which are organized under the laws of foreign
countries or whose principal offices are located outside
Japan; and
•
corporations in which more than 50 percent of the shares are
held 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.
Any individuals or corporations that do not correspond to any of the above may be regarded
as a foreign investor when they acquire or hold shares on behalf of foreign investor.
Due to the amendments to the Foreign Exchange Law effective on April 1, 1998, all aspects of
foreign exchange and foreign trade transactions that were previously subject to licensing or other
prior notifications or approvals, with minor exceptions, were changed to require only
post-transaction reporting. However, the Minister of Finance of Japan will have the power to
impose licensing requirements for transactions in limited circumstances.
Potential Consequences Resulting from an Acquisition of Listed Shares
In the event that a foreign investor acquires shares of a Japanese company listed on a
Japanese stock exchange ("listed shares") and if the foreign investor's direct and indirect total
holdings are 10 percent or more of the issued shares of the company after the acquisition, the
foreign investor must file a report of the acquisition with the Minister of Finance and any other
competent Minister within 15 days from and including the date of such acquisition. However, in
certain limited circumstances (including the case where the acquisition of the shares reaches 10
percent), a prior notification of such an acquisition must be filed with the Minister of Finance
and any other competent Minister, who may then modify or prohibit the proposed acquisition. The
acquisition of shares by exchange non-residents as a result of stock splits is not subject to any
of the foregoing requirements.
Potential Consequences Resulting from Dividends and Proceeds of Sales
Under the current Foreign Exchange Law, dividends paid on, and the proceeds of sales in Japan
of, shares held by exchange non-residents may, in general, be converted into foreign currency and
repatriated abroad.
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Potential Consequences Resulting from the Sale of Securities to Exchange Non-Resident
A Japanese resident is required to file a report with the Minister of Finance concerning the
transfer of securities for value exceeding ¥100 million to an exchange non-resident within 20 days
of the date of the transfer. If an exchange resident issues or offers its securities for value of
¥1 billion or more outside Japan, the exchange resident must file a report of the issuance or
offering of securities with the Minister of Finance within 20 days of the date of the closing.
American Depositary Shares
The deposit of shares of Common Stock by a non-resident of Japan, the issuance of ADRs in
exchange therefor and the withdrawal of the underlying shares of Common Stock upon surrender of
ADRs are not subject to any formalities or restrictions referred to under "Potential Consequences
Resulting from an Acquisition of Listed Shares" above, except where, as a result of such deposit or
withdrawal, the aggregate number of shares held by the depositary (or its nominee) or the holder
surrendering ADRs, as the case may be, would be 10 percent or more of the total outstanding shares
of Common Stock, in which event the reporting to the Minister of Finance of Japan may be required
as outlined in the second sentence under the same heading.
E. Taxation
Dividends, Stock Splits and Repurchase
Generally, a non-resident of Japan or a non-Japanese corporation is subject to Japanese
withholding tax on dividends paid by Japanese corporations. Stock splits are not subject to
Japanese income tax.
The rate of Japanese withholding tax applicable to dividends on TDK's shares paid by TDK to
non-resident shareholders is 7 percent for dividends paid on or before March 31, 2008 and 15
percent thereafter, except for any individual shareholder who holds 5 percent or more of the issued
shares, for whom the applicable rate is 20 percent.
Japan has income tax treaties, conventions or agreements which generally provide that the
withholding tax rate may not exceed 15 percent for portfolio investors with, among others,
Australia, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, The
Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the
United States. In case of the Japan-U.S. tax treaty, however, as a result of a recent amendment,
the maximum withholding tax rate has been reduced, generally to 10 percent for portfolio investors
effective from July 1, 2004. Under Japanese tax law, the maximum rate applicable under the tax
treaties, conventions or agreements shall be applicable except when such maximum rate is more than
the Japanese statutory rate.
TDK, as a Japanese corporation, may be obligated to withhold a certain amount from any
payments by TDK to its shareholder that is a non-resident of Japan or a non-Japanese corporation.
Specifically, according to Articles 212-1 and 212-2 of the Income Tax Law of Japan, TDK has the
obligation to withhold the amount determined by the applicable tax rate from its dividends to such
of its shareholders.
Acquisition or Disposal of Shares or ADRs
Gains derived by a non-resident of Japan or a non-Japanese corporation from the sale outside
Japan of Shares or ADRs, or from the sale of Shares or ADRs within Japan by a non-resident of Japan
or a non-Japanese corporation not having a permanent establishment in Japan are in general not
subject to Japanese income tax.
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Table of Contents
Japanese inheritance and gift taxes at progressive rates may be payable by an individual who
has acquired Shares or ADRs as a legatee, heir or donee.
F. Dividends and paying agents
Not applicable.
G. Statements by experts
Not applicable.
H. Documents on display
According to the Securities Exchange Act of 1934, as amended, TDK is subject to the
requirements of informational disclosure. TDK files various reports and other information,
including Form 20-F and Annual Reports, with the Securities Exchange Commission and the New York
Stock Exchange. These reports may be inspected at the following sites.
Securities Exchange Commission:
100 F Street, NE, Washington D.C. 20549
New York Stock Exchange:
20 Broad Street, New York, New York 10005
Form 20-F is also available at the Electronic Data Gathering, Analysis, Retrieval system
(EDGAR) website maintained by the Securities Exchange Commission.
Securities Exchange Commission Home Page:
http://www.sec.gov
I. Subsidiary information
Not applicable.
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Table of Contents
Item 11
. Quantitative and Qualitative Disclosures about Market Risk
Market risk exposure
TDK is subject to market risk associated with changes in stock prices, interest rates and
foreign currency exchange rates. Foreign exchange risk is considered as the primary market risk
exposure. TDK has a policy for the procedures and controls to manage market risk sensitive
instruments. In order to hedge interest rate risk and foreign currency exchange rate risk, TDK
uses derivative financial instruments. TDK does not hold or issue derivative financial instruments
for trading purposes.
Foreign exchange and interest rate risk
Forward exchange contracts and currency swap contracts have been entered into to hedge adverse
effects of foreign currency exchange rate fluctuations mainly on foreign-currency-denominated trade
receivables and foreign-currency-denominated forecasted transactions.
At March 31, 2006 and 2005, TDK and certain of its subsidiaries had forward exchange contracts
to sell and buy foreign currencies (principally U.S. dollars and Japanese Yen) and currency option
contracts for a contract amount of ¥17,726 million ($151,504 thousand) and ¥28,990 million,
respectively.
TDK and one of its subsidiaries had currency swaps and interest rate and currency swaps with
certain financial institutions to limit their exposure to fluctuations in foreign exchange rates
and interest rates involved mainly with loans made by TDK to its subsidiaries in a total amount of
¥11,067 million at March 31, 2005. These swaps require TDK and the subsidiary to pay principally
euros and U.S. dollars and to receive Japanese yen at a specified rate on specific dates.
The following table provides information about TDK's derivative instruments related to foreign
exchange risk as of March 31, 2006 and 2005.
2006
2005
(millions of yen)
Average
(millions of yen)
Average
Contract
Fair
contractual
Contract
Fair
contractual
amounts
value
rate
amounts
value
rate
Forward exchange contracts
To sell Euro / receive Yen
¥
5,669
¥
(4
)
141.73
¥
—
¥
—
—
To sell USD / receive Yen
1,183
12
118.30
4,295
(88
)
105.00
To sell CHF / receive Euro
—
—
—
54
—
1.54
Total
¥
6,852
¥
8
¥
4,349
¥
(88
)
(millions of yen)
Average
(millions of yen)
Average
Contract
Fair
contractual
Contract
Fair
contractual
amounts
value
rate
amounts
value
rate
Currency option contracts
To sell USD / receive USD
¥
4,675
¥
(27
)
116.88
¥
23,803
¥
(354
)
105.10
To sell USD / receive Yen
5,359
23
118.00
—
—
—
To sell Euro / receive Euro
840
(4
)
141.30
838
(12
)
39.07
Total
¥
10,874
¥
(8
)
¥
24,641
¥
(366
)
(millions of yen)
Average
(millions of yen)
Average
Contract
Fair
contractual
Contract
Fair
contractual
amounts
value
rate
amounts
value
rate
Currency and interest rate swaps
contracts
To receive Euro / pay GBP
¥
—
¥
—
—
¥
2,041
¥
(10
)
0.69
To receive Yen / pay Euro
—
—
—
9,026
(302
)
134.75
Total
¥
—
¥
—
¥
11,067
¥
(312
)
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TDK's exposure to market risk related to changes in interest rates relates primarily to
its debt securities. TDK has debt securities with fixed rates. TDK, to the extent possible, plans
to limit debt securities to short-term debt securities. TDK believes that the fair values of
interest rate sensitive instruments as of March 31, 2006 and 2005, and potential, near-term losses
affecting future earnings, fair values, and/or cash flows from reasonable near-term changes in
interest rates are immaterial.
Stock price risk
TDK's exposure to market risk involving changes in stock prices relates only to its equity
securities categorized as available-for-sale securities. TDK purchases equity securities for the
purpose of acquiring technological information and as part of its sales strategy, and not as a
means of investing surplus funds. The aggregate cost and fair value of these equity securities
were ¥9.2 billion ($79 million) and ¥12.1 billion ($103 million) as of March 31, 2006, and ¥6.0
billion and ¥7.0 billion as of March 31, 2005, respectively. As of March 31, 2006, these
securities mainly represented investments in companies in the transportation, communications and
electronic equipment industries, and the cost and fair value of these equity securities were ¥8.8
billion ($75 million) and ¥11.1 billion ($95 million), respectively. As of March 31, 2005, these
securities mainly represented investments in companies in the transportation, communications and
electronic equipment industries, and the cost and fair value of the equity securities were ¥5.6
billion and ¥6.5 billion, respectively.
TDK's portfolio of equity securities, including available-for-sale securities, at March 31,
2006 and 2005, is as follows:
2006
2005
Yen (Millions)
Yen (Millions)
Gross
Gross
Gross
Gross
unrealized
unrealized
unrealized
unrealized
holding
holding
holding
holding
Cost
gains
losses
Fair value
Cost
gains
losses
Fair value
¥     9,246
2,859
2
12,103
5,951
1,054
—
7,005
Item 12
. Description of Securities Other than Equity Securities
A. Debt securities
Not applicable.
B. Warrants and rights
Not applicable.
C. Other securities
Not applicable.
D. American depositary shares
Not applicable.
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PART 2
Item 13
. Defaults, Dividend Arrearages and Delinquencies
None.
Item 14
. Material Modifications to the Rights of Security Holders and Use of Proceeds
None.
Item 15
. Controls and Procedures
(a) Disclosure controls and procedures
TDK's Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness
of its "disclosure controls and procedures" (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) as of March 31, 2006 (the "Evaluation Date"), the end of the period covered by this
Annual Report, have concluded that, as of the Evaluation Date, TDK's disclosure controls and
procedures were adequate and effective and designed to ensure that material information relating to
TDK and its consolidated subsidiaries is made known to the Chief Executive Officer and the Chief
Financial Officer by others within TDK and its consolidated subsidiaries.
(b) Management's annual report on internal control over financial reporting
This requirement was "intentionally omitted pursuant to SEC Release No. 33-8345 dated March 2,
2005" and SEC Release No. 33-8618 dated September 22,
2005.
(c) Attestation report of the registered public accounting firm
This requirement was "intentionally omitted pursuant to SEC Release No. 33-8345 dated March 2,
2005" and SEC Release No. 33-8618 dated September 22,
2005.
(d) Changes in internal control over financial reporting
There were no changes in TDK's internal control over financial reporting that occurred during
the period covered by this Annual Report that has materially affected, or is reasonably likely to
materially affect, the issuer's internal control over financial reporting.
Item 16A
. Audit Committee Financial Expert
The registrant, a foreign private issuer, has at least one "audit committee financial expert"
serving on its audit committee. TDK's board of auditors has determined that Ryoichi Ohno qualifies
as an "audit committee financial expert" as defined by the rules of SEC. Mr. Ohno is an outside
corporate auditor within the meaning of the Special Audit Law. See
Significant differences in
corporate governance practices between TDK and U.S. listed companies on the New York Stock Exchange
in Item 6.C. "Board practices". Mr. Ohno was registered as a U.S. Certified Public Accountant in
1988 and elected as one of TDK's corporate auditors at an Ordinary General Meeting of Shareholders
held in June 2004. See Item 6.A. for additional information regarding Mr. Ohno.
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Item 16B.
Code of Ethics
TDK has established a code of business ethics ("TDK Code of Ethics") that applies to TDK's
corporate officers and all TDK employees and is actively promoting ethical business practices on a
worldwide basis. TDK amended the TDK Code of Ethics as of May 25, 2005 to revise the section
pertaining to the civil rights of its employees and to add a new section regarding employment
conditions. Both sections apply to TDK's corporate officers and all TDK employees. Please see
Sections 2.2.3 and 2.2.4 of the TDK Code of Ethics. The TDK Business Ethics & CSR Committee
(formerly named "TDK Business Ethics Committee") has been charged with the oversight of the ethics
program at TDK. It has built a global ethics framework which encompasses domestic and overseas
consolidated subsidiaries. Built into the framework is a direct communication means called the
"helpline" for employees to report matters relating to business ethics issues and offer
suggestions. The TDK Code of Ethics is attached as Exhibit 11.1 to this annual report. TDK has
not granted a waiver or implicit waiver from any provision of the TDK Code of Ethics in the most
recent fiscal year.
Item 16C.
Principal Accountant Fees and Services
The following table discloses the aggregate fees accrued or paid to KPMG AZSA & Co. and KPMG
International member firms for each of the last two fiscal years and briefly describes the services
performed:
(Yen in millions)
Years ended March 31
2006
2005
Audit fees
609
323
Audit-related fees
131
36
Tax fees
279
211
All other fees
0
5
Total
1,019
575
Audit fees consist of fees for "Audit Services". "Audit Services" are professional services
rendered by the Principal Auditor for the audit of TDK's annual financial statements and services
that are normally provided by the Principal Auditor in connection with statutory and regulatory
filings or engagements: (i) Services associated with statutory audits; and (ii) Services associated
with U.S. SEC registration statements or other periodic filings.
Audit-related fees consist of fees for "Audit-Related Services". "Audit-Related Services" are
professional services relating to the Audit Services: (i) Audits of employee benefit plans; (ii)
Sarbanes-Oxley Act related assistance; and (iii) Financial due diligence.
Tax fees consist of fees for "Tax Services": (i) Federal and local tax compliance; (ii) Review
of federal, local and international income, franchise, and other tax returns; (iii) Transfer
pricing documentation assistance; and (iv) Domestic and foreign indirect taxes.
Audit and Non-Audit Services Pre-Approval Policy
Subject to the confirmation as stipulated below, no pre-approval of the Board of Directors, in
the context of the United States Sarbanes-Oxley Act of 2002 ("Sarbox Act") or the U.S. SEC rules,
is required for any non-audit services rendered by any Non-Outside Auditor. Any contracts
involving such services shall be processed in the usual manner in accordance with the applicable
laws, in-house rules or any other regulations.
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Any person who wishes to retain a Non-Outside Auditor for non-audit services ("Retainer") is
not allowed to do so unless both of the following conditions are met:
(i)
The Retainer has received a letter of confirmation from such public accounting
firm that the public accounting firm is neither the Outside Auditor nor a person
associated with the Outside Auditor; and
(ii)
The Retainer has confirmed that such public accounting firm does not appear on
the list of persons associated with the Outside Auditor, which is contained in the
database system ("Pre-Approval Database") within the TDK intranet system.
The foregoing letter of confirmation shall be regularly renewed at least once every 12 months
and the manager of the Pre-Approval Database described in that Database shall update the list of
associated persons to reflect changes or modifications as reported by the Outside Auditor.
The types of services generally described in above explanation for audit fees, audit-related
fees and tax fees shall be pre-approved by the Board of Directors. Those services described are
provided for the sake of establishing general criteria as to the types of services requiring
pre-approval. The Board of Directors shall evaluate and determine whether or not to pre-approve
each application for such services.
TDK is prohibited from causing the Outside Auditor to provide, and the Outside Auditor is
prohibited from rendering such services generally described as follows: (i) Bookkeeping or other
services related to the accounting records or financial statements of the audit client; (ii)
Financial information systems design and implementation; (iii) Appraisal or valuation services,
fairness opinions or contribution-in-kind reports; (iv) Actuarial services; (v) Internal audit
outsourcing services; (vi) Management functions or human resources; (vii) Broker or dealer,
investment adviser or investment banking services; (viii) Legal services and expert services
unrelated to the audit; and (ix) Any other service that the Board of Directors determines, by
regulation, is impermissible. When such an application is received, the Board of Directors must
not pre-approve the application.
In accordance with the Sarbox Act and related SEC Rules, audit or non-audit services which do
not fit in with any of the types generally described in above explanation for audit fees,
audit-related fees and tax fees may have to be pre-approved by the Board of Directors. The Board
of Directors shall evaluate and determine whether or not to pre-approve each application for such
services.
TDK may engage the Outside Auditor to render an audit or non-audit service pursuant to this
policy without obtaining individual pre-approval by the Board of Directors, provided that all
of the following conditions are met:
(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").
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The Appointed Director must confirm whether an audit or non-audit service to be rendered by
the Outside Auditor meets the foregoing conditions. The Appointed Director also shall report to
the Board of Directors all audit and non-audit services in which the Outside Auditor is engaged in
accordance with this Section. The Board of Directors must appoint a director as the Appointed
Director and after the appointment the Appointed Director must be listed in the Pre-Approval
Database.
Any divisions or departments of TDK, which contemplate or attempt to receive audit or
non-audit services from an Outside Auditor or Non-Outside Auditor, shall report its intention and
submit designated information, using the Pre-Approval Database.
The Appointed Director must evaluate such audit or non-audit services to be rendered either by
the Outside Auditor or Non-Outside Auditor reported electronically through the Pre-Approval
Database and must confirm whether any given reported services requires pre-approval by the Board of
Directors. The Appointed Director shall request pre-approval to the Board of Directors if
pre-approval by the Board of Directors is required.
In making determination, the Board of Directors is required to consider the following:
(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.
The Board of Directors must not pre-approve, in the absence of strong countervailing
considerations, non-audit services proposed to be performed by the Outside Auditor if the total
amount of fees payable to the Outside Auditor by TDK on account of non-audit services with respect
to any fiscal year exceeds the total amount of audit fees payable to the Outside Auditor by TDK
with respect to such year.
Item 16D.
Exemptions from Listing Standards for Audit Committees
TDK is relying on the general exemption contained in Rule 10A-3(c)(3) under the Exchange Act.
Because of such reliance, TDK does not have an audit committee which can act independently and
satisfy the other requirements of Rule 10A-3 under the Exchange Act.
According to Rule 10A-3 under the Exchange Act and NYSE listing standards, TDK's Board of
Corporate Auditors acts in place of an audit committee. The Board of Corporate Auditors meets the
following requirements of the general exemption contained in Rule 10A-3(c)(3):
•
the Board of Corporate Auditors is established pursuant to the Company Law;
•
as required by the Company Law, the Board of Corporate Auditors is separate from the
Board of Directors;
•
the Board of Corporate Auditors is not elected by the management of TDK and no executive
officer of TDK is a member of the Board of Corporate Auditors;
•
the Company Law provides for the standards for independence of the Board of Corporate
Auditors from the management of TDK;
•
in accordance with the Company Law, the Board of Corporate Auditors of TDK is
responsible, to the extent permitted by law, for the appointment, retention and supervision
of the work of a registered public accounting firm engaged for the purpose of preparing or
issuing an audit report or performing other audit, review or attest services for TDK; and
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Table of Contents
•
Under the Company 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.
In addition, each Corporate Auditor of TDK has the authority to engage independent counsel
and other advisers if such engagement is necessary to carry out his/her duties.
Furthermore, each Corporate Auditor may require TDK to pay any and all expenses necessary
for carrying out his/her duties, including compensation of any advisers employed by him/her
and ordinary administrative expenses.
TDK's reliance on Rule 10A-3(c)(3) does not, in its opinion, materially adversely affect the
ability of its Board of Corporate Auditors to act independently and to satisfy the other
requirements of Rule 10A-3.
Item 16E.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The following table sets forth certain information with respect to TDK's purchases of our own
shares during the year ended March 31, 2006.
(c) Total
Number of
(d) Maximum
Shares
Number of
Purchased as
Shares that May
(a) Total
(b) Average
Part of Publicly
Yet Be
Number
Price Paid
Announced
Purchased Under
of Shares
per Share
Plans or
the Plans or
Period
Purchased
(Yen)
Programs
Programs
April 1 to April 30, 2005
194
7,497.89
—
—
May 1 to May 31, 2005
146
7,551.51
—
—
June 1 to June 30, 2005
216
7,824.31
—
—
July 1 to July 31, 2005
242
7,727.31
—
—
August 1 to August 31, 2005
555
8,049.78
115,200
—
September 1 to September 30, 2005
296
8,382.84
—
—
October 1 to October 31, 2005
273
8,055.71
—
—
November 1 to November 30, 2005
165
8,401.52
—
—
December 1 to December 31, 2005
625
9,542.42
—
—
January 1 to January 31, 2006
—
—
—
—
February 1 to February 28, 2006
246
8,234.43
—
—
March 1 to March 31, 2006
108
8,711.30
—
—
Total
3,066
8,343.80
—
—
Note:
Under the Company Law, a holder of shares constituting less than one full unit may
request TDK to purchase such shares at their market value (See Item 10. Additional Information
"Common Stock"
"Unit" share system
). All purchases described in the above table were made
pursuant to such requests by shareholders excluding the reserve for stock option plans of the
amount of 115,200 shares in August 2005.
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Table of Contents
PART 3
Item 17.
Financial Statements
Index of Consolidated Financial Statements of TDK Corporation and subsidiaries:
Page
Report of Independent Registered Public Accounting Firm
89
Consolidated Statements of Income
for the years ended March 31, 2006, 2005 and 2004
90
Consolidated Balance Sheets as of March 31, 2006 and 2005
91
Consolidated Statements of Stockholders' Equity
for the years ended March 31, 2006, 2005 and 2004
93
Consolidated Statements of Cash Flows
for the years ended March 31, 2006, 2005 and 2004
94
Notes to Consolidated Financial Statements
95
Schedule for the years ended March 31, 2006, 2005 and 2004:
Schedule II – Valuation and Qualifying Accounts
133
Schedules other than those listed above have been omitted as they are not applicable or the
information is presented in the consolidated financial statements and related notes.
Financial statements of 50 percent or less owned persons accounted for by the equity method
have been omitted as, in the aggregate, they do not meet the tests of a significant subsidiary at a
20 percent level as of or for the years ended March 31, 2006, 2005 and 2004.
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Table of Contents
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
TDK Corporation:
We have audited the consolidated financial statements of TDK Corporation and subsidiaries as
listed in the accompanying index. In connection with our audits of the consolidated financial
statements, we also have audited the financial statement schedule as listed in the accompanying
index. These consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
The Company declined to present segment information for each of the years in the three-year
period ended March 31, 2006. In our opinion, disclosures of segment and related information about
the different types of business activities in which the company engages and the different economic
environments in which it operates is required by U.S. generally accepted accounting principles.
The omission of segment information results in an incomplete presentation of the Company's
consolidated financial statements.
In our opinion, except for the omission of the segment information as discussed in the
preceding paragraph, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of TDK Corporation and subsidiaries as of March 31, 2006
and 2005, and the results of their operations and their cash flows for each of the years in the
three-year period ended March 31, 2006, in conformity with U.S. generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
The accompanying consolidated financial statements as of and for the year ended March 31,
2006, have been translated into United States dollars solely for the convenience of the reader. We
have audited the translation and, in our opinion, the consolidated financial statements expressed
in yen have been translated into United States dollars on the basis set forth in Note 2 to the
consolidated financial statements.
/s/ KPMG AZSA & Co.
Tokyo, Japan
May 23, 2006
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Table of Contents
Consolidated statements of income
For the years ended March 31, 2006, 2005 and 2004
U.S. Dollars
Yen
(Thousands)
(Millions)
(Note 2)
2006
2005
2004
2006
Net sales (Notes 20 and 24)
¥
795,180
657,853
655,792
$
6,796,410
Cost of sales (Note 24)
585,780
484,323
476,407
5,006,666
Gross profit
209,400
173,530
179,385
1,789,744
Selling, general and administrative expenses (Note 24)
142,052
119,886
122,875
1,214,120
Transfer to the government of the substitutional
portion of Employees' Pension Fund (Note 8):
Subsidy from the government
—
(33,533
)
—
—
Loss on settlement
—
27,347
—
—
Restructuring cost (Note 16)
6,825
—
—
58,333
Operating income
60,523
59,830
56,510
517,291
Other income (deductions):
Interest and dividend income
3,605
1,692
1,189
30,812
Interest expense
(149
)
(967
)
(323
)
(1,274
)
Equity in earnings of affiliates
1,368
1,765
1,639
11,692
Gain (loss) on securities, net (Note 4)
(286
)
(142
)
(1,093
)
(2,444
)
Foreign exchange gain (loss)
948
(856
)
(3,064
)
8,103
Other — net
94
(594
)
989
803
5,580
898
(663
)
47,692
Income from continuing operations
before income taxes
66,103
60,728
55,847
564,983
Income taxes (Note 7)
21,057
23,284
12,133
179,974
Income from continuing operations
before minority interests
45,046
37,444
43,714
385,009
Minority interests, net of tax
635
479
359
5,428
Income from continuing operations
44,411
36,965
43,355
379,581
Discontinued operations (Note 21):
Loss from operations of discontinued business
(including loss on disposal of ¥224 million in 2006)
310
3,509
244
2,649
Income tax expense
—
156
1,010
—
Loss from discontinued operations
310
3,665
1,254
2,649
Net income
¥
44,101
33,300
42,101
$
376,932
Yen (except number of
U.S. Dollars
common shares outstanding)
(Note 2)
Amounts per share:
Income from continuing operations per share (Note 19):
Basic
¥
335.84
279.41
327.27
$
2.87
Diluted
335.54
279.25
327.15
2.87
Loss from discontinued operations per share (Note 19):
Basic
¥
(2.34
)
(27.70
)
(9.47
)
$
(0.02
)
Diluted
(2.34
)
(27.69
)
(9.46
)
(0.02
)
Net income per share (Note 19):
Basic
¥
333.50
251.71
317.80
$
2.85
Diluted
333.20
251.56
317.69
2.85
Weighted average basic common shares
outstanding (in thousands) (Note 19)
132,239
132,293
132,475
Weighted
average diluted common shares outstanding (in thousands) (Note 19)
132,355
132,376
132,523
Cash dividends paid during the year (Note 9)
¥
80.00
60.00
50.00
$
0.68
See accompanying notes to consolidated financial statements.
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Table of Contents
Consolidated balance sheets
As of March 31, 2006 and 2005
U.S. Dollars
Yen
(Thousands)
(Millions)
(Note 2)
2006
2005
2006
ASSETS
Current assets:
Cash and cash equivalents
¥
239,017
251,508
$
2,042,880
Marketable securities (Note 4)
56
1,609
479
Trade receivables (Note 20):
Notes
7,899
6,133
67,513
Accounts (Note 24)
185,224
144,426
1,583,111
Allowance for doubtful receivables
(4,064
)
(2,560
)
(34,735
)
Net trade receivables
189,059
147,999
1,615,889
Inventories (Note 5)
88,968
74,924
760,410
Income tax receivables (Note 7)
265
204
2,265
Assets held for sale (Note 17)
4,110
993
35,128
Prepaid expenses
and other current assets (Notes 7 and 24)
45,278
33,366
386,992
Total current assets
566,753
510,603
4,844,043
Investments in securities
(Note 4)
28,757
22,698
245,786
Property, plant and equipment, at cost:
Land
21,790
20,097
186,239
Buildings
187,810
181,581
1,605,214
Machinery and equipment
482,398
445,636
4,123,060
Construction in progress
12,687
15,206
108,436
704,685
662,520
6,022,949
Less accumulated depreciation
(461,020
)
(445,551
)
(3,940,342
)
Net property, plant and equipment
243,665
216,969
2,082,607
Goodwill
(Note 18)
19,453
9,210
166,265
Intangible assets
(Note 18)
29,478
13,247
251,949
Deferred income taxes
(Note 7)
7,287
8,633
62,282
Other assets
(Notes 8 and 12)
28,110
26,641
240,256
¥
923,503
808,001
$
7,893,188
See accompanying notes to consolidated financial statements.
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Table of Contents
U.S. Dollars
Yen
(Thousands)
(Millions)
(Note 2)
2006
2005
2006
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt (Note 6)
¥
4,469
—
$
38,197
Current installments of long-term debt (Note 6)
1,958
103
16,735
Trade payables:
Notes
4,353
638
37,205
Accounts (Note 24)
80,336
61,454
686,632
Accrued salaries and wages
19,010
12,915
162,479
Accrued expenses (Notes 16 and 24)
43,524
31,065
372,000
Income taxes payables (Note 7)
9,155
19,283
78,248
Liabilities held for sale (Note 17)
—
92
—
Other current liabilities (Note 7)
6,817
5,307
58,265
Total current liabilities
169,622
130,857
1,449,761
Long-term debt, excluding current installments
(Note 6)
405
81
3,462
Retirement and severance benefits
(Note 8)
26,790
28,839
228,974
Deferred income taxes
(Note 7)
5,314
751
45,419
Other noncurrent liabilities
4,979
3,244
42,555
Total liabilities
207,110
163,772
1,770,171
Minority interests
13,974
5,162
119,436
Commitments and contingent liabilities
(Notes 12 and 13)
Stockholders' equity:
Common stock
Authorized 480,000,000 shares;
issued 133,189,659 shares in 2006 and 2005;
outstanding 132,266,828 shares in 2006
and 132,244,587 shares in 2005
32,641
32,641
278,983
Additional paid-in capital
63,237
63,051
540,487
Legal reserve (Note 9)
17,517
16,918
149,718
Retained earnings (Note 9)
618,259
585,557
5,284,265
Accumulated other comprehensive income (loss)
(Notes 7, 8 and 11)
(21,946
)
(51,657
)
(187,573
)
Treasury stock at cost; 922,831 shares in 2006
and 945,072 shares in 2005 (Note 10)
(7,289
)
(7,443
)
(62,299
)
Total stockholders' equity
702,419
639,067
6,003,581
¥
923,503
808,001
$
7,893,188
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Table of Contents
Consolidated statements of stockholders' equity
For the years ended March 31, 2006, 2005 and 2004
U.S. Dollars
Yen
(Thousands)
(Millions)
(Note 2)
2006
2005
2004
2006
Common stock:
Balance at beginning of period
¥
32,641
32,641
32,641
$
278,983
Balance at end of period
32,641
32,641
32,641
278,983
Additional paid-in capital:
Balance at beginning of period
63,051
63,051
63,051
538,897
Non-cash compensation charges under a stock option plan
186
—
—
1,590
Balance at end of period
63,237
63,051
63,051
540,487
Legal reserve
(Note 9)
:
Balance at beginning of period
16,918
16,497
15,953
144,598
Transferred from retained earnings
599
421
544
5,120
Balance at end of period
17,517
16,918
16,497
149,718
Retained earnings
(Note 9)
:
Balance at beginning of period
585,557
560,756
525,919
5,004,761
Net income
44,101
33,300
42,101
376,932
Cash dividends
(10,578
)
(7,938
)
(6,625
)
(90,410
)
Losses on sales of treasury stock
(222
)
(140
)
(95
)
(1,898
)
Transferred to legal reserve
(599
)
(421
)
(544
)
(5,120
)
Balance at end of period
618,259
585,557
560,756
5,284,265
Accumulated other comprehensive income (loss)
(Notes 7, 8 and 11)
:
Balance at beginning of period
(51,657
)
(90,387
)
(78,824
)
(441,513
)
Other comprehensive income (loss) for the period, net of tax
29,711
38,730
(11,563
)
253,940
Balance at end of period
(21,946
)
(51,657
)
(90,387
)
(187,573
)
Treasury stock
(Note 10)
:
Balance at beginning of period
(7,443
)
(6,339
)
(4,855
)
(63,615
)
Acquisition of treasury stock
(955
)
(1,672
)
(1,865
)
(8,162
)
Exercise of stock options
1,109
568
381
9,478
Balance at end of period
(7,289
)
(7,443
)
(6,339
)
(62,299
)
Total stockholders' equity
¥
702,419
639,067
576,219
$
6,003,581
Disclosure of comprehensive income:
Net income for the period
¥
44,101
33,300
42,101
$
376,932
Other comprehensive income (loss) for the period,
net of tax (Note 11)
29,711
38,730
(11,563
)
253,940
Total comprehensive income for the period
¥
73,812
72,030
30,538
$
630,872
See accompanying notes to consolidated financial statements.
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Table of Contents
Consolidated statements of cash flows
For the years ended March 31, 2006, 2005 and 2004
U.S. Dollars
Yen
(Thousands)
(Millions)
(Note 2)
2006
2005
2004
2006
Cash flows from operating activities:
Net income
¥
44,101
33,300
42,101
$
376,932
Loss from discontinued operations, net of tax
310
3,665
1,254
2,649
Income from continuing operations
44,411
36,965
43,355
379,581
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization
58,540
52,806
50,726
500,342
Loss on disposal of property and equipment
3,220
1,190
1,363
27,521
Deferred income taxes
(696
)
(5,532
)
1,858
(5,949
)
Loss (gain) on securities, net
286
142
1,093
2,445
Gain on sale of a subsidiary
—
(1,799
)
(567
)
—
Changes in assets and liabilities, net of effects of acquisition of businesses:
Increase in trade receivables
(16,886
)
(7,343
)
(7,680
)
(144,325
)
Decrease (increase) in inventories
(287
)
3,461
(7,868
)
(2,453
)
Decrease (increase) in other current assets
(8,748
)
1,149
(4,387
)
(74,769
)
Increase in trade payables
7,101
245
8,200
60,692
Increase (decrease) in accrued expenses
12,347
(2,496
)
8,878
105,530
Increase (decrease) in income taxes payables, net
(10,689
)
14,464
5,704
(91,359
)
Increase (decrease) in retirement and severance benefits, net
981
2,519
9,285
8,385
Other — net
(462
)
(522
)
4,059
(3,949
)
Net cash provided by operating activities
89,118
95,249
114,019
761,692
Cash flows from investing activities:
Capital expenditures
(73,911
)
(61,005
)
(44,471
)
(631,718
)
Proceeds from sale and maturity of investments in securities
4,263
1,788
1,814
36,436
Payment for purchase of investments in securities
(4,227
)
(2,424
)
(1
)
(36,128
)
Acquisition of businesses, net of cash acquired
(32,868
)
(1,496
)
—
(280,923
)
Proceeds from sale of property, plant and equipment
3,373
999
4,299
28,829
Acquisition of minority interests
(2,587
)
—
(366
)
(22,111
)
Proceeds from sale of a subsidiary
—
—
1,523
—
Proceeds from sale of discontinued operations
1,538
—
—
13,145
Other — net
(363
)
(221
)
(445
)
(3,103
)
Net cash used in investing activities
(104,782
)
(62,359
)
(37,647
)
(895,573
)
Cash flows from financing activities:
Proceeds from long-term debt
269
218
69
2,299
Repayment of long-term debt
(218
)
(164
)
(479
)
(1,863
)
Increase (decrease) in short-term debt, net
3,688
(330
)
(1,047
)
31,521
Proceeds from exercise of stock options
887
428
286
7,581
Cash paid to acquire treasury stock
(955
)
(1,672
)
(1,865
)
(8,162
)
Dividends paid
(10,578
)
(7,938
)
(6,625
)
(90,410
)
Other — net
(218
)
(171
)
(199
)
(1,863
)
Net cash used in financing activities
(7,125
)
(9,629
)
(9,860
)
(60,897
)
Cash flows of discontinued operations (Revised — Note 1(v))
Opearting cash flows:
(407
)
(1,458
)
885
(3,478
)
Investing cash flows:
(4
)
(166
)
(123
)
(34
)
Financing cash flows:
—
—
—
—
Effect of exchange rate changes on
cash and cash equivalents from discontinued operations
(3
)
(1
)
(1
)
(26
)
Net cash provided by (used in) discontinued operations
(414
)
(1,625
)
761
(3,538
)
Effect of exchange rate changes on cash and cash equivalents
10,712
2,717
(10,669
)
91,555
Net increse (decrease) in cash and cash equivalents
(12,491
)
24,353
56,604
(106,761
)
Cash and cash equivalents at beginning of period
251,508
227,155
170,551
2,149,641
Cash and cash equivalents at end of period
¥
239,017
251,508
227,155
$
2,042,880
See accompanying notes to consolidated financial statements.
- 94 -
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Operations and Summary of Significant Accounting Policies
(a) Nature of Operations
TDK, a Tokyo-based company founded in 1935, is a multinational manufacturer of ferrite
products and a producer of inductor, ceramic capacitors, magnetic head and other components and
recording media. TDK's two business segments are electronic materials and components, and
recording media, which accounted for 86.5 percent and 13.5 percent of net sales, respectively, for
the year ended March 31, 2006. The main products which are manufactured and sold by the two
business segments are as follows:
(i) Electronic materials and components products:
Ferrite cores, Multilayer chip capacitors, High-frequency components, Inductors, GMR
heads, and Organic electroluminescent (EL) display
(ii) Recording media products:
Audio tapes, Video tapes, CD-Rs, MDs, DVDs, and Tape-based data storage media for
computers
TDK sells electronic materials and components products to electric and communication equipment
manufacturers and audio equipment manufacturers, mainly in Asia and Japan, and recording media
products to distribution agents and audio equipment manufacturers, mainly in Japan, Europe, and
North America.
(b) Basis of Presentation
TDK and its domestic subsidiaries maintain their books of account in conformity with financial
accounting standards of Japan, and its foreign subsidiaries in conformity with those of the
countries of their domicile.
The consolidated financial statements presented herein reflect certain adjustments, not
recorded on the primary books of TDK and subsidiaries, to present the financial position, results
of operations, and cash flows in conformity with U.S. generally accepted accounting principles (the
"U.S. GAAP"). Such adjustments relate principally to accounting for retirement and severance
benefits.
(c) Consolidation Policy
The consolidated financial statements include the accounts of TDK, its subsidiaries and those
variable interest entities where TDK is the primary beneficiary under Financial Accounting
Standards Board ("FASB") Interpretation No. 46 (revised December 2003) ("FIN 46R"), "Consolidation
of Variable Interest Entities". All significant intercompany accounts and transactions have been
eliminated in consolidation.
The investments in affiliates in which TDK's ownership is 20 percent to 50 percent and where
TDK exercises significant influence over their operating and financial policies are accounted for
by the equity method. All significant intercompany profits from these affiliates have been
eliminated.
(d) Cash Equivalents
Cash equivalents include all highly liquid debt instruments purchased with an original
maturity of three months or less.
(e) Allowance for Doubtful Receivables
The allowance for doubtful receivables is TDK's best estimate of the amount of probable credit
losses in TDK's existing trade receivables. An additional reserve for individual receivables is
recorded when TDK becomes aware of a customer's inability to meet its financial obligations, such
as in the case of bankruptcy filings or deterioration in a customer's operating results or
financial position. If customer circumstances change, estimates of the recoverability of
receivables would be further adjusted.
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Table of Contents
(f) Investments in Securities
TDK classifies its debt and equity securities into one of three categories: trading,
available-for-sale, or held-to-maturity. Trading securities are bought and held principally for
the purpose of selling them in the near term. Held-to-maturity securities are those securities in
which TDK has the ability and intent to hold the security until maturity. All securities not
included in trading or held-to-maturity are classified as available-for-sale.
Trading and available-for-sale securities are recorded at fair value. Held-to-maturity
securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums
or discounts. Unrealized holding gains and losses on trading securities are included in earnings.
Unrealized holding gains and losses, net of the related tax effect, on available-for-sale
securities are excluded from earnings and are reported as a separate component of accumulated other
comprehensive income (loss) until realized. As of March 31, 2006 and 2005, TDK did not hold any
trading or held-to-maturity securities. Available-for sale securities, which mature or are
expected to be sold in less than one year, are classified as current assets.
A decline in the fair value of any available-for-sale security below cost that is deemed to be
other-than-temporary results in a reduction in carrying amount to fair value. The impairment is
charged to earnings and a new cost basis for the security is established. To determine whether an
impairment is other-than-temporary, TDK periodically reviews the fair value of available-for-sale
securities for possible impairment by taking into consideration the financial and operating
conditions of the issuer, the general market conditions in the issuer's industry, degree and period
of the decline in fair value and other relevant factors.
Nonmarketable securities are recorded at cost, as fair value is not readily determinable. TDK
periodically evaluates whether an event or change in circumstances may have a significant adverse
effect on the fair value of the investment. Factors considered in accessing whether an indication
of impairment exists include the financial and operating conditions of the issuer, the general
market conditions in the issuer's industry and other relevant factors. If an indication of
impairment is present, TDK estimates the fair value of nonmarketable securities. If the fair value
is less than cost and the impairment is determined to be other-than-temporary, a nonmarketable
security is written down to its impaired value through a charge to earnings.
(g) Inventories
Inventories are stated at the lower of cost or market. Cost is determined principally by the
average cost method.
(h) Property, Plant and Equipment
Depreciation of property, plant and equipment is principally computed by the declining-balance
method for assets located in Japan and of certain foreign subsidiaries and by the straight-line
method for assets of other foreign subsidiaries based on the following estimated useful lives:
Buildings
3 to 60 years
Machinery and equipment
2 to 22 years
(i) Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and
liabilities are recognized for the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date. TDK uses a specific identification
method to release the residual tax effects associated with components of accumulated other
comprehensive income resulting from a change in tax law or rate.
- 96 -
Table of Contents
(j) Stock Option Plan
In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148 ("SFAS
148"), "Accounting for Stock-Based Compensation — Transition and Disclosure", which amends FASB
Statement No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation". SFAS 148 provides
alternative methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SAFS 148 amends the disclosure
requirements of SFAS 123 to require more prominent and more frequent disclosures in financial
statements about the effects of stock-based compensation. However, it gives an entity a choice of
recognizing related compensation expense by adopting the fair value method or to continue to
measure compensation using the intrinsic value-based method prescribed under Accounting Principles
Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees", the former standard.
TDK has chosen to use the measurement principle prescribed by APB 25. As such, stock-based
compensation cost is recognized by TDK only if the market price of the underlying common stock
exceeds the exercise price on the date of grant. Accordingly, stock option related compensation
cost of ¥186 million ($1,590 thousand) has been recognized in fiscal 2006, representing the amount
attributed to service rendered during the current period of the amount by which the market price of
the underlying common stock exceeded the exercise price of stock options approved for issuance at
the Ordinary General Meeting of Shareholders held in June 2005 (note 10). No compensation cost has
been recognized in fiscal 2005 and fiscal 2004 for TDK's stock based compensation plan.
The following table illustrates the effects on both income from continuing operations and net
income if the fair-value-based method had been applied to all outstanding and unvested stock based
awards with such costs recognized ratably over the vesting period of the underlying instruments.
Yen
U.S. Dollars
(Millions)
(Thousands)
2006
2005
2004
2006
Income from continuing
operations, as reported
¥
44,411
36,965
43,355
$
379,581
Add compensation expense
recognized under intrinsic
value method
186
—
—
1,590
Deduct total stock-based
employee compensation
expense determined under
fair-value-based method for
all awards
(607
)
(438
)
(330
)
(5,188
)
Pro forma income from
continuing operations
¥
43,990
36,527
43,025
$
375,983
Yen
U.S. Dollars
Basic income from continuing
operations per share:
As reported
¥
335.84
279.41
327.27
$
2.87
Pro forma
332.66
276.11
324.78
2.84
Diluted income from
continuing operations per
share:
As reported
¥
335.54
279.25
327.15
$
2.87
Pro forma
332.39
275.98
324.74
2.84
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Table of Contents
Yen
U.S. Dollars
(Millions)
(Thousands)
2006
2005
2004
2006
Net income, as reported
¥
44,101
33,300
42,101
$
376,932
Add compensation expense
recognized under intrinsic
value method
186
—
—
1,590
Deduct total stock-based
employee compensation
expense determined under
fair-value-based method for
all awards
(607
)
(438
)
(330
)
(5,188
)
Pro forma net income
¥
43,680
32,862
41,771
$
373,334
Yen
U.S. Dollars
Basic net income per share:
As reported
¥
333.50
251.71
317.80
$
2.85
Pro forma
330.32
248.40
315.31
2.82
Diluted net income per share:
As reported
¥
333.20
251.56
317.69
$
2.85
Pro forma
330.05
248.29
315.27
2.82
(k) Research and Development Expenses
Research and development costs are expensed as incurred.
(l) Advertising Costs
Advertising costs are expensed as incurred.
(m) Shipping and Handling Fees and Costs
Shipping and handling costs amounted to ¥15,326 million ($130,991 thousand), ¥13,397 million
and ¥12,163 million for the years ended March 31, 2006, 2005 and 2004, respectively, and are
included in selling, general and administrative expenses in the consolidated statements of income.
(n) Foreign Currency Translation
Foreign currency financial statements have been translated in accordance with Statement of
Financial Accounting Standards No. 52 ("SFAS 52"), "Foreign Currency Translation". Under SFAS 52,
the assets and liabilities of TDK's subsidiaries located outside Japan are translated into Japanese
yen at the rates of exchange in effect at the balance sheet date. Revenue and expense items are
translated at the average exchange rates prevailing during the year. Gains and losses resulting
from foreign currency transactions are included in other income (deductions), and those resulting
from translation of financial statements are excluded from the statements of income and are
accumulated in stockholders' equity as a component of accumulated other comprehensive income
(loss).
(o) Use of Estimates
Management of TDK has made a number of estimates and assumptions relating to the reporting of
assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities
to prepare these consolidated financial statements in conformity with the U.S. GAAP. Significant
items subject to such estimates and assumptions include the valuation of intangible assets,
property, plant and equipment, trade receivables, inventories, and deferred income tax assets, and
assumptions related to the estimation of actuarial determined employee benefit obligations. Actual
results could differ from those estimates.
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(p) Accounting for the Impairment or Disposal of Long-Lived Assets
Property, plant and equipment and certain identifiable intangibles with finite useful lives
are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to future net cash flows (undiscounted
and without interest charges) expected to be generated by the asset. If such assets are considered
to be impaired, the impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be disposed of are reported at
the lower of the carrying amount or fair value less costs to sell.
(q) Goodwill and Other Intangible Assets
Goodwill is not amortized, but instead is tested for impairment at least annually or more
frequently if certain indicators arise. Intangible assets with finite useful lives are amortized
over their respective estimated useful lives. Intangible assets determined to have an indefinite
useful life are not amortized, but instead are tested for impairment until the life is determined
to no longer be indefinite.
TDK conducts its annual impairment test in the fourth quarter of each fiscal year.
(r) Derivative Financial Instruments
TDK has elected not to apply hedge accounting. Accordingly, changes in the fair value of
derivatives are recognized in earnings in the period of the changes.
(s) Net Income per Share
Basic net income per share has been computed by dividing net income available to common
stockholders by the weighted-average number of common shares outstanding during each year. Diluted
net income per share reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or resulted in the
issuance of common stock of TDK. For the years ended March 31, 2006, 2005 and 2004, stock options
to purchase 116,100 shares, 364,300 shares and 156,500 shares, respectively, were excluded from the
calculation of diluted earnings per share as the effect would have been antidilutive.
(t) Revenue Recognition
TDK generates revenue principally through the sale of electronic materials & components and
recording media under separate contractual arrangements for each. TDK recognizes revenue when
persuasive evidence of an arrangement exists, delivery has occurred and title and risk of loss have
been transferred to the customer, the sales price is fixed or determinable, and collectibility is
probable.
Revenue from sales of electronic materials & components including electronic materials,
electronic devices and recording devices is recognized when the products are received by customers
based on the free-on board destination sales term. With regards to sales of electronic materials &
components, TDK's policy is not to accept product returns unless the products are defective. The
conditions of acceptance are governed by the terms of the contract or customer arrangement and
those not meeting the predetermined specification are not recorded as revenue.
Revenue from sales of recording media products such as videotape and DVDs is also recognized
when the products are received by customers based on the free-on board destination sales term.
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TDK offers sales incentives through various programs to certain resellers and retailers.
These sales incentives include product discounts, volume-based discounts, marketing development
funds ("MDFs"), rebates and coupons, and are accounted for in accordance with the Emerging Issues
Task Force Issue No. 01-9 "Accounting for Consideration Given by a Vendor to a Customer (Including
a Reseller of Vendor's Product)" ("EITF 01-9"). Generally, under EITF 01-9, consideration given by
a vendor to a customer is presumed to be a reduction of the selling price of goods and services,
and, therefore, should be recognized as a reduction of revenue in the vendor's income statement.
The presumption may be overcome based on certain factors. These sales incentives totaled to
¥13,479 million ($115,205 thousand), ¥14,292 million and ¥15,089 million for the years ended March
31, 2006, 2005 and 2004, respectively.
A number of product discounts are based on a certain percentage off the invoice price
predetermined by spot contracts or based on contractually agreed upon amounts with resellers and
retailers. Product discounts are recognized as a reduction of revenue at the time the related
revenue is recognized and amounted to ¥7,415 million ($63,376 thousand), ¥7,194 million and ¥5,993
million for the years ended March 31, 2006, 2005 and 2004, respectively.
Volume-based discounts are provided only if the resellers and retailers achieve a specified
cumulative level of revenue transactions in a year or less period. Liabilities are recognized as a
reduction of revenue for the expected sales incentive at the time the related revenue is recognized
and are initially based on the estimation of sales volume by using historical experience on an
individual customer basis. Estimates of expected sales incentives are evaluated and adjusted
periodically based on actual revenue transactions and forecasts for the balance of the year or
incentive period. Volume-based discounts recognized as a reduction of revenue amounted to ¥2,646
million ($22,615 thousand), ¥3,005 million and ¥2,982 million for the years ended March 31, 2006,
2005 and 2004, respectively.
MDFs are provided to certain resellers and retailers as a contribution to or a sponsored fund
for customers' marketing programs, such as customers' coupons, catalog, sales contests and
advertisements, mostly in the form of a subsidy. Under this program, we do not receive an
identifiable benefit sufficiently separable from our customers. Accordingly, MDFs are accounted
for as a reduction of revenue based on the annual contract or at the time TDK has incurred the
obligation, if earlier, and amounted to ¥1,970 million ($16,838 thousand), ¥2,631 million and
¥2,923 million for the years ended March 31, 2006, 2005 and 2004, respectively.
Consumer promotions mainly consist of coupons and mail-in rebates offered to end users, who
are reimbursed by TDK to retailers or end users for the coupons or mail-in rebates redeemed.
Liabilities are recognized at the time related revenue is recognized (or at the time of the offer
if the sale to retailers occurs before the offer) for the expected number of coupons or mail-in
rebates to be redeemed. TDK uses historical rates of redemption on similar offers for similar
products to estimate redemption rates for current incentive offerings. Consumer promotions
recognized as a reduction of revenue amounted to ¥995 million ($8,504 thousand), ¥1,061 million and
¥2,446 million for the years ended March 31, 2006, 2005 and 2004, respectively.
TDK also provides slotting fees paid to certain retailers for putting TDK products at
attractive areas or shelves in the store. Slotting fees are recognized as a reduction of revenue
at the time TDK has incurred the obligation. Slotting fees recognized as a reduction of revenue
amounted to ¥274 million ($2,342 thousand), ¥205 million and ¥451 million for the years ended March
31, 2006, 2005 and 2004, respectively.
Additionally, TDK has advertising programs with certain resellers and retailers where TDK
agrees to reimburse them for advertising cost incurred by them to put TDK products on their flyers,
catalogs and billboards. TDK receives an identifiable benefit (advertising) in return for the
consideration and that benefit is sufficiently separable because TDK could have purchased that
advertising from other parties. Also, TDK can reasonably estimate the fair value of the benefit
through obtaining sufficient evidence from the resellers and retailers in the form of the invoice
issued by the third party providing the service to the resellers and retailers. Therefore, such
advertising programs are expensed as selling, general and administrative expenses at the time TDK
has incurred the obligation and amounted to ¥179 million ($1,530 thousand), ¥196 million and ¥293
million for the years ended March 31, 2006, 2005 and 2004, respectively.
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TDK allows limited right of returns in certain cases and reduces revenue for estimated future
returns based upon historical experience at the time the related revenue is recorded.
Warranties offered on TDK's products are insignificant.
(u) New Accounting Standards Not Yet Adopted
In November 2004, the FASB issued Statement of Financial Accounting Standards No. 151 ("SFAS
151"), "Inventory Costs – an amendment of Accounting Research Bulletin No. 43 ("ARB 43"), Chapter
4". SFAS 151 amends the guidance in ARB 43, Chapter 4, "Inventory Pricing", to clarify the
accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted
material (spoilage). SFAS 151 requires that items such as idle facility expense, excessive
spoilage, double freight and rehandling costs be recognized as current-period charges regardless of
whether they meet the criterion of "so abnormal" as stated in ARB 43. In addition, SFAS 151
requires that allocation of fixed production overheads to the costs of conversion be based on the
normal capacity of the production facilities. SFAS 151 is effective for inventory costs incurred
in fiscal periods beginning after June 15, 2005. TDK does not expect the adoption of SFAS 151 to
have a material effect on TDK's consolidated financial position and results of operations.
In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised
2004), "Share Based Payment" ("SFAS 123R"). SFAS 123R is a revision of SFAS 123, "Accounting for
Stock Based Compensation", and supersedes APB 25. SFAS 123R requires TDK to measure the cost of
employee services received in exchange for equity awards based on the grant date fair value of the
awards. The cost will be recognized as compensation expense over the vesting period of the awards.
In April 2005, the Securities and Exchange Commission deferred the effective date of SFAS 123R to
the beginning of the first annual period after June 15, 2005. TDK adopted SFAS 123R in the first
quarter of fiscal 2007 and will continue to evaluate the impact of SFAS 123R on TDK's consolidated
financial position and results of operations. The pro forma information presented in Note 1(j) and
Note 10 presents the estimated compensation charges under SFAS 123. TDK's assessment of the
estimated compensation charges is affected by TDK's stock price as well as assumptions regarding a
number of complex and subjective variables and the related tax impact. These variables include,
but are not limited to, TDK's stock price volatility and employee stock option exercise behaviors.
TDK will recognize the compensation cost for stock-based awards issued after April 1, 2006 on a
straight-line basis over the requisite service period for the entire award. In addition, TDK will
recognize the unvested portion of the grant date fair value of awards issued prior to adoption
based on the fair values previously calculated for disclosure purposes. At March 31, 2006, the
aggregate value of unvested options, as determined using a Black-Scholes option pricing model, was
¥227 million. Upon adoption of SFAS 123R, this amount will be recognized over the remaining
vesting period of these options.
In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154 ("SFAS 154"),
"Accounting Changes and Error Corrections – a replacement of Opinion of the Accounting Principle
Board No. 20 ("APB 20") and Statement of Financial Accounting Standards No. 3 ("SFAS 3")". SFAS
154 replaces APB 20, "Accounting Changes" and SFAS 3, "Reporting Accounting Changes in Interim
Financial Statements", and provides guidance on the accounting for and reporting of accounting
changes and error corrections. SFAS 154 establishes retrospective application, or the latest
practicable date, as the required method for reporting a change in accounting principle and the
reporting of a correction of an error. SFAS 154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15, 2005. TDK does not expect
the adoption of SFAS 154 to have a material effect on TDK's consolidated financial position and
results of operations.
(v) Reclassifications
Certain reclassifications have been made to the prior year's consolidated financial statements
to conform to the presentation used for the year ended March 31, 2006.
In 2006 TDK has separately disclosed the operating, investing and financing portions of the
cash flows attributable to its discontinued operations, which in prior periods were reported on a
combined basis as a single amount.
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2. Financial Statement Translation
The consolidated financial statements are expressed in Japanese yen, the functional currency
of TDK. Supplementally, the Japanese yen amounts as of and for the year ended March 31, 2006, have
also been translated into U.S. dollar amounts, solely for the convenience of the reader, at the
rate of ¥117=U.S.$1, the approximate exchange rate on the Tokyo Foreign Exchange Market on March
31, 2006. This translation should not be construed as a representation that the amounts shown
could be converted into U.S. dollars at such rate.
3. Foreign Operations
Amounts included in the consolidated financial statements relating to subsidiaries operating
in foreign countries are summarized as follows:
U.S. Dollars
Yen (Millions)
(Thousands)
2006
2005
2004
2006
Net assets
¥
435,381
360,925
318,915
$
3,721,205
Net sales
626,626
498,366
494,184
5,355,778
Net income
28,582
17,362
38,731
244,291
4. Marketable Securities and Investments in Securities
Marketable securities and investments in securities at March 31, 2006 and 2005, are as
follows:
U.S. Dollars
Yen (Millions)
(Thousands)
2006
2005
2006
Short-term marketable securities
¥
56
1,609
$
479
Long-term marketable securities
13,042
7,094
111,470
Nonmarketable securities
596
1,555
5,094
Investments in affiliates
15,119
14,049
129,222
¥
28,813
24,307
$
246,265
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Marketable securities and investments in securities include available-for-sale securities.
Information with respect to such securities at March 31, 2006 and 2005, is as follows:
As of March 31, 2006
Gross
Gross
Unrealized
Unrealized
Holding
Holding
Cost
Gains
Losses
Fair Value
Yen (Millions):
Equity securities
¥
9,246
2,859
2
12,103
Debt securities
1,002
—
7
995
¥
10,248
2,859
9
13,098
As of March 31, 2005
Gross
Gross
Unrealized
Unrealized
Holding
Holding
Cost
Gains
Losses
Fair Value
Yen (Millions):
Equity securities
¥
5,951
1,054
—
7,005
Debt securities
1,698
—
—
1,698
¥
7,649
1,054
—
8,703
As of March 31, 2006
Gross
Gross
Unrealized
Unrealized
Holding
Holding
Cost
Gains
Losses
Fair Value
U.S. Dollars (Thousands):
Equity securities
$
79,026
24,436
17
103,445
Debt securities
8,564
—
60
8,504
$
87,590
24,436
77
111,949
Debt securities classified as available-for-sale at March 31, 2006 mature in fiscal 2008
(weighted average remaining term of 1.7 years).
The proceeds from sale and settlement of available-for-sale securities are ¥4,263 million
($36,436 thousand), ¥1,788 million and ¥1,814 million for the years ended March 31, 2006, 2005 and
2004, respectively. The gross realized gains on the sale and settlement of available-for-sale
securities are ¥714 million ($6,103 thousand), ¥377 million and ¥135 million for the years ended
March 31, 2006, 2005 and 2004, respectively. TDK recorded a write-down of ¥1,000 million ($8,547
thousand), ¥519 million and ¥1,228 million on certain available-for-sale securities and
nonmarketable securities representing other-than-temporary declines in the fair value for the years
ended March 31, 2006, 2005 and 2004, respectively.
At March 31, 2006, all of the available-for-sale securities with unrealized losses had been in
a continuous unrealized loss position for less than 12 months.
The aggregate cost of nonmarketable securities accounted for under the cost method at March
31, 2006 and 2005 totaled ¥596 million ($5,094 thousand) and ¥1,555 million, respectively, and, as
of March 31, 2006 and 2005, those securities were not evaluated for impairment because (a) TDK did
not estimate the fair value of those investments as it was not practicable to estimate the fair
value of the investment and (b) TDK did not identify any events or changes in circumstances that
might have had significant adverse effect on the fair value of those investments.
Investments in affiliates accounted for by the equity method consist of 26.1 percent of the
common stock of Semiconductor Energy Laboratory Co., Ltd., a research and development company, 50.0
percent of the common stock of TMP Co., Ltd., a magnetic products manufacturing company, and five
other affiliated companies, collectively, which are not significant. The difference between TDK's
carrying value of investments in affiliates and its share of the underlying net equity in such
affiliates substantially consists of unamortized amounts of equity-method goodwill of ¥1,231
million ($10,521 thousand) as of both March 31, 2006 and 2005.
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As of March 31, 2006 and 2005, certain debt securities in the amount of ¥989 million and
¥1,695 million, respectively were pledged as collateral for extended custom duty payments to Tokyo
Customs.
5. Inventories
Inventories at March 31, 2006 and 2005, are summarized as follows:
Yen
U.S. Dollars
(Millions)
(Thousands)
2006
2005
2006
Finished goods
¥
36,826
30,819
$
314,752
Work in process
23,490
21,633
200,769
Raw materials
28,652
22,472
244,889
¥
88,968
74,924
$
760,410
The cost elements for finished goods and work in process include direct costs for materials
such as primary materials and purchased semi-finished products, direct labor costs such as basic
salaries, bonuses, and legal welfare expenses, direct costs such as expenses paid to
subcontractors, and indirect manufacturing costs comprising material costs, labor costs and other
overhead costs.
6. Short-Term and Long-Term Debt
Short-term debt and weighted average interest rates at March 31, 2006 and 2005, are as
follows:
Yen
U.S. Dollars
Weighted average
(Millions)
(Thousands)
interest rate
2006
2005
2006
2006
2005
Short-term bank
loans — unsecured
¥
4,469
—
$
38,197
1.63
%
—
Long-term debt at March 31, 2006 and 2005, is set forth below:
Yen
U.S. Dollars
(Millions)
(Thousands)
2006
2005
2006
Loans from banks, unsecured, due fiscal 2007
(weighted average: 2006-0.96%)
¥
1,700
—
$
14,530
Loans from banks, secured, due fiscal 2009-2012
(weighted average: 2006-0.95%)
345
—
2,949
Lease obligation (weighted average: 2006-5.78%,
2005-4.05%)
318
184
2,718
2,363
184
20,197
Less current installments
1,958
103
16,735
¥
405
81
$
3,462
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The aggregate annual maturities of long-term debt outstanding at March 31, 2006, are as
follows:
U.S. Dollars
Yen (Millions)
(Thousands)
Year ending March 31,
2007
¥
1,958
$
16,735
2008
196
1,675
2009
127
1,086
2010
36
308
2011
31
265
Later years
15
128
¥
2,363
$
20,197
Short-term and long-term bank loans were made under general agreements that provide that under
certain circumstances security and guarantees for present and future indebtedness will be given
upon request of the bank, and that the bank shall have the right, as the obligations become due, or
in the event of their default, to offset cash deposits against such obligations due to the bank.
Property, plant and equipment having a net book value of ¥2,264 million ($19,350 thousand) is
pledged as a collateral for long-term debt from banks.
There were no debt covenants, or cross-default provisions under TDK's financing arrangements.
Furthermore, there were no subsidiary level dividend restrictions under the financing arrangements.
7. Income Taxes
TDK and its domestic subsidiaries are subject to a national corporate tax of 30 percent, an
inhabitants tax of between 5.2 percent and 6.2 percent and a deductible enterprise tax of between
7.7 percent and 8.0 percent, which in the aggregate resulted in a statutory rate of approximately
40 percent for the years ended March 31, 2006 and 2005. For the year ended March 31, 2004, the
deductible enterprise tax rate was between 9.6 percent and 10.1 percent, which in the aggregate
resulted in statutory rate of approximately 41 percent.
Amendments to Japanese tax regulations were enacted into law on March 24, 2003. As a result
of this amendment, the statutory income tax rate was reduced from approximately 41 percent to 40
percent effective from April 1, 2004. Current income taxes were calculated at the rate of 40
percent, in effect for the years ended March 31, 2006 and 2005, respectively, and 41 percent in the
year 2004.
For the year ended March 31, 2005, residual tax effects of ¥4,571 million previously recorded
in accumulated other comprehensive income (minimum pension liability adjustments) were released and
recorded as a reduction to income tax expense in the consolidated statements of income as a result
of the elimination of the minimum pension liability adjustment.
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The effective tax rates of TDK for the years ended March 31, 2006, 2005 and 2004, are
reconciled with the Japanese statutory tax rate in the following table:
2006
2005
2004
Japanese statutory tax rate
40.4
%
40.4
%
41.0
%
Expenses not deductible for tax purposes
1.6
1.1
1.2
Non taxable income
(0.1
)
(0.2
)
0.0
Difference in statutory tax rates of foreign
subsidiaries
(13.9
)
(10.5
)
(23.0
)
Change in the valuation allowance
4.7
3.8
4.5
Investment tax credit
(0.1
)
(1.2
)
(1.6
)
Research and development tax credit
(1.4
)
(3.6
)
(1.3
)
Residual tax effect in minimum pension liability
adjustments
—
(7.5
)
—
Additional tax related to prior years income
1.7
17.0
—
Other
(1.0
)
(1.0
)
0.9
Effective tax rate
31.9
%
38.3
%
21.7
%
On June 29, 2005, TDK received a notification and assessment of additional tax from the Tokyo
Regional Tax Bureau (Nihonbashi Tax Office) asserting that prices charged and paid by TDK in
connection with sales and purchases of products involving its overseas subsidiaries have not been
commensurate with the prices of similar transactions involving unrelated third parties. The period
of additional assessments covers the tax years ending from March 1999 through March 2003. The
additional tax assessed by the Tokyo Regional Tax Bureau amounts to ¥11,960 million including
interest and penalty, which has been reflected as additional tax expense and other expense, net of
deferred income tax benefits in the accompanying consolidated statements of income for the year
ended March 31, 2005.
Total income taxes for the years ended March 31, 2006, 2005 and 2004 are allocated as follows:
Yen
U.S.Dollars
(Millions)
(Thousands)
2006
2005
2004
2006
Income from continuing operations
¥
21,057
23,284
12,133
$
179,974
Loss from discontinued operations
—
156
1,010
—
Stockholders' equity, accumulated other
comprehensive income (loss):
Foreign currency translation adjustments
8
8
245
68
Net unrealized gains (losses) on
securities
849
(148
)
348
7,256
Minimum pension liability adjustments
2,074
29,538
9,422
17,727
Total income taxes
¥
23,988
52,838
23,158
$
205,025
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Income from continuing operations before income taxes and income taxes for the years ended
March 31, 2006, 2005 and 2004, are summarized as follows:
Income From
Continuing
Operations
Before Income
Income Taxes
Taxes
Current
Deferred
Total
Yen (Millions):
2006
Japanese
¥
28,004
11,160
657
11,817
Foreign
38,099
10,593
(1,353
)
9,240
¥
66,103
21,753
(696
)
21,057
2005
Japanese
36,836
22,261
(5,026
)
17,235
Foreign
23,892
6,555
(506
)
6,049
60,728
28,816
(5,532
)
23,284
2004
Japanese
8,611
4,411
(7
)
4,404
Foreign
47,236
5,864
1,865
7,729
55,847
10,275
1,858
12,133
U.S. Dollars (Thousands):
2006
Japanese
$
239,350
95,385
5,615
101,000
Foreign
325,633
90,538
(11,564
)
78,974
$
564,983
185,923
(5,949
)
179,974
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The tax effects of temporary differences that give rise to significant portions of the
deferred tax assets and deferred tax liabilities at March 31, 2006 and 2005, are as follows:
Yen
U.S. Dollars
(Millions)
(Thousands)
2006
2005
2006
Deferred tax assets:
Trade accounts receivable, principally due to
allowance for doubtful receivables
¥
433
332
$
3,701
Inventories
1,005
894
8,590
Accrued business tax
370
1,330
3,162
Accrued expenses
5,145
3,863
43,974
Retirement and severance benefits
11,884
10,648
101,573
Net operating loss carryforwards
20,116
14,631
171,932
Tax credit carryforwards
684
208
5,846
Minimum pension liability adjustments
2,269
4,174
19,393
Property, plant and equipment, principally due
to differences in depreciation
3,153
2,523
26,949
Other
1,835
1,867
15,684
Total gross deferred tax assets
46,894
40,470
400,804
Less valuation allowance
(20,298
)
(15,409
)
(173,487
)
Net deferred tax assets
¥
26,596
25,061
$
227,317
Deferred tax liabilities:
Investments, principally due to differences
in valuation
(6,030
)
(6,034
)
(51,538
)
Undistributed earnings of foreign subsidiaries
(3,948
)
(2,656
)
(33,744
)
Net unrealized gains on securities
(1,223
)
(272
)
(10,453
)
Acquired intangible assets
(4,990
)
(374
)
(42,650
)
Other
(1,086
)
(1,220
)
(9,282
)
Total gross deferred tax liabilities
(17,277
)
(10,556
)
(147,667
)
Net deferred tax assets
¥
9,319
14,505
$
79,650
The net changes in the total valuation allowance for the years ended March 31, 2006, 2005 and
2004, are an increase of ¥4,889 million ($41,786 thousand), ¥4,381 million and ¥1,338 million,
respectively. The valuation allowance primarily relates to deferred tax assets associated with net
operating loss carryforwards incurred by certain foreign subsidiaries. The decrease in the
valuation allowance attributable to preacquisition tax benefits recognized during the years ended
March 31, 2006 and 2005 amounted to ¥154 million and ¥119 million, respectively. The reversal of
the valuation allowance upon realization of tax benefits resulted in a reduction of goodwill. In
assessing the realizability of deferred tax assets, management considers whether it is more likely
than not that some portion or all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of future taxable income during
the periods in which those temporary differences become deductible and tax carryforwards are
utilized. Management considered the scheduled reversal of deferred tax liabilities, projected
future taxable income, and tax planning strategies in making this assessment. Based upon the level
of historical taxable income and projections for future taxable income over the periods which the
deferred tax assets are deductible, management believes it is more likely than not TDK will realize
the benefits of these deductible differences and tax carryforwards, net of the existing valuation
allowance at March 31, 2006.
At March 31, 2006, certain subsidiaries have net operating loss carryforwards for income tax
purposes of ¥65,398 million ($558,957 thousand) which are available to offset future taxable
income, if any.
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Periods available to offset future taxable income vary in each tax jurisdiction and range from
one year to an indefinite period as follows:
U.S. Dollars
Yen (Millions)
(Thousands)
Within 1 year
¥
845
$
7,222
1 to 5 years
4,676
39,966
5 to 20 years
18,626
159,196
Indefinite periods
41,251
352,573
¥
65,398
$
558,957
At March 31, 2006, certain subsidiaries have tax credit carryforwards for income tax purposes
of ¥684 million ($5,846 thousand) which are available to reduce future income taxes, if any.
Approximately ¥44 million ($376 thousand) of the tax credit carryforwards expire through 2019,
while the remainder have an indefinite carryforward period.
Net deferred income tax assets and liabilities at March 31, 2006 and 2005, are reflected in
the accompanying consolidated balance sheets under the following captions:
Yen
U.S. Dollars
(Millions)
(Thousands)
2006
2005
2006
Prepaid expenses and other current assets
¥
7,401
6,654
$
63,257
Deferred income taxes (noncurrent assets)
7,287
8,633
62,282
Other current liabilities
(55
)
(31
)
(470
)
Deferred income taxes (noncurrent
liabilities)
(5,314
)
(751
)
(45,419
)
¥
9,319
14,505
$
(79,650
)
As of March 31, 2006 and 2005, TDK did not recognize deferred tax liabilities of approximately
¥61,144 million ($522,598 thousand) and ¥61,663 million, respectively, for certain portions of
undistributed earnings of foreign subsidiaries because TDK currently does not expect those
unremitted earnings to reverse and become taxable to TDK in the foreseeable future. A deferred tax
liability will be recognized when TDK expects that it will recover those undistributed earnings in
a taxable manner, such as through receipt of dividends or sale of the investments. As of March 31,
2006 and 2005, the undistributed earnings of these subsidiaries are approximately ¥258,881 million
($2,212,658 thousand) and ¥244,341 million, respectively.
8. Retirement and Severance Benefits
TDK and certain of its subsidiaries sponsor contributory and noncontributory retirement and
severance plans that provide for pension or lump-sum benefit payments, based on length of service,
employee salary and certain other factors, to substantially all employees who retire or terminate
their employment for reasons other than dismissal for cause. Corporate statutory auditors
participate in an unfunded retirement plan sponsored by TDK.
The contributory plan in Japan mainly represents the Employees' Pension Fund plan ("EPF"),
comprised of the substitutional portion based on the pay related part of the old age pension
benefits prescribed by the Welfare Pension Insurance Law (similar to Social Security benefits in
the United States) and the corporate portion based on contributory defined pension arrangements
established at the discretion of TDK. The substitutional portions of the EPF represent a welfare
pension plan carried out on behalf of the Japanese government. The contributory plan is funded in
conformity with the funding requirements of the applicable Japanese governmental regulations.
TDK had been exempted from contributing to the Japanese Pension Insurance ("JPI") program that
would otherwise have been required if it had not elected to fund the government substitutional
portion of the benefit through an EPF arrangement. The plan assets of the EPF were invested and
managed as a single portfolio for the entire EPF and were not separately attributed to the
substitutional and corporate portions.
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In June 2001, the Contributed Benefit Pension Plan Law was newly enacted. This law permits an
employer to elect to transfer the entire substitutional portion benefit obligation from the EPF to
the government together with a specified amount of plan assets pursuant to a government formula.
After such transfer, the employer would be required to make periodic contribution to JPI, and the
Japanese government would be responsible for all benefit payments.
Pursuant to the new law, TDK received an approval of exemption from the Minister of Health,
Labor and Welfare, effective September 25, 2003, from the obligation for benefits related to future
employee service with respect to the substitutional portion of its EPF. TDK received governmental
approval of exemption from the obligation for benefits related to past employee service in October
2004 with respect to the substantial portion of its domestic contributory plan. The transfer to
the government was completed on January 31, 2005.
TDK accounted for the transfer in accordance with EITF Issue No. 03-2 "Accounting for the
Transfer to the Japanese Government of the Substitutional Portion of Employee Pension Fund
Liabilities" ("EITF 03-2"). As specified in EITF 03-2, the entire separation process is to be
accounted for at the time of completion of the transfer to the government of the substitutional
portion of the benefit obligation and related plan assets as a settlement in accordance with SFAS
No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans
and for Termination Benefits". As a result of the transfer, TDK recognized as a subsidy from the
Japanese government an amount equal to the difference between the fair value of the obligation
deemed "settled" with the Japanese government and the assets required to be transferred to the
government. The subsidy that TDK recognized amounted to ¥33,533 million. In addition, TDK
recognized a settlement loss equal to the amount calculated as the ratio of the obligation settled
to the total EPF obligation immediately prior to settlement, both of which exclude the effect of
future salary progression relating to the substitutional portion, times the net unrecognized
gain/loss immediately prior to settlement, which amounted to ¥27,347 million. This gain and loss
is included in operating income in the accompanying consolidated statements of income for the year
ended March 31, 2005.
Effective October 1, 2004, the corporate portion of the EPF was replaced by a new defined
benefit plan that provides benefits based on length of service, employee salary and other factors
in a manner similar to the predecessor corporate defined benefit plan but, at a reduced rate. The
reduction in the pension benefit obligation as of the effective date in the amount of ¥10,925
million has been accounted for as a negative plan amendment and included in prior service cost and
is amortized into net periodic benefit cost over the weighted average remaining service period of
the plan participants.
TDK and its subsidiaries use a December 31 measurement date for the majority of the plans.
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Net periodic benefit cost for TDK's employee retirement and severance defined benefit plans
for the years ended March 31, 2006, 2005 and 2004 consisted of the following components:
Yen
U.S. Dollars
(Millions)
(Thousands)
2006
2005
2004
2006
Service cost-benefits earned during the year
¥
6,587
6,806
10,341
$
56,299
Interest cost on projected benefit obligation
4,050
5,359
6,271
34,615
Expected return on plan assets
(3,386
)
(3,180
)
(2,640
)
(28,940
)
Amortization of transition assets
(1,331
)
(1,331
)
(1,331
)
(11,376
)
Recognized actuarial loss
3,445
5,696
7,480
29,444
Amortization of unrecognized prior service
benefit
(2,041
)
(1,522
)
(1,353
)
(17,444
)
Settlement gain, net
—
(6,186
)
—
—
¥
7,324
5,642
18,768
$
62,598
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Reconciliations of beginning and ending balances of the benefit obligations and the fair value
of the plan assets are as follows:
Yen
U.S. Dollars
(Millions)
(Thousands)
2006
2005
2006
Change in benefit obligations:
Benefit obligations at beginning of period
¥
184,997
258,991
$
1,581,171
Service cost
6,587
6,806
56,299
Interest cost
4,050
5,359
34,615
Plan amendments
—
(10,925
)
—
Actuarial loss (gain)
(336
)
(727
)
(2,872
)
Benefits paid
(6,447
)
(6,646
)
(55,102
)
Transfer of substitutional portion
—
(67,862
)
—
Acquisition
3,600
—
30,769
Others
(63
)
(437
)
(538
)
Translation adjustment
904
438
7,726
Benefit obligations at end of period
193,292
184,997
1,652,068
Change in plan assets:
Fair value of plan assets at beginning of period
142,648
168,913
1,219,214
Actual return on plan assets
28,124
8,053
240,376
Employer contributions
6,050
3,596
51,710
Benefits paid
(5,815
)
(6,046
)
(49,701
)
Transfer of substitutional portion
—
(31,985
)
—
Acquisition
1,467
—
12,538
Translation adjustment
386
117
3,299
Fair value of plan assets at end of period
172,860
142,648
1,477,436
Funded status
(20,432
)
(42,349
)
(174,632
)
Unrecognized net transition obligation being
recognized over 18 years
(1,276
)
(2,607
)
(10,906
)
Unrecognized net actuarial loss
45,280
72,650
387,008
Unrecognized prior service benefit
(26,254
)
(28,295
)
(224,393
)
Net amount recognized
(2,682
)
(601
)
(22,923
)
Amounts recognized in consolidated balance sheets
consist of:
Prepaid pension cost
18,289
17,669
156,316
Retirement and severance benefits
(26,790
)
(28,839
)
(228,974
)
Intangible assets
99
56
846
Accumulated other comprehensive loss
5,720
10,513
48,889
Net amount recognized
(2,682
)
(601
)
(22,923
)
Actuarial present value of accumulated benefit
obligations at end of period
¥
175,073
167,834
$
1,496,350
The projected benefit obligations and the fair value of plan assets for the pension plans with
projected benefit obligations in excess of plan assets, and the accumulated benefit obligations and
the fair value of plan assets for the pension plans with accumulated benefit obligations in excess
of plan assets are as follows.
Yen
U.S. Dollars
(Millions)
(Thousands)
2006
2005
2006
Plans with projected benefit
obligations in excess of plan assets:
Projected benefit obligations
¥
66,613
184,997
$
569,342
Fair value of plan assets
37,405
142,648
319,701
Plans with accumulated benefit
obligations in excess of plan assets:
Accumulated benefit obligations
60,200
54,504
514,530
Fair value of plan assets
36,584
28,531
312,684
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Assumptions
Weighted-average assumptions used to determine
benefit obligations at March 31:
2006
2005
Discount rate
2.2
%
2.2
%
Assumed rate of increase in future compensation levels
3.0
%
3.0
%
Weighted-average assumptions used to determine
net periodic benefit cost for the years ended March 31:
2006
2005
2004
Discount rate
2.2
%
2.1
%
2.1
%
Assumed rate of increase in future compensation levels
3.0
%
3.0
%
3.0
%
Expected long-term rate of return on plan assets
2.7
%
2.2
%
2.2
%
TDK determines the expected long-term rate of return based on the expected long-term return of
the various asset categories in which it invests. TDK considers the current expectations for
future returns and the actual historical returns of each plan asset category.
Plan assets
The weighted-average asset allocations of TDK's benefit plans at March 31, 2006 and 2005 by
asset category are as follows:
2006
2005
Equity securities
65.4
%
26.2
%
Debt securities
26.1
%
6.9
%
Cash
2.2
%
62.5
%
Other
6.3
%
4.4
%
100.0
%
100.0
%
TDK's investment policies are designed to ensure adequate plan assets are available to provide
future payments of pension benefits to eligible participants. Taking into account the expected
long-term rate of return on plan assets, TDK formulates a "model" portfolio comprised of the
optimal combination of equity securities and debt securities. Plan assets are invested in
individual equity and debt securities using the guidelines of the "model" portfolio in order to
produce a total return that will match the expected return on a mid-term to long-term basis. TDK
evaluates the gap between expected return and actual return of invested plan assets on an annual
basis to determine if such differences necessitate a revision in the formulation of the "model"
portfolio. TDK revises the "model" portfolio when and to the extent considered necessary to
achieve the expected long-term rate of return on plan assets.
During the year ended March 31, 2005, the EPF sold certain assets to facilitate the funding of
the payment to the Japanese government for the transfer of the substitutional portion of the plan.
In addition, the strategic mix for domestic pension plans had increased asset allocation to cash
based on the unclear outlook for the bond and equity market in Japan during the middle of 2004.
During the year ended March 31, 2006, the strategic mix for domestic pension plans resulted in
increase of asset allocation to the equity and debt securities to reflect the completion of the
payment to the Japanese government for the transfer of the substitutional portion of the EPF, and
the upturn of the equity and debt securities market in Japan. As a result, the relative portion of
the equity and debt securities in pension assets at March 31, 2006 increased compared to March 31,
2005.
Contributions
TDK expects to contribute ¥6,315 million ($53,974 thousand) to its defined benefit plans for
the year ending March 31, 2007.
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Estimated future benefit payments
The benefits expected to be paid from the pension plans in each year 2007 through 2016 are as
follows:
Yen
U.S. Dollars
(Millions)
(Thousands)
Year ending March 31,
2007
¥
5,981
$
51,120
2008
6,887
58,863
2009
7,457
63,735
2010
8,002
68,393
2011
8,049
68,795
2012 - 2016
¥
41,320
$
353,162
9. Legal Reserve and Dividends
The Japanese Company Law provides that an amount equal to 10 percent of cash dividends and
other distributions from retained earnings paid by TDK and its Japanese subsidiaries be
appropriated as a legal reserve. No further appropriations are required when the total amount of
the additional paid-in capital and the legal reserve equals 25 percent of their respective stated
capital. The Japanese Company Law also provides that to the extent that the sum of the additional
paid-in capital and the legal reserve exceeds 25 percent of the stated capital, the amount of the
excess (if any) is available for appropriations by resolution of the shareholders. Certain foreign
subsidiaries are also required to appropriate their earnings to legal reserves under the laws of
the respective countries. Cash dividends and appropriations to the legal reserve charged to
retained earnings for the years ended March 31, 2006, 2005 and 2004 represent dividends paid out
during those years and the related appropriations to the legal reserve. The accompanying
consolidated financial statements do not include any provision for the dividend proposed by the
Board of Directors of ¥50 ($0.43) per share aggregating ¥6,613 million ($56,521 thousand) in
respect of the year ended March 31, 2006.
Cash dividends per common share are computed based on dividends paid for the year.
10. Stock Option Plan
(a) TDK
TDK obtained approval of the Ordinary General Meeting of Shareholders held on June 29, 2005
regarding the issuance of stock acquisition rights as share-based compensation stock options (the
Stock Acquisition Rights) to Board members and Corporate Officers, pursuant to Articles 280-20 and
280-21 of the Japanese Commercial Code. Upon approval, the Board of Directors adopted resolutions
to issue an aggregate of 246 Stock Acquisition Rights, each representing an option to purchase 100
shares of common stock of TDK, to the then 17 Directors and Corporate Officers of TDK. The Stock
Acquisition Rights issued on June 30, 2005 are fully vested on date of issuance and are exercisable
during the period from July 1, 2005 to June 30, 2025. The amount to be paid by qualified persons
upon the exercise of each Stock Acquisition Rights is set at ¥1 ($0.01) per share of common stock.
Stock option related compensation cost of ¥186 million ($1,590 thousand) has been recognized in
fiscal 2006, representing the amount attributed to service rendered during the current period of
the amount by which the market price of the underlying common stock exceeded the exercise
price of stock options approved for issuance at the Ordinary General Meeting of Shareholders
held in June 2005.
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TDK obtained approval of the Ordinary General Meeting of Shareholders held on June 29, 2005
regarding the issuance of stock acquisition rights as stock options to select senior executives,
pursuant to Articles 280-20 and 280-21 of the Japanese Commercial Code. Upon approval, the Board
of Directors adopted resolutions to issue an aggregate of 906 Stock Acquisition Rights, each
representing an option to purchase 100 shares of common stock of TDK, to the then 172 select senior
executives of TDK, and the Directors and select senior executives of subsidiaries. The Stock
Acquisition Rights issued on August 11, 2005 are exercisable during the period from August 1, 2007
to July 31, 2011. The amount to be paid by qualified persons upon the exercise of each Stock
Acquisition Rights is set at ¥8,134 ($69.52) per share of common stock, which was calculated by a
formula approved by shareholders at the said annual shareholders meeting and is subject to an
adjustment in certain events, including but not limited to a stock split, stock dividend and issue
of new shares at a price less than the current market price of the shares of TDK. The exercise
price of each Stock Acquisition Rights was equal to or greater than the fair market value of TDK's
common stock on the date of grant.
To cover these options and the share-based compensation stock options issued on June 30, 2005,
TDK purchased on the Tokyo Stock Exchange ("TSE") a total of 115,200 common shares with an
aggregate purchase price of ¥930 million ($7,949 thousand) from August 17, 2005 through August 22,
2005.
TDK obtained approval of the Ordinary General Meeting of Shareholders held in June 2004, 2003
and 2002 regarding the issuance of stock acquisition rights as stock options, pursuant to Articles
280-20 and 280-21 of the Japanese Commercial Code. Upon approval, the Board of Directors adopted
resolutions to issue an aggregate of 2,343, 2,547 and 2,236 Stock Acquisition Rights, each
representing a stock option to purchase 100 shares of common stock of TDK, to the then 187, 179 and
197 Directors, Corporate Officers and selected senior executives of TDK, and the Directors and
select senior executives of its subsidiaries, respectively. The amount to be paid by qualified
persons upon the exercise of each Stock Acquisition Rights was set at ¥8,147, ¥6,954 and ¥5,909 per
share of common stock, respectively. The exercise price of each Stock Acquisition Rights was equal
to or greater than the fair market value of TDK's common stock on the date of grant.
The Ordinary General Meeting of Shareholders held in June 2001 and 2000 approved to implement
TDK's stock option plan for Directors and certain employees of TDK, and the purchase of TDK's own
shares for transfer to them under the plan, pursuant to Article 210-2 of Japanese Commercial Code.
Stock options were provided to the then 196 and 204 Directors on the Board and associate directors
and officials in amounts ranging from 500 to 10,000 common shares each, at an exercise price of
¥6,114 and ¥15,640 per share. The exercise price of each Stock Acquisition Rights was equal to or
greater than the fair market value of TDK's common stock on the date of grant.
TDK currently accounts for these stock option plans as fixed plans pursuant to APB 25.
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Table of Contents
A summary of the status of TDK's stock option plans as of March 31, 2006, 2005 and 2004, and
of the activity during the years ending on those dates, is as follows:
2006
2005
2004
2006
Weighted
Weighted
Weighted
Weighted
Number
average
Number
average
Number
average
average
of
exercise
of
exercise
of
exercise
exercise
shares
price
shares
price
shares
price
price
Yen
Yen
Yen
U.S. Dollars
Outstanding at
beginning of year
868,600
¥
8,293
739,300
¥
8,358
548,000
¥
8,967
$
70.88
Granted
115,200
6,397
234,300
8,147
254,700
6,954
54.68
Exercised
139,700
6,308
71,700
5,979
46,900
6,114
53.90
Forfeited or
Expired
15,900
14,563
33,300
13,695
16,500
13,276
124.47
Outstanding at
end of year
828,200
8,244
868,600
8,293
739,300
8,358
70.46
Exercisable at
end of year
504,300
8,308
380,600
9,275
264,300
11,755
71.01
Information about stock options outstanding at March 31, 2006 is as follows:
Options Outstanding
Weighted
Number
average
outstanding at
remaining
Weighted average
Range of exercise prices
March 31, 2006
contractual life
exercise price
Yen
(years)
Yen
U.S. Dollars
1
24,600
19.3
1
0.01
5,909
105,700
2.3
5,909
50.50
6,114
52,400
1.1
6,114
52.26
6,954
205,500
3.3
6,954
59.44
8,134
90,600
5.3
8,134
69.52
8,147
233,300
4.3
8,147
69.63
15,640
116,100
0.1
15,640
133.68
1 to 15,640
828,200
3.6
8,244
70.46
The fair value of these stock options was estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions:
The Stock Acquisition Rights – the exercise price is equal to or greater than the market price of
the stock on the grant date
2006
2005
2004
Grant-date fair value
¥
2,325
¥
2,223
¥
2,290
($
19.87
)
Expected life
4.0 years
4.0 years
4.0 years
Risk-free interest rate
0.54
%
0.59
%
0.26
%
Expected volatility
38.93
%
46.30
%
51.36
%
Expected dividend yield
0.96
%
0.85
%
0.71
%
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Table of Contents
The Stock Acquisition Rights – the exercise price is less than the market price of the stock on the
grant date
2006
Grant-date fair value
¥
7,235
($
61.84
)
Expected life
5.5 years
Risk-free interest rate
0.47
%
Expected volatility
44.46
%
Expected dividend yield
0.80
%
(b) Densei-Lambda
Densei-Lambda K. K. ("Densei-Lambda"), a subsidiary of TDK, obtained approval of the Ordinary
General Meeting of Shareholders held in June 2002 regarding the issuance of stock acquisition
rights as stock options, pursuant to Articles 280-20 and 280-21 of the Japanese Commercial Code.
Upon approval, the Board of Directors adopted resolutions to issue an aggregate of 1,147 Stock
Acquisition Rights, each representing a stock option to purchase 100 shares of common stock of
Densei-Lambda, to the then 201 Directors, Corporate Auditors, Corporate Officers and certain
employees of Densei-Lambda, respectively. The Stock Acquisition Rights issued on January 10, 2003
are exercisable during the period from January 11, 2006 to January 10, 2013. The amount to be paid
by qualified persons upon the exercise of each Stock Acquisition Rights was set at ¥789 per share
of common stock. The exercise price of each Stock Acquisition Rights was equal to or greater than
the fair market value of Densei-Lambda's common stock on the date of grant.
The Ordinary General Meeting of Shareholders held in June 2001 and 2000 approved to implement
Densei-Lambda's stock option plan for Directors, Corporate Officers and certain employees of
Densei-Lambda, and the purchase of Densei-Lambda's own shares for transfer to them under the plan,
pursuant to Article 210-2 of Japanese Commercial Code. Stock options were provided to the then 97
Directors, Corporate Officers and certain employees, and 10 Directors and Corporate Officers at an
exercise price of ¥1,817 and ¥2,229 per share, respectively. The exercise price of each Stock
Acquisition Rights was equal to or greater than the fair market value of Densei-Lambda's common
stock on the date of grant.
Densei-Lambda currently accounts for these stock option plans, which are immaterial, as fixed
plans pursuant to APB 25.
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11. Other Comprehensive Income (Loss)
Change in accumulated other comprehensive income (loss) for the years ended March 31, 2006,
2005 and 2004, are as follows:
Yen
U.S. Dollars
(Millions)
(Thousands)
2006
2005
2004
2006
Foreign currency translation adjustments:
Balance at beginning of period
¥
(47,171
)
(52,807
)
(26,520
)
$
(403,171
)
Adjustments for period
26,100
5,636
(26,287
)
223,077
Balance at end of period
(21,071
)
(47,171
)
(52,807
)
(180,094
)
Net unrealized gains (losses) on
securities:
Balance at beginning of period
801
648
110
6,846
Adjustments for period
892
153
538
7,624
Balance at end of period
1,693
801
648
14,470
Minimum pension liability adjustments:
Balance at beginning of period
(5,287
)
(38,228
)
(52,414
)
(45,188
)
Adjustments for period
2,719
32,941
14,186
23,239
Balance at end of period
(2,568
)
(5,287
)
(38,228
)
(21,949
)
Total accumulated other comprehensive
income (loss):
Balance at beginning of period
(51,657
)
(90,387
)
(78,824
)
(441,513
)
Adjustments for period
29,711
38,730
(11,563
)
253,940
Balance at end of period
¥
(21,946
)
(51,657
)
(90,387
)
$
(187,573
)
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Table of Contents
Tax effects allocated to each component of other comprehensive income (loss) and
reclassification adjustments for the years ended March 31, 2006, 2005 and 2004, are as follows:
Yen
(Millions)
Tax
Before tax
(expense)
Net-of-tax
amount
or benefit
amount
2006
Foreign currency translation adjustments
¥
26,108
(8
)
26,100
Unrealized gains (losses) on securities:
Unrealized holding gains arising for period
2,128
(856
)
1,272
Reclassification adjustments for (gains)
losses realized in net income
(387
)
7
(380
)
Net unrealized gains (losses)
1,741
(849
)
892
Minimum pension liability adjustments
4,793
(2,074
)
2,719
Other comprehensive income (loss)
¥
32,642
(2,931
)
29,711
2005
Foreign currency translation adjustments:
Amount arising during the year on
investments in foreign entities held at
end of period
¥
5,870
(8
)
5,862
Reclassification adjustments for the
portion of gains and losses realized upon
liquidation and sale of investments in
foreign entities
(226
)
—
(226
)
Net foreign currency translation
adjustments
5,644
(8
)
5,636
Unrealized gains (losses) on securities:
Unrealized holding gains arising for period
676
(119
)
557
Reclassification adjustments for (gains)
losses realized in net income
(671
)
267
(404
)
Net unrealized gains (losses)
5
148
153
Minimum pension liability adjustments
62,479
(29,538
)
32,941
Other comprehensive income (loss)
¥
68,128
(29,398
)
38,730
2004
Foreign 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 of investments in foreign
entities
422
—
422
Net foreign currency translation
adjustments
(26,042
)
(245
)
(26,287
)
Unrealized gains (losses) on securities:
Unrealized holding gains arising for period
886
(348
)
538
Minimum pension liability adjustments
23,608
(9,422
)
14,186
Other comprehensive income (loss)
¥
(1,548
)
(10,015
)
(11,563
)
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U.S. Dollars
(Thousands)
Tax
Before tax
(expense)
Net-of-tax
amount
or benefit
amount
2006
Foreign currency translation adjustments
$
223,145
(68
)
223,077
Unrealized gains (losses) on securities:
Unrealized holding gains arising for period
18,188
(7,316
)
10,872
Reclassification adjustments for (gains)
losses realized in net income
(3,308
)
60
(3,248
)
Net unrealized gains (losses)
14,880
(7,256
)
7,624
Minimum pension liability adjustments
40,966
(17,727
)
23,239
Other comprehensive income (loss)
$
278,991
(25,051
)
253,940
12. Leases
TDK and its subsidiaries occupy offices and other facilities under various cancellable lease
agreements expiring in fiscal 2007 through 2008. Lease deposits made under such agreements,
aggregating ¥1,827 million ($15,615 thousand) and ¥1,900 million, at March 31, 2006 and 2005,
respectively, are included in other assets on the accompanying consolidated balance sheets.
The following is a schedule by years of future minimum rental payments required under
operating leases that have initial or remaining noncancellable lease terms in excess of one year as
of March 31, 2006:
Yen
U.S. Dollars
(Millions)
(Thousands)
Year ending March 31,
2007
¥
2,499
$
21,359
2008
1,894
16,188
2009
1,437
12,282
2010
1,090
9,316
2011
791
6,761
Later years
3,873
33,103
¥
11,584
$
99,009
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13. Commitments and Contingent Liabilities
At March 31, 2006, commitments outstanding for the purchase of property, plant and equipment
approximated ¥13,088 million ($111,863 thousand). TDK has entered into several purchase agreements
with certain suppliers whereby TDK committed to purchase a minimum amount of raw materials to be
used in the manufacture of its products. Future minimum purchases remaining under the agreements
approximated ¥4,539 million ($38,795 thousand) at March 31, 2006.
TDK and certain of its subsidiaries provide guarantees to third parties on bank loans of its
employees. The guarantees on behalf of the employees are made for their housing loans. For each
guarantee issued, in the event the employee defaults on payment, TDK would be required to make
payments under its guarantee. The maximum amount of undiscounted payments TDK would have to make
in the event of default is ¥5,740 million ($49,060 thousand) and ¥6,296 million at March 31, 2006
and 2005, respectively. As of March 31, 2006, the liability recognized for the estimated fair
value of TDK's obligation under the guarantee arrangement is not material.
Several claims against TDK and certain subsidiaries are pending. Provision has been made for
the estimated liabilities for the items. In the opinion of management, based upon discussion with
counsel, any additional liability not currently provided for will not materially affect the
consolidated financial position and results of operations of TDK.
14. Risk Management Activities and Derivative Financial Instruments
TDK and its subsidiaries operate internationally which exposes them to the risk of changes in
foreign exchange rates and interest rates; derivative financial instruments are utilized to reduce
these risks. TDK and its subsidiaries do not hold or issue financial instruments for trading
purposes. TDK and its subsidiaries are exposed to credit related losses in the event of
nonperformance by the counterparties to those financial instruments, but does not expect any
counterparties to fail to meet their obligations given their high credit ratings. The credit
exposure of currency swaps, interest rate and currency swaps, forward foreign exchange contracts
and currency option contracts is represented by the fair values of contracts.
TDK and one of its subsidiaries had currency swaps and interest rate and currency swaps with
certain financial institutions to limit their exposure to fluctuations in foreign exchange rates
and interest rates related primarily to loans made by TDK to its subsidiaries in a total amount of
¥11,067 million at March 31, 2005. During the year ended March 31, 2006, TDK decided to use
forward exchange contracts to limit the aforementioned exposure. As a result, no currency swaps or
interest and currency swaps were outstanding at March 31, 2006. These swaps required TDK and the
subsidiary to pay principally euros and U.S. dollars and to receive Japanese yen at a specified
rate on specific dates. Gains or losses on interest and currency swaps and currency swaps were
included in interest expense and foreign exchange gain (loss) in the consolidated statements of
income, respectively. The swap contracts were measured at fair value and were included in prepaid
expenses and other current assets or other current liabilities, as the case may be, in the
consolidated balance sheets.
Forward exchange contracts and currency option contracts have been entered into to hedge
adverse effects of foreign currency exchange rate fluctuations mainly on
foreign-currency-denominated trade receivables and foreign-currency-denominated forecasted
transactions.
At March 31, 2006 and 2005, TDK and certain of its subsidiaries had forward exchange contracts
to sell and buy foreign currencies (principally U.S. dollars and Japanese yen) and currency option
contracts for a contract amount of ¥17,726 million ($151,504 thousand) and ¥28,990 million,
respectively. Gains or losses on forward exchange contracts and currency option contracts were
included in foreign exchange gain (loss) in the consolidated statements of income. These contracts
were measured at fair value and were
included in prepaid expenses and other current assets or other current liabilities, as the
case may be, in the consolidated balance sheets.
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15. Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of financial
instruments in cases for which it is practicable:
(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.
The carrying amount approximates fair value because of the short maturity of these
instruments.
(b)
Marketable securities and Investments in securities
The fair values of marketable securities and investments in securities are estimated based on
quoted market prices for these instruments. For other securities for which there are no quoted
market prices, a reasonable estimate of fair values could not be made without incurring excessive
costs. Additional information pertinent to the value of unquoted investments is provided below.
(c)
Long-term debt
The fair value of TDK's long-term debt is estimated based on the amount of future cash flows
associated with the instrument discounted using TDK's current borrowing rate for similar debt of
comparable maturity, or based on the quoted market prices for the same or similar issues.
(d)
Currency Swaps, Currency and Interest Rate Swaps, Forward Foreign Exchange Contracts and
Foreign Currency Option Contracts
The fair values of currency swaps, currency and interest rate swaps, forward foreign exchange
contracts and foreign currency option contracts are estimated by obtaining quotes from financial
institutions.
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The carrying amounts and estimated fair values of TDK's financial instruments at March 31,
2006 and 2005, are summarized as follows:
Yen (Millions)
As of March 31, 2006
Carrying amount
Estimated fair value
Nonderivatives:
Assets:
Investments in
securities and
other assets
for which it
is:
Practicable to estimate fair value
¥
20,497
20,497
Not practicable to estimate fair value
801
—
Liability:
Long-term debt, including current portion
(2,363
)
(2,363
)
Derivatives:
Forward foreign exchange contracts in a:
Gain position
8
8
Loss position
—
—
Currency option contracts in a:
Gain position
—
—
Loss position
(8
)
(8
)
Yen (Millions)
As of March 31, 2005
Carrying amount
Estimated fair value
Nonderivatives:
Assets:
Investments in securities and other assets
for which it is:
Practicable to estimate fair value
¥
12,684
12,684
Not 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
)
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Table of Contents
U.S. Dollars (Thousands)
As of March 31, 2006
Carrying amount
Estimated fair value
Nonderivatives:
Assets:
Investments in securities and other assets
for which it is:
Practicable to estimate fair value
$
175,188
175,188
Not practicable to estimate fair value
6,846
—
Liability:
Long-term debt, including current
portion
(20,197
)
(20,197
)
Derivatives:
Forward foreign exchange contracts in a:
Gain position
68
68
Loss position
—
—
Currency option contracts in a:
Gain position
—
—
Loss position
(68
)
(68
)
The carrying amounts of the nonderivative assets and liabilities are included in the
consolidated balance sheets under the indicated captions. The carrying amounts of the currency
swaps, the currency and interest rate swaps, forward foreign exchange contracts and foreign
currency option contracts in a gain position are included in prepaid expenses and other current
assets, while those in a loss position are included in other current liabilities.
It is not practicable to estimate the fair value of investments in untraded companies.
Management believes that the carrying amounts approximate fair value.
Limitations
Fair value estimates are made at a specific point in time, based on relevant market
information and information about the financial instrument. These estimates are subjective in
nature and involve uncertainties and matters of significant judgment and therefore cannot be
determined with precision. Changes in assumptions could significantly affect the estimates.
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16. Restructuring Cost
On March 8, 2006, TDK's board of directors decided to restructure certain of its recording
media business, including the withdrawal from the manufacturing of recordable CD and DVDs.
Pursuant to that decision, TDK shut down the production facilities at its European subsidiary,
TDK Recording Media Europe S.A. in Luxembourg in April 2006. In March 2006, TDK recorded a
restructuring cost of ¥6,825 million ($58,333 thousand) which included a charge of ¥3,309 million
($28,282 thousand) relating to employee termination benefits. As a result of the restructuring, a
total of 350 regular employees were terminated through May 31, 2006. In addition, TDK recorded a
restructuring cost of ¥2,594 million ($22,171 thousand) relating to an impairment of property,
plant and equipment in connection with the decision to shut down production facilities at its
European subsidiary.
The change of the restructuring liabilities for the year ended March 31, 2006 is as follows:
Yen (Millions)
2006
Impairment on
Workforce
property, plant
reduction
and equipment
Other
Total
Beginning balance
¥
—
—
—
—
Costs and expenses
3,309
2,594
922
6,825
Payments
286
—
242
528
Non-cash adjustments
—
2,594
—
2,594
Ending balance
¥
3,023
—
680
3,703
U.S. Dollars (Thousands)
Beginning balance
$
—
—
—
—
Costs and expenses
28,282
22,171
7,880
58,333
Payments
2,444
—
2,068
4,512
Non-cash adjustments
—
22,171
—
22,171
Ending balance
$
25,838
—
5,812
31,650
Restructuring liabilities were included in Accrued expenses in the consolidated balance sheets
as of March 31, 2006.
TDK expects that the entire accrued liabilities of ¥3,703 million ($31,650 thousand)
recognized at March 31, 2006 will be paid by September 30, 2006.
17. Assets Held for Sale
At March 31, 2006, assets held for sale consists of certain property, plant and equipment,
which were classified as held for sale in connection with the restructuring activities in Europe
(Note 16) and certain property, plant and equipment in Japan in accordance with FASB Statement of
Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets". TDK recorded write-downs to fair value less cost to sell in the amount of ¥2,594 million
($22,171 thousand) in 2006, which was included in restructuring cost in the consolidated statements
of income. TDK expects these assets to be sold during the year ended March 31, 2007.
At March 31, 2005, assets and liabilities held for sale consists of assets and liabilities of
TDK's former subsidiary TDK Semiconductor Corporation ("TSC"), which was sold during the year ended
March 31, 2006 (Note 21).
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The components of the assets and liabilities held for sale at March 31, 2006 and 2005 are as
follows:
Yen
U.S. Dollars
(Millions)
(Thousands)
2006
2005
2006
Assets held for sale
Current assets
¥
—
548
$
—
Net property, plant and equipment
4,110
430
35,128
Other assets
—
15
—
4,110
993
35,128
Liabilities held for sale
Current liabilities
¥
—
92
$
—
18. Goodwill and Other Intangible Assets
The components of acquired intangible assets excluding goodwill at March 31, 2006 and 2005,
are as follows:
Yen (Millions)
2006
Gross Carrying
Accumulated
Amount
Amortization
Net Amount
Amortized intangible assets:
Patent
¥
10,350
3,226
7,124
Customer relationships
10,673
441
10,232
Software
9,268
5,389
3,879
Other
7,024
1,658
5,366
Total
37,315
10,714
26,601
Unamortized intangible assets
¥
2,877
2,877
Yen (Millions)
2005
Gross Carrying
Accumulated
Amount
Amortization
Net Amount
Amortized intangible assets:
Patent
¥
10,347
2,242
8,105
Software
7,271
4,399
2,872
Other
2,346
715
1,631
Total
19,964
7,356
12,608
Unamortized intangible assets
¥
639
639
U.S. Dollars (Thousands)
2006
Gross Carrying
Accumulated
Amount
Amortization
Net Amount
Amortized intangible assets:
Patent
$
88,462
27,573
60,889
Customer relationships
91,222
3,769
87,453
Software
79,214
46,060
33,154
Other
60,034
14,171
45,863
Total
318,932
91,573
227,359
Unamortized intangible assets
$
24,590
24,590
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Intangible assets subject to amortization are amortized using the straight-line method
over their estimated useful lives to their estimated residual value of zero. The useful lives are
11 years for the Patents, 5 to 17 years for Customer relationships, 2 to 10 years for Internal-use
Software, and 8 to 10 years for Other intangible assets.
Aggregate amortization expense for the years ended March 31, 2006, 2005 and 2004 was ¥3,618
million ($30,923 thousand), ¥2,467 million and ¥2,626 million, respectively. Estimated
amortization expense for the next five years is: ¥3,779 million in 2007, ¥3,217 million in 2008,
¥2,888 million in 2009, ¥2,730 million in 2010, and ¥2,440 million in 2011.
The changes in the carrying amount of goodwill by segment for the year ended March 31, 2006 is
as follows:
Yen (Millions)
Electronic
materials and
Recording
components
media
Total
March 31, 2004
¥
10,029
—
10,029
Additions
991
—
991
Deductions
(1,975
)
—
(1,975
)
Translation adjustment
165
—
165
March 31, 2005
9,210
—
9,210
Additions
9,782
—
9,782
Deductions
(401
)
—
(401
)
Translation adjustment
862
—
862
March 31, 2006
¥
19,453
—
19,453
U.S. Dollars (Thousands)
Electronic
materials and
Recording
components
media
Total
March 31, 2005
$
78,718
—
78,718
Additions
83,607
—
83,607
Deductions
(3,427
)
—
(3,427
)
Translation adjustment
7,367
—
7,367
March 31, 2006
$
166,265
—
166,265
Goodwill additions during the year ended March 31, 2006 represent the excess of purchase price
over the fair value of assets acquired and liabilities assumed in connection with the acquisition
of Lambda Power Business in the amount of ¥4,854 million (Note 23) and ¥4,928 million in connection
with an immaterial acquisition made during the year. Goodwill deductions during the year ended
March 31, 2006 primarily consist of an impairment loss in the amount of ¥159 million and the
reclassification to deferred income taxes in the amount of ¥154 million related to post-acquisition
adjustment resulting from recognition of preacquisition tax benefits.
Goodwill additions during the year ended March 31, 2005 represent the excess of purchase price
over the fair value of assets acquired and liabilities assumed for a certain immaterial acquisition
made during the year. Goodwill deductions during the year ended March 31, 2005 primarily consist
of an impairment loss from discontinued operations in the amount of ¥1,856 million in connection
with the discontinuation of TDK's semiconductor business (Note 21) and a reclassification to
deferred income taxes in the amount of ¥119 million related to post-acquisition adjustment
resulting from recognition of preacquisition tax benefits.
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19. Net Income per Share
A reconciliation of the numerators and denominators of the basic and diluted net income per
share computations is as follows:
Yen
U.S. Dollars
(Millions)
(Thousands)
2006
2005
2004
2006
Income from continuing
operations available to common
stockholders
¥
44,411
36,965
43,355
$
379,581
Loss from discontinued
operations available to common
stockholders
310
3,665
1,254
2,649
Net income available to common
stockholders
¥
44,101
33,300
42,101
$
376,932
Number of shares (Thousands)
2006
2005
2004
Weighted average common shares
outstanding — Basic
132,239
132,293
132,475
Effect of dilutive stock options
116
83
48
Weighted average common shares
outstanding — Diluted
132,355
132,376
132,523
Yen
U.S. Dollars
2006
2005
2004
2006
Income from
continuing
operations per
share:
Basic
¥
335.84
279.41
327.27
$
2.87
Diluted
335.54
279.25
327.15
2.87
Loss from
discontinued
operations per
share:
Basic
¥
(2.34
)
(27.70
)
(9.47
)
$
(0.02
)
Diluted
(2.34
)
(27.69
)
(9.46
)
(0.02
)
Net income per share:
Basic
¥
333.50
251.71
317.80
$
2.85
Diluted
333.20
251.56
317.69
2.85
20. Business and Credit Concentrations
One significant customer, Maxtor Peripherals (S) Pte. Ltd., related to electronic materials
and components business accounted for 11.5 percent, 12.6 percent and 12.1 percent of TDK's net
sales for the years ended March 31, 2006, 2005 and 2004, respectively, and 12.7 percent and 13.2
percent of trade receivables at March 31, 2006 and 2005, respectively.
During the year ended March 31, 2006, the said customer agreed to be acquired by a competitor.
The acquisition was completed in May 2006. During the year ended March 31, 2007, TDK will be
losing the majority of the sales from this customer that it recorded in the year ended March 31, 2006.
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21. Discontinued Operations
On March 31, 2005, TDK entered into an agreement to sell all outstanding stock of its wholly
owned subsidiary, TSC for $14,028 thousand to Golden Gates Capital ("Buyer"). The sale of TSC is
part of TDK's continuing shift away from non-core products and technologies. The sale agreement
also includes earn-out payments, to be made by the Buyer to TDK, of up to $32,500 thousand. No
earn-out payments were made through March 31, 2006. The payments are contingent upon certain
milestones being met related to future revenue targets extending through 2007. The transaction was
completed on April 8, 2005. TDK has accounted for the sale of TSC as a discontinued operation
pursuant to FASB Statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets", as TSC meets the definition of a "component of an entity". The results of operations for
this subsidiary have been reported as discontinued operations for all periods presented.
Accordingly, certain financial statement information and related footnote disclosures related to
prior periods have been reclassified.
Selected financial information for the years ended March 31, 2006, 2005 and 2004 for the
discontinued operations, are summarized as follows:
U.S. Dollars
Yen (Millions)
(Thousands)
2006
2005
2004
2006
Net sales
¥
45
2,242
3,070
$
385
Loss from operations before
income taxes (including loss on
disposal of ¥224 million in
2006)
310
3,509
244
2,649
Income tax expense
—
156
1,010
—
Loss from discontinued operations
¥
310
3,665
1,254
$
2,649
Included in loss from discontinued operations for the year ended March 31, 2004, is patent
infringement settlement income in the amount of ¥1,933 million which, prior to being reclassified,
was previously included in income before income taxes for the year. This patent infringement
settlement income has been reflected as a component of loss from discontinued operations as it
directly relates to the TSC business being disposed.
On August 6, 2001, TSC filed suit against Silicon Laboratories, Inc. ("SiLabs") alleging
infringement by SiLabs of U.S. Patent No. 5,654,984 entitled "Signal Modulation Across Capacitors"
("the '984 patent") owned by TSC. The patent relates to novel methods and circuitry for
communicating a signal across an isolation barrier using capacitors. The patented technology is
principally useful in modem applications. TDK's lawsuit alleged that SiLabs integrated the
patented technology into its competing modem products. SiLabs counterclaimed alleging (1) unfair
competition and (2) intentional and negligent interference with economic relations.
In April 2003, the parties resolved the dispute with the execution of a Settlement Agreement
wherein both parties agreed to dismiss all litigation between them without admitting any liability.
In exchange for the payment of $17 million to TSC, SiLabs was granted a fully paid-up, exclusive
perpetual license to use the '984 patent, as well as three ancillary patents owned by TSC.
Pursuant to the Settlement Agreement, TDK has no further obligation to provide additional services,
product deliverables or enhancements to the licensed technology. TSC did reserve for itself and
other TDK companies the right to use the patents with regard to TDK-branded products. In addition,
TSC agreed that neither it or any TDK entity would pursue a claim against SiLabs for a period of 20
years for patent infringement related to any SiLabs product in existence at the time of the
settlement or any capacitive-based digital access arrangement ("DAA") product subsequently
introduced by SiLabs.
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Table of Contents
22. Sale of a Subsidiary
On October 1, 2004, TDK Logistics Corporation ("TDK Logistics"), a wholly owned subsidiary
which provided warehousing and transportation services to only TDK, was acquired in a share for
share exchange by Alps Logistics Co., Ltd. ("ALPS"), a third party listed company on the Tokyo
Stock Exchange. The share exchange ratio was 0.82 of an ALPS share for one TDK Logistics share.
The fair value of shares issued to effect this transaction was determined based on the market value
of ALPS common shares at the consummation date and amounted to ¥3,365 million. As a result of the
acquisition, TDK owns approximately 7.9 percent of the outstanding common stock of ALPS. TDK
continues to use warehousing and transportation services which are now provided by ALPS. The sale
of TDK Logistics does not meet the criteria for reporting as discontinued operations as the
operations and cash flows of the former subsidiary will not be eliminated from the cash flows of
TDK. TDK recorded a gain on sale of ¥1,799 million which is included in operating income in the
consolidated statement of income for the year ended March 31, 2005.
23. Acquisition
On October 1, 2005, TDK acquired 59 percent of the issued and outstanding common shares of
Lambda Power Business from U.K.-based Invensys plc. The results of Lambda Power Business's
operations have been included in the accompanying consolidated financial statements of TDK since
that date. The acquisition is intended to establish a more resilient operating base for TDK in the
power supply field, which is expected to continue to grow in the years ahead, by combining TDK's
strengths with those of the various businesses of Lambda Power Business. The total purchase price
was ¥24,202 million, net of cash acquired of ¥4,305 million.
The purchase price has been allocated based on the fair value of the assets acquired,
including identifiable intangible assets and liabilities assumed, at the date of acquisition. The
excess of the cost of the acquisition over the net of amounts assigned to the fair value of the
tangible and identifiable intangible assets acquired and the liabilities assumed is recorded as
goodwill. Goodwill is not deductible for tax purposes. The following table summarizes the
estimated fair value of the assets acquired and liabilities assumed at the date of the acquisition.
Yen
U.S. Dollars
(Millions)
(Thousands)
Current assets
¥
23,176
$
198,086
Property, plant and equipment
9,673
82,675
Intangible assets
13,686
116,974
Goodwill
4,854
41,487
Other assets
5,090
43,504
Total assets acquired
56,479
482,726
Current liabilities
(13,429
)
(114,777
)
Noncurrent liabilities
(9,583
)
(81,906
)
Minority interests
(9,265
)
(79,188
)
Total liabilities assumed
(32,277
)
(275,871
)
Net assets acquired
¥
24,202
$
206,855
The acquired intangible assets which are being amortized have a weighted average useful life
of approximately 15 years. The intangible assets include customer relationships of ¥9,778 million
(16-years weighted average useful life), patented technology of ¥1,134 million (8-years weighted
average useful life), and other intangible assets of ¥550 million (1-year weighted average useful
life). The acquired intangible assets which are not being amortized include trademarks of ¥2,132
million and other intangible assets of ¥92 million.
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Table of Contents
Pro Forma Results
The following unaudited pro forma financial information presents the combined results of
operations of TDK and Lambda Power Business as if the acquisition had occurred as of April 1, 2005
and 2004. The results of Lambda Power Business have been included in the historical financial
statements of TDK since the date of acquisition. The unaudited pro forma financial information is
not intended to represent or be indicative of TDK's consolidated results of operations or financial
condition that would have been reported had the acquisition been completed as of the beginning of
the periods presented and should not be taken as indicative of the TDK's future consolidated
results of operations or financial condition.
(Unaudited)
Yen
U.S. Dollars
(Millions)
(Thousands)
2006
2005
2006
Net sales
¥
816,431
¥
702,566
$
6,978,043
Income from continuing operations
44,188
35,354
377,675
Loss from discontinued operations
310
3,665
2,650
Net income
43,878
31,689
375,026
Yen
U.S. Dollars
2006
2005
2006
Income from continuing operations
per share:
Basic
¥
334.15
267.24
$
2.86
Diluted
333.86
267.07
2.85
Loss from discontinued operations
per share:
Basic
¥
(2.34
)
(27.70
)
$
(0.02
)
Diluted
(2.34
)
(27.69
)
(0.02
)
Net income per share:
Basic
¥
331.81
239.54
$
2.84
Diluted
331.52
239.38
2.83
Unaudited pro forma net income for 2006 and 2005 includes ¥698 million (net of tax effect) for
the amortization of acquired intangibles.
On May 17, 2005, TDK acquired 100 percent of the issued and outstanding shares of Amperex
Technology Limited ("ATL"), a Hong Kong based company engaged in the production and sale of Polymer
Lithium Batteries with about 3,000 employees, for the total purchase price of approximately ¥8,666
million, net of cash acquired. In connection with this transaction, TDK recognized goodwill of
¥3,803 million and intangible assets of ¥3,497 million.
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Table of Contents
24. Related party transaction
Receivables and payables include the following balances with affiliated companies at March 31,
2006 and 2005:
Yen
U.S. Dollars
(Millions)
(Thousands)
2006
2005
2006
Due from
¥
5,515
4,680
$
47,137
Due to
5,169
5,068
44,179
Purchases, research and development expenses, and sales include the following transactions
with affiliated companies for the years ended March 31, 2006, 2005 and 2004:
Yen
U.S. Dollars
(Millions)
(Thousands)
2006
2005
2004
2006
Gross purchase
¥
55,963
52,351
46,608
$
478,316
Less raw materials
sold with no
mark-up
(46,580
)
(43,786
)
(38,133
)
398,120
Net purchases
9,383
8,565
8,475
80,196
Research and
development
expenses
2,141
2,089
1,130
18,299
Sales
249
198
161
2,128
25. Supplementary Information
Yen
U.S. Dollars
(Millions)
(Thousands)
2006
2005
2004
2006
(a) Statement of Income
Research and development
¥
45,528
36,348
32,948
$
389,128
Rent
7,739
7,349
8,037
66,145
Maintenance and repairs
13,732
11,090
11,875
117,368
Advertising costs
4,828
4,926
6,261
41,265
(b) Statement of Cash Flows
Cash paid during year for:
Interest
¥
749
331
350
$
6,402
Income taxes
¥
32,789
13,740
4,299
$
280,248
Noncash activities
In fiscal 2006, noncash investing activities related to the purchase of subsidiaries were as
follows:
Yen
U.S. Dollars
(Millions)
(Thousands)
Short-term debt assumed in connection with
business acquisition
¥
781
$
6,675
Long-term debt assumed in connection with
business acquisition
2,107
18,009
In fiscal 2005, TDK received a 7.9 percent ownership interest in ALPS having a fair value of
¥3,365 million in exchange for all issued and outstanding shares of TDK Logistics in a
share-to-share exchange transaction.
In fiscal 2004, there were no material noncash investing and financing activities.
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Table of Contents
Schedule II
TDK CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
(In millions of yen)
Years ended March 31, 2006, 2005 and 2004
Balance at
beginning of
Charged to
Bad debts
Translation
Balance at
period
earnings
written off
adjustment
end of period
Year ended
March 31, 2006:
Allowance for
doubtful receivables
¥
2,560
1,355
71
220
4,064
Year ended
March 31, 2005:
Allowance for
doubtful receivables
¥
2,000
598
106
68
2,560
Year ended
March 31, 2004:
Allowance for
doubtful receivables
¥
2,850
(227
)
373
(250
)
2,000
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Table of Contents
Item 18.
Financial Statements
Not applicable.
Item 19.
Exhibits
Documents filed as exhibits to this annual report are as follows:
1.1
ARTICLES OF INCORPORATION (English translation)
1.2
REGULATIONS OF THE BOARD OF DIRECTORS (English translation)
2.1
SHARE HANDLING REGULATIONS (English translation)
8.1
List of Significant Subsidiaries
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
Company
12.2
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of CFO of the
Company
13.1
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of CEO of the
Company
13.2
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of CFO of the
Company
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Table of Contents
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the
Registrant certifies that it meets all the requirements for filing of Form 20-F and has duly caused
this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.
TDK Corporation
(Registrant)
Date: July 27, 2006
By:
/s/Hajime Sawabe
Hajime Sawabe
Representative Director,
Chairman and CEO
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