SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

o 

REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

x 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2006

OR

o 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 1-5238

Nihon Densan Kabushiki Kaisha

(Exact name of registrant as specified in its charter)

NIDEC CORPORATION

(Translation of Registrant’s name into English)

Japan	338 Kuzetonoshiro-cho, Minami-ku, Kyoto 601-8205 Japan
(Jurisdiction of incorporation or organization)	(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange On Which Registered
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 each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

As of March 31,  2006, 144,619,182 shares of common stock were outstanding, including 6,329,604 shares represented by 25,318,416 American Depositary Shares .

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x   No o

If this report is an annual transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes o   No x

Indicate by 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 x   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  x   Accelerated filer  o    Non-accelerated filer  o

Indicate by check mark which financial statement item the registrant has elected to follow:

Item 17  o   Item 18x

If this is an annual report, indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o   No x

*

Not for trading, but only in connection with the listing of the American Depositary Shares, each representing one-fourth of one share of Common Stock.

	TABLE OF CONTENTS
		Page
PART I
Item  1.	Identity of Directors, Senior Management and Advisors.	3
Item  2.	Offer Statistics and Expected Timetable.	3
Item  3.	Key Information.	4
Item  4.	Information on the Company.	17
Item  4A.	Unresolved Staff Comments	44
Item  5.	Operating and Financial Review and Prospects.	45
Item  6.	Directors, Senior Management and Employees.	78
Item  7.	Major Shareholders and Related Party Transactions	83
Item  8.	Financial Information	84
Item  9.	The Offer and Listing.	86
Item 10.	Additional Information.	89
Item 11.	Quantitative and Qualitative Disclosures about Market Risk.	105
Item 12.	Description of Securities Other Than Equity Securities.	109
PART II
Item 13.	Defaults, Dividend Arrearages and Delinquencies.	109
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds.	109
Item 15.	Controls and Procedures.	110
Item 16A.	Audit Committee Financial Expert.	112
Item 16B.	Code of Ethics.	112
Item 16C.	Principal Accountant Fees and Services.	112
Item 16D.	Exemptions from the Listing Standards for Audit Committees.	113
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchases	115
PART III
Item 17.	Financial Statements	116
Item 18.	Financial Statements	116
Item 19.	Exhibits.	117
Index to Consolidated Financial Statements and Information.		F-1

As used in this annual report, unless otherwise specified, references to “Nidec” are to Nidec Corporation, and references to “we,” “our” and “us” are to Nidec Corporation and, except as the context otherwise requires, its consolidated subsidiaries.

As used in this annual report, “U.S. dollar” or “$” means the lawful currency of the United States of America, and “yen” or “¥” means the lawful currency of Japan.

As used in this annual report, “U.S. GAAP” means accounting principles generally accepted in the United States, and “Japanese GAAP” means accounting principles generally accepted in Japan.

As used in this annual report, “ADS” means an American Depositary Share, and “ADR” means an American Depositary Receipt.

In tables appearing in this annual report, figures may not add up to totals due to rounding.

2

PART I

Item 1.

Identity of Directors, Senior Management and Advisors.

Not applicable.

Item 2.

Offer Statistics and Expected Timetable.

Not applicable.

3

Item 3. Key Information.

A. Selected Financial Data.

The following table include selected historical financial data as at and for the years ended March 31, 2002 through 2006 derived from our consolidated financial statements prepared in accordance with the U.S. GAAP. You should read the selected financial data below in conjunction with Item 5 of this annual report and our audited consolidated financial statements which are included in this annual report.

Selected Financial Data

		Year ended March 31,
	2002	2003	2004	2005	2006	2006
	(Yen in millions and U.S. dollars in thousands, except number of shares outstanding and per share amounts)
Income statement data:
Net sales	¥193,332	¥231,836	¥277,497	¥485,861	¥536,858	$4,570,171
Cost of products sold	159,442	187,306	218,189	370,938	413,012	3,515,893
Selling, general and administrative expenses	17,691	21,302	28,542	35,340	41,188	350,626
Operating income	10,472	16,404	22,015	53,665	53,426	454,805
Income before provision for income taxes	11,477	10,911	19,639	57,290	64,378	548,038
Net income	6,580	10,680	16,089	33,455	40,949	348,591
Balance sheet data (period end):
Total assets	¥257,911	¥257,932	¥443,886	¥484,173	¥565,970	$4,817,996
Short-term borrowings	58,395	64,597	86,636	28,478	43,621	371,337
Current portion of long-term debt	15,365	8,951	2,653	8,493	4,647	39,559
Long-term debt	21,360	16,388	45,025	37,833	32,134	273,551
Total shareholders’ equity	85,475	88,557	110,046	207,040	263,659	2,244,479
Common stock	26,469	26,485	28,995	61,180	65,649	558,858
Number of shares outstanding	127,127,306	127,149,458	130,035,796	142,504,926	144,661,292	144,661,292
Per share data:
Net income per share-basic (1)	¥51.76	¥84.01	¥125.57	¥239.87	¥285.47	$2.43
Net income per share-diluted (1)	49.42	79.91	120.76	228.29	275.05	2.34
Cash dividends paid per share	13.75	10.00	15.00	17.50	25.00	0.21

Notes:

(1) Calculated using the average number of shares outstanding for the period (excluding shares held by Nidec). Number of shares outstanding and all per share amounts have been restated to reflect the retroactive effect of the 2 for 1 stock split that took effect on November 18, 2005. More detailed information regarding diluted shares outstanding is included in Note 20 in our consolidated financial statements included in this annual report.

4

We increased our interests in Nidec Copal Corporation and Nidec Copal Electronics Corporation, to over fifty percent each in January and February 2004, and they became our consolidated subsidiaries. Their results of operations are reflected in our financial statements for the year ended March 31, 2005 from the time of their consolidation.

We acquired an approximately 40% share in Nidec Sankyo Corporation in October 2003 and increased our share to over 50% in February 2004. As a result, the results of operations of this subsidiary are included in our consolidated results of operations from February 2004.

Fluctuations in exchange rates between the Japanese yen and U.S. dollar and other currencies will affect the U.S. dollar and other currency equivalents of the yen price of our shares and ADSs and the U.S. dollar amounts received on conversion of cash dividends. We have translated some Japanese yen amounts presented in this annual report into U.S. dollars solely for your convenience. Unless otherwise noted, the rate used for the translations was ¥117.47 per $1.00, which was the approximate exchange rate in Japan on March 31, 2006.

	High	Low	Average	Period-end
Year ended March 31,
2002	134.77	115.89	125.05	132.70
2003	133.41	115.71	121.95	118.07
2004	120.55	104.18	113.07	104.18
2005	114.30	102.26	107.49	107.22
2006	120.93	104.41	113.15	117.48
Calendar period
January 2006	117.55	113.96	115.48	116.88
February 2006	118.95	115.82	117.86	115.82
March 2006	119.07	115.89	117.28	117.48
April 2006	118.66	113.79	117.07	113.79
May 2006	113.46	110.07	111.73	112.26
June 2006	116.42	111.66	114.63	114.51
July 2006	117.44	113.97	115.77	114.44
August 2006	116.53	114.21	115.23	117.35

The above table presents the noon buying rates for Japanese yen per $1.00 in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York for and as of the end of each period indicated. These translations do not imply that the yen amounts actually represent, or have been or could be converted into, equivalent amounts in U.S. dollars at these rates or at all.

As of September 19 , 2006, the noon buying rate was ¥117.60 per $1.00.

B. Capitalization and Indebtedness.

Not applicable.

C. Reasons for the Offer and Use of Proceeds.

Not applicable.

5

D. Risk Factors.

If any of the risks described below actually occurs, our business, financial condition or results of operations could be adversely affected.

Our customer base is highly concentrated, and our sales would suffer if one or more of our significant customers substantially reduce or cancel orders for our products

We are dependent on a limited number of large customers for a substantial portion of our net sales. Sales to our largest customer, Seagate, were approximately 14%, 8% and 11% of total net sales for the year ended March 31, 2004, 2005 and 2006, respectively. Sales to our six largest customers represented approximately 41%, 29% and 34% of our net sales for the years ended March 31, 2004, 2005 and 2006, respectively and the six customers also represented ¥23.6 billion, or 24%, ¥33.6 billion, or 30% and 37.0 billion, or 29% of our gross accounts receivable at March 31, 2004, 2005 and 2006, respectively. As a result of customer concentration, our net sales could be significantly impacted in the event of:

•

a significant reduction, delay or cancellation of orders from one or more of our significant customers;

•

a decision by one or more significant customers to select products manufactured by a competitor, or its own internally developed components, for inclusion in future product generations; or

•

financial difficulties affecting one or more significant customers.

We expect that, for the foreseeable future, sales to a limited number of customers will continue to account for a high percentage of our net sales. If current customers do not continue to place orders, we may not be able to replace these orders with orders from new customers, and this would significantly impact our business, operating results and financial condition.

We depend on the computer industry for sales of our products, and our business may be adversely affected by a decline in the computer market

Our precision motor and fan products are components used primarily in computer systems. A substantial portion of our net sales in turn depends on sales of computers and computer peripherals that incorporate our products. Revenues from hard disk drive spindle motors accounted for 38.5%, 24.5% and 30.7% of our net sales for the years ended March 31, 2004, 2005 and 2006, respectively. Although we have been diversifying our products and entering into new markets, such as motors for use in household appliances, automobiles and home entertainment equipment, we expect to continue to derive a significant portion of our revenues from the sale of products for use in computers and computer peripherals. The markets for computers and computer peripherals are cyclical and have been characterized by:

•

rapid technological change;

•

frequent new product introductions and short product life cycles;

•

significant price competition and price erosion;

•

fluctuating inventory levels;

•

alternating periods of over-capacity and capacity constraints due, in part, to cyclical and seasonal market patterns;

•

variations in manufacturing costs and yields; and

•

significant expenditures for manufacturing equipment and product development.

6

The computer market grew substantially in the late 1990s and then experienced a significant downturn from which it is only now continuing to recover. The downturn was characterized by lower product demand and accelerated reductions of product prices. These conditions prompted restructuring of operations by hardware manufacturers, including makers of hard disk drives, including our customers. Such restructurings involving our customers may result in our customers seeking to reduce costs and inventories, which could in turn reduce our margins or sales volumes. These customers may also switch to suppliers other than us. Such restructuring or similar moves by hard disk drive manufacturers in the future could have a material negative impact on our results of operations if we are unable to increase sales to other hard disk drive manufacturers or increase sales of spindle motors for non-desktop use.

The rate of decline in average selling price accelerates when, as is currently the case in the hard disk drive industry, competitors lower prices to absorb excess capacity, liquidate excess inventories, restructure or attempt to gain market share. During an industry downturn, manufacturers may abruptly stop purchasing additional inventory from suppliers such as us. And because many of our customers have adopted just-in-time inventory management processes, we often maintain up to one month’s inventory at or near the customer’s production facility, a practice which may force us to absorb excess inventories when growth slows. Our inventory was ¥45.2 billion at March 31, 2004, ¥49.0 billion at March 31, 2005 and ¥60.5 billion at March 31, 2006. Maintaining inventory increases our capital requirements and costs, complicates our inventory management strategies and makes it more difficult to match manufacturing plans with customer demand, thereby increasing the risk of inventory obsolescence and price erosion during periods of reduced demand, which could in turn have a material adverse effect on our business, financial condition and results of operations.

The hard disk drive industry is fast extending its reach into the realm of digital consumer electronics. The prospect of rapid expansion of the digital consumer electronics market is intensifying the competition between hard disk drive manufacturers and manufacturers of other data-storage alternatives such as semiconductor memory devices.

Excessive competition in the data-storage market, combined with the volatile nature of the digital consumer electronics market, could force hard disk drive manufacturers to exercise unexpectedly drastic production adjustments. Such event could reduce demand for our products, eventually affecting our business, financial condition and results of operations.

We are facing downward pricing pressure in our main product markets, and price declines could reduce our revenues and gross margins

We expect downward pricing pressure in our main product markets to continue. The hard disk drive industry, in particular, is characterized by rapidly declining average selling prices over the life of a product even for those products which are competitive and timely to-market. Our average selling price for hard disk drive spindle motors fell by approximately 9% and 9% during the years ended March 31, 2004 and 2005, respectively, although it rose by approximately 4% during the years ended March 31, 2006. In general, the average selling price for a given product in the hard disk drive market decreases over time as increases in the supply of competitive products and cost reductions occur and as technological advancements are achieved. There is also intense price competition among hard disk drive manufacturers and, as a result, our principal customers pressure us to lower the prices of our spindle motors. Falling prices reduce our margins, cause operating results to suffer and may make it difficult for us to maintain profitability. If we are not able to achieve such cost reductions, develop new customized products or increase our unit sales volume, our business, financial condition and results of operations could be materially and adversely impacted.

7

If our third party suppliers experience capacity constraints or production failures, our production could be significantly harmed

We rely on third party suppliers for some of the materials and equipment used in our manufacturing processes, including connectors and electric circuit unit assemblies. Our production capacity would nevertheless be limited if one or more of these materials were to become unavailable or available in reduced quantities or if we were unable to find alternative suppliers. If our source of materials and supplies were unavailable for a significant period of time, our operating results would be adversely affected.

We face aggressive competition both in the spindle motor market and in the markets into which we are attempting to expand our business, which could have a material adverse effect on our business and results of operations

Our major competitors in the area of hard disk drive spindle motors have increased their production capacity in recent periods, which has resulted in intensified competition and a reduction in prices. This trend of severe competition is likely to intensify as our competitors offer very competitive prices in order to grab larger market shares. It is also possible that ball bearing or other subcomponent manufacturers will try to enter the spindle motor market. In the area of mid-size motors for automobiles and household appliances, some of our competitors have substantially greater financial, engineering, manufacturing, marketing, service and support resources than we do and may have substantially greater name recognition, manufacturing expertise and capability and longer standing customer relationships than we do.

To remain competitive in our core business area of spindle motors and to increase our competitiveness in other motor markets in which we are attempting to expand our business, we believe that we must maintain a substantial investment in research and development and expand our manufacturing capability, marketing, sales efforts and customer service and support. We must also develop new products and enhance our existing products in a timely manner. We may not compete successfully in all or some of our markets in the future, and we may not have sufficient resources to continue to make such investments. We may not make the technological advances necessary to maintain our competitive position so that our products will receive industry acceptance. We anticipate that we may have to adjust prices on many of our products to stay competitive, and our profit margins may fall. In addition, technological changes, manufacturing efficiencies or development efforts by our competitors may render our products or technologies obsolete or uncompetitive. Our failure to maintain our competitive position could have a material adverse effect on our business and results of operations.

We may be unable to commercialize customized products that satisfy customers’ needs in a timely manner and in sufficient quantities, which could damage our reputation and reduce sales

Many of our customers work directly with component suppliers such as us to design and build customized products for specific needs. A significant portion of our contracts with these customers require us to provide customized products within a set delivery timetable. If we are unable to commercialize new product lines including design, manufacture and delivery of customized products, we may not be able to meet our customers’ product needs or timetables. Although we have not had such problems in the past, any future failure to meet significant customer requirements could damage our reputation and impede our ability to expand our business in markets for these products.

8

We could experience losses or damage to our reputation if any of the end-products in which our motors or other products are incorporated malfunction, causing damage to persons, property or data

Our small precision motors and other products are a key component in many consumer electronics devices, particularly data storage devices such as hard disk drives. Widespread malfunction of such devices could lead to consumer dissatisfaction, recalls and, potentially, lawsuits. If such problems are caused by or attributed or alleged to be attributed to defects in our motors or their design, we might be drawn into disputes with our customers, our reputation could be damaged and our results of operations might be adversely affected by lost sales or costs associated with recalls or defending ourselves against legal claims. We may suffer such losses or damage regardless of whether our products were defective.

Our operating results may fluctuate significantly because of a number of factors, many of which are beyond our control

We have experienced, and expect to continue to experience, fluctuations in sales and operating results from one quarter to the next. As a result, we believe that quarter-to-quarter comparisons of our operating results are not necessarily meaningful, and that such comparisons cannot be relied upon as indicators of future performance. Our operating results may be subject to significant quarterly fluctuations as a result of the following principal factors:

•

fluctuations in product demand as a result of the cyclical and seasonal nature of the industries in which our motor and drive technology products are sold and used, including the computer industry;

•

translation effect of exchange rate fluctuations on the results of our overseas subsidiaries;

•

the availability and extent of utilization of our manufacturing capacity;

•

changes in our product or customer mix;

•

entry of new competitors;

•

cancellation or rescheduling of significant orders, which can occur on short notice;

•

deferrals of customer orders in anticipation of new products or enhancements;

•

component and raw material costs and availability, particularly with respect to components obtained from sole or limited sources ; and

•

natural and man-made disasters, including earthquakes, warfare and acts of terrorism, in Japan or elsewhere.

Reductions in our unit sales will not typically correspond with reductions in these relatively fixed costs. Therefore, such reductions in our unit sales will generally result in reduced or negative margins for our products. Any or all of the above factors could have a material adverse effect on our business, financial condition and results of operations.

9

Our recent growth has been based in part on acquisitions, and our future growth could be adversely affected if we make acquisitions that turn out to be incompatible with our existing business or unsuccessful, or if we are unable to find suitable acquisition targets

We have achieved much of our growth by acquiring other companies that have provided us with complementary technologies and product lines. To the extent that we are unable to make successful acquisitions, we may not be able to continue to expand our product range and our growth rates could be adversely affected. Critical to the success of our acquisitions is the ordered, efficient integration of acquired businesses into our organization, which has in the past required, and may continue to require, significant resources. There can be no assurance that our investments will generate the operational and financial returns we expect. The success of future acquisitions will depend upon factors such as:

•

our ability to manufacture and sell the products of the businesses acquired;

•

continued demand for these acquired products by our customers;

•

our ability to integrate the acquired businesses’ operations, products and personnel;

•

our ability to retain key personnel of the acquired businesses; and

•

our ability to extend our financial and management controls and reporting systems and procedures to acquired businesses.

Failure to succeed in acquisitions, or an inability to find suitable acquisition targets, could have a material adverse effect on our business results of operations and financial condition.

Our growth places strains on our managerial, operational and financial resources

Our future success depends on our ability to expand our organization in line with the growth of our business, including the integration of recently added subsidiaries within the Nidec group. However, our growth has placed, and is expected to continue to place, a significant strain on our managerial, operational and financial resources. Our recent acquisitions and any further growth by us or our subsidiaries or affiliates, or an increase in the number of our strategic relationships, will increase this strain on our managerial, operational and financial resources. This strain may inhibit our ability to achieve the rapid execution necessary to successfully implement our business plan.

We could be harmed by litigation involving patents and other intellectual property rights

We have patent protection on certain aspects of our technology and also rely on trade secret, copyright and trademark laws, as well as contractual provisions, to protect our proprietary rights. We face the following risks:

10

•

we could incur substantial costs in defending against claims of infringement of the intellectual property of others and such claims could result in damage awards against us, in orders to pay for the use of previously unrecognized third-party intellectual property or in injunctions preventing us from continuing aspects of our business, which could in turn have a material adverse effect on our business, financial condition and results of operations.

•

our protective measures may not be adequate to protect our proprietary rights;

•

other parties, including competitors with substantially greater resources, may independently develop or otherwise acquire equivalent or superior technology, and we may be required to pay royalties to license intellectual property of those parties;

•

patents may not be issued pursuant to our current or future patent applications, and patents issued pursuant to such applications, or any patents we own or have licenses to use, may be invalidated, circumvented or challenged;

•

the rights granted under any such patents may not provide competitive advantages to us or adequately safeguard and maintain our technology;

•

we could incur substantial costs in seeking enforcement of our patents against infringement or the unauthorized use of our trade secrets, proprietary know how or other intellectual property by others; and

•

the laws of foreign countries in which our products are manufactured and sold may not protect our products and intellectual property rights to the same extent as the laws of Japan and the United States, and such laws may not be enforced in an effective manner.

For specific information relating to two intellectual property disputes that could have an adverse effect on our results of operations, see Item 4.B. “Business Overview—Legal Proceedings.”

Because our sales to overseas customers are denominated predominantly in U.S. dollars, we are exposed to exchange rate risks that could harm our results of operations

Sales to customers outside Japan accounted for 61.0%, 63.6% and 69.1% of our consolidated net sales during the years ended March 31, 2004, 2005 and 2006, respectively. A significant portion of our overseas sales is denominated in currencies other than the Japanese yen, primarily the U.S. dollar. As a result, appreciation of the Japanese yen against the U.S. dollar will generally have a negative effect on our operating income and net income. We experience volatility in our results of operations as a result of foreign currency exchange rate fluctuations when or result of operations of subsidiaries operating in currencies other than the yen are consolidated into our financial statements, which are reported in yen. We also experience foreign exchange risk to the extent that our sales and expenses or those of our subsidiaries are denominated in different currencies. In order to mitigate against this risk, in recent years we have attempted to offset a portion of our foreign currency revenue by matching the currency of revenue with the currency of expense. For example, if revenue for a particular product is in U.S. dollars, we attempt to purchase the supplies and resources used to produce that product in U.S. dollars. We also enter into forward exchange contracts to hedge portions of our transactional exposure to fluctuations in the value of foreign currencies as compared to the Japanese yen. Nevertheless, we remain exposed to the effects of foreign exchange fluctuations.

11

We rely on monthly financial data from operating segments that are not prepared on a U.S. GAAP basis and are not comparable between segments, which potentially reduces the usefulness of this data to us in making management decisions.

We assess our performance and make operating decisions based on financial information received from the fourteen operating segments that we report in our consolidated financial statements: Nidec Corporation, Nidec Electronics (Thailand) Co., Ltd., Nidec (Zhejiang) Corporation, Nidec (Dalian) Limited, Nidec Singapore Pte. Ltd., Nidec (H.K.) Co., Ltd., Nidec Philippines Corporation, Nidec Sankyo Corporation, Nidec Copal Corporation, Nidec Tosok Corporation, Nidec Copal Electronics Corporation, Nidec Shibaura Corporation, Nidec-Shimpo Corporation and Nidec Nissin Corporation. This segmental information is prepared in accordance with the accounting principles in each segment’s respective country of domicile. For example, Nidec Corporation’s operating profit or loss is determined using Japanese GAAP while Nidec Singapore Pte. Ltd. applies Singaporean accounting principles. Therefore, our segmental data has not been prepared under U.S. GAAP on a basis that is consistent with the consolidated financial statements or on any other single basis that is consistent between segments. In addition, year-end closing adjustments and other items are not included in segment totals. These aspects of our segment data could make it more difficult for us to evaluate the relative performance of individual segments and our overall operations in a timely manner, as compared with segment data compiled on a uniform U.S. GAAP basis.

We rely on production in developing countries which may become politically or economically unstable and face risks affecting international operations

We produce and sell a large percentage of our products at locations in the following developing countries: China, Thailand, Malaysia, Indonesia, the Philippines and Vietnam. In particular, we are growing increasingly reliant on our production bases in China, where we continue to move manufacturing operations in order to take advantage of more competitive production and supply costs. These countries are still in the process of developing their economic, social and other infrastructures and are susceptible to various uncertainties. The political, social and economic situations of these countries may not continue to provide an environment in which we would be able to continue to manufacture our products cost-efficiently or at all. The governmental authorities of those areas may impose regulations or restrictions that would make it difficult, impractical or impossible, whether economically, legally or otherwise, for us to conduct our business there. Dependence on overseas production, especially in developing countries, and managing international operations expose us to a number of additional risks associated with foreign commerce, including the following:

•

economic slowdown or downturn in the relevant industries in foreign markets;

•

international currency fluctuations;

•

general strikes or other disruptions in working conditions;

•

political instability (recently for example, terrorist activities);

•

trade restrictions or changes in tariffs;

•

outbreaks, such as avian flu, that inhibit international or regional commerce

•

the difficulties associated with staffing and managing international operations;

•

generally longer receivables collection periods;

•

unexpected changes in or imposition of new legislative or regulatory requirements;

•

relatively limited protection for intellectual property rights in some countries;

•

potentially adverse taxes; and

any or all of these risks could adversely affect our business, financial condition and results of operations.

12

We may become subject to more stringent environmental regulations in the future

Our operations and manufacturing processes are subject to a wide range of environmental laws and regulations in Thailand, the Philippines, Singapore, Japan, the United States and other countries. These regulations may become more stringent over time. In such a case, the amount of capital expenditures and other expenses which might be required to complete remedial actions and to continue to comply with applicable environmental laws could increase and be significant, which would materially and adversely affect our business, financial condition and results of operations.

We rely on our founder, President and CEO, Mr. Shigenobu Nagamori, the loss of whom could have a material adverse effect on our business

Our continued success will depend to a significant extent on the efforts and abilities of our founder and current President and CEO, Mr. Shigenobu Nagamori. Mr. Nagamori is actively engaged in our management and determines our strategic direction, especially with regard to acquisition activity. While we are in the process of establishing a management structure designed to reduce our dependence on Mr. Nagamori, his sudden departure or reduced attention to us could have a material adverse effect on our operations, financial condition and operating results.

For our business to continue effectively, we will need to attract and retain qualified personnel

Our business depends on the continued employment of our senior management, engineering and other technical personnel, many of whom would be extremely difficult to replace. To maintain our current market position and support future growth, we will need to hire, train, integrate and retain significant numbers of additional highly skilled managerial, engineering, manufacturing, sales, marketing, support and administrative personnel. Competition worldwide for such personnel is extremely intense, and there can be no assurance that we and our affiliates will be able to attract and retain such additional personnel.

A substantial number of our shares of common stock are eligible for future sale, and the sale of these shares may cause our stock price to decline, even if our business is doing well

As of March 31, 2006, there were 144,619,182 shares of our common stock issued and outstanding, including 23,417,084 shares beneficially owned by our President and CEO, Mr. Shigenobu Nagamori, representing 16.2% of the outstanding shares. These shares and, generally, the shares owned by other shareholders, can be disposed of on the Osaka Securities Exchange Co., Ltd., the Tokyo Stock Exchange, Inc. and otherwise in Japan. Additional sales of a substantial amount of our common stock in the public market, or the perception that sales may occur, could cause the market price of our common stock to decline. This could also impair our ability to raise additional capital through the sale of our securities. Also, in the future, we may issue securities to raise cash for additional capital expenditures, working capital, research and development or acquisitions. We may also pay for interests in additional subsidiary or affiliated companies by using cash, common stock or both. We may also issue securities convertible into our common stock. Any of these events may dilute your ownership interest in us and have an adverse impact on the price of our common stock.

Japan’s unit share system imposes restrictions in holdings of our common stock that do not constitute whole units

Our Articles of Incorporation provide that 100 shares of our stock constitute one “unit.” The Company Law imposes significant restrictions and limitations on holdings of shares that constitute less than a whole unit. Holders of shares constituting less than a unit do not have the right to vote. A shareholder who owns shares representing less than one unit will not be able to exercise any rights relating to voting rights, such as the right to participate in a demand for the resignation of a director, the right to participate in a demand for the convocation of a general meeting of shareholders and the right to join with other shareholders to propose an agenda item to be addressed at a general meeting of shareholders. In addition, a holder of shares constituting less than one unit does not have the right to require us to issue share certificates for those shares. Accordingly the transferability of our shares constituting less than one unit is significantly limited. Under the unit share system, holders of shares constituting less than a unit have the right to require us to purchase their shares.

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However, holders of ADSs that represent other than multiples of whole units cannot withdraw the underlying shares representing less than one unit and, therefore, they will be unable to exercise the right to require us to purchase the underlying shares. As a result, holders of ADSs representing shares in lots of less than one unit may not have access to the Japanese markets to sell their shares through the withdrawal mechanism.

Rights of shareholders under Japanese law may be more limited than under the laws of other jurisdictions

Our Articles of Incorporation, Regulations of the Board of Directors and the Company Law govern our corporate affairs. Legal principles relating to such matters as the validity of corporate procedures, directors’ and officers’ fiduciary duties and shareholders’ rights may be different from those that would apply if we were a non-Japanese company. Shareholders’ rights under Japanese law may not be as extensive as shareholders’ rights under the laws of other countries or jurisdictions within the United States. You may have more difficulty in asserting your rights as a shareholder than you would as a shareholder of a corporation organized in another jurisdiction. In addition, Japanese courts may not be willing to enforce liabilities against us in actions brought in Japan which are based upon the securities laws of the United States or any U.S. state.

A holder of our ADSs will have fewer rights than a shareholder has and will have to act through the depositary to exercise those rights

The rights of the shareholders under Japanese law to take actions including voting their shares, receiving dividends and distributions, bringing derivative actions, examining the company’s accounting books and records and exercising appraisal rights are available only to holders of record. Because the depositary, through its custodian agent, is the record holder of the shares underlying the ADSs, only the depositary can exercise those rights in connection with the deposited shares. The depositary will make efforts to vote the shares underlying ADSs as instructed by the ADS holder and will pay to ADS holders the dividends and distributions collected from us. However as an ADS holder you will not be able to bring a derivative action, examine our accounting books and records or exercise appraisal rights in your capacity as ADS holder.

Because of daily price range limitations under Japanese stock exchange rules, you may not be able to sell your shares of our common stock at a particular price on any particular trading day, or at all

Stock prices on Japanese stock exchanges are determined on a real-time basis by the equilibrium between bids and offers. These exchanges are order-driven markets without specialists or market makers to guide price formation. To prevent excessive volatility, these exchanges set daily upward and downward price fluctuation limits for each stock, based on the previous day’s closing price. Although transactions may continue at the upward or downward limit price if the limit price is reached on a particular trading day, no transactions may take place outside these limits. Consequently, an investor wishing to sell at a price above or below the relevant daily limit may not be able to sell his or her shares at such price on a particular trading day, or at all.

Foreign exchange fluctuations may affect the dollar value of our ADSs and dividends payable to holders of our ADSs

Market prices for our ADSs may fall if the value of the yen declines against the U.S. dollar. In addition, the U.S. dollar amount of cash dividends and other cash payments made to holders of our ADSs would be reduced if the value of the yen declines against the U.S. dollar.

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It may not be possible for investors to effect service of process within the United States upon us or our Directors or Corporate Auditors or to enforce against us or these persons judgments obtained in United States courts predicated upon the civil liability provisions of the federal securities laws of the United States

We are a limited liability, joint-stock corporation incorporated under the laws of Japan. Most of our Directors and Corporate Auditors reside in Japan. All or substantially all of our assets and the assets of these persons are located in Japan and elsewhere outside the United States. It may not be possible, therefore, for investors to effect service of process within the United States upon us or these persons or to enforce against us or these persons judgment obtained in United States courts predicated upon the civil liability provisions of the federal securities laws of the United States. Our Japanese counsel, Tokyo Aoyama Aoki Law Office, has advised us that there is doubt as to the enforceability in Japan, in original actions for enforcement of judgments of United States courts, of liabilities predicated solely upon the federal securities laws of the United States.

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Special Note Regarding Forward-looking Statements

This annual report contains forward-looking statements that are based on our current expectations, assumptions, estimates and projections about our business, our industry and capital markets around the world. These forward-looking statements are subject to various risks and uncertainties. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “plan” or similar words. These statements discuss future expectations, identify strategies, contain projections of results of operations or of our financial condition, or state other forward-looking information. Known and unknown risks, uncertainties and other factors could cause the actual results to differ materially from those contained in any forward-looking statement. We cannot promise that our expectations expressed in these forward-looking statements will turn out to be correct. Our actual results could be materially different from and worse than our expectations. Important risks and factors that could cause our actual results to be materially different from our expectations are set forth in “Risk Factors” and elsewhere in this annual report and include, but are not limited to:

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our ability to design, develop, mass produce and win acceptance of our products, particularly those that use the hard disk spindle motor technology, which are offered in highly competitive markets characterized by continual new product introductions and rapid technological development;

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abrupt changes in our customers’ market position, particularly as a result of mergers and acquisitions

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general economic conditions in the information technology, consumer electronics and related product markets, particularly levels of consumer spending;

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exchange rate fluctuations, particularly between the Japanese yen and the U.S. dollar and other currencies in which we make significant sales or in which our assets and liabilities are denominated;

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our ability to acquire and successfully integrate companies with complementary technologies and product lines;

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adverse changes in laws, regulations or economic policies in any of the countries where we have manufacturing operations, especially China; and

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any negative impacts on our businesses from outbreaks of diseases in the countries where we have production plants, such as avian flu.

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Item 4. Information on the Company.

A. History and Development of the Company.

Nidec is a joint stock corporation that was incorporated and registered under the Commercial Code (In May, 2006, the Commercial Code was replaced by the new Company Law) of Japan on July 23, 1973 under the name of Nihon Densan Kabushiki Kaisha. Our corporate headquarter is at 338 Kuzetonoshiro-cho, Minami-ku, Kyoto 601-8205, Japan. Our telephone number is 81-75-935-6140.  We currently operate through 94 subsidiaries located in 14 countries, and five affiliated companies located in five countries. As of March 31, 2006, we had 78,721 employees worldwide, 90.4% of which were employed outside Japan.

A major part of our growth strategy has involved the acquisition of and investment in other companies. During the fiscal year ended March 31, 2004, we added three companies: Nidec Copal Corporation, Nidec Copal Electronics Corporation and Nidec Sankyo Corporation, to our scope of consolidation under the U.S. GAAP by acquiring control through acquisition of over 50% of their outstanding shares. Our share of Nidec Copal Corporation and Nidec Copal Electronics Corporation increased to approximately 51% in February 2004 and January 2004, respectively, from approximately 45% each as of March 31, 2003. Also in February 2004, our share in Nidec Sankyo Corporation increased to approximately 51% from approximately 40% as of October 1, 2003.

The following list presents a selected history of our major acquisition activities related the expansion of our small precision motors, mid-size motors, machinery, electronics and optical components and other products businesses:

Small Precision Motors, Machinery and Other Products

Year	Event
1989	We acquired Shinano Tokki Co., Ltd, a major manufacturer of spindle motors for hard disk drives, from Teac Corporation, a then major manufacturer of audio equipment and magnetic recording devices for PCs. As a result, we gained the largest market share of spindle motors in the world.
1995	We acquired 38.5% of Kyoritsu Machinery Co., Ltd. and changed its name to Nidec Machinery Corporation. We subsequently increased our ownership to 60.0%. This company manufactures factory automation equipment for small precision motor assemblies and automated measuring instruments.
1995/ 2003	We acquired newly issued shares of Shimpo Industries Co., Ltd., currently Nidec-Shimpo Corporation, constituting 36.7% of its then outstanding shares. We subsequently increased our ownership to 51% and have consolidated its results since February 2002. Nidec-Shimpo became a wholly-owned subsidiary of Nidec by way of share exchange, effective as of October 1, 2003. Nidec-Shimpo is a major manufacturer of stepless automatic transmission mechanisms.

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Year	Event
1997/ 2002	Our subsidiary, Nidec-Shimpo Corporation, acquired 90.0% of the outstanding shares of Read Corporation, currently Nidec-Read Corporation, from Nippon Steel Chemical Co., Ltd. Nidec-Read manufactures engineering inspection equipment for electronics components, including printed circuit boards, ceramics, semiconductors and automotive parts. Nidec-Read Corporation became our majority-owned subsidiary in February 2002 as a result of our acquisition of additional shares of Nidec-Shimpo Corporation.
1998/ 2004	We acquired 17.7% of the outstanding shares of Copal Co., Ltd., currently Nidec Copal Corporation, from Fujitsu Limited. We subsequently increased our ownership of Nidec Copal to 42.8% also in 1998. We increased our ownership of Nidec Copal to 51.3% in February 2004. Nidec Copal is a leading manufacturer of camera shutters and other optical and electronics instruments. Nidec Copal also manufactures information terminals, laboratory system instruments and automated manufacturing systems. In connection with our acquisition of Copal’s shares, we acquired from Copal 32.3% of the outstanding shares of Copal Electronics Corporation, currently Nidec Copal Electronics Corporation. Nidec Copal Electronics Corporation is a manufacturer of small electronic precision instruments, including semi-fixed gas registers, trimmer capacitators, small precision motors and gas and liquid pressure sensors. We subsequently increased our ownership of Nidec Copal Electronics to 40.0%, also in 1998. We increased our ownership of Nidec Copal Electronics to 51.0% in January 2004.
1998	We acquired the assets relating to the motor division of Shibaura Engineering Works Co., Ltd. and established a joint venture, Nidec Shibaura Corporation, with Toshiba Corporation and Shibaura Engineering. We owned 40.0% of the joint venture. We subsequently dissolved the joint venture and purchased the other 60.0% from our former joint venture partners, and Nidec Shibaura became our wholly-owned subsidiary from September 2000. Nidec Shibaura develops and manufactures precision motors for electric appliances and automobiles. Through Nidec Shibaura, we aim to accelerate the pace of development of new, highly competitive products in the worldwide market of motors for household appliances and automobiles.
1999	In October 1999, we acquired 71.0% of the outstanding shares of Nemicon Corporation, currently Nidec Nemicon Corporation. Later that year we acquired an additional 2.1%. Nidec Nemicon produces optical rotary encoders, proximity sensors and other electronic equipment.
2000	We acquired 67.0% of the outstanding shares of Y-E Drive Corporation, currently Nidec Power Motor, from Yasukawa Electric Corporation. Nidec Power Motor designs, develops, manufactures and services mid-size motors for industrial equipment and home electrical appliances. This acquisition is in line with our strategic plan to expand our business into the field of mid-size motors.
2004	In October 2003, we acquired approximately 40% of the outstanding shares of Sankyo Seiki Mfg. Co., Ltd., currently Nidec Sankyo Corporation. We subsequently increased our ownership of Nidec Sankyo to approximately 51% in February 2004.

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For the years ended March 31, 2004, 2005 and 2006, our capital expenditures, as shown in our consolidated statements of cash flows for those years, were ¥22,631 million, ¥37,257 million and ¥43,185 million, respectively. Major capital expenditures for the last three fiscal years included the acquisition of plants and equipments for hard disk spindle motors that have fluid dynamic bearings in Thailand and the Philippines. We have had no recent significant divestiture and no significant divestitures are currently being planned.

B. Business Overview.

Overview

We are the world’s leading manufacturer of spindle motors for computer hard disk drives and also produce a variety of other small precision brushless DC motors. We ship our spindle motors to hard disk drive manufacturers throughout the world. For the year ended March 31, 2006, our net sales of hard disk drive spindle motors amounted to ¥164,575 million, representing 30.7% of total net sales of ¥536,858 million. For the year ended March 31, 2005, our net sales of hard disk drive spindle motors amounted to ¥119,233 million, representing 24.5% of total net sales of ¥485,861 million. For the year ended March 31, 2004, our net sales of hard disk drive spindle motors amounted to ¥106,919 million, representing 38.5% of total net sales of ¥277,497 million.

In addition to spindle motors, we focus on the production of:

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other small precision brushless DC motors used in high-speed, continuous-duty applications, such as CD-ROM drives, CD-read/write, or R/W, DVD drives, high-capacity floppy disk drives, as well as in office equipment, such as facsimile machines, laser printers and photocopy machines;

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brushless DC fans, which are incorporated in computers, game consoles and other electronic equipment to disperse heat and lower the temperature of critical components;

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mid-size brushless DC motors used in household appliances, automobiles and industrial equipment;

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machinery;

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electronic and optical components; and

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other products.

In order to better respond to pricing pressure and customer demands, we have established various overseas operations for research and development, production and sales. We currently have research and development facilities, production facilities and sales offices located in Japan, Asia, North America and Europe. Most of our research and development facilities are concentrated in Japan, where we focus on the development of next-generation motor and drive technology products. Most of our production facilities outside Japan are located in Asian countries such as China, Thailand, the Philippines, Singapore and Vietnam. This allows us to take advantage of lower labor costs while also gaining more direct access to our customers’ production facilities in these regions.

In recent years, we have sought to grow and expand the range of our products by investing in or acquiring companies with technologies in motor, drive and other related products. These investments and acquisitions have provided us with ready access to markets for new products and personnel who can work with us in developing products that incorporate their technologies and ours. The products and operating results of recently acquired consolidated subsidiaries are covered within the description of our business.

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Basic Characteristics of Electric Motors

The following description of basic characteristics of electric motors is meant to provide some background information that will help you understand recent trends relating to electric motors, our primary products.

In the first half of the twentieth century, electric motors had a limited number of uses such as driving industrial machinery and pumps. However, with the proliferation of household appliances after World War II, electric motors came to be used in a wider variety of applications and products such as air conditioners, washing machines, refrigerators and other household appliances. Today, sophisticated motors are required by many of the electronic products including computers, information technology equipment and home electronics. Electronic products are becoming increasingly sophisticated, offering greater features through the use of microprocessors, micro disk drives and other components. This increasing complexity requires more precise power quality and greater power reliability. In addition, the increasing costs of electricity, coupled with government regulations and environmental concerns, have contributed to increased demand for more energy-efficient motors. All these trends are contributing to increased demand for more advanced electric motors and rotational equipment technology.

Small precision motors can be classified into three broad categories based on the underlying technology: AC motors, general-purpose brush DC motors and special purpose brushless DC motors. Hard disk drive spindle motors, which are our main product, are a type of special purpose brushless DC motor.

DC Motors and AC Motors

At the most basic level, electric motors are devices that convert electric power into rotating mechanical energy. An electric motor can be powered by alternating current, commonly known as AC, or direct current, commonly known as DC. AC power is supplied to homes, offices and industrial sites directly by power companies, whereas DC power is supplied either through the use of batteries or by converting AC power to DC power.

Both AC motors and DC motors can be used to power most applications. The determination as to which motor is most appropriate depends on considerations of factors such as power source availability, speed variability requirements, torque needs, noise constraints and cost. Torque is a measure of the amount an object will rotate when a given force is applied.

Because of their simple design, AC motors offer reliable, low maintenance-cost operation for heavy applications. This is why AC motors are preferred for fixed speed applications in the industrial context and for commercial and domestic applications where AC line power can be easily provided. Many machines that require heavy power inputs such as air conditioners, washers, dryers, industrial machinery, fans, blowers, vacuum cleaners, elevators and escalators use AC motors. However, AC motors are not ideal for products that require delicate or precise control because the electronics required to control an AC motor are considerably more expensive than those required to control a DC motor. In addition, due to heat considerations, AC motors usually cannot be operated at low speeds.

DC motors are ideal for products that are more dependent on the precision of speed than power. Controlling the speed of a DC motor is simple. The higher the current becomes, the faster the rotation becomes. Most DC motors will operate over a wider range of speeds and provide better performance than comparable AC motors. The superior performance is partly due to the simplicity of control, but it is also due in part to the fact that most DC motors are designed with variable speed operation in mind, and have added heat dissipation features that allow lower operating speeds. It is also easy to control the motor’s torque because it is proportional to current. By limiting the current, the torque is also limited. This makes DC motors ideal for delicate applications. DC motors have become the motor of choice in the majority of variable speed and torque control applications such as hard disk drives, CD-ROM drives, DVD drives and floppy disk drives. In the area of household appliances, such as cordless vacuum cleaners and other products that have traditionally used AC motors, manufacturers are beginning to switch from AC motors to DC motors due to the need for more energy-efficient and precisely controlled motors that support more sophisticated product features.

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Brush DC Motors and Brushless DC Motors

There are two kinds of DC motors: brush and brushless. Brushless DC motors differ from conventional, brush DC motors in that the current which produces mechanical energy is applied to stationary coils via electronic switches without physical contact with the rotor, rather than by stationary rods brushing against the rotating coil. Conventional brush DC motors have several limitations: brush life, brush residue, maximum speed, and electrical noise. By avoiding friction, sparks and the wearing and fragmenting of the brush rods, brushless DC motors provide cleaner, faster, more efficient and quieter operation and longer maintenance-free life than conventional brush DC motors. These characteristics make brushless DC motors suitable for applications such as hard disk drives, for which clean operation is critical, and audio-visual equipment, for which low-noise operation is an important factor.

Although brushless DC motors have many advantages over brush DC motors, the use of brushless DC motors is still primarily confined to precision applications in disk drives and industrial motion equipment that require high efficiency, smooth operation and precise speed control. The higher price of brushless DC motors has been the primary factor slowing their broader adoption. DC motors require not only motor parts, but also drive electronics that currently can cost more than motor parts. Nevertheless, we believe that over time brushless DC motors will be more widely adopted among manufacturers of household appliances, audio-visual equipment and even larger heating, ventilation and air conditioning systems. As consumers come to demand more sophisticated and energy-efficient appliances, and as the production of brushless DC motors for such products reaches higher volumes, prices may fall to levels competitive enough to encourage more users to switch from brush DC motors to the more efficient and longer-lasting brushless DC motors.

Fluid Dynamic Bearing Technology in Hard Disk Drive Spindle Motors

Although products vary, all hard disk drives incorporate the same basic technology. One or more rigid disks are attached to a spindle motor assembly that rotates the disks at a high constant speed around a hub. The disks are the components on which data is stored and from which it is retrieved. Read/write heads, mounted on an arm assembly similar in shape to that of a record player, fly extremely close to each disk surface and record data on and retrieve it from concentric tracks in the magnetic layers of the rotating disks. In a hard disk drive, with a gap of less than 0.1 microns between the disk and the read/write head, even the smallest error can result in disastrous data damage or loss.

The most significant technological challenges facing hard disk drive manufacturers today are associated with market demand for increased storage capacity, speed, precision and durability. Storage capacity is measured by areal density, which represents the number of bits of information on a linear inch of the recording track, multiplied by the number of recording tracks on a radial inch of the disk. As the size of computer software and data files has increased and the use of graphic and video files has proliferated, the need has grown for higher capacity, higher performance, smaller size and lighter weight hard disk drives. To achieve these goals, spindle motors capable of higher speeds and greater rotational precision need to be continually developed. Accordingly, the disk drive spindle motor has become an increasingly critical component of disk drive technology.

Ball bearing technology, which was used in conventional disk drive motors, had limitations. Ball bearings are not perfectly round and both ball bearings and their races can deform slightly under load. Any imperfections in roundness or in raceways will cause what are known as non-repeatable run-out errors that prevent tracks written to the disk from being regular. From the point of view of design, future increases in storage capacity may need to come largely from increasing the number of recording tracks on a radial inch of the disk.

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In fluid dynamic bearings, the bearing function is taken over by a layer of lubricant less than one-tenth the thickness of a human hair. The rotating spindle supported by the lubricant essentially floats in the bearing unit. The non-existence of metal-to-metal friction in fluid dynamic bearings substantially reduces non-repeatable run-out errors caused by surface imperfections of ball bearings. That makes it possible to increase rotational speed, reduce track spacing and increase the number of tracks per inch on the disk. Fluid dynamic bearing hard disk drive spindle motors offer other advantages over conventional ball bearing hard disk drive spindle motors, including better shock absorbance and vibration dampening, less noise and an extended fatigue life. Our fluid dynamic bearing hard disk drive spindle motors can rotate at over 20,000 revolutions per minute compared with the 12,000 to 15,000 revolutions per minute for conventional motors with ball bearings. Fluid dynamic bearings reduce operation noise by three to ten decibels compared with ball bearings.

Most of our customers have evaluated the reliability of fluid dynamic bearing technology and made a decision to switch to this technology from conventional ball bearing technology. Over 99% of our net sales of hard disk drive spindle motor for the year ended March 31, 2006 consisted of spindle motors mounted with fluid dynamic bearings.

Markets for DC Motors

Markets for Small Precision DC Motors

Small precision motors have many applications across a broad spectrum of industries. Though often not readily visible to consumers, since they are incorporated into other equipment as components, they serve a vital function. Small precision DC motors currently have uses as components in five major types of equipment:

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computers and office equipment;

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audio-visual equipment, home appliances and other consumer products;

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motor vehicles;

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heating and cooling machinery; and

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various industrial machines.

The demand for small precision motors fluctuates chiefly in response to trends in the key end-user industries whose products incorporate these motors. Consumer spending and capital investments are two important drivers of demand for the end-user industries. The 1990s saw expansion of the major markets for small precision motors, with computers and office equipment the major category of expansion, followed by audio-visual equipment, home appliances, other consumer products and heating and cooling machinery. The industrial machinery sector also grew primarily as result of an increase in capital investment. From late 2000 until recently, there was a significant deterioration of economic conditions, particularly with respect to capital investment and consumer spending in the computer, information technology and related product markets, which had a negative impact on sales. However, more recently there have been indications that economic conditions may have stabilized. There has also been an increase in the range of applications for our small precision DC motors, such for as mobile phones and digital cameras, and an increase in demand for spindle motors. As a result, demand for our small precision DC motors has shown improvement.

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Hard Disk Drive Spindle Motors for Computer-Based Information Storage and Retrieval Devices. Most computer applications require access to a greater volume of information than can be stored economically in the random access memory, or RAM, of the computer’s central processing unit. This information can be stored on a variety of storage devices, including hard disk drives, both fixed and removable, floppy disk drives, magnetic tape drives, optical disk drives and semiconductor memory, including RAM and flash memory. Semi-conductor memory does not require rotating parts and accordingly has lower power requirements. However, among all of these storage devices, hard disk drives provide a balance between high volume and fast access speeds that makes them an attractive choice for many computer products. Hard disks are also available at substantially lower prices than high-speed semiconductor memory and are now being produced in comparable sizes (with much higher capacity). Semi-conductor memory is becoming more widespread, particularly in applications such as digital cameras and mobile phones. However, we believe that, due to the advantages of cost, capacity and speed, hard disk drives will continue to be used as the primary device for storing electronic data for computers.

Currently, hard disk drives, which incorporate our motors and other components such as pivot assemblies, comprise the largest sector of the information storage industry based on Techno Systems Research Co., Ltd. The amount of data stored and accessed electronically has been growing due to the increased amount of data created as a result of the growth of the Internet. The increased volume of shared information was made possible by the growth of high speed broadband communications and the development of sophisticated software applications to generate and manage increasing volumes of data.

Traditionally, hard disk drive motors have been integrated into computer products in three primary categories:

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Enterprise. This category consists of high performance workstations, servers, mini-computers, mainframes and backup drive subsystems. Applications that run on enterprise systems are usually data-intensive. Servers mainly use 3.5-inch hard disk drives.

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Desktop. This category consists of desktop PCs. These PCs are used in a number of environments, ranging from homes to small and large businesses. Typically, these PCs use 3.5-inch hard disk drives.

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Portable. This category consists of portable notebook PCs and hand-held computers, which typically use 1.0-inch, 1.8-inch or 2.5-inch hard disk drives.

Hard Disk Drive Spindle Motors for New Consumer Electronics and Home Entertainment Applications. In addition to the growth in demand for PCs, and Internet- and network-related servers and storage, the widespread use and transmission of graphic images and high-fidelity audio and video in digital format is creating a need for greater storage capacity in consumer electronic devices. As a result, new generations of consumer electronics are expected by us to incorporate hard disk drives for data storage and retrieval functions.

MP3 players with incorporating small hard disk drives, already have gained an amount of popularity. We believe that small hard disk drives will be used in more electric products, such as personal digital assistants, or PDAs, digital video recorders, digital cameras and cellular telephones.

Hard disk drives are increasingly being used in other non-computer devices, such as home video game consoles, advanced television set-top boxes that retrieve audio and video data and store the data locally on these devices for playback and car navigation systems. These trends are expanding the market for hard disk drives from enterprise, desktop and portable computers to new consumer and home entertainment devices.

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Other Small Precision Brushless DC Motors. Other small precision brushless DC motors are designed for quiet performance in high-speed, continuous-duty applications such as CD-ROM, CD-R/W and DVD players and recorders, as well as in office equipment such as facsimile machines, laser printers and photocopy machines.

There has been a growing consumer demand for multimedia products such as CD-ROM, CD-R/W, DVD-ROM and DVD-R/W drives that incorporate brushless DC motors. CD-ROM technology combines audio, video, text, and graphics in one medium with the capability to store, search, and retrieve large quantities of information. One CD-ROM can contain up to 650 megabytes of data. During the 1990s, CD-ROM became the dominant medium for software distribution. DVDs are a type of optical disk that can hold up to 17 gigabytes of information. DVD video has already gained acceptance as a new medium for home video distribution. We believe the DVD video format is replacing the VHS format over time, because DVDs experience no image or sound degradation from normal usage and offer greater storage capacity, indexing, random access and lower manufacturing costs. DVD data storage devices have also been steadily replacing CD-ROMs in the computer industry. In particular, the market for DVD-R/W is rapidly growing for use in household appliances and PCs.

Markets for Brushless DC Fans

As more electronics components, at higher densities, are incorporated into household appliances, computers, telecommunications and consumer electronics devices, medical and audio-visual equipment and home video game consoles, the benefits of brushless DC fans are creating greater interest and demand for their use in traditional AC fan applications. Beyond providing superior airflow, brushless DC fans can be controlled more easily. Operating a fan or blower at full speed continuously or cycling it on and off is not ideal for most cooling and ventilating applications. Variable speed DC fans offer several benefits. First, reducing fan speed provides energy savings from lower electrical power consumption. Second, noise can be reduced with variable-speed fans by automatically adjusting airflow as needed. Noise is an important factor in the perceived quality of a product. Third, DC fans significantly extend product life and, in turn, extend the operating life of the fan.

We expect that the advantages of DC fans over AC fans will lead to their inclusion in even more applications and that this trend will continue to contribute to an increase in our future sales. Three of the major fan applications where we expect future growth are discussed below.

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Cooling Fans for Computers. Virtually every computer in operation requires a fan to cool itself as it heats up during operation. Heat represents one of the biggest obstacles to building more powerful PCs than today’s PCs. The demand for increased cooling in smaller spaces with less noise has continued to grow as manufacturers seek to incorporate more components, particularly faster central processing units, into smaller, more powerful systems.

•

High-Performance Fans for Use in Game Machines. Currently, we supply fans used in home video game consoles produced by the three major manufacturers.

•

Fans for Audio-Visual Equipment. This market has entered a growth phase, driven by factors that include the introduction of digital technology, the addition of communications functions, and the linkage of audiovisual products with PCs.

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Markets for Mid-size Brushless DC Motors for Use in Household Appliances and Automobiles

Electric motors are basic components of most appliances. Control of these motors has become a critically important issue as new applications arise, higher performance is demanded, environmental concerns mount, and power becomes more expensive. Electric motors typically consume most of the power needed by appliances. One means of economizing energy usage by appliances is improving motor design. The on-off, single-speed operation of the motors in common appliances such as refrigerators, washers, dryers and vacuum cleaners leads to inefficient energy usage.

Demand is also growing for advanced electric motors in automobiles. Electronic motor-powered power steering systems, engine cooling, active suspensions and brake systems have become increasingly commonplace in small and mid-size cars. Automotive manufacturers are also focusing on developing energy-efficient electrical power steering systems. Conventional power steering systems use a hydraulic pump driven by the vehicle’s engine to provide the required assistance for the driver. The biggest disadvantage of this system is that the pump has to work continuously, wasting power. Fuel consumption can be improved by as much as 2% by switching the power source from the engine to a high-efficiency, mid-size motor, which activates only when needed just for enough power. Brushless DC motors also provide quieter operation and a longer life. For mid-size brushless DC motors in power steering systems, we expect steady market growth in Europe, followed by the United States and Asia. Eventually, we hope to see demand grow for mid-size brushless DC motors for automobile air conditioners, because brushless DC motors are more durable and require less frequent maintenance and repair.

Markets for Machinery

Principal products in this market include industrial robots, card readers, power transmission equipment, high-speed pressing machines, semiconductor production equipment such as die bonders, and circuit board testers.

In the field of industrial robots, demand for LCD panel substrate-handling robots is increasing. Demand for large LCD panels has grown in recent years with the increasing demand for large-screen PC monitors and LCD televisions, and demand from LCD manufacturers in Korea, Taiwan, and Japan are brisk. Demand for seventh generation LCD substrate-handling robots, which yield more panels from one substrate, is particularly strong.

In the field of card readers, demand for use in bank automatic teller machines (ATMs) is brisk. In Brazil, Russia, India and China, the so-called BRICs market, demand for ATMs is rising and, in Japan, replacement demand for ATMs with biometrics-based security solutions is emerging. We expect the need for card readers in hotels, amusement facilities, transportation services and the distribution market to expand.

In the field of semiconductor-related equipment, we supply die bonders that paste semiconductor chips on lead frames, and testers for the burn-in of semiconductor packages. Demand for high-speed, high-precision semiconductor-related equipment is expanding as a result of the striking miniaturization and increasing functionality of mobile phones, PCs, digital cameras, and a variety of other digital consumer electronic products.

Market for Electronic and Optical Components

Principal products in the electronic and optical components segment include camera shutters, lens units, precision-molded plastic case parts for digital cameras and mobile phone cameras, optical pickup units and polygon scanners for optical disk drive devices, electronic circuit components such as actuators, drive motor units, and trimmer potentiometers used in office equipment and home appliances.

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Demand for optical components for digital cameras and mobile phone cameras has increased due to an increase in demand for digital cameras in Asia, as well as healthy demand within Japan for high-speed, high-precision shutters and lens units for high-end digital cameras with six million or more pixels. The introduction of mobile phone cameras with three million or more pixels is driving increased demand for high value-added components such as shutters and auto focus systems.

Demand for optical pickup units for PCs and digital consumer appliances is expanding. In particular, demand for optical pickup units for DVD burners and low-profile devices for notebook PCs is expanding in tandem with the increasing use of those products.

In the field of actuators for polygon scanners, demand for actuators with high-speed, high-precision air bearing motors is growing, as a result of the ever-improving image quality offered by copiers and color printers.

Drive motor units for consumer electronic goods and appliances contribute to the added value of such products as refrigerators, by improving their ice-making functions, and washing machines, by enhancing drainage. Demand for drive motor units in the BRICs market is expected to rise steadily with improvement in the standard of living and the expansion of the moneyed class in the region.  

Electronic components such as trimmer potentiometers and switches are used in printed circuit boards, and demand for these products mirrors the silicon cycle (the cyclical ups and downs in the semiconductor industry). The market was sluggish in the first half of the fiscal year ending March 31, 2006. However, it has been showing signs of recovery in the second half.

Market for Others

The “Others” segment consists mainly of automobile transmission parts, pivot assemblies for hard disk drives, music box related products, the transportation industry, and other service industries.

The auto parts we supply include control valves, which are the heart of automatic transmissions, electromagnetic valves, and valve spools. All these require extreme precision to achieve high-accuracy control of hydraulic transmissions. Recent years have seen growing demand for continuously variable transmissions (CVTs), which offer smooth acceleration and superior fuel consumption, and demand for enhanced controllability has fueled rising demand for control valves.

Pivot assemblies support and control the arm of the magnetic head in hard disk drives. Because they are used in hard disk drives, shipments of pivot assembly units are steadily increasing.

Our Business Strategy

We pursue high business growth, high profitability and high stock price by establishing a position as the leading provider of brushless motors and other drive technology products. We intend to accomplish these goals based on the following strategies.

1) Maintaining the dominant position in the hard disk drive (HDD) spindle motor market

The spread of broadband internet network and diversified broadcast services in recent years have significantly increased demand for data storage.

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The HDD industry gives every indication that there will be a long-term sustained increase in demand for increased drive capacity as audio and visual data require much more storage capacity than simple text data. We believe that the HDD industry will continue to pursue higher density strage in all HDD form factors, leveraging the perpendicular recording technology in which data bits are oriented vertically on the disc platter (perpendicular to the disc surface), rather than flat to the surface as with the existing longitudinal recording.

As the world’s leading manufacturer of HDD motors, we believe that our ability to meet changing customer demands will be crucial for stable development of the HDD market. We have maintained the market leadership in this field through a ceaseless quest for excellence in spindle motor technology, motor miniaturization know-how, supply capacity and cost competitiveness in ways that effectively advance the performance and applicability of HDD.

The following outline the recent progress in our strategic approach to the HDD motor market today.

i) Technological Leadership

Our fluid dynamic bearing (FDB) motors developed to meet demand for faster rotational speed, enhanced precision and lower acoustic quickly gained the recognition of the HDD manufacturers and have almost entirely replaced traditional ball-bearing motors as the mainstream HDD motor today. Using sintered-alloy metal as the main material of a FDB unit is the second strategic step for us to ensure our competitive advantage in this field. The sintered-alloy-metal FDB draws on a proprietary technique co-developed in a joint venture with a major Japanese bearing manufacturer, which enables fewer processing operation, thus reducing production lead time and costs. Sintered-alloy-metal FDB motors are increasingly recognized among major HDD manufacturers for its practicality and are fast coming into use for desktop personal computers and various digital consumer electronics, including digital video recorders, set-top boxes, digital still cameras, camcorders, home video game consoles, MP3 players, car navigation systems, surveillance TV cameras and cell-phones.

ii) Production Enhancement

To meet the growing demand, we are strengthening our production activities in Asian/Southeast Asian countries, such as China, Thailand, Singapore and Philippines, where our customers’ manufacturing operations are predominantly located. The latest developments include the construction of two additional factories in Thailand, whose government grants long-term tax benefits to the foreign HDD component manufacturers operating in the country’s designated economic zone. Both factories, one of which will partially adopt automatic production system, are due to start operation within the year. Under the current plan, we estimate our aggregate production capacity including these new factories will have been increased approximately 40% year on year by the end of 2006. Also, as part of efforts to improve productivity, we are adding emphasizing in-house manufacture of the components and peripheral parts of HDD motors.

2) Expanding the market share of small precision brushless DC motors for non-HDD applications

In tandem with efforts to maintain a strong position in the market for HDD motors, we also seek to increase presence in a broader range of small precision motor markets by extensive use of our technological and manufacturing resources related to brushless DC motors. These non-HDD-oriented brushless DC motors mainly activate optical disk drives, office equipment, and cooling fans for varying purposes. The following are our recent progress in these market segments.

i) Optical Disk Drives

At the forefront of the high-end optical disk drive market, particularly that of Japan, a gradual transition to the next-generation DVD formats referred to as Blu-ray and HD DVD is underway in step with the popularization of high-definition broadcast. As the dominant supplier of brushless DC motors for high-end optical disk drives, we look to the emerging market for new revenue opportunity. In the meantime, we have also been extending our reach into the low-end Asian markets, making extensive use of our technological, scale advantages already established in the high-end field.

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ii) Office Equipment and Cooling Fans

The centerpiece of our strategic approach toward the office equipment applications market is driving replacement demand for our brushless DC motors. In recent years, we have augmented product portfolio to include new brushless DC motor lineups closely directed toward this purpose. With their technological advantages remaining intact, the specifically-designed brushless DC motors apply the most commonly used surface configurations and therefore fit in virtually all installation spaces currently filled by brush/AC motors, significantly saving the customers switching costs. On the marketing front, Nidec and Nidec Copal Electronics have jointly made full-scale sales initiatives to promote the use of the new lines. In the cooling fans business, we are seeing our product mix shifting toward high-value-added lines. With a particular focus on further productivity enhancement, we have taken measures to streamline production, including a review our manufacturing locations.

3) Penetration into the automotive motor market

With emphasis on enhanced driving safety, fuel efficiency and environmental friendliness of automobiles, the automobile industry is going through a phased technological transition toward highly-sophisticated, electronically-controlled automobile drive systems which require a greater number of electric motors than the existing mechanically-controlled system does. We view the automotive motor market as a major source of our future growth and have been proactively investing research and development resources in this area. Automotive applications using our brushless DC motors on a commercial basis presently include hydraulic/electric power steering system and seat/fuel-cell cooling fans. We expect the future application areas to expand into a wider range of riding and handling system, such as electric active suspension/brakes, and more critical driving sources including the engine drive motor system of gas-electric hybrid cars.

4) Mergers and acquisitions to increase technological strength and product portfolio

Effectively shortening the research and development period is increasingly important for us to constantly get to market fast with new products and maintain market leadership. In this respect, corporate acquisitions aimed to strengthen product development capabilities have been and will continue to be an essential element to our business growth. Since 1995, we have acquired a total of twenty-three companies with world-class drive technologies and manufacturing expertise and have utilized these resources to augment our core, small precision motor business. We consider that further steps towards more integrated product development environment will require technologies relating to semiconductor and electronic control unit. From a broader strategic perspective, acquiring access to the large-size motor market, where brush/AC motors are still the mainstream, is also an option matching our aim to increase replacement demand for brushless DC motors. To assist in evaluating our future corporate acquisitions, we have invited seasoned experts from the outside and established an internal think tank division dedicated to mergers and acquisitions in June 2006 (the Corporate Strategy Office).

5) Constant reduction of manufacturing cost to enhance price competitiveness and profitability.

Mitigating the impact of market fluctuations on the company performance is an essential part of managerial efforts. To achieve this, we constantly work on productivity improvements primarily through reasonable reductions in manufacturing cost. Specific measures include shifting production to lower-cost, tax-advantaged overseas locations (particularly those in immediate proximity to our customers manufacturing bases for transport efficiency), and producing more in-house, thereby achieving scale economies.

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6) Increasing presence in all key regional markets

We seek to develop our competitive advantage by increasing presence in the world’ key geographical markets: Asia, North America and Europe. The Asian region, as illustrated by the rapid rise of the Chinese and Indian economies, is assuming greater prominence today not only as the world’s manufacturing center, but also as huge consumer market of enormous growth potential. Building upon advances thus far made in the Southeast Asian countries, we have established and strengthened our manufacturing, logistical and sales capabilities in China over the past few years in step with our customers’ production shift to China. In the Pinghu Economic Development Zone in Zhejiang, we have twelve companies in operation and one in the making on a group-wide basis today. In order to maintain an optimal balance in overseas production, we are now looking at Vietnam’s Saigon High-tech Park (SHTP) for future capacity increases and have established two manufacturing factories to date on the group-wide basis. Our North American and European operations work at the forefront of our overseas sales activities, collecting information on local markets and customers in a manner that helps expand our global business opportunities.  

Our Principal Products, Customers and Competition

The following table presents net sales in each of our major categories of products for each of the three years ended March 31, 2004, 2005 and 2006:

		Yen in millions			U.S. dollars in thousands
		For the year ended March 31			For the year ended March 31, 2006
		2004	2005	2006
Net sales:
	Small precision motors:
	Hard disk drives spindle motors	¥ 106,919	¥ 119,233	¥ 164,575	$ 1,400,996
	Other small precision brushless DC motors	34,138	61,066	66,463	565,787
	Small precision brush DC motors	5,372	7,980	7,849	66,817
	Brushless DC fans	26,047	34,435	34,872	296,859
	Sub-total	172,476	222,714	273,759	2,330,459
	Mid-size motors	32,574	35,564	37,767	321,503
	Machinery	31,240	76,957	73,243	623,504
	Electronic and optical components	23,188	128,417	128,791	1,096,374
	Others	18,019	22,209	23,298	198,331
	Consolidated total	¥ 277,497	¥ 485,861	¥ 536,858	$ 4,570,171

Hard Disk Drive Spindle Motors

We have been providing fluid dynamic bearing hard disk drive spindle motors, offering such motors for 3.5-inch, 2.5-inch, 1.8-inch, 1.0-inch and 0.85-inch hard disk drives. As shown in the table above, our net sales of hard disk drive spindle motors were ¥106,919 million for the year ended March 31, 2004 and ¥119,233 million for the year ended March 31, 2005. For the year ended March 31, 2006, our net sales of hard disk drive spindle motors amounted to ¥164,575 million, representing 30.7% of total net sales.

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We currently have six customers for our hard disk drive spindle motors. All of these customers are major hard disk drive manufacturers. Our six customers are Seagate, Western Digital, Hitachi GST, Fujitsu, Toshiba, Samsung  For the year ended March 31, 2004, sales of hard disk drive spindle motors to our top five customers constituted over 36% of our net sales. For the year ended March 31, 2005, sales of hard disk drive spindle motors to our top five customers constituted over 24% of our net sales. For the year ended March 31, 2006, sales of hard disk drive spindle motors to our top five customers constituted over 30% of our net sales. For the year ended March 31, 2006, Seagate, the world’s largest disk drive manufacturer, represented 10.9% of our net sales, with ¥58,767 million, and Hitachi GST represented 7.9% of our net sales, with ¥42,345 million. We currently supply Seagate, our largest customer, with a majority of its high-end, all of its fluid dynamic bearing hard disk drive spindle motors. We also supply our second-largest customer, Hitachi GST, with a most of its hard disk drive motor requirements. We currently supply substantially all of other leading hard disk drive manufacturers with most of their hard disk drive spindle motors. In the near future, we do not expect to see any new major manufacturers enter the market for 1.0-inch, 1.8-inch, 2.5-inch or 3.5-inch hard disk drives, due to extreme competition in the hard disk drive industry. However, we expect to see new hard disk drive manufacturers, and thus potential new customers, to emerge for 1.8-inch, 1.0-inch and 0.85-inch hard disk drives, as new applications for those hard disk drives are developed.

Currently, there are four major producers of spindle motors for hard disk drives in the world, including us, who together account for almost all of the worldwide market. While we face competition from the other three producers, Minebea, Victor Company of Japan, or JVC, and Panasonic, particularly in the 1.8-inch, 2.5-inch and 3.5-inch hard disk drive motor segments, we currently have a market share of more than majority of the hard disk drive spindle motor market by shipment volume. The hard disk drive industry is almost shifted from motors based on ball bearing technology to those based on fluid dynamic bearing technology, where we believe we have a technological advantage and will gain additional reputation benefits from being one of the first market entrants. At present, we are the largest manufacturer of 2.5-inch fluid dynamic bearing hard disk drive spindle motors. Most 2.5-inch hard disk drives are used in notebook computers. Seagate was the first manufacturer to use fluid dynamic bearing motors in 3.5-inch hard disk drives used in desktop computers and high-end hard disk drives. Moreover, we believe that we are the dominant supplier of spindle motors for their high-end hard disk drives. The fluid dynamic bearing motors that we supply to Seagate are based on the designs developed by Seagate. We also believe that we enjoy a very strong position in the 1.0-inch hard disk drive motor segment, as we are not aware of any other producers of this product at present.

We seek to compete by working closely with our customers to design and develop motors that meet their specifications. We have already developed a strong background in manufacturing both 2.5-inch models for notebook applications and 3.5-inch models for desktop applications as well as 3.5-inch models for high-end applications. Aside from producing Seagate models, we have been developing a wide range of our own fluid dynamic bearing spindle motors in all categories from 0.85- to 3.5-inch models. Seagate was formerly a competitor. However, we no longer expect them to be engaged in mass production of fluid dynamic bearing motors, because they sold their fluid dynamic bearing production facilities in Rangsit, Thailand to us in November 2000.

We believe that our development activities, which enable us to provide high speed, precision rotation motors and our move to lower-cost, overseas production will maintain and potentially strengthen our competitive position in the market for hard disk drive spindle motors. We are building a new plant in Ransit, Thailand as part of our strategy to produce hard disk drive spindle motors on a larger scale, at lower cost and to have closer contact to our customers, who are increasing relocating their production facilities to China. Although information storage technologies exist that do not utilize hard disk drives, we are not aware of any products that will replace the hard disk drive in the foreseeable future. We believe that demand for hard disk drives will continue to increase in the medium and long term.

Other Small Precision Brushless DC Motors

In addition to our hard disk drive spindle motors and small precision brushless DC fans, our small precision brushless DC motors are used in both computer related devices (including CD-ROM drives, CD-R/W drives, DVD recorders and players and DVD-multi drives) and office equipment (including computer peripherals, copiers, printers and fax machines). Color copiers in particular require a sensitive and smooth dram spin to achieve high-grade printing. Our power transmission drives and brushless motors work together to provide a high-accuracy spin.

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We are in fierce competition with Matsushita Electric Industrial, LG Innotek and Samsung Electric in this market, though we hope to increase our market share through the introduction of new products. Our net sales of other small precision brushless DC motors were ¥34,138 million for the year ended March 31, 2004, ¥61,066 million for the year ended March 31, 2005 and ¥66,463 million for the year ended March 31, 2006. The market trend for slim optical disk drive units, incorporated mainly into laptop computers, is steadily shifting to value-added, CD-R/W-DVD Multi hybrids. We are the main supplier of CD-R/W-DVD Multi hybrid units to two major Taiwan makers, – Lite-on and QSI – and believe that we have a significant share of this market. Another focus of our attention is DVD disk drives incorporated into slim optical disk drive units. We believe that we are in a good position to increase our share in this slim optical disk drive market because spindle motors for these products are required to demonstrate a high degree of rotation accuracy. We have been expanding our market share both in terms of slim and thick types, by targeting products on the higher end of the quality spectrum.

Manufacturers in Korea and Taiwan currently lead the manufacturing market for CD-ROM drives, CD-R/W and DVD devices.  We supply a large portion of brushless DC motors to manufacturers in these countries.  In order to expand our market share, we are making efforts to further reduce our production costs by standardizing our products and by generating scale efficiencies.

We have been increasing our monthly production of brushless DC motors for use in office equipment such as laser printers, fax machines and multimedia equipment, including CD-ROM and CD-R/W drives and DVD drives, to up to fifteen million motors per month during the year ended March 31, 2006. Because we are intentionally expanding our market shares both in slim and thick types, our sales have been steadily increasing since the second half of the year ended March 31, 2001 despite of the severe competition with low-cost manufacturers in Korea and Taiwan. In order to respond to this competition, we have attempted to lower our costs by shifting our production bases to overseas, especially to China where we have established our subsidiary, Nidec (Dongguan) located nearby Shenzhen.

Brushless DC Fans

Our brushless DC fans are used in many types of products, including computers and video game consoles, for the purpose of lowering the temperature of central processing units in these products. In addition, they are used in household appliances, including bidet-toilets, rice cookers, microwave ovens and plasma displays. Our net sales of brushless DC fans accounted for ¥26,047 million for the year ended March 31, 2004, ¥34,435 million for the year ended March 31, 2005 and ¥34,872 million for the year ended March 31, 2006.

Customers for our brushless DC fans include manufacturers of central processing units, computers, computer cases and computer peripherals, laser printers, photocopy machines, projectors, audio/visual equipment, household appliances, game consoles, telecommunications equipment, automobile seats and automobile air conditioners. Overseas, a substantial portion of our sales is to manufacturers of central processing units, computers and computer peripherals. We also have a major position in the fan market for color printers, projectors and mini-component stereo sets. We are also expanding sales of our fans into new markets such as automobile seats and telecommunications equipment. We began selling fans for video game consoles in March 2000, and we believe that we are currently the largest supplier to each of the three major game console manufacturers. In Japan, our primary competitors for brushless DC fans are Minebea-Matsushita and Sanyo Denki. We also face competition from Papst in Germany and Taiwanese companies such as Delta, Sunon and Chenhome, which are generally providing less expensive fans. We are also selling our fans and motors to the manufacturers of digital laser projectors. Texas Instruments, with which we maintain a long-standing business relationship, is a major designer and manufacturer of digital laser projectors, and we expect that from our existing business with Texas Instruments, we will be able to capture a large share of the market for fans and motors in digital laser projectors.

We do not sell large quantities of brushless DC fans to overseas customers in the household appliance industry. Overseas markets in this industry still favor AC fans, which are less expensive than DC fans. On the other hand, there is greater demand in Japan for our small precision brushless DC fans within the Japanese appliance industry, because Japanese households tend to demand better quality and more fully featured household appliances that require precisely regulated power control. We believe that we have the largest share of the domestic fan motor market with respect to household appliance products.

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Mid-size Motors

Through Nidec Shibaura Corporation, which was originally a joint venture among Nidec, Shibaura Mechatronics and Toshiba and which became our wholly owned subsidiary in September 2000, we produce mid-size brushless DC motors for household appliances such as washing machines and air conditioners. We are combining the technology and expertise of Nidec Shibaura in household appliance motors with other technologies we have developed through our experience in the spindle motor field. In the area of household appliance DC motors, our principal competitors are Matsushita Electric, Hitachi and several Chinese manufacturers. We also design, develop, manufacture and service mid-size motors for industrial equipment such as pumps and elevators as well as home electrical appliances through Nidec Power Motor. Our net sales of mid-size motors accounted for ¥32,574 million for the year ended March 31, 2004, ¥35,564 million for the year ended March 31, 2005 and ¥37,767 million for the year ended March 31, 2006.

One area into which we have diversified is mid-size motors for power steering. We are currently selling such motors to five car manufacturers through three major power steering manufacturers. We are actively exploring possibilities for collaboration with other suppliers to the automotive industry and plan to enter the U.S. market. We face competition from companies that supply auto parts to the major car manufacturers such as Globe in the United States and Bosch and Siemens VD in Europe.

Machinery

Machinery we design and manufacture includes semiconductor production equipment, such as robots, card readers, die bonders and board testers, high-speed press machines, machine tool equipment for the manufacture of motors, measuring equipment, power transmission equipment and factory automation systems.

Our net sales of machinery accounted for ¥31,240 million for the year ended March 31, 2004, ¥76,957 million for the year ended March 31, 2005 and ¥73,243 million for the year ended March 31, 2006.

The majority of our die bonders and board testers are shipped directly to information technology and semiconductor industry plants.

An active demand for LCD (liquid-crystal-display) TVs drove capital spending by LCD panel makers in Japan, Korea and Taiwan, leading to an increase in sales of Nidec Sankyo’s LCD-substrate transfer robots.

Nidec Sankyo’s card readers were also in high demand, benefiting from the expanded BRICs market and banks’ replacement need for biometric automatic teller machines.

In the meantime, Nidec Tosok’s semiconductor equipment business exhibited different product-specific trends. In contrast with brisk tester sales, the sales of die bonder declined sharply as Nidec Tosok narrowed its production focus to high-yielding lines in an effort to improve profitability.

Electronic and Optical components

 Sales of Nidec Sankyo’s optical pickup units increased in a strong drive to expand market share. However, productivity deteriorated due to a sharp decline in production-yield during the second half period.

Sales of Nidec Copal’s digital camera shutters and lens units slowed during the first half period as the digital camera market entered an inventory-adjustment phase. Nidec Copal brought to market a series of new products during the second half period, with recovering demand in the background. However, low production yield hindered output growth, resulting in the second-half sales falling short of covering the first-half revenue loss.

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Sales of Nidec Copal Electronics’s electronic circuit components for industrial equipment increased moderately, while sales of actuators for home appliances and entertainment devices decreased due to sluggish demand.

Our net sales of electronic and optical components accounted for ¥23,188 million for the year ended March 31, 2004, ¥128,417 million for the year ended March 31, 2005 and ¥128,791 million for the year ended March 31, 2006.

In January and February 2004, Nidec Copal Corporation, Nidec Copal Electronics Corporation and Nidec Sankyo Corporation, which have previously been our affiliated companies, became consolidated subsidiaries of the NIDEC group. Nidec Copal Corporation produces lens units and digital camera shutters, Nidec Copal Electronics Corporation manufactures electronic parts and Nidec Sankyo Corporation manufactures optical pickups.

Other products

“Other products” have progressed favorably due to strong sales of new products from our major customers in North America, Europe and Japan, to which automotive component parts manufactured by Nidec Tosok Corporation are supplied. Our net sales of other products accounted for ¥18,019 million for the year ended March 31, 2004, ¥22,209 million for the year ended March 31, 2005 and ¥23,298 million for the year ended March 31, 2006.

Sales of Nidec Tosok’s automotive parts increased, driven by high demand for newly-marketed continuously variable transmission (CVT) and expanded customer base. Sales of pivot assemblies for use in hard disk drives also increased, benefiting from the expanded hard disk drive market. This business segment marked a moderate year-on-year sales increase by offsetting impact of price pressure and inventory adjustments.

Sales

We regard a timely response to consumer demands as the most important aspect of service. By establishing a sales base in many regions, both inside and outside Japan, we have established a global sales network which covers the world’s key motor markets. As of March 31, 2006, we had 90 sales and marketing offices in Japan, 13 in the United States, 2 in Europe and 31 in the rest of Asia.

In Japan, products are mainly sold to customers directly through Sales Departments, which employed 930 staff members as of March 31, 2006. Some products are also sold through sales representatives. We have sales bases and sales branches in various regions in Japan, such as Tokyo, Osaka, Aichi (Nagoya), Fukuoka, Kanagawa, and Hiroshima. Since most of our customers have a technical development department in Japan, we work to expand new demand by meeting the diversified needs of our customers through these sales departments and seek to quickly respond to changes in the market.

Overseas, generally, products are sold to customers through subsidiaries and affiliates. In the United States and Canada, a portion of our products is sold through sales representatives.  In Europe, products are mainly sold directly to customers through sales subsidiaries. In Asia, such as Singapore, China, Hong Kong, Taiwan, and South Korea, sales subsidiaries are responsible for directly selling products to customers in their area. As for manufacturing subsidiaries in Asia, such as Singapore, Thailand, Taiwan, the Philippines, and China, products are generally sold through parent companies, although, some products are sold through sales subsidiaries in these areas or directly to customers. Our manufacturing subsidiary in Dongguan sells nearly all of its products to customers through sales subsidiaries in Hong Kong.

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The following table presents a breakdown of total revenues by geographic market for the three years ended March 31,2004, 2005 and 2006:

		Yen in millions			U.S. dollars in thousands
		For the year ended March 31			For the year ended March 31, 2006
		2004	2005	2006
Sales and operating revenue:
	Japan	¥ 149,392	¥ 292,822	¥ 294,307	$ 2,505,380
	U.S.A.	5,378	8,200	8,398	71,491
	Singapore	39,056	59,989	72,970	621,180
	Thailand	36,610	42,653	56,246	478,812
	The Philippines	2,230	5,557	6,848	58,296
	China	13,439	23,771	30,565	260,194
	Other	31,392	52,869	67,524	574,818
	Consolidated total	¥ 277,497	¥ 485,861	¥ 536,858	$ 4,570,171

Because our hard disk drive spindle motors are components used in information technology equipment, the market for which is subject to rapid technological change, it is critical to provide in-depth support, including by locating production, sales and service operations as close as possible to customers. Success in our business depends on the ability to quickly understand and respond to market needs, including product trends, features and specifications, as well as production capacity and pricing. Our Sales Department is constantly evaluating the market in search of new opportunities. Feedback on identified needs is quickly passed on to our Development and Production Departments, and the entire team works together to further the commercialization effort of new products. The rapid acquisition of information and action by our Sales Department enables our Development and Production Departments to respond quickly, so that products meeting customer requirements can be launched in a timely manner.

Production

We specialize in the field of “Everything that Spins and Moves” centering on drive technology products, namely motors, and have acquired large market share for many of our products by reinforcing motor-related technology and application engineering through mergers and acquisitions. As a result, we have been successful in expanding sales and profits by taking advantage of new market opportunities and demand trends. We divide operations into the five business segments discussed below. While development and design engineering are mostly conducted in Japan, production of small precision motors is conducted in various Asian countries, including Thailand, the Philippines, Singapore and China, based on our basic policy of producing products close to the production sites of our customers. While some mid-size motors are being produced in Japan, production of mid-size motors has been increasingly shifted toward Thailand and China, mainly for cost advantage. Machinery is still being produced mostly in Japan.

Small Precision Motors

We produce most of our small precision motors, such as spindle motors for HDDs, brushless DC motors and fan motors in our overseas manufacturing subsidiaries in Thailand, the Philippines, Singapore, Vietnam and China. In addition, we established joint ventures with NTN Corporation in China in August 2002, then in Thailand November 2005. The joint ventures are producing fluid dynamic bearing units using oil impregnated sintered-alloy metal for our spindle motors for HDDs. These production operations in Asia and Southeast have resulted in cost reductions in relation to such factors as capital expenditure, labor costs and taxes. Also, as part of efforts to facilitate production cost reduction, we are promoting the internalization of motor parts in these sites.

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We have established research and development centers in Japan, which develop new designs and more efficient processing/production technology in order to create advanced new products. In particular, our technical development centers in Kyoto, Shiga, Nagano and Tottori have been engaged in design and prototype production for new-products  and are promoting the a full transfer of their technical expertise, including formation of mass production lines, to our overseas plants.

Mid-Size Motors

The design and development of the mid-size motors is conducted in Shiga, Fukui and Fukuoka prefectures in Japan. Shiga branch handles mid-size brushless DC motors for vehicles responding to an increase in demand for fuel-efficient vehicles generating less emission, Fukui branch deals with mid-size brushless DC motors for consumer electronics and housing facilities, which are equipped with energy-saving, low noise and longer life features, and Fukuoka branch handles mid-size motors for energy-efficient machinery. Production of those products is conducted in Japan, Thailand and in China. Production bases in Japan provide technical support to manufacturing subsidiaries in Thailand and in China.

Machinery

Semiconductor manufacturing equipment, automatic measuring equipment, image processing equipment, high-speed press machines, printed-circuit-boards inspection equipment, industrial robots and card readers, have mainly been designed, developed and manufactured in Japan. Some of our measuring equipment and high-speed press machines are being manufactured in China.

Electronic and optical components

We produce encoders, optical components such as camera shutters, lens units and optical pick-up units, electronic parts including pressure sensors, electronics circuit parts and actuators, as a result of Nidec Copal Corporation, Nidec Copal Electronics Corporation and Nidec Sankyo Corporation (then Sankyo Seiki Mfg. Co., Ltd.) becoming our consolidated subsidiaries in January and February 2004. Shutters and lens units for various cameras are developed and designed by Nidec Copal Corporation in Japan and produced in Japan, Thailand and China. Nidec Sankyo Corporation develops, designs and manufactures electronic components such as actuators and optical pick-up units, which are being produced in Singapore and China. Electronic components such as pressure sensors and electronics circuit parts are being developed, designed by Nidec Copal Electronics Corporation in Japan and manufactured in Japan and China.

Others

“Others”, consists of pivot assemblies and automotive parts. Our manufacturing subsidiary in Singapore conducts the development, design and manufacture of pivot assemblies. Automotive parts are being developed and designed in Japan and produced in Japan and Vietnam.

Suppliers

We purchase components, raw materials, equipment relevant to the manufacture of our products from various suppliers selected on the basis of superiority in product price, product quality, production lead-time, and associated services. We believe that this policy encourages suppliers to develop technological expertise and cost competitiveness. A large portion of such procurements, except some components for printed circuits, is locally available. We believe that the materials and components necessary for our manufacturing operations are presently available both in quantity and quality.

Key motor parts outsourced are, pressing and stamping parts for the production of hubs, stator cores, and die casts used in brackets motors are mounted on. Other products outsourced include printed-circuit components, including integrated circuits and electromagnetic steel sheets, as well as other electronic parts. In the past, we purchased base plates for motors from suppliers, but now we produce such base plates. Once in the past, an increase in demand for printed circuits caused shortage of relevant electronic components, including integrated circuits. If similar difficulties should occur in the future, we would be compelled to build stock to meet demand.

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In January and February 2004, Nidec Copal Corporation, Nidec Copal Electronics Corporation and Nidec Sankyo Corporation (then Sankyo Seiki Mfg. Co., Ltd.) became our consolidated subsidiaries. Since then these companies have been shifting production overseas in order to reduce production costs and increase competitive strength, while improving the framework for purchasing quality control.

Government Regulation and Environmental Standards

In Japan, we are subject to environmental regulation under the Air Pollution Control Law, the Water Pollution Control Law, the Wastes Disposal and Public Cleaning Law, the Resource Recycling Law, the Basic Law for Establishing a Recycling-based Society and other laws. We are also subject to local regulations which in some cases impose requirements more stringent than the national requirements. However, we do not use large volumes of hazardous or toxic chemicals in our manufacturing operations in Japan. Moreover, our operations do not require the disposal of large amounts of waste into the environment. Our emissions are sufficiently low so that we are not required to report their amount under the Pollutant Release and Transfer Register.

Our overseas operations are also subject to environmental regulation. Our operations in the United States, for example, are subject to extensive environmental regulation under a number of laws, including the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental, Response, Compensation and Liability Act and the Toxic Substances Control Act. We are also subject to substantial state legislation that parallels, and in some cases imposes more stringent obligations than, federal requirements.

We believe that leadership in environmental protection is an important competitive factor in the markets for our products. We have given and will continue to give high management priority to environmental matters. We believe that our operations are in substantial compliance with regulatory requirements affecting our facilities and products in each of the markets in which we operate. We monitor these requirements and adjust affected operations and products to ensure that we remain in substantial compliance with these requirements. With one exception, all our plants in Japan and all our overseas production bases have either received, or are scheduled to receive within the next several years, certifications under the ISO 14001 standards on environmental management systems of the International Organization for Standardization. The one exception is Nidec America Corporation, whose clients have not requested ISO 14001 certification. Also, in response to a number of recent requests from customers, we have established a committee to investigate ways that we might eliminate the use of lead in our manufacturing processes. As a result, almost all of our current products use lead-free solder, with a few exceptions because of specific customer requirements.

The Restriction of Hazardous Substances Directive (RoHS) 2002/95/EC is a set of regulations regarding the sale and use of certain restricted substances in electrical and electronic equipment, designed to prevent environmental and health hazards attributable to inappropriate disposal, or time degradation of products.

From July 1, 2006, any new electronic or electrical equipment sold in the EC must not contain the following hazardous substances in excess of the permitted levels.

Mercury

Cadmium

Lead

Hexavalent chromium

PBB (polybrominated biphenyl)

PBDE (polybrominated diphenyl ether)

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The directive indicates only products entering the EU must be in compliance. Still, we consider the Directive essentially covers our whole lines of products because of the possibility that products we make and sell elsewhere could be eventually destined for the EU as components of other companies’ products.

Our Employees

The following table shows the number of our employees as of the dates indicated:

	As of March 31,
	2004	2005	2006
Japan	7,486	7,222	7,550
North America	330	284	197
Asia (other than Japan)	51,315	62,647	70,943
Europe	9	16	31
Total	59,140	70,169	78,721

Japan

In Japan, as of March 31, 2006, we had 7,550 employees. 3,424 of these employees were engaged in manufacturing operations, 1,796 in research and development and 930 in retail business activities.

Most of our employees receive compensation on the basis of fixed annual salaries and twice-a-year bonuses. In addition, we have a separate bonus system to reward employees who make significant technological contributions to our operations as reflected primarily by patent registrations. We emphasize and reward individual skills and performance. We have started to incorporate performance-linked elements into our domestic compensation and promotion systems to make us more competitive in Japan in recruiting and retaining highly-skilled individuals. Under our retirement allowance system, eligible employees are entitled to a lump-sum allowance and a retirement annuity upon their retirement.

In Japan, although Nidec has no labor union, labor unions have been organized in some of our subsidiaries. No substantial strikes and/or labor disputes have occurred so far. We consider that the relationship between the company and employees is favorable.

Overseas

As of March 31, 2005, we had 70,943 employees overseas. 65,952 of these employees were engaged in manufacturing operations, 76 in research and development and 375 in retail business activities.

No material strikes and/or labor disputes have occurred overseas and we believe that the relationship between us and our employees is favorable.

Intellectual Property

As of March 31, 2006, we owned approximately 1,599 issued patents, 139 utility model registrations and 287 trademarks in Japan as well as 551 issued patents and 17 trademarks in the United States. Every year, we file additional patent applications in Japan, some of which we also file in the United States. We also seek patent protection in various other foreign jurisdictions where we manufacture or sell our products. As of March 31, 2006, we had a total of 4,902 patent and utility model applications pending in Japan and in foreign jurisdictions. While we believe that our patents are important, in general, no single or group of related patents is essential to us or any of our principal business segments.

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We have two strategies for enhancing the protection of our intellectual property rights. First, we distribute descriptions of our patented technology, with schematics, to our development and sales personnel who have more frequent contact with our competitors and their products. By keeping our development and sales personnel informed about the current status and content of our patent and utility model applications and registrations, they are better able to evaluate whether any of our competitors’ products might be infringing our technology. Second, we are putting more effort into obtaining samples of our competitors’ products so that our technical and legal teams can conduct detailed analysis regarding possible patent infringement. Information gained from this process also helps us to obtain more favorable terms during the negotiation of license agreements.

Legal Proceedings

On December 9, 2004, NEC Corporation (NEC) filed a lawsuit against us in the Tokyo District Court claiming that NEC had a loss of ¥174 million ($1,481 thousand) resulting from unamortized equipment for its products and other costs caused by a stoppage of purchases of its products by us. Though we have rebutted the entire claim by NEC, based on the Judge’s strong recommendation for settlement, we have held discussions with experts on the possibility of accepting settlement with NEC. As a result, on March 2, 2006, we reached a litigious settlement with NEC by paying 10% of the amount of money claimed by the company.

On February 15, 2005, we filed a patent infringement lawsuit with the Northern District of California in U.S. A against Victor Company of Japan, Limited and its subsidiary, JVC Components (Thailand) Co., Ltd., and their sales agents, Kabushiki Kaisha Agilis and Agilis Technology Inc. (collectively “JVC”), charging them with infringing its U.S. Patent Nos. 5,667,309, 6,554,476, 6,343,877 and 6,793,394. The four patents cover our fluid dynamic bearing technology used in spindle motors found in computer hard disc drives. JVC has supplied and continues to supply spindle motors to hard disc drive manufacturers without a license under these patents. We brought this action to prevent JVC from selling, distributing or importing infringing spindle motors in the United States, and from selling or distributing such motors for incorporation into hard disc drives sold, distributed or imported in the United States. In addition, we seek compensatory damages for JVC’s infringement, as well as treble damages for willful infringement and recovery of our attorneys’ fees, as permitted under United States Patent law.

On April 19, 2005, a group of 62 U.S. Music Copyright holders including BOURNE CO., (collectively “Plaintiffs”) filed a lawsuit in the Southern District Court of New York, alleging that five companies and one individual, including Nidec Sankyo Corporation and two of its other consolidated subsidiaries of Company (collectively “Defendants”) had been concerned in sales of allegedly infringing music-box movements which were imported into U.S. by several U.S. importers. An investigation found out that the importers had not paid copyright royalty for the music-box movements, and that sales effort by Nidec Sankyo and the two subsidiaries could be regarded as sales effort for the importers, and therefore could become a reason to find Nidec Sankyo’s and the two subsidiaries liable for copyright law violation.  Nidec Sankyo and the two subsidiaries have therefore discussed with the Plaintiffs and sought solutions while having discussions with the other Defendants. As a result, even though a settlement agreement is yet to be concluded, the Court dismissed the case on May 24, 2006 on condition that a request to reopen the case will not be made within 60 days. The negotiation for settlement is at the final stage, and after the agreement is concluded, both the Plaintiffs and the Defendants will be able to reveal the content of the agreement upon approval.

We are also involved in a number of other actions and proceedings in Japan and overseas in the ordinary course of our business. Based upon the information currently available to us and our domestic and overseas legal counsel, we believe that the ultimate resolution of such actions and proceedings will not, in the aggregate, have a material adverse effect on our financial condition or results of operations.

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C. Organizational Structure.

The following table and the discussion that follows present summary information on our major consolidated subsidiaries as of March 31, 2006:

Name	Country	Principal business	Net sales for the year ended March 31, 2006	Issued share capital as of March 31, 2006	Percentage owned by us as of March 31, 2006
					(%)
Consolidated subsidiaries
Nidec America Corporation	U.S.A	Manufacture and sales of fans and precision motors	US$25,027 thousand	US$82 thousand	100.0%
Nidec (Zhejiang) Corporation	China	Manufacture of spindle motors for hard disk drives	US$170,965 thousand	US$20,000 thousand	100.0%
Nidec (Dalian) Limited	China	Manufacture of small brushless DC motors and fan motors	US$429,553 thousand	US$35,500 thousand	100.0%
Nidec (Dongguan) Limited	China	Manufacture of small brushless DC motors	US$135,821 thousand	US$10,000 thousand	100.0%
Nidec Electronics GmbH	Germany	Sales of spindle motors for hard disk drives and fans	EUR34,926 thousand	EUR153 thousand	100.0%
Nidec Philippines Corporation	Philippines	Manufacture of spindle motors for hard disk drives	PP14,900 million	PP1,400 million	99.9%
Nidec (H.K.) Co., Ltd.	Hong Kong	Sales of parts for our products and sales of spindle motors	HK$1,871,283 thousand	HK$800 thousand	99.9%
Nidec Singapore Pte. Ltd.	Singapore	Manufacture and sales of pivot assemblies	US$557,658 thousand	US$4,656 thousand	100.0%
Nidec Taiwan Corporation	Taiwan	Sales of fans	NT$3,851,589 thousand	NT$5,000 thousand	100.0%
Nidec Electronics (Thailand) Co., Ltd.	Thailand	Manufacture and sales of spindle motors for hard disk drives	TB31,923 million	TB1,950 million	99.9%
Nidec Subic Philippines Corporation	Philippines	Manufacture of spindle motors for hard disk drives	PP4,941 million	PP1,585 million	100.0%
Nidec (Shanghai) International Trading Co., Ltd.	China	Sales of small brushless DC motors	CNY132,732 thousand	CNY1,655 thousand	100.0%
Nidec Nemicon Corporation	Japan	Manufacture and sales of rotary encoders, proximity sensors and other electronic equipment	¥3,042 million	¥230 million	95.2%
Nidec Power Motor Corporation	Japan	Manufacture and sales of mid-size motors and small AC motors	¥10,581 million	¥2,000 million	91.7%
Nidec Shibaura Corporation	Japan	Manufacture and sales of small AC motors	¥28,61230,892 million	¥1,000 million	100.0%
Nidec Copal Electronics Corporation *	Japan	Manufacture and sales of electronic circuit components, pressure sensors, actuators and potentiometers	¥22,599 million	¥2,362 million	55.4%

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Name	Country	Principal business	Net sales for the year ended March 31, 2006	Issued share capital as of March 31, 2006	Percentage owned by us as of March 31, 2006
					(%)
Nidec Copal Corporation *	Japan	Manufacture and sales of optical, electronic and information equipment, photo laboratory system and factory automation equipment	¥63,094 million	¥11,080 million	57.5%
Nidec-Kyori Corporation	Japan	Manufacture and sales of high speed automatic presses, feed devices and other industrial machinery	¥8,067 million	¥450 million	100.0%
Nidec System Engineering (Zhejiang) Corporation	China	Manufacture of factory automation equipment	CNY166,049 thousand	CNY41,384 thousand	100.0%
Nidec Machinery Corporation	Japan	Manufacture and sales of automatic assembly line machinery and testers	¥8,825 million	¥100 million	60.0%
Nidec-Shimpo Corporation	Japan	Manufacture and sales of power transmission drives, control devices, measuring and factory automation equipment, ceramic and wood art equipment, and others	¥18,122 million	¥2,592 million	100.0%
Nidec Tosok Corporation *	Japan	Manufacture and sales of precision automotive parts, automatic measuring equipment, semiconductor manufacturing machinery, air/electronic gauges, precision ball screws, and other precision measuring devices and manufacture of fan motors	¥26,518 million	¥5,087 million	65.0%
Nidec Total Service Corporation	Japan	Insurance agency, real estate business, merchandising, building maintenance and others	¥2,469 million	¥86 million	100.0%
Nidec Sankyo Corporation *	Japan	Manufacture and sales of motors, optical pickup units, automated teller machines, home appliance components, factory automation equipment	¥121,994 million	¥35,270 million	55.6%

Note:  * - Listed on one or more stock exchanges in Japan

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Joint Venture with NTN Corporation

On August 28, 2002, Nidec and NTN Corporation established a joint venture, NTN-Nidec (Zhejiang) Corporation, in Pinghu City located near Shanghai, China.

Nidec hold 40% and NTN holds 60% of the equity of the joint venture. The breakdown of initial paid-in capital of $6.5 million was $2.6 million from Nidec and $3.9 million from NTN. The purpose of the new joint venture company is to manufacture and sell fluid dynamic bearing units made of sintered alloy metal for hard disk drive motors. Production started in April 2003.

A sintered-alloy-based fluid dynamic bearing units by the new joint venture will be used in our fluid dynamic bearing motors for hard disk drives.  Those motors are sold mainly to the computer/server market through Nidec Corporation.  And in order to expand the market further, the joint ventures have turned their eyes to promising markets such as the audio-visual market and the mobile market, as the demand of hard disk drives in those markets are increasing dramatically.

In January 2004, NTN-Nidec (Zhejiang) Corporation increased its paid-in capital to $21 million US dollars from $13 million US dollars in lieu of an exchange of ownership of shares between Nidec and NTN Corporation. This capital investment was used for capital improvements to achieve increased production capability to 8 million pieces per month from the original 3 million. At the end of 2005, NTN-Nidec (Zhejiang) Corporation had capacity of approximately 5 million pieces per month.

After the success of the joint venture NTN-Nidec (Zhejiang) Corporation in China, Nidec and NTN Corporation established second joint venture, NTN-Nidec (Thailand) Corporation, in Rayong Province located at the south of Bangkok Metropolis, Thailand on November 9, 2005.

Nidec hold 40% and NTN holds 60% of the equity of the new joint venture. The first capital of 360 million Baht is paid by NTN last November. In March 24, 2006, Nidec paid the increased capital of 240 million Baht.

Same as the first joint venture in China, the purpose of the second joint venture is to manufacture and sell fluid dynamic bearing units made of sintered alloy metal for hard disk drive motors. Production started in June 2006.

In addition to 7.5 million pieces per month production capability of NTN-Nidec(Zhejiang) Corporation, in March 2007, NTN-Nidec (Thailand) will also produce 7.5 million pieces per month, which leads to 15 million pieces production capability.

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D. Property, Plants and Equipment.

Our principal executive offices are located in Kyoto, Japan and occupy approximately 36,119 square meters of office space. At March 31, 2006, we operated manufacturing and sales facilities through 23 Japanese subsidiaries and 71 foreign subsidiaries. These facilities are located in Japan, China, Taiwan, Singapore, Thailand, Malaysia, South Korea, Indonesia, the Philippines, Vietnam, Canada, the United States and Europe.

The following table sets forth information, as of March 31, 2006, with respect to our principal manufacturing facilities and other facilities:

Facility name	Location	Floor space (square meters)	Principal products and function
In Japan
Corporate Headquarters and Central Technical Laboratories (1)	Japan	36,119	Basic research and development and fluid dynamic bearing technology development
Nidec-Shimpo Corporation	Japan	29,322	Manufacturing of power transmission equipments and measuring equipment
Nidec Copal Corporation Koriyama Technical Center	Japan	23,642	Development design and material procurement
Nidec Tosok Corporation Headoffice and Technical Center (1)	Japan	20,949	Manufacturing of measuring equipments and semiconductor equipment
Shiga Technical Development Center (1)	Japan	20,596	Research and development and manufacturing of spindle motors for hard disk drives, DC motors for PC peripheral devices, mid-size motors for automobiles and pumps and precision motors
Nidec Sankyo Komagane Facility	Japan	19,741	Manufacturing of motor-driven actuator units and DC motors for PC peripheral devices
Nidec Copal Corporation Shiojiri Factory	Japan	18,989	Manufacturing of mini-laboratory system
Nidec Shibaura Corporation Head Office	Japan	18,517	Manufacturing and sales of mid-size motors
Nidec Tosok Corporation Yamanashi Factory	Japan	15,044	Manufacturing of components for automobiles
Nidec Copal Precision Parts Corporation Koriyama Factory	Japan	13,615	Manufacturing of precision dies, press stamping components, injection molding components and surface treatment processing components
Nidec Copal Electronics Corporation Sano Factory (1)	Japan	11,393	Manufacturing and sales of precision automotive parts
Nidec Sankyo Ina Facility	Japan	11,298	Manufacturing of robots
Mineyama Precision Machining Center (1)	Japan	11,070	Research and development and manufacturing of spindle motors for hard disk drives (both ball bearing and fluid dynamic bearing)
Nidec Nissin Head office and Chino factory	Japan	10,536	Forming of plastic and plastic lens and dies

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Facility name	Location	Floor space (square meters)	Principal products and function
Outside Japan
Nidec Philippines Corporation (3)	Philippines	131,455	Manufacturing of spindle motors for hard disk drives
Nidec Tosok (Vietnam) Co., Ltd.	Vietnam	47,412	Manufacturing of fans and components for automobiles
Nidec (Dalian) Limited (2)	China	46,338	Manufacturing of spindle motors for hard disk drives, DC motors for PC peripheral devices, fans and components for precision motors
Nidec Electronics (Thailand) Co., Ltd. Rojana Factory	Thailand	38,600	Manufacturing of spindle motors for hard disk drives
Nidec Subic Philippines Corporation	Philippines	35,786	Manufacturing of spindle motors for hard disk drives
Nidec (Dong Guan) Corporation (2)	China	30,880	Manufacturing of small brushless DC motors for PC peripheral devices and office automation equipment
Nidec Copal (Zhejiang) Co.,Ltd .	China	29,335	Manufacturing of components and lens cones for digital still cameras and mini-laboratory systems
Nidec (Zhejiang) Corporation (2)	China	29,000	Manufacturing of spindle motors for hard disk drives and assembling motors and accessories
Nidec Shibaura (Zhejiang) Co., Ltd.	China	22,700	Manufacturing of mid-size motors
Nidec Sankyo (Fuzhou) Co.,Ltd.	China	20,540	Manufacturing of optical pickup units
Nidec Precision (Thailand) Co., Ltd. (4)	Thailand	19,560	Manufacturing of components for hard disk drive spindle motors
Nidec Copal (Thailand) Corporation	Thailand	16,450	Manufacturing of camera components and micro motors
Nidec-Shimpo (Zhejiang) Co., Ltd.	China	15,557	Manufacturing of power transmission drives
Nidec Nissin (Dalian) Corporation	China	14,436	Manufacturing of engineering plastic dies and moldings
Nidec Pigeon (H.K.) Co., Ltd.	Hong Kong	14,254	Manufacturing and sales of Mechanism for audio
Nidec System Engineering (Zhejiang) Corporation (2)	China	13,940	Manufacturing of factory automation equipment
Nidec Nissin (H.K.) Co., Ltd.	Hong Kong	13,780	Forming of plastic and plastic lens
Nidec Shibaura Electronics (Thailand) Co., Ltd.	Thailand	13,410	Manufacturing of mid-size motors
Nidec Sankyo Singapore Pte. Ltd.	Singapore	13,045	Manufacturing of stepping motors and motor-driven actuator units
Sankyo Electronics (Shaoguan) Co., Ltd.	China	12,300	Manufacturing of motor-driven actuator units
Nidec Sankyo Taiwan Corporation	Taiwan	11,790	Manufacturing of parts
Nidec High-Tech Motor (Thailand) Co., Ltd. (4)	Thailand	11,650	Manufacturing of fluid dynamic bearing spindle motors
Nidec Copal Electronics (Zhejiang) Co., Ltd.	China	10,400	Manufacturing of actuator

Notes:

(1) We own both the property and the facilities.

(2) We lease the property and own the facilities.

(3) Nidec Philippines Corporation leases the property from Nidec Development Philippines Corporation, a joint venture company with Prudential BK established for the purpose of purchasing land in the Philippines. We own the facilities.

(4) We lease both the property and the facilities.

In addition to the above facilities, we have a number of other smaller factories located worldwide. We also have sales and service offices which are located primarily in Tokyo, Machida, Osaka, Nagoya, Fukuoka, Zama and Hiroshima.

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As of March 31, 2006, the aggregate book value of the land and buildings we owned was ¥125.1 billion, and the aggregate book value of machinery and equipment we owned was ¥210.1 billion. We lease other equipment that we use in our operations.

Item 4A. Unresolved Staff Comments

We are a large accelerated filer as defined in Rule 12b-2 under the Securities Exchange Act of 1934. There are no written comments which have been provided by the staff of the Securities and Exchange Commission regarding our periodic reports under that Act not less than 180 days before the end of the fiscal year ended March 31, 2006 and which remain unresolved as of the date of the filing of this Form 20-F with the Commission.

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Item 5. Operating and Financial Review and Prospects

A. Operating Results.

You should read the following discussion of our financial condition and results of operations together with our consolidated financial statements and information included in this annual report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth under Item 3.D and elsewhere in this annual report.

Overview

Market Environment for Hard Disk Drive Spindle Motors

Sales of hard disk drive spindle motors, mainly to major hard disk drive manufacturers account for the most significant portion of our sales, and constituted 30.7% of our total sales for the year ended March 31, 2006.

According to Techno Systems Research Co., Ltd. (TSR), a Japanese research institute specializing in technological industries, 84.2% of hard disk drives were used for PCs and the rest were used for non-PC products such as game consoles, DVD recorders and portable audio units for the calendar year ended December 31, 2005.

During the year ended March 31, 2006, we believe that almost all hard disk drive manufacturers in the world, with a few exceptions, shifted from conventional ball bearing motors to fluid dynamic bearing motors.

Reflecting the recent rapid worldwide expansion in demand for digital devices, such as PCs, hard disk drives (HDD) recorders, digital audio players, car navigation systems and game machines demand for HDDs has increased dramatically. According to TSR, world-wide HDD shipments increased by around 25% in calendar year 2005 compared to calendar year 2004, although the average sales price of HDDs declined by approximately 2%. Our average sales price of hard disk drive spindle motors rose by approximately 4% in Japanese Yen terms and fell by approximately 1% in US Dollar terms during the year ended March 31, 2006 due to the depreciation of the Japanese Yen against the US Dollar. During the year ended March 31, 2006, our shipments of hard disk drive spindle motors increased by 32% and our sales increased by 38%, reflecting, we believe changes in our product mix of hard disk drive spindle motors, especially the increase of motors for 2.5-inch HDDs and motors for HDDs smaller than 1.8-inches.  

The increase in the shipments of HDDs was attributable to the strong demand for notebook PCs and consumer electronics. We have seen an increasing number of our customers establish their hard disk drive production centers in Asia, as they have been attracted by these countries’ low production cost environment. We believe that the migration of our customers’ production facilities to Asian and Southeast Asian countries will continue for the next several years.

We have been responding to the trends described above by taking the following steps:

•

We are expanding manufacturing and assembly operations in China and other low-cost production locations, such as Thailand and the Philippines.

•

We are expanding the manufacture of a new type of fluid dynamic bearing spindle motor using oil-impregnated, sintered-alloy metal. The use of sintered-alloy metal, due to its fitness for molding and press work, significantly lessens dependence on the comparatively lengthy machining process during production of other spindle motors, and therefore substantially reduces processing cost per unit.

•

We are expanding the percentage of components we produce in-house.

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We believe that, by taking these steps, we are achieving cost savings that outweigh the decrease in average unit prices. In addition, we have been increasing total revenue from fluid dynamic bearing spindle motors in new non-computer markets, a trend we believe will continue. This, we believe, reflects strong demand for our hard disk drive motors, especially from manufacturers of new consumer electronics and home entertainment applications.

Market Environment for Other Small Precision Brushless DC Motors

Most of our revenues from sales of other DC motors, which accounted for 12.4% of our total net sales for the year ended March 31, 2006, are derived from the sales to manufacturers of CD-ROM, COMBO (CD-R/W drive combined with DVD-ROM drive) drives and writable DVD drives.

We believe that the market for CD-ROM drives is reaching maturity. On the other hand, the markets for COMBO drives and writable DVD drives are growing, in part as replacements for CD-ROM drives. Despite a recent strong demand for computers, especially for notebook PCs, there is significant downward pressure on the pricing for these drives. Accordingly, some of our small precision brushless DC motors, particularly for use in CD-ROM drives, have been experiencing downward pricing pressure, while the demand for other uses, particularly in COMBO drives and writable DVD drives in non-computer products, has been growing. We expect to become more competitive in these markets, as our production costs decline as a result of standardizing our product lines and we achieve the effects of mass production.

Market Environment for brushless DC Fans

We sell our brushless DC fans, which accounted for 6.5% of our total net sales for the year ended March 31, 2006, to various manufacturers of computers, computer peripheral, game consoles, photocopy machines, projectors and household appliances such as refrigerators. We also sell brushless DC fans, which are used to cool automobile seats.

Sales of brushless DC fans are primarily affected by the general market demand for the products that incorporate them. For several years prior to calendar year 2003, the demand for brushless DC fans used for game consoles increased substantially. However, during the last three fiscal years ended March 31, 2004 to 2006, such demand dropped substantially, mainly due to a peak in the global demand for game machines, which had a negative effect on the market for brushless DC fans. Despite significant decreases in sales of brushless DC fans, we have seen strong demand for fans directed to the high-end segments of the PC, server, and MPU cooler markets. Demand for our brushless DC fans is also increasing in the market for household electric appliances, as represented by microwave ovens, warm water toilet seats and refrigerators. In addition, we believe, new demand for our brushless DC fans for use in next generation game consoles is scheduled to be introduced to the market some time this fiscal year ending March 31, 2007.

Market Environment for Mid-size Motors

We sell mid-size motors, which accounted for approximately 7.0% of our total net sales for the year ended March 31, 2006, to home electric appliance, industrial machine and automobile power steering system manufacturers.

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The demand for power steering systems that incorporate mid-size brushless DC motors and help conserve energy has been increasingly growing. An increasing number of power steering system manufacturers have shifted to producing such power steering systems, as opposed to the conventional engine-driven type that uses belts. Although this shift in demand has been increasing, we believe that it will take some more time before the acceptance of power steering systems that use mid-size brushless DC motors reaches a high level of our mass production of these motors, since the evaluation of samples that must take place prior to the introduction of a new product takes a comparatively long period of time in this industry. Also, in recent years there has been increased demand for mid-size brushless DC motors for automobiles for use engine rooms and hybrid engine systems. To comply with those demands and to secure the orders for the coming year , we have made significant expenditures for research and development. In addition, there has recently been increased demand for mid-size brushless DC motors for household appliance products, including air conditioners and dish washers that use mid-size brushless DC motors.

However, during the fiscal year ended March 31, 2006 , mid-size brushless DC motors for use in home electric appliances and industrial machines suffered increases in raw material prices, particularly the prices of cupper and aluminum in the second half of the year. In this segment, mainly due to a steep rise in raw material prices, operating income decreased by ¥2,119 million as compared to the previous period, to minus ¥1,863 million.

Market Environment for Machinery

Sales of our machinery, which accounted for approximately 13.6% of our total net sales for the year ended March 31, 2006, include sales of industrial robots, card readers, high-speed pressing machines and die bonders. The sales decrease in the year ended March 31, 2006 is due to a decrease in sales of laboratory systems to Agfa Photo GmbH, which declared bankrupcy during the year, as well as to decreases in semiconductor manufacturing device, such as die bonders. These decreases more than offset increases in sales of industrial robots, especially liquid crystal substrate handling robots and card readers for ATMs. We expect the demand for liquid crystal substrate handling robots and the increase in sales of card readers to increase further because demand for flat panel TVs which use liquid crystal substrates is rapidly increasing world-wide and demand for card readers are increasing significantly in Brazil, Russia, India and China.

Market Environment for Electronic and Optical Components

We sell electronic and optical components, which accounted for approximately 24.0% of our total net sales for the year ended March 31, 2006, to digital camera and optical disk drive manufacturers.

In the field of optical pickup units for computer optical disk drives, sales expanded over the previous year due to increased orders. However, there was a delay in our adoption of technology, which significantly reduced production yield and profitability. We believe the overall market for optical pickup units expanded during the fiscal year due to the strength of healthy demand for high-end optical disk drives used in notebook PCs and DVD recorders.

Sales of our shutters and lens units decreased over the previous fiscal year, primarily due to inventory adjustments in the first half of the year.

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Effects of Our Recent Acquisitions Activities on Our Financial Statements

As discussed under Item 4.A of this annual report, we have sought growth by investing in or acquiring companies with motors, drives and other related products and technologies. Depending on the circumstances, we acquire a majority interest or a substantial minority interest in the target companies we seek to acquire. Our approach has been to identify underperforming companies with advanced products and technologies. In the past years, we have acquired substantial interests in a number of major companies, several of which were public companies in Japan.

In connection with our acquisition of subsidiaries, we had an aggregate amount of goodwill of ¥3,611 million as of March 31, 2002. This goodwill was originally scheduled to be amortized over a period of five years. In accordance with Statement of Financial Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”), amortization of goodwill ceased beginning on April 1, 2002. Goodwill is now to be tested for impairment at least annually.

In February 2002, we made an additional acquisition of approximately 1.1% of the common stock of Nidec-Shimpo Corporation and made it our majority-owned subsidiary. As a result of this acquisition, Nidec Read Corporation, Nidec Tosok Corporation and other affiliated companies also became our majority-owned subsidiaries.

We acquired additional shares of common stock of Nidec Copal Corporation, Nidec Copal Electronics Corporation and Sankyo Seiki Mfg. Co., Ltd.(currently named Nidec Sankyo Corporation), which had previously been accounted for by the equity method, in January and February 2004. Our ownership interests in these companies increased to over 50%, and our consolidated financial statements now include the accounts of these majority-owned subsidiaries from their acquisition dates.

During the years ended March 31, 2004 and 2005, our equity-method affiliates recorded contributed ¥156,818 million and ¥10,319 million to net sales, ¥22,291 million and ¥1,088 million to gross profit (net sales minus and cost of products sold), and ¥5,069 million and ¥45 million to net income, respectively. Earnings (loss) from equity-method investment in affiliated companies amounted to ¥2,522 million and ¥(34) million for the year ended March 31, 2004 and 2005, respectively. The decrease in net sales, gross profit, net income and earnings from equity-method investments in affiliated companies for the year ended March 31, 2005 compared with the previous year was primarily due to the consolidation of Nidec Copal Corporation and Nidec Copal Electronics Corporation as subsidiaries in January and February 2004, respectively.

Effects of Foreign Currency Fluctuations

A significant portion of our business is conducted in currencies other than the yen, most significantly, the U.S. dollar. Our business is thus sensitive to fluctuations in foreign currency exchange rates, especially the yen-U.S. dollar exchange rate. Our consolidated financial statements are subject to both translation risk and transaction risk. Translation risk is the risk that our consolidated financial statements for a particular period or for a particular date are affected by changes in the prevailing exchange rates of the currencies in those countries in which we conduct business against the Japanese yen. The translation effect, even if it is substantial, is a reporting consideration and does not reflect our underlying results of operations.

Transaction risk arises when the currency structure of our costs and liabilities deviates from the currency structure of our sales proceeds and assets. A substantial portion of our overseas sales are made in U.S. dollars. While sales denominated in U.S. dollars are, to a significant extent, offset by U.S. dollar denominated costs, we generally have had a significant net long U.S. dollar position. With respect to costs not denominated in U.S. dollars, we believe that we have been able to reduce the level of transaction risk to the extent that our overseas subsidiaries incur costs in currencies that generally follow the U.S. dollar. Transaction risk remains for products sold in U.S. dollars to the extent that we must purchase parts for our products from Japan, the costs for which are denominated in yen.

48

Changes in the fair values of our foreign exchange forward contracts and changes in option prices under our foreign currency option agreements are recognized as gains or losses on derivative instruments in our consolidated statement of income. For a more detailed discussion of these instruments, you should read Note 21 to our consolidated financial statements included in this annual report.

Trends for the Year Ending March 31, 2007

We believe that we face multiple factors of uncertainty surrounding our businesses for the fiscal year ending March 31, 2007. Although a large number of Japanese corporations, including in the industries in which we operate, reported high operating profits for the fiscal year ended March 31, 2006, mainly due to strong demand from Asian countries, especially from China, it remains unclear how the Chinese economy will respond to exchange fluctuations and whether such strong demand will last.

Further, there is a concern that political instability, including the situation concerning North Korean situation, may give rise to adverse effects on corporate activities. In addition, our business will be significantly affected depending on whether the recent divergence between product prices and raw material prices will be corrected or expand.

Under such changing circumstances, while it is impossible to accurately forecast demand, our group will continue to pursue challenges not only in the motor business but also new growth by expanding the scope of related technologies. We expect that the machinery segment and electronics and optical components segment of the group companies will gradually improve for the year ended March 31, 2007 and continue to grow in accordance with overall economic recoveries in their respective markets.

The foregoing statements regarding the year ending March 31, 2007 are forward-looking statements based on our assumptions and beliefs as to economic and market conditions. Our performance under those conditions and other factors are subject to the qualifications set forth in the “Special Note Regarding Forward-looking Statements” under Item 3.D of this annual report. Our actual results of operations could vary significantly from those described above, as a result of factors such as:

•

a decline in the demand for computer hard disk drives and related information technology products and consumer home electronics contained hard disk drives that incorporate our motors, or a longer than expected delay in the recovery of such demand;

•

a downward movement in the pricing of our motors due to efforts by competing manufacturers to reduce excess inventory or to gain market share;

•

a general decline in the global economy, particularly levels of consumer spending and capital investment;

•

our ability to mass produce and win market acceptance of our products, particularly those that use new motor technology;

•

the appreciation of the Japanese yen against the U.S. dollar and other currencies in which we make significant sales or in which our assets and liabilities are denominated; and

•

other factors discussed under Item 3.D of this annual report.

In addition to the above, unanticipated events and circumstances could affect our results of operations.

49

Results of Operations

The following table sets forth selected information relating to our income and expense items for each of the three years in the period ended March 31, 2006.

	Yen in millions						U.S. dollars in thousands
	For the year ended March 31						For the year ended March 31,
	2004		2005		2006		2006
Net sales	¥ 277,497		¥ 485,861		¥ 536,858		$ 4,570,171
Operating expenses:
Cost of products sold	218,189		370,938		413,012		3,515,893
Selling, general and administrative expenses	28,542		35,340		41,188		350,626
Research and development expenses	8,751		25,918		29,232		248,847
	255,482		432,196		483,432		4,115,366
Operating income	22,015		53,665		53,426		454,805
Other income (expense):
Interest and dividend income	362		929		1,664		14,165
Interest expense	(862	)	(871	)	(1,362	)	(11,594	)
Foreign exchange (loss) gain, net	(3,149	)	2,377		7,866		66,962
(Loss) gain on derivative instruments, net	(5	)	(175	)	75		639
Gain from marketable securities, net	816		1,586		3,869		32,936
Gain (loss) from sales of investments in affiliated companies	45		(3	)	-		-
Other, net	417		(218	)	(1,160	)	(9,875	)
	(2,376	)	3,625		10,952		93,233
Income before provision for income taxes	19,639		57,290		64,378		548,038
Provision for income taxes	(5,424	)	(12,847	)	(15,213	)	(129,505	)
Income before minority interest and equity in earnings of affiliated companies	14,215		44,443		49,165		418,533
Minority interest in income of consolidated subsidiaries	648		10,954		8,170		69,550
Equity in net (income) / losses of affiliated companies	(2,522	)	34		46		392
Net income	¥ 16,089		¥ 33,455		¥ 40,949		$ 348,591

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Results of Operations – Year Ended March 31, 2006 Compared to Year Ended March 31, 2005

Net Sales

	Yen in millions
	2005	2006	Inc/Dec		%
Net sales:
Small precision motors:
Hard disk drives spindle motors	¥ 119,233	¥ 164,575	¥ 45,342		38.0	%
Other small precision brushless DC motors	61,066	66,463	5,397		8.8
Small precision brush DC motors	7,980	7,849	(131	)	(1.6	)
Brushless DC fans	34,435	34,872	437		1.3
Sub-total	222,714	273,759	51,045		22.9
Mid-size motors	35,564	37,767	2,203		6.2
Machinery	76,957	73,243	(3,714	)	(4.8	)
Electronic and optical components	128,417	128,791	374		0.3
Others	22,209	23,298	1,089		4.9
Consolidated total	¥ 485,861	¥ 536,858	¥ 50,997		10.5	%

Details will be described by segment below.

Net sales of our hard disk drive spindle motors increased ¥45,342 million, or 38.0%, from ¥119,233 million for the year ended March 31, 2005 to ¥164,575 million for the year ended March 31, 2006. This increase was primary due to an increase of 32.5% in the sales volume of hard disk drive spindle motors compared to the same period of the previous fiscal year, resulting primarily from an increase in net sales of 2.5-inch and 3.5-inch motors for notebook PCs, new consumer electronics and home entertainment applications.

Net sales of hard disk drive spindle motors accounted for 24.5% of total net sales for the year ended March 31, 2005 and 30.7 % of total net sales for the year ended March 31, 2006.

Net sales of our other small precision brushless DC motors increased ¥5,397 million, or 8.8%, from ¥61,066 million for the year ended March 31, 2005 to ¥66,463 million for the year ended March 31, 2006, primary due to an increase in net sales of Nidec (Dalian) Limited.

Net sales of our other small precision brushless DC motors accounted for 12.6% of total net sales for the year ended March 31, 2005 and 12.4% of total net sales for the year ended March 31, 2006.

Net sales of our brushless DC fans increased ¥437 million, or 1.3%, from ¥34,435 million for the year ended March 31, 2005 to ¥34,872 million for the year ended March 31, 2006. This slight increase was primary due to the fact that our top customer has adopted just-in-time management processes, which delayed our sales recognition..

Net sales of our brushless DC fans accounted for 7.1% of total net sales for the year ended March 31, 2005 and 6.5% of total net sales for the year ended March 31, 2006.

Net sales of our mid-size motors increased ¥2,203 million, or 6.2%, from ¥35,564 million for the year ended March 31, 2005 to ¥37,767 million for the year ended March 31, 2006. This increase was primarily due to an increase in net sales of motors for power steering in automobiles and for home appliances. Net sales of motors for power steering in automobiles increased ¥1,190 million compared to the same period of the previous fiscal year.

Net sales of our mid-size motors accounted for 7.3% of our total net sales for the year ended March 31, 2005 and 7.0% of total net sales for the year ended March 31, 2006.

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Net sales of our machinery decreased ¥3,714 million, or 4.8%, from ¥76,957 million for the year ended March 31, 2005 to ¥73,243 million for the year ended March 31, 2006. This decrease was primarily due to a decrease in sales of photo laboratory systems manufactured by Nidec Copal Corporation and of semiconductor manufacturing machinery by Nidec Tosok Corporation, which more than offset a substantial increase in net sales of industrial robots manufactured by Nidec Sankyo Corporation.

Net sales of our machinery accounted for 15.8% of our total net sales for the year ended March 31, 2005 and 13.6% of total net sales for the year ended March 31, 2006.

Net sales of our electronic and optical components increased ¥374 million, or 0.3%, from ¥128,417 million for the year ended March 31, 2005 to ¥128,791 million for the year ended March 31, 2006. This slight increase was primary due to an increase in net sales of optical pickup units and home appliance components manufactured by Nidec Sankyo Corporation, which more than off set decreases in net sales of optical components manufactured by Nidec Copal Corporation and actuators manufactured by Nidec Copal Electronics Corporation.

Net sales of our electronic and optical components accounted for 26.4% of our total net sales for the year ended March 31, 2005 and 24.0% of total net sales for the year ended March 31, 2006.

Net sales of our other products increased ¥1,089 million, or 4.9%, from ¥22,209 million for the year ended March 31, 2005 to ¥23,298 million for the year ended March 31, 2006. This increase was primarily due to an increase in net sales of pivot assemblies by Nidec Singapore Pte. Ltd and automobile components manufactured by Nidec Tosok Corporation.

Cost of Products Sold

Our cost of products sold increased ¥42,074 million, or 11.3%, from ¥370,938 million for the year ended March 31, 2005 to ¥413,012 million for the year ended March 31, 2006 due primarily to increased sales. As a percentage of net sales, cost of sales increased slightly from 76.3% to 76.9%, due primarily to a cost increase caused by a rise in materials prices such as steel and copper.

Selling, General and Administrative Expenses

Our selling, general and administrative expenses increased ¥5,848 million, or 16.5%, from ¥35,340 million for the year ended March 31, 2005 to ¥41,188 million for the year ended March 31, 2006. This increase was due in part to a ¥1,059 million loss on bad debts at Nidec Copal Corporation resulting from the insolvency of AgfaPhoto GmbH. In addition, during the previous year, we had a gain from reversal of accrued retirement benefit to directors amounting to ¥1,001 million and from the termination of the employee’s pension fund at Nidec Copal Corporation amounting to ¥2,312 million, which were recognized as a decrease in selling, general and administrative expenses, which we did not experience in the year ended March 31. 2006. We also had an increase in personnel expenses of ¥1,460 million due mainly to an increase in our employees. As a percentage of net sales, selling, general and administrative expenses increased from 7.3% for the year ended March 31, 2005 to 7.7% for the year ended March 31, 2006.

Research and Development Expenses

Our research and development expenses increased ¥3,314 million, or 12.8%, from ¥25,918 million for the year ended March 31, 2005 to ¥29,232 million for the year ended March 31, 2006. This was primarily due to an increase in expenses for our research and development with respect to sub-1.8 inch hard disk drive spindle motors, mainly used for portable music players, and mid-size motors, mainly used for automobile steering systems. An increase in expenses related to research and development resources, including labor costs for technical personnel, was another contributing factor.

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Operating Income

As a result of the foregoing factors, our operating income decreased ¥239 million, or 0.4%, from ¥53,665 million for the year ended March 31, 2005 to ¥53,426 million for the year ended March 31, 2006. As a percentage of net sales, operating income decreased from 11.0% to 10.0%.

Other Income (Expenses)

Other income increased ¥7,327 million, or 202.1%, from ¥3,625 million for the year ended March 31, 2005 to ¥10,952 million for the year ended March 31, 2006.

Interest and dividend income increased ¥735 million, or 79.1%, from ¥929 million for the year ended March 31, 2005 to ¥1,664 million for the year ended March 31, 2006. This was primarily due to interest income attributable to the increased average balance of our foreign currency deposits and increases of interest rates.

Gain from marketable securities, net increased ¥2,283 million, or 143.9%, from ¥1,586 million for the year ended March 31, 2005 to ¥3,869 million for the year ended March 31, 2006. This increase was attributable to profitable sales of marketable securities, reflecting favorable stock prices.

Foreign exchange gain increased ¥5,489 million, or 230.9%, from ¥2,377 million for year ended March 31, 2005 to ¥7,866 million for the year ended March 31, 2006. This was principally due to an increase in the balance of our foreign currency denominated assets during the year ended March 31, 2006 and a further depreciation in the value of the yen against relevant foreign currencies, as compared to the year ended March 31, 2005. The exchange rate of the yen against the U.S. dollar as of March 31, 2005 and 2006 was 107.39 yen and 117.47 yen, respectively.

Income before Provision for Income Taxes

As a result of the foregoing, our income before income taxes increased ¥7,088 million, or 12.4%, from ¥57,290 million for the year ended March 31, 2005 to ¥64,378 million for the year ended March 31, 2006.

Provision for Income Taxes

Our provision for income taxes increased ¥2,366 million, or 18.4%, from ¥12,847 million for the year ended March 31, 2005 to ¥15,213 million for the year ended March 31, 2006.

The effective income tax rate for the year ended March 31, 2006 was higher compared to the effective income tax rate for the year ended March 31, 2005. This was mainly because of changes in the valuation allowance for the year ended March 31, 2006 at Nidec Sankyo Corporation as its recovery in profitability was less than in the previous year.

Minority Interest in Income of Consolidated Subsidiaries

Minority interest in income of our consolidated subsidiaries decreased ¥2,784 million, or 25.4%, from ¥10,954 million for the year ended March 31, 2005 to ¥8,170 million for the year ended March 31, 2006.

This was due primarily to a decrease in income of group companies and a decrease in minority interest as a result of an increase in interests held in subsidiaries such as Nidec Copal Corporation and Nidec Tosok Corporation.

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Equity in Net Losses of Affiliated Companies

Equity in net losses of our affiliated companies increased ¥12 million, or 35.3%, from ¥34 million for the year ended March 31, 2005 to ¥46 million for the year ended March 31, 2006. This was primarily due to an increase in net losses of affiliates accounted for by the equity method.

Net Income

As a result of the foregoing, our net income increased ¥7,494 million, or 22.4%, from ¥33,455 million for the year ended March 31, 2005 to ¥40,949 million for the year ended March 31, 2006.

Results of Operations – Year Ended March 31, 2005 Compared to Year Ended March 31, 2004

Net Sales

	Yen in millions
	2004	2005	Inc/Dec	%
Net sales:
Small precision motors:
Hard disk drives spindle motors	¥ 106,919	¥ 119,233	¥ 12,314	11.5	%
Other small precision brushless DC motors	34,138	61,066	26,928	78.9
Small precision brush DC motors	5,372	7,980	2,608	48.5
Brushless DC fans	26,047	34,435	8,388	32.2
Sub-total	172,476	222,714	50,238	29.1
Mid-size motors	32,574	35,564	2,990	9.2
Machinery	31,240	76,957	45,717	146.3
Electronic and optical components	23,188	128,417	105,229	453.8
Others	18,019	22,209	4,190	23.3
Consolidated total	¥ 277,497	¥ 485,861	¥ 208,364	75.1	%

Our net sales increased ¥208,364 million, or 75.1%, from ¥277,497 million for the year ended March 31, 2004 to ¥485,861 million for the year ended March 31, 2005. This increase was mainly due to the addition of newly consolidated subsidiaries. In particular, net sales of Nidec Copal Corporation, Nidec Copal Electronics Corporation, Nidec Sankyo Corporation and certain other affiliated companies were newly consolidated in January and February 2004 as a result of an increase in our ownership interest therein, and were included in our net sales for only February and March 2004. The net sales of these newly consolidated subsidiaries were ¥29,723 million for February and March 2004 and ¥207,767 million for the year ended March 31, 2005. Excluding the contribution from these newly consolidated subsidiaries, net sales increased ¥30,320 million, or 12.2%, from ¥247,774 million for the year ended March 31, 2004 to ¥278,094 million for the year ended March 31, 2005, due primarily to an increase in sales of hard disk drive spindle motors, other small precision brushless DC motors and machinery.

Details will be described by segment below.

Net sales of our hard disk drive spindle motors increased ¥12,314 million, or 11.5%, from ¥106,919 million for the year ended March 31, 2004 to ¥119,233 million for the year ended March 31, 2005. Unit shipments of our hard disk drive spindle motors increased by 20.4%. However, the average sales price on a yen basis dropped by slightly less than 9% as compared to the previous period. The primary factor for the small decrease in the average sales price was the increase in sales volume of high-priced goods of 1.8 inches or smaller hard disk drive spindle motors.

54

Net sales from hard disk drive spindle motors accounted for 38.5% of total net sales for the year ended March 31, 2004 and 24.5% of total net sales for the year ended March 31, 2005. Net sales of fluid dynamic bearing motors accounted for 77.0% of total net sales of hard disk drive spindle motors for the year ended March 31, 2004 and 90.3% of total net sales for the year ended March 31, 2005.

Net sales of other small precision brushless DC motors increased ¥26,928 million, or 78.9%, from ¥34,138 million for the year ended March 31, 2004 to ¥61,066 million for the year ended March 31, 2005.

Excluding the contribution from newly consolidated subsidiaries, net sales increased ¥2,466 million, or 7.9%, from ¥31,028 million for the year ended March 31, 2004 to ¥33,494 million for the year ended March 31, 2005. Unit shipments increased approximately 25% as compared to the previous period, which together with the impact of a stronger yen and changes in the mix of products contributed to a decrease in the average sales price of approximately 14% at an annualized rate.

Net sales of other small precision brushless DC motors accounted for 12.3% of total net sales for the year ended March 31, 2004 and 12.6% of total net sales for the year ended March 31, 2005.

Net sales of our brushless DC fans increased ¥8,388 million, or 32.2%, from ¥26,047 million for the year ended March 31, 2004 to ¥34,435 million for the year ended March 31, 2005. Excluding the contribution from newly consolidated subsidiaries, net sales increased ¥7,898 million, or 30.4%, from ¥25,986 million for the year ended March 31, 2004 to ¥33,884 million for the year ended March 31, 2005. Unit shipments only increased by approximately 11%. The primary factor for the increase was the increase in sales of high-priced goods, including those for high-end PCs and servers and for high-end MPU coolers.

Net sales of brushless DC fans accounted for 9.4% of total net sales for the year ended March 31, 2004 and 7.1% of total net sales for the year ended March 31, 2005.

Net sales of mid-size motors increased ¥2,990 million, or 9.2%, from ¥32,574 million for the year ended March 31, 2004 to ¥35,564 million for the year ended March 31, 2005. The increase in net sales was due to a sales increase in motors for home appliances, including air conditioners, and industrial use. Net sales of motors for power steering remained almost unchanged as a result of a change to sales of motors without electronic control devices during the previous period.

Net sales of mid-size motors accounted for 11.7% of our total net sales for the year ended March 31, 2004 and 7.3% of total net sales for the year ended March 31, 2005.

Net sales of machinery increased ¥45,717 million, or 146.3%, from ¥31,240 million for the year ended March 31, 2004 to ¥76,957 million for the year ended March 31, 2005. ¥39,426 million, out of total increase, was from the addition of Nidec Copal Corporation and Nidec Sankyo Corporation as a result of an expansion in our consolidation of these companies. Excluding the contribution of these newly consolidated subsidiaries, net sales increased ¥6,291 million, or 23.2%, from ¥27,171 million for the year ended March 31, 2004 to ¥33,462 million for the year ended March 31, 2005. The increase was primarily due to increased sales of digital information devices and liquid crystal related devices as a result of the expansion of consolidation and products related to capital investment, including the precision press of Nidec-Kyori Corporation, inspection equipment of Nidec-Read Corporation and various semiconductor manufacturing equipment of Nidec Tosok Corporation. However, in the fourth quarter of the current period, sales significantly declined.

Net sales of machinery accounted for 11.3% of our total net sales for the year ended March 31, 2004 and 15.8% of total net sales for the year ended March 31, 2005.

“Electronic and Optical components” is a new product category established from the current period as a result of expansion in the scope of consolidation. This product category includes optical pickup units, shutters for digital cameras and trimmer potentiometers produced by Nidec Sankyo Corporation, Nidec Copal Corporation, Nidec Copal Electronics Corporation and Nidec Nemicon Corporation. (Note: Products of these companies had been included in the “Others” product category in the previous fiscal year ended March 31, 2004). Net sales from this business for the year ended March 31, 2005 totaled ¥128,417 million and accounted for 26.4% of our total net sales year ended March 31, 2005.

55

Net sales of other products increased ¥4,190 million, or 23.3%, from ¥18,019 million for the year ended March 31, 2004 to ¥22,209 million for the year ended March 31, 2005. This increase mainly resulted from increased sales of products by Nidec Sankyo Corporation and automobile parts by Nidec Tosok Corporation.

Net sales of other products accounted for 6.5% of total net sales for the year ended March 31, 2004 and 4.6% of total net sales for the year ended March 31, 2005.

Cost of Products Sold

Our cost of products sold increased ¥152,749 million, or 70.0%, from ¥218,189 million for the year ended March 31, 2004 to ¥370,938 million for the year ended March 31, 2005. Much of the increase was attributable to Nidec Sankyo Corporation, Nidec Copal Corporation, Nidec Copal Electronics Corporation and others, in which we increased our ownership interest and which became consolidated subsidiaries in January and February 2004. As a percentage of net sales, cost of sales decreased from 78.6% to 76.3%. This was due primarily to the efficiencies of scale realized by mass production of small precision motors. Excluding the contribution from the newly consolidated subsidiaries, cost of products sold increased ¥22,459 million, or 11.5%, from ¥194,726 million for the year ended March 31, 2004 to ¥217,185 million for the year ended March 31, 2005 due primarily to increased sales.

Selling, General and Administrative Expenses

Our selling, general and administrative expenses increased ¥6,798 million, or 23.8%, from ¥28,542 million for the year ended March 31, 2004 to ¥35,340 million for the year ended March 31, 2005. This increase was due primarily to the additional expenses of our newly consolidated subsidiaries as described above. As a percentage of net sales, selling, general and administrative expenses decreased from 10.3% for the year ended March 31, 2004 to 7.3% for the year ended March 31, 2005. Excluding the additional expenses from the newly consolidated subsidiaries, selling, general and administrative expenses decreased ¥662 million, or 3.1%, from ¥21,451 million for the year ended March 31, 2004 to ¥20,789 million for the year ended March 31, 2005. This was due primarily to a decrease in the disposal loss of property, plant and equipment by ¥614 million.

Research and Development Expenses

Our research and development expenses increased ¥17,167 million, or 196.2%, from ¥8,751 million for the year ended March 31, 2004 to ¥25,918 million for the year ended March 31, 2005. This increase was due in part to the additional expenses of our newly consolidated subsidiaries. As a percentage of net sales, research and development expenses increased from 3.2% for the year ended March 31, 2004 to 5.3% for the year ended March 31, 2005. Excluding the additional expenses of the newly consolidated subsidiaries, research and development expenses increased ¥9,581 million, or 124.9%, from ¥7,668 million for the year ended March 31, 2004 to ¥17,249 million for the year ended March 31, 2005. This was primarily due to an increase in expenses for our research and development with respect to sub-1.8 inch hard disk drives spindle motors, mainly used for portable music players and mid-size motors mainly used for automobile steering systems. An increase in expenses related to research and development resources, including labor costs for technical personnel, was another contributing factor.

56

Operating Income

As a result of the foregoing factors, our operating income increased ¥31,650 million, or 143.8%, from ¥22,015 million for the year ended March 31, 2004 to ¥53,665 million for the year ended March 31, 2005. As a percentage of net sales, operating income increased from 7.9% to 11.0%.

Other Income (Expenses)

We had other income in the amount of ¥3,625 million for the year ended March 31, 2005, while we incurred other expenses in the amount of ¥2,376 million for the year ended March 31, 2004.

Interest and dividend income increased ¥567 million, or 156.6%, from ¥362 million for the year ended March 31, 2004 to ¥929 million for the year ended March 31, 2005. This was primarily due to the addition of our newly consolidated subsidiaries. Excluding the effect of the addition of these newly consolidated subsidiaries, interest and dividend income increased ¥170 million, or 53.6%, from ¥317 million for the year ended March 31, 2004 to ¥487 million for the year ended March 31, 2005. This was primarily due to interest income attributable to the increased average balance of our foreign currency deposits.

Gain on marketable securities, net increased ¥770 million, or 94.4%, from ¥816 million for the year ended March 31, 2004 to ¥1,586 million for the year ended March 31, 2005. This increase is attributable to the fact that a stable domestic stock market facilitated sales of marketable securities providing for net realized gains.

We had foreign exchange gains in the amount of ¥2,377 million for the year ended March 31, 2005, an increase of ¥5,526 million from foreign exchange losses in the amount of ¥3,149 million for the year ended March 31, 2004. This increase was primarily due in some part to the addition of our newly consolidated subsidiaries. Excluding the effect of these newly consolidated subsidiaries, we had foreign exchange gains in the amount of ¥1,686 million for the year ended March 31, 2005, an increase of ¥4,867 million from foreign exchange losses in the amount of ¥3,181 million for the year ended March 31, 2004. This was principally due to an increase in the balance of our foreign currency denominated assets during the fiscal year ended March 31, 2005 and a further depreciation in the value of the yen against relevant foreign currencies, as compared to the fiscal year ended March 31, 2004. The exchange rate of the yen against the U.S. dollar as of March 31, 2004 and March 31, 2005 was 105.69 yen and 107.39 yen, respectively.   

Income before Provision for Income Taxes

As a result of the foregoing, our income before income taxes increased ¥37,651 million, or 191.7%, from ¥19,639 million for the year ended March 31, 2004 to ¥57,290 million for the year ended March 31, 2005.

Provision for Income Taxes

Our provision for income taxes increased ¥7,423 million, or 136.9%, from ¥5,424 million for the year ended March 31, 2004 to ¥12,847 million for the year ended March 31, 2005.

Our provision for income taxes did not increase in proportion to the income before provision for income taxes because the estimated effective income tax rate for the year ended March 31, 2005 was lower than the estimated effective income tax rate for the year ended March 31, 2004. This was mainly because the valuation allowance corresponding to the estimated taxable income for the year ending March 31, 2005 decreased primarily due to a decrease in carryforwards losses for tax purposes as a result of the recovery in the profitability of Nidec Sankyo Corporation. The impact of tax benefits associated with foreign subsidiaries decreased due to a drop in the ratio of income from overseas subsidiaries with lower tax rates to total income resulting from the addition of Nidec Sankyo Corporation, Nidec Copal Corporation and Nidec Copal Electronics Corporation as consolidated subsidiaries which operate primarily in Japan.

57

Minority Interest in Income (Loss) of Consolidated Subsidiaries

Minority interest in income of our consolidated subsidiaries increased ¥10,306 million, or almost 16 times, from ¥648 million for the year ended March 31, 2004 to ¥10,954 million for the year ended March 31, 2005. This was due primarily to our increased interest in, Nidec Copal Corporation, Nidec Copal Electronics Corporation, Nidec Sankyo Corporation and certain other affiliated companies, which became consolidated subsidiaries in January and February 2004.

Equity in Net (Income)/Losses of Affiliated Companies

We had equity in net losses of affiliated companies in the amount of ¥34 million for the year ended March 31, 2005, as compared to and equity in net income in our affiliated companies in the amount of ¥2,522 million for the year ended March 31, 2004. This was primarily due to a decrease in the number of affiliates accounted for by the equity method as we acquired additional ownership interests in Nidec Copal Electronics Corporation, Nidec Copal Corporation, Nidec Sankyo Corporation and certain other affiliated companies, which resulted in their consolidation in January and February 2004, respectively.

Net Income

As a result of the foregoing, our net income increased ¥17,366 million, or 107.9%, from ¥16,089 million for the year ended March 31, 2004 to ¥33,455 million for the year ended March 31, 2005.

58

Segment Information

Based on the applicable criteria set forth in the Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information” (“SFAS No. 131”), we have fourteen reportable operating segments on which we report in our consolidated financial statements. These reportable operating segments are legal entities. One of them is Nidec Corporation, while the others are Nidec’s thirteen consolidated subsidiaries: Nidec Electronics (Thailand) Co., Ltd., Nidec (Zhejiang) Corporation, Nidec (Dalian) Limited, Nidec Singapore Pte. Ltd., Nidec (H.K.) Co., Ltd., Nidec Philippines Corporation, Nidec Sankyo Corporation*(1), Nidec Copal Corporation, Nidec Tosok Corporation, Nidec Copal Electronics Corporation, Nidec Shibaura Corporation, Nidec-Shimpo Corporation, and Nidec Nissin Corporation*(2). For the information required by SFAS No. 131, see Note 25 to our consolidated financial statements included in this annual report.

Nidec (Zhejiang) Corporation and Nidec (H.K.) Co., Ltd. were identified as reportable segments because the materiality of these segments increased for the year ended March 31, 2006. Segment information for the year ended March 31, 2004 and 2005 has been restated to conform to the current presentation. We excluded Nidec Taiwan Corporation and Nidec Power Motor Corporation for the year ended March 31, 2006 due to their immateriality.

We evaluate our financial performance based on segmental profit and loss, which consists of sales and operating revenues less operating expenses. Segmental profit or loss is determined using the accounting principles in the segment’s country of domicile. Nidec Corporation, Nidec Sankyo Corporation, Nidec Copal Corporation, Nidec Tosok Corporation, Nidec Copal Electronics Corporation, Nidec Shibaura Corporation, Nidec-Shimpo Corporation, and Nidec Nissin Corporation apply Japanese GAAP. Nidec Electronics (Thailand) Co., Ltd. applies Thai accounting principles. Nidec (Zhejiang) Corporation and Nidec (Dalian) Limited apply Chinese accounting principles. Nidec (H.K.) Co., Ltd. applies Hong Kong accounting principles. Nidec Singapore Pte. Ltd. applies Singaporean accounting principles, and Nidec Philippines Corporation applies Philippine accounting principles. Therefore our segmental data has not been prepared under U.S. GAAP on a basis that is consistent with our consolidated financial statements or on any other single basis that is consistent between segments. While there are several differences between U.S. GAAP and the underlying accounting principles used by the operating segments, the principal differences that affect segmental operating profit or loss are accounting for pension and severance costs, directors’ bonuses and leases. We believe that the monthly segmental information is available on a timely basis and that it is sufficiently accurate at the segment profit and loss level for us to manage our business.

Notes:	*(1)	Sankyo Seiki Mfg. Co., Ltd. changed its name to Nidec Sankyo Corporation as of October 1, 2005.
	*(2)	Nissin Kohki Co., Ltd. changed its name to Nidec Nissin Corporation as of October 1, 2005.

The first of the following two tables shows revenues from external customers and other operating segments by reportable operating segment for the years ended March 31, 2004, 2005 and 2006. The second table shows operating profit or loss by reportable operating segment, which includes intersegment revenues, for the years ended March 31, 2004, 2005 and 2006:

	Year ended March 31
	2004	2005	2006	2006
	(Yen in millions and U.S. dollars in thousands)
Nidec
External revenues	¥ 60,316	¥ 56,602	¥ 68,613	$ 584,090
Intersegment revenues	58,320	73,749	99,607	847,936
Sub total	118,636	130,351	168,220	1,432,026
Nidec Electronics (Thailand)
External revenues	33,003	36,891	47,745	406,444
Intersegment revenues	17,794	21,240	29,732	253,103
Sub total	50,797	58,131	77,477	659,547

59

	Year ended March 31
	2004	2005	2006	2006
	(Yen in millions and U.S. dollars in thousands)
Nidec (Zhejiang)
External revenues	¥ 9,142	¥ 13,037	¥ 14,995	$ 127,650
Intersegment revenues	391	1,052	4,377	37,261
Sub total	9,533	14,089	19,372	164,911
Nidec (Dalian)
External revenues	112	754	3,044	25,913
Intersegment revenues	31,270	38,678	45,629	388,431
Sub total	31,382	39,432	48,673	414,344
Nidec Singapore
External revenues	36,668	45,442	62,009	527,871
Intersegment revenues	3,081	1,363	1,179	10,037
Sub total	39,749	46,805	63,188	537,908
Nidec (H.K.)
External revenues	12,112	17,114	24,600	209,415
Intersegment revenues	1,792	2,003	2,702	23,002
Sub total	13,904	19,117	27,302	232,417
Nidec Philippines
External revenues	1,511	1,094	1,186	10,096
Intersegment revenues	22,117	21,131	31,121	264,927
Sub total	23,628	22,225	32,307	275,023
Nidec Sankyo
External revenues	7,779	68,880	70,195	597,557
Intersegment revenues	3,641	19,313	17,977	153,035
Sub total	11,420	88,193	88,172	750,592
Nidec Copal
External revenues	9,146	54,067	46,408	395,063
Intersegment revenues	1,384	9,351	8,977	76,420
Sub total	10,530	63,418	55,385	471,483
Nidec Tosok
External revenues	21,211	23,992	22,081	187,971
Intersegment revenues	666	657	407	3,465
Sub total	21,877	24,649	22,488	191,436
Nidec Copal Electronics
External revenues	2,854	20,653	19,151	163,029
Intersegment revenues	372	2,355	2,642	22,491
Sub total	3,226	23,008	21,793	185,520
Nidec Shibaura
External revenues	15,767	14,449	13,502	114,940
Intersegment revenues	4,429	9,348	2,702	23,002
Sub total	20,196	23,797	16,204	137,942
Nidec-Shimpo
External revenues	8,476	10,317	9,619	81,885
Intersegment revenues	1,583	2,326	1,514	12,888
Sub total	10,059	12,643	11,133	94,773

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	Year ended March 31
	2004		2005		2006		2006
	(Yen in millions and U.S. dollars in thousands)
Nidec Nissin
External revenues	1,974		12,641		12,022		102,341
Intersegment revenues	303		1,041		907		7,721
Sub total	2,277		13,682		12,929		110,062
All Others
External revenues	59,459		109,700		120,041		1,021,886
Intersegment revenues	64,754		166,350		182,093		1,550,121
Sub total	124,213		276,050		302,134		2,572,007
Total
External revenues	279,530		485,633		535,211		4,556,151
Intersegment revenues	211,897		369,957		431,566		3,673,840
Adjustments(*)	(2,033	)	228		1,647		14,020
Intersegment elimination	(211,897	)	(369,957	)	(431,566	)	(3,673,840	)
Consolidated total (net sales)	¥ 277,497		¥ 485,861		¥ 536,858		$ 4,570,171

(*) See Note 25 to the consolidated financial statements included in this annual report.

		Year ended March 31
		2004		2005		2006		2006
		(Yen in millions and U.S. dollars in thousands)
Segment profit or loss:
	Nidec	¥ 1,483		¥ 2,351		¥ 8,852		$ 75,355
	Nidec Electronics (Thailand)	8,590		8,649		11,335		96,493
	Nidec (Zhejiang)	(345	)	107		108		919
	Nidec (Dalian)	2,486		2,436		3,718		31,651
	Nidec Singapore	2,489		1,935		1,205		10,258
	Nidec (H.K.)	243		362		347		2,954
	Nidec Philippines	1,422		(379	)	1,059		9,015
	Nidec Sankyo	(2,581	)	7,624		9,050		77,041
	Nidec Copal	586		3,195		2,524		21,486
	Nidec Tosok	1,450		1,053		435		3,703
	Nidec Copal Electronics	307		3,583		2,949		25,104
	Nidec Shibaura	801		1,356		(274	)	(2,333	)
	Nidec-Shimpo	826		1,397		498		4,239
	Nidec Nissin	229		946		683		5,814
	All Others	7,283		13,252		12,179		103,679
	Total	25,269		47,867		54,668		465,378
	Adjustments (*)	(3,254	)	5,798		(1,242	)	(10,573	)
	Consolidated total	¥ 22,015		¥ 53,665		¥ 53,426		$ 454,805

(*) See Note 25 to the consolidated financial statements included in this annual report.

61

Net sales of Nidec increased ¥37,869 million, or 29.1%, from ¥130,351 million for the year ended March 31, 2005 to ¥168,220 million for the year ended March 31, 2006. External revenues of Nidec increased ¥12,011 million, or 21.2%, from ¥56,602 million for the year ended March 31, 2005 to ¥68,613 million for the year ended March 31, 2006. This increase resulted primarily from an increase in net sales in our core business, hard disk drive spindle motors, reflecting strong demand in the IT industry and consumer electronics. Intersegment revenues of Nidec increased ¥25,858 million, or 35.1%, from ¥73,749 million for the year ended March 31, 2005 to ¥99,607 million for the year ended March 31, 2006. This increase resulted primarily from an increase in sales of hard disk drives spindle motors to one of our main customers through Nidec Singapore Pte. Ltd. Operating profit of Nidec increased ¥6,501 million, or 276.5%, from ¥2,351 million for the year ended March 31, 2005 to ¥8,852 million for the year ended March 31, 2006. This increase was due primarily to an increase in commission fees from subsidiary companies.

Net sales of Nidec increased ¥11,715 million, or 9.9%, from ¥118,636 million for the year ended March 31, 2004 to ¥130,351 million for the year ended March 31, 2005. External revenues of Nidec decreased ¥3,714 million, or 6.2%, from ¥60,316 million for the year ended March 31, 2004 to ¥56,602 million for the year ended March 31, 2005. This decrease resulted primarily from a decrease in sales of hard disk drives spindle motors due to a change in sales methods for some overseas customers. Sales to these overseas customers were previously made through Nidec but, starting with the year ended March 31, 2005, suchi sales have been made through direct transactions between our overseas subsidiaries and customers. Nonetheless, intersegment revenues of Nidec increased ¥15,429 million, or 26.5%, from ¥58,320 million for the year ended March 31, 2004 to ¥73,749 million for the year ended March 31, 2005. This increase resulted primarily from an increase in sales of hard disk drives spindle motors to one of our main customers, through Nidec Singapore Pte. Ltd. Operating profit of Nidec increased ¥868 million, or 58.5%, from ¥1,483 million for the year ended March 31, 2004 to ¥2,351 million for the year ended March 31, 2005. This increase was due primarily to an increase in commission fees from subsidiary companies.

Net sales of Nidec Electronics (Thailand) Co., Ltd. increased ¥19,346 million, or 33.3%, from ¥58,131 million for the year ended March 31, 2005 to ¥77,477 million for the year ended March 31, 2006 due primarily to an increase in sales of hard disk drive spindle motors to main customers. Operating profit increased ¥2,686 million, or 31.1%, from ¥8,649 million for the year ended March 31, 2005 to ¥11,335 million for the year ended March 31, 2006 due primarily to the large increase in sales.

Net sales of Nidec Electronics (Thailand) Co., Ltd. increased ¥7,334 million, or 14.4%, from ¥50,797 million for the year ended March 31, 2004 to ¥58,131 million for the year ended March 31, 2005 due primarily to an increase in sales of fluid dynamic bearing motors to main customers. Operating profit increased slightly by ¥59 million, or 0.7%, from ¥8,590 million for the year ended March 31, 2004 to ¥8,649 million for the year ended March 31, 2005 due primarily to an increase in royalty expenses and commission fees to Nidec that partially offset the increase in net sales.

Net sales of Nidec (Zhejiang) Corporation increased ¥5,283 million, or 37.5%, from ¥14,089 million for the year ended March 31, 2005 to ¥19,372 million for the year ended March 31, 2006. This increase resulted from increased sales of hard disk drive spindle motors, reflecting strong demand. Operating profit increased slightly by ¥1 million from ¥107 million for the year ended March 31, 2005 to ¥108 million for the year ended March 31, 2006. The comparatively lower increase in operating profit compared with sales was resulted primarily from a delay in shifting to a more efficient mass production of our hard disk drive spindle motors.

Net sales of Nidec (Zhejiang) Corporation increased ¥4,556 million, or 47.8%, from ¥9,533 million for the year ended March 31, 2004 to ¥14,089 million for the year ended March 31, 2005 due to an increase in sales of hard disk drive spindle motors, reflecting strong demand. Nidec (Zhejiang) Corporation had an operating loss of ¥345 million for the year ended March 31, 2004 and operating profit of ¥107 million for the year ended March 31, 2005. This increase in operating profit was due to volume efficiency as a result of an increase in sales.

Net sales of Nidec (Dalian) Limited increased ¥9,241 million, or 23.4%, from ¥39,432 million for the year ended March 31, 2005 to ¥48,673 million for the year ended March 31, 2006. This increase was due primarily to an increase in customer demand for other small precision brushless DC motors used in DVD drives. Operating profit increased ¥1,282 million, or 52.6% from ¥2,436 million for the year ended March 31, 2005 to ¥3,718 million for the year ended March 31, 2006. This was due primarily to the large increase in sales.

62

Net sales of Nidec (Dalian) Limited increased ¥8,050 million, or 25.7%, from ¥31,382 million for the year ended March 31, 2004 to ¥39,432 million for the year ended March 31, 2005. This increase was due primarily to an increase in customer demand for brushless DC fans for notebook-type personal computers. However, operating profit decreased 2.0% from ¥2,486 million for the year ended March 31, 2004 to ¥2,436 million for the year ended March 31, 2005 due primarily to an increase in royalty expenses to Nidec and freight and packing expenses that partially offset the increase in net sales.

Net sales of Nidec Singapore Pte. Ltd. increased ¥16,383 million, or 35.0%, from ¥46,805 million for the year ended March 31, 2005 to ¥63,188 million for the year ended March 31, 2006 due primarily to an increase in sales of hard disk drives spindle motors to main customers. However, operating profit of Nidec Singapore Pte. Ltd. decreased ¥730 million, or 37.7%, from ¥1,935 million for the year ended March 31, 2005 to ¥1,205 million for the year ended March 31, 2006. due primarily to the continued decrease of sales with higher margins.

Net sales of Nidec Singapore Pte. Ltd. increased ¥7,056 million, or 17.8%, from ¥39,749 million for the year ended March 31, 2004 to ¥46,805 million for the year ended March 31, 2005 due primarily to an increase in sales of hard disk drives spindle motors to main customers. However the operating profit of Nidec Singapore Pte. Ltd. decreased ¥554 million, or 22.3%, from ¥2,489 million for the year ended March 31, 2004 to ¥1,935 million for the year ended March 31, 2005 due primarily to decreased sales of higher margin products.

Net sales of Nidec (H.K.) Co., Ltd. increased ¥8,185 million, or 42.8%, from ¥19,117 million for the year ended March 31, 2005 to ¥27,302 million for the year ended March 31, 2006. This was due primarily to an increase in sales of hard disk drive spindle motors and other small precision brushless DC motors to main customers. However, operating profit of Nidec (H.K.) Co., Ltd. decreased ¥15 million, or 4.1%, from ¥362 million for the year ended March 31, 2005 to ¥347 million for the year ended March 31, 2006. This was due to an increase in sales with lower margins and increased selling, general and administrative expenses.

Net sales of Nidec (H.K.) Co., Ltd. increased ¥5,213 million, or 37.5%, from ¥13,904 million for the year ended March 31, 2004 to ¥19,117 million for the year ended March 31, 2005. This increase resulted from primarily from an increase in sales of hard disk drive spindle motors and other small precision brushless DC motors to main customers. Operating profit of Nidec (H.K.) Co., Ltd. increased ¥119 million, or 49.0 %, from ¥243 million for the year ended March 31, 2004 to ¥362 million for the year ended March 31, 2005 due primarily to the large increase in sales.

Net sales of Nidec Philippines Corporation increased ¥10,082 million, or 45.4%, from ¥22,225 million for the year ended March 31, 2005 to ¥32,307 million for the year ended March 31, 2006. This increase resulted primarily from an increase in sales of hard disk drive spindle motors to our main customer in Singapore through Nidec. Nidec Philippines Corporation had an operating loss of ¥379 million for the year ended March 31, 2005 and operating profit of ¥1,059 million for the year ended March 31, 2006. This increase in operating profit was due to an increase in sales of high-price and high-margin goods, namely 2.5 inches or smaller hard disk drive spindle motors.

Net sales of Nidec Philippines Corporation decreased ¥1,403 million, or 5.9%, from ¥23,628 million for the year ended March 31, 2004 to ¥22,225 million for the year ended March 31, 2005. This decrease in sales was due primarily to a decrease in sales of conventional ball bearing motors to several main customers. Also, a main customer in Thailand purchased fluid dynamic bearing motors from Nidec Electronics (Thailand) Co., Ltd. instead of Nidec Philippines Corporation. Nidec Philippines Corporation had operating profit of ¥1,422 million for the year ended March 31, 2004 compared to had an operating loss of ¥379 million for the year ended March 31, 2005. This decrease in operating profit was due primarily to the decrease in sales and an increase in depreciation of tangible fixed assets related to the expansion of our fluid dynamic bearing motors production capacity. The adverse impact from decentralization of production in the Philippines to two factories as a result of absorbing the FDB department of Nidec Sankyo Corporation, as well as an increase in fixed costs also contributed to the operating loss for the year ended March 31, 2005.

63

Net sales of Nidec Sankyo Corporation decreased ¥21 million from ¥88,193 million for the year ended March 31, 2005 to ¥88,172 million for the year ended March 31, 2006. Operating profit of Nidec increased ¥1,426 million, or 18.7%, from ¥7,624 million for the year ended March 31, 2005 to ¥9,050 million for the year ended March 31, 2006. The major reason for this increase was improvements in production cost efficiency.

Net sales of Nidec Sankyo Corporation were ¥11,420 million for the year ended March 31, 2004 and ¥88,193 million for the year ended March 31, 2005. Nidec Sankyo had an operating loss of ¥2,581 million for the year ended March 31, 2004 compared to an operating profit of ¥7,624 million for the year ended March 31, 2005. Nidec Sankyo has been consolidated since February 2004, and thus only its net sales and operating loss for February and March 2004 are reflected in our consolidated net sales and operating profit for the year ended March 31, 2004. It recorded a significant amount of loss due to expenses for reconstruction of factories in March 2004.

Net sales of Nidec Copal Corporation decreased ¥8,033 million, or 12.7%, from ¥63,418 million for the year ended March 31, 2005 to ¥55,385 million for the year ended March 31, 2006. This was due primarily to a decrease in sales of shutters, optical units and lenses as a result of a delay in the launch of some new products. The decrease also partially resulted from the insolvency of AgfaPhoto GmbH, a purchaser of the company’s photo lab systems. Operating profit of Nidec decreased ¥671 million, or 21.0%, from ¥3,195 million for the year ended March 31, 2005 to ¥2,524 million for the year ended March 31, 2006 due primarily to the decrease in sales of shutters, optical units and lenses.

Net sales of Nidec Copal Corporation were ¥10,530 million for the year ended March 31, 2004 and ¥63,418 million for the year ended March 31, 2005. Operating profit was ¥586 million for the year ended March 31, 2004 and ¥3,195 million for the year ended March 31, 2005. Nidec Copal Corporation has been consolidated since February 2004, and thus only its net sales and operating profit for February and March 2004 are reflected in our consolidated net sales and operating profit for the year ended March 31, 2004.

Net sales of Nidec Tosok Corporation decreased ¥2,161 million, or 8.8%, from ¥24,649 million for the year ended March 31, 2005 to ¥22,488 million for the year ended March 31, 2006. This was due primarily to a decrease in sales of semiconductor fabrication equipment as a result of decreased volume of orders starting from the second half of the previous year due to decreased customer investment in facilities in the semiconductor industry. Operating profit decreased ¥618 million, or 58.7%, from ¥1,053 million for the year ended March 31, 2005 to ¥435 million for the year ended March 31, 2006. This was due primarily to the decrease in sales of semiconductor fabrication equipment and a drop in sales prices resulting from severe price competition.

Net sales of Nidec Tosok Corporation increased ¥2,772 million, or 12.7%, from ¥21,877 million for the year ended March 31, 2004 to ¥24,649 million for the year ended March 31, 2005 due primarily to an increase in sales of automobile parts and semiconductor fabrication equipment. However, operating profit decreased ¥397 million, or 27.4%, from ¥1,450 million for the year ended March 31, 2004 to ¥1,053 million for the year ended March 31, 2005. This decrease was due primarily to an increase in research and development expenses related to automobile parts and in depreciation of tangible fixed assets related to the head office.

Net sales of Nidec Copal Electronics Corporation decreased ¥1,215 million, or 5.3%, from ¥23,008 million for the year ended March 31, 2005 to ¥21,793 million for the year ended March 31, 2006. This decrease was primarily due to a decrease in sales of stepping motors and a delay in the launch of some new products. Operating profit decreased ¥634 million, or 17.7%, from ¥3,583 million for the year ended March 31, 2005 to ¥2,949 million for the year ended March 31, 2006. This was due primarily to the decrease in sales of stepping motors.

64

Net sales of Nidec Copal Electronics Corporation were ¥3,226 million for the year ended March 31, 2004 and ¥23,008 million for the year ended March 31, 2005. Operating profit was ¥307 million for the year ended March 31, 2004 and ¥3,583 million for the year ended March 31, 2005. Nidec Copal Electronics Corporation has been consolidated since January 2004, and thus only its net sales and operating profit for January through March 2004 contributed to our net sales and operating profit for the year ended March 31, 2004.

Net sales of Nidec Shibaura Corporation decreased ¥7,593 million, or 31.9%, from ¥23,797 million for the year ended March 31, 2005 to ¥16,204 million for the year ended March 31, 2006 due primarily to a decrease in sales of machinery and mid-size motors for air conditioners. Nidec Shibaura Corporation had operating profit of ¥1,356 million for the year ended March 31, 2005 and operating loss of ¥274 million for the year ended March 31, 2006 due primarily to a decrease in sales of machinery and mid-size motors for air conditioners.

Net sales of Nidec Shibaura Corporation increased ¥3,601 million, or 17.8%, from ¥20,196 million for the year ended March 31, 2004 to ¥23,797 million for the year ended March 31, 2005 due primarily to an increase in sales of mid-size motors and machines from its trading division. Operating profit increased ¥555 million, or 69.3%, from ¥801 million for the year ended March 31, 2004 to ¥1,356 million for the year ended March 31, 2005. The major reason for this increase in operating profit came from the increase in sales of machines from Nidec Shibaura Corporation’s trading division.

Net sales of Nidec-Shimpo Corporation decreased ¥1,510 million, or 11.9%, from ¥12,643 million for the year ended March 31, 2005 to ¥11,133 million for the year ended March 31, 2006. This was due primarily to a decrease in sales of factory automation equipment as a result of decreased customer demand. Operating profit of Nidec-Shimpo Corporation decreased ¥899 million, or 64.4%, from ¥1,397 million for the year ended March 31, 2005 to ¥498 million for the year ended March 31, 2006. This resulted primarily from a decrease in sales of factory automation equipment and a decrease in sales of high-price and high-margin power transmission equipment.

Net sales of Nidec-Shimpo Corporation increased ¥2,584 million, or 25.7%, from ¥10,059 million for the year ended March 31, 2004 to ¥12,643 million for the year ended March 31, 2005 due primarily to an increase in sales of power transmission equipment and factory automation equipment for the Chinese market. Operating profit of Nidec-Shimpo Corporation increased ¥571 million, or 69.1%, from ¥826 million for the year ended March 31, 2004 to ¥1,397 million for the year ended March 31, 2005. The increase in operating profit resulted primarily from the increase in sales and a cost reduction due to a shift of production to China.

Net sales of Nidec Nissin Corporation decreased ¥753 million, or 5.5%, from ¥13,682 million for the year ended March 31, 2005 to ¥12,929 million for the year ended March 31, 2006. This decrease was primarily due to a decrease in sales of plastic lenses for mobile telephones. Operating profit of Nidec decreased ¥263 million, or 27.8%, from ¥946 million for the year ended March 31, 2005 to ¥683 million for the year ended March 31, 2006 due to a decrease in sales of plastic lenses for mobile telephones and an increase in research and development cost.

Net sales of Nidec Nissin Corporation were ¥2,277 million for the year ended March 31, 2004 and ¥13,682 million for the year ended March 31, 2005. It had operating profit of ¥229 million for the year ended March 31, 2004 and ¥946 million for the year ended March 31, 2005. Nidec Nissin has been consolidated since February 2004 and thus only its net sales and operating profit for February and March 2004 contributed to our consolidated net sales and operating profit for the year ended March 31, 2004.

65

Within the All Others segment, net sales increased ¥26,084 million, or 9.4% from ¥276,050 million for the year ended March 31, 2005 to ¥302,134 million for the year ended March 31, 2006. This was primarily due to the expansion in sales of Nidec Subic Philippines Corporation and Nidec (Dongguan) Limited. Operating profit decreased ¥1,073 million, or 8.1% from ¥13,252 million for the year ended March 31, 2005 to ¥12,179 million for the year ended March 31, 2006. This was primarily due to a decrease in profitability in Nidec Power Motor Corporation, Nidec Sankyo Fuzhou (Hong Kong) Co., Ltd. and Nidec Copal (Thailand) Co., Ltd.

Within the All Others segment, net sales increased ¥161,017 million, or 127.9% from ¥125,912 million for the year ended March 31, 2004 to ¥286,929 million for the year ended March 31, 2005. Operating profit also increased ¥7,415 million, or 112.9% from ¥6,568 million for the year ended March 31, 2004 to ¥13,983 million for the year ended March 31, 2005. The net sales and operating profits of our newly consolidated subsidiaries other than Nidec Copal Corporation, Nidec Copal Electronics Corporation, Nidec Sankyo Corporation and Nidec Nissin Corporation were ¥148,171 million and ¥5,810 million for the year ended March 31, 2005, respectively, and were included in the All Others segment. Excluding the contribution from these newly consolidated subsidiaries, net sales and operating profit increased ¥35,009 million and ¥1,858 million, respectively, mainly due to the expansion and improvement of profitability in Nidec (Dongguan) Corporation, Nidec (Zhejiang) Corporation.

Recent Accounting Pronouncements

In November 2004, the Financial Accounting Standards Board (the “FASB”) issued Statement of Financial Accounting Standards No. 151 (“SFAS 151”), “Inventory Costs - an amendment of ARB No. 43, Chapter 4.” SFAS 151 amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expenses, freight, handling costs and wasted material (spoilage).  Among other provisions, the new rule requires that such items be recognized as current-period charges, regardless of whether they meet the criterion of “so abnormal” as stated in ARB No. 43.  SFAS 151 is effective for fiscal years beginning after June 15, 2006. We do not expect that adoption of SFAS 151 will have a material effect on our consolidated financial position, consolidated results of operations, or liquidity.

In December 2004, the FASB issued SFAS No. 123R (“SFAS 123R”), revised 2004, “Share-Based Payment.”  SFAS 123R requires employee stock options and rights to purchase shares under stock participation plans to be accounted for under the fair value method, and eliminates the ability to account for these instruments under the intrinsic value method prescribed by APB Opinion No. 25 and allowed under the original provisions of SFAS 123.  SFAS 123R requires the use of an option pricing model for estimating fair value, which is amortized to expense over the service periods.  For existing employee stock options and rights to purchase shares under stock participation plans, the effect of adoption will not be material to our consolidated financial position, consolidated results of operations, or liquidity.

In May 2005, the FASB issued SFAS No. 154 (“SFAS 154”), “Accounting Changes and Error Corrections – a replacement of APB Opinion No. 20 and FASB Statement No. 3”. APB Opinion No. 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of change a cumulative effect of changing to the new accounting principle whereas SFAS 154 requires retrospective application to prior periods’ financial statements of a voluntary change in accounting principle, unless it is impracticable. SFAS 154 also requires that a change in depreciation or amortization be accounted for as a change in accounting estimate affected by a change in accounting principle. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. We do not expect that adoption of SFAS 154 will have a material effect on our consolidated financial position, consolidated results of operations, or liquidity.

In July 13, 2006, the Financial Accounting Standards Board (the “FASB”) released FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an Interpretation of FASB Statement 109 (“FIN 48”). The Interpretation applies to all U.S. GAAP financial statements for public and private enterprises alike and clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes.

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FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, it also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Interpretation is effective for fiscal years beginning after December 15, 2006, however earlier application is encouraged. We are currently evaluating the potential effect of adoption of FIN 48 on its consolidated financial position, consolidated results of operations, or liquidity.

In September 13, 2006, the SEC staff issued Staff Accounting Bulletin No. 108 Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB 108”) in order to address the observed diversity in quantification practices with respect to annual financial statements. There have been two widely-recognized methods for quantifying the effects of financial statement errors: the “roll-over” method and the “iron curtain” method. The roll-over method focuses primarily on the impact of a misstatement on the income statement including the reversing effect of prior year misstatements but its use can lead to the accumulation of misstatements in the balance sheet. The iron-curtain method, on the other hand, focuses primarily on the effect of correcting the period-end balance sheet with less emphasis on the reversing effects of prior year errors on the income statement. In SAB 108, the SEC staff establishes an approach that requires quantification of financial statement errors based on the effects of the error on each of the company’s financial statements and the related financial statement disclosures. This model is commonly referred to as a “dual approach” because it essentially requires quantification of errors under both the iron-curtain and the roll-over methods. We are currently evaluating the potential effect of adoption of SAB 108 on our consolidated financial position, consolidated results of operations, or liquidity.

Application of Critical Accounting Policies

The Company and its subsidiaries in Japan maintain their records and prepare their financial statements in accordance with accounting principles generally accepted in Japan, and its foreign subsidiaries in conformity with those of their countries of domicile. Certain adjustments and reclassifications have been incorporated in the accompanying consolidated financial statements to conform with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the periods presented. Actual results may differ from these estimates, judgments and assumptions.

An accounting estimate in our financial statements is a critical accounting estimate if it requires us to make assumptions about matters that are highly uncertain at the time the accounting estimate is made, and either different estimates that we reasonably could have used in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, would have a material impact on the presentation of our financial condition, changes in financial condition or results of operations. We have identified the following critical accounting policies with respect to our financial presentation.

Inventories

Our inventories, which consist primarily of finished products such as hard disk drive spindle motors, are stated at the lower of cost or market value. Cost is determined principally using the weighted average cost method and the market value is mainly based on net realizable value less direct sales costs. These products are exposed to frequent innovation, the introduction of new products to the market and short product life cycles due to rapid technological advances and model changes. We periodically assess the market value of our inventory, based on sales trends and forecasts and technological changes and write off inventories with no movement for one year or when it is apparent that there is no possibility of future sales or usage. We may have to recognize large amounts of inventory write-off as a result of an unexpected decline in market conditions, changes in demand or our product line.

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Other-than-temporary Losses on Marketable Securities

We review the market value of our marketable securities at the end of each fiscal quarter. Our marketable securities consist of available-for-sale securities and investments in listed subsidiaries. Other-than-temporary losses on individual marketable securities are charged to income in the period as incurred. Losses on available-for-sale securities are classified as other-than-temporary based on the length of time and the extent to which the fair value has been less than the carrying amount. When the carrying amount of the equity-method investment exceeds the quoted market value at the end of each period, we write down such investment to the market value if the decline in fair value below the carrying amount is considered other-than-temporary.

In determining if a decline in the fair value of equity-method investment is other-than-temporary, we take into consideration the length of time and the extent to which the fair value has been less than the carrying amount, the financial condition and estimated future profitability of the company. The fair value of marketable securities is based on quoted market prices. Our management employs a systematic methodology to assess the recoverability of such investments by reviewing the financial position of underlying companies and prevailing market conditions in which these companies operate to determine if our investment in each of these companies is impaired and whether the impairment is other-than-temporary.

We believe that the accounting estimate related to investment impairment is a critical accounting policy because:

•

it is highly susceptible to change from period to period because it requires our management to make assumptions about future financial condition and cash flows of investees; and

•

the impact that recognizing an impairment would have on the total assets reported on our balance sheet as well as our operating income would be material.

As of March 31, 2006, the estimated fair value of our marketable securities was ¥19,676 million. We recorded gain on marketable securities in the amount of ¥3,869 million for the years ended March 31, 2006.

Allowance for Doubtful Accounts

We maintain a general allowance for doubtful accounts based on the historical rate of credit losses experienced. We additionally provide allowances for specific customer accounts deemed uncollectible. Management assesses the need for specific allowances based on changes in the customers’ financial condition and length of time the account has remained overdue. As our customer base is highly concentrated, the nonfulfillment or delay in payment caused by even one of our major customers may require us to record a significant additional allowance. For the year ended March 31, 2006, sales to our six largest customers represented approximately 34% of our net sales. Our accounts receivable are likewise concentrated. At March 31, 2006, six customers represented ¥36,960 million, or 29%, of our gross accounts receivable. In addition, during economic downturns, certain number of our customers may have difficulty with their cash flows.

Although we believe that we can make reliable estimates for doubtful accounts, customer concentrations as well as overall economic conditions may affect our ability to accurately estimate the allowance for doubtful accounts. Our allowance for doubtful accounts amounted to ¥538 million as of March 31, 2006. Our trade notes and accounts receivable balance was ¥143,738 million, net of allowance for doubtful accounts, as of March 31, 2006.

Deferred Tax Assets

As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process requires us to estimate our actual current tax exposure together with assessing temporary differences resulting from differing treatment of items, such as deferred revenue, for tax and accounting purposes.

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These differences resulted in deferred tax assets and liabilities, which were included within our consolidated balance sheet. As of March 31, 2006 we had deferred tax assets in the amount of ¥21,457 million. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe that recovery is not likely, we must establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we must include an expense within the tax provision in our income statement.

Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. We have recorded a valuation allowance of ¥11,602 million as of March 31, 2006, due to uncertainties related to our ability to utilize some of our deferred tax assets, primarily consisting of certain net operating losses carried forward for tax purposes incurred by our subsidiaries.

Our determination to record valuation allowances is based on a history of unprofitable periods by the subsidiaries and their estimated future profitability. In the event that actual results differ from these estimates or we adjust these estimates in future periods, we may need to establish an additional valuation allowance which could have an adverse effect on our financial position and results of operations.

Impairment of Long-lived Assets

Long-lived assets, consisting primarily of property, plant and equipment, comprised approximately 31% of our total assets as of March 31, 2006. We carefully monitor the appropriateness of the estimated useful lives of these assets. Since the fiscal year ended March 31, 2003, the first year we adopted impairment of long-lived assets, whenever events or changes in circumstances indicate that the carrying amounts of these assets may not be recoverable, we have reviewed the respective assets for impairment. An impairment loss is recognized when the carrying amount of an asset exceeds the estimated undiscounted future cash flows. We review idle assets for possible impairment based on their condition or based on the probability of future use. Changes in technology, market demand, our planned product mix, or in our intended use of these assets, may cause the estimated period of use or the value of these assets to change. In addition, changes in general industry conditions such as increased competition could cause the value of a certain amount of these assets to change. Estimates and assumptions used in both estimating the useful life and evaluating potential impairment issues require a significant amount of judgment. As such, our judgment as to the recoverability of capitalized amounts and the amount of any impairment will be significantly impacted by such factors.

Acquisitions

In recent years, we have made a number of significant business acquisitions, which have been accounted for using the purchase method of accounting. The purchase method requires that the net assets, tangible and identifiable intangible assets less liabilities of the acquired company be recorded at fair value, with the difference between the cost of an acquired company and the fair value of the acquired net assets recorded as goodwill. Application of the purchase method requires our management to make complex judgments about the allocation of the purchase price to that of the fair value of the net assets we acquire and estimation of the related useful lives. The determinations of fair value of assets and liabilities are primarily based on factors such as independent appraisers’ cash flow analysis and quoted market prices, if available.

Valuation of Goodwill

We assess the impairment of acquired goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider important which could trigger an impairment review include the following:

•

significant underperformance relative to expected historical or projected future operating results;

•

significant changes in the manner of our use of the acquired assets or the strategy for our overall business;

•

significant negative industry or economic trends;

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•

significant decline in the stock price of the acquired entity for a sustained period; and

•

market capitalization of the acquired entity relative to its net book value.

When we determine that the carrying value of goodwill and other intangibles may not be recoverable, based upon the existence of one or more of the above indicators of impairment, we measure any impairment based on a projected discounted cash flow determined by our management to be commensurate with the risk inherent in our current business model. Changes in the projected discounted cash flow could negatively affect the valuations. Goodwill amounted to ¥44,266 million as of March 31, 2006.

Pension Plans

We account for our defined benefit pension plans in accordance with Statement of Financial Accounting Standards No. 87, “Employer’s Accounting for Pensions.” For periodic pension calculation, we are required to assume some components, which include expected return on plan assets, discount rate, rate of increase in compensation levels and average remaining years of service. We use long-term historical actual return information and estimated future long-term investment returns by reference to external sources to develop our expected rate of return on plan assets. The discount rate is assumed based on the rates available on high-quality fixed-income debt instruments (rated AA by a recognized rating agency) for which the timing and amount of cash inflows approximates the estimated outflows of the defined benefit plan. We assume a rate of increase in compensation levels and average remaining years of service based on our historical data. Changes in these assumptions will have an impact on our net periodic pension cost.

The following table shows the sensitivity to a change in discount rates and the expected rate of return on plan assets, holding all other assumptions constant.

	Yen in millions
	Effect on pre-tax income		Effect on PBO
	For the year ended March 31, 2007		As of March 31, 2006
Discount rates
0.5% decrease	¥ (122	)	¥1,119
0.5% increase	109		(1,008	)
Expected rate of return on plan assets
0.5% decrease	¥ (30	)
0.5% increase	30

B. Liquidity and Capital Resources.

Our principal needs for cash are:

•

payments for the purchase of parts and raw materials;

•

payments for the purchase of equipment for our production facilities;

•

selling, general and administrative expenses such as research and development expenses;

•

payments for the purchase of shares of companies targeted under our acquisitions strategy;

•

employees’ salaries, wages and other payroll costs;

•

repayment of short-term debt;

•

payments of dividends to our shareholders; and

•

taxes.

We fund our growth primarily with funds generated from operations, proceeds from issuances of new shares, unsecured bonds, including convertible bonds, and borrowings from banks. We believe that these funding sources, as well as future sources of external funding, will be sufficient to meet our capital requirements for the current fiscal year.

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The uses of funds raised are capital expenditures, investment in and financing of affiliated companies and repayment of borrowings from banks. We intend to implement additional funding programs as the need arises to further strengthen our capital base, and thus enhance the balance between borrowings and equity capital. Part of the funds raised going forward will be reserved and utilized for potential mergers and acquisitions.

During the year ended March 31, 2005, we issued 5,620,000 shares of common stock in a public offering in Japan and received proceeds in the amount of ¥59,954 million. We used the proceeds mainly for capital expenditures and the remainder for repayments of borrowings. We intend to obtain significant amounts of cash through offerings of securities as necessary in the future.

We actively seek to implement group financing strategies within Nidec Group in order to improve our cash efficiencies on a consolidated basis and reduce capital costs. We prepared a “Cash management system” during the fiscal year ended March 31, 2006 and introduced it in April 2006. Our subsidiaries actively repay loans with higher interest rates from banks and we extend loans with lower interest rates to these subsidiaries. We work to reduce finance costs on a consolidated basis by thoroughly reviewing and managing the group’s financing costs and allocating surplus cash effectively within the group through balancing cash flows and investment activities including mergers and acquisitions.

Total assets increased ¥81,797 million from ¥484,173 million to ¥565,970 million for the year ended March 31, 2006. Property, plant and equipment increased ¥27,022 million due primarily to additional machinery and equipment acquired to meet increased production in overseas companies. Trade accounts receivable and inventories increased ¥15,430 million and ¥11,512 million, respectively, due to an increase in sales. Cash and cash equivalents also increased ¥21,968 million, as mentioned under “Cash Flows” below.

Total liabilities increased ¥17,707 million from ¥221,626 million to ¥239,333 million for the year ended March 31, 2006. This was mainly due to increases of short-term borrowings of ¥15,143 million and trade notes and accounts payable of ¥13,977 million while long-term debts decreased ¥9,545 million.

Working capital, defined as current assets less current liabilities, increased ¥24,801 million from ¥100,616 million to ¥125,417 million as of March 31, 2006 as compared to March 31, 2005. This was due primarily to the increases in trade accounts receivable and inventories due to an increase in sales.

Our receivable turnover ratio is calculated by dividing net sales for the year ended March 31 by the year-end trade notes and accounts receivable balance. Our receivable turnover ratio was 3.7 for the year ended March 31, 2006, which was the same as the year ended March 31, 2005. The inventory turnover ratio is calculated by dividing cost of products sold for the year ended March 31 by the year-end inventory balance. Our inventory turnover ratio was 6.8 for the year ended March 31, 2006, compared to 7.6 for the year ended March 31, 2005. We have been trying to reduce production levels to enable us to reduce our excess inventory levels and avoid write-offs, but did not reach satisfactory results during this fiscal year.

Total shareholder’s equity increased ¥56,619 million, or 27.3%, from ¥207,040 million for the year ended March 31, 2005 to ¥263,659 million for the year ended March 31, 2006. This increase was mainly due to an increase in retained earnings of ¥37,380 million, offset by dividends paid of ¥3,569 million. Common stock and additional paid-in capital increased by 8,482 million due to the conversion of convertible debt. In addition, foreign currency translation adjustments increased ¥9,391 million due to the depreciation of the yen to other main currencies. As a result, the ratio of stockholders’ equity to total assets increased 3.8% from 42.8% as of March 31, 2005 to 46.6% as of March 31, 2006.

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Cash Flows

Net cash provided by operating activities increased ¥11,599 million from ¥44,333 million for the year ended March 31, 2005 to ¥55,932 million for the year ended March 31, 2006. This was mainly due to an increase in net income of ¥7,494 million. Accrual for pension and severance costs, net payment increased  ¥6,428 million, due to the absence of a transfer to the Japanese Government of Substitutional Portion of Employee Pension Fund Liabilities, which occurred the previous fiscal year. In addition, changes in operating assets and liabilities increased ¥3,597 million mainly due primarily to an increase in notes and accounts payable as compared to the prior year. On the other hand, the total non-cash income statement items decreased ¥6,579 due to decreases in foreign currency adjustments, minority interest in income of consolidated subsidiaries, gain from sales of marketable securities and loss on disposal of property and equipment of ¥3,485 million, ¥2,784 million, ¥2,251 million and ¥1,356 million, respectively, while depreciation increased ¥4,757 million.

Net cash provided by operating activities increased ¥12,923 million from ¥31,410 million for the year ended March 31, 2004 to ¥44,333 million for the year ended March 31, 2005. This was mainly due to an increase in net income of ¥17,366 million. In addition, non-cash income statement items such as depreciation, minority interest in income of consolidated subsidiaries and equity in net income of affiliated companies increased ¥20,117 million. This was offset by decreases in notes and accounts receivable and notes and accounts payable as compared to the prior year of ¥16,304 million and decrease in accrual for pension and severance costs, net payment of ¥8,410 million due to a transfer to the Japanese Government of Substitutional Portion of Employee Pension Fund Liabilities. Excluding the effect of newly consolidated subsidiaries, net cash provided by operating activities increased ¥3,042 million from ¥25,011 million to ¥28,053 million.

Net cash used in investing activities decreased ¥1,913 million from ¥45,888 million for the year ended March 31, 2005 to ¥43,975 million for the year ended March 31, 2006. This mainly resulted from a decrease in payments for additional investments in subsidiaries of ¥6,820 million and an increase in additions to property, plant and equipment to meet increased production in overseas companies of ¥5,928 million.

Net cash used in investing activities increased ¥24,755 million from ¥21,133 million for the year ended March 31, 2004 to ¥45,888 million for the year ended March 31, 2005. This was mainly due to increases in additions to property, plant and equipment of ¥14,626 million and investments in consolidated subsidiaries of ¥11,046 million, as well as decreases in investments in and advances to affiliated companies and in acquisitions of consolidated subsidiaries, net of cash acquired. Excluding the effect of newly consolidated subsidiaries, net cash used in investing activities increased ¥7,389 million from ¥21,124 million to ¥28,513 million.

Net cash provided by financing activities was ¥5,344 million for the year ended March 31, 2006, while net cash used in financing activities was ¥2,494 million for the year ended March 31, 2005. This was mainly because short-term borrowings increased more than other payments such as repayments of long-term debt and dividends paid this year, while short-term borrowings, long-term debt and dividends paid decreased more than proceeds from issuance of new shares last year.

Net cash used in financing activities was ¥2,494 million for the year ended March 31, 2005, while net cash provided by financing activities was ¥32,494 million for the year ended March 31, 2004. This increase in net cash provided by financing activities was mainly due to an increase in the repayment of short-term borrowings of ¥69,028 million and a decrease in proceeds from issuance of corporate bonds of ¥30,873 million, which were partly offset by an increase in proceeds from the issuance of shares of ¥60,133 million. Excluding the effect of newly consolidated subsidiaries, net cash provided by financing activities decreased ¥34,811 million from ¥37,601 million to ¥2,790 million.

As a result of the foregoing factors and the effect of exchange rate changes, our total outstanding balance of cash and cash equivalents increased ¥21,968 million from ¥70,111 million as of March 31, 2005 to ¥92,079 million as of March 31, 2006.

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C. Research and Development, Patents and Licenses, etc.

An important requirement for success in the highly competitive markets in which we operate is the ability to supply products that incorporate cutting-edge technology and quality. Given that competition has been intensifying, one of the major aims of our research and development activities in recent years has been to reduce the cost of design without affecting the quality of our products.

We employed approximately 1,872 people engaged in research and development mainly in Japan as well as in Singapore, Malaysia, Taiwan and Hong Kong, as of March 31, 2006.

Our position as the leading supplier of hard disk drive spindle motors to the major hard disk drive manufacturers provides us with access to information regarding the industry, which we seek to incorporate into our research and development activities. We seek to quickly develop products that meet the precise needs of each customer.

Based on precision engineering expertise gained from our history of making motors, we have concentrated our research and development activities on drive motor technologies. However, we are conducting research in many areas, including the basic technologies of spindle motors for various types of information equipment, as well as technologies for new types of motors such as fluid dynamic bearing technology, which we have been developing for the past 15 years.

We are diversifying our research and development activities, which have been heavily concentrated on small motor technology in the field of spindle motors, to motor and drive technologies in new fields. For example, through Nidec Shibaura Corporation and Nidec Tosok Corporation, we focus on the research and development of motors for home electric appliances and motors for automobile parts. In addition, through Nidec-Shimpo Corporation, our subsidiary specializing in power transmission drives and variable speed drives, we have been focusing on the research and development of geared motors for color copiers. By doing so, we have been able to develop and market new products through our integrated sales design and production system.

In January and February 2004, Nidec Copal, Nidec Copal Electronics and Nidec Sankyo became our consolidated subsidiaries. Nidec Copal has a substantial market share in shutters for digital cameras and has been developing shutters and lens units. It has developed vibration motors for mobile phones and laboratory systems equipment, among other industrial equipment related products. Nidec Copal Electronics has developed ultra-precision fixed resistors for its circuit parts business and coreless type polygon laser scanners for its actuator business. It has also promoted the development of sensors for its pressure sensor business, mainly for the semiconductor equipment industry. Nidec Sankyo has developed intelligent mechanism products, which have merged fine mechatronics and software, coupled with the development of ultra-precision processing technology. These activities include research and development of multimedia equipment and information accessory equipment such as computers, industrial equipment, home electronics and housing equipment.

In April 2005, we opened Motor Engineering Research Laboratory in our Tokyo Office. Motor Engineering Research Laboratory develops basic research for various types of motors and aims to establish the foundation of motor technology going forward for our motor-related business.

Recently, our principal research and development activities have included the following:

•

the development of fluid dynamic bearing spindle motors, including technology for installing fluid dynamic bearing spindle motors in hard disk drives smaller than 1.8 inches and fluid dynamic bearing spindle motors using sintered-alloy metal;

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•

the development and improvement of basic motor characteristics. For example, in order to achieve a higher transfer rate of memory written on hard disks, higher rotation speeds are required of spindle motors. As a result, spindle motors which were formerly required to generate 5,400 rotations per minute are now required to generate 7,200 to 15,000 rotations per minute. These higher speeds can, however, produce more vibration. Such vibration, as well as the higher density of disks, can disrupt the read-write function of hard disk drives. Accordingly, rotation precision has become more important, and we are conducting research and development with a view to improving such precision;

•

the improvement of analysis and material technologies, including (1) improving technologies for investigating the impact of spindle motors on hard disks, (2) improving the cleanliness of materials and of manufacturing technology and (3) research into the development of uses of new materials for spindle motors;

•

the development of spindle motors smaller than a 1.0-inch disc, used for digital still cameras, selected mobile phones, car navigation systems and digital video cameras;

•

the development and improvement of spindle motors for DVDs;

•

the development and improvement of DC fan motors with a high airflow capacity that helps disperse heat inside end products such as computers, game machines and audio-visual equipments;

•

the development and improvement of optical components including shutters and lens unit for digital cameras and lens products for blue-ray, vibration motors, stepping motors, dye sublimation printer, printer for IC cards and geared motors by Nidec Copal;

•

the development and improvement of actuator, pressure sensors and RF (“radiofrequency”) components by Nidec Copal Electronics; and

•

the development and improvement of LCD panel handling robots for large LCD, micro lens actuator units for mobile phone and card readers by Nidec Sankyo.

The core of our research and development activities is our Central Technical Laboratory, located at our headquarters in Kyoto. In addition to basic and applied research, the Central Technical Laboratory supports the development of products that incorporate the latest technology. Market requirements are becoming more demanding. To respond in a reliable and timely matter to these requirements we have established research and development bases in various countries and regions. Nidec operate technical centers most notably in Kyoto, and also in Tokyo, Shiga, Nagano and Tottori Prefectures in Japan. These operations carry out research and development relating not only to the development of new products, but also to improve the quality of and production technology for existing products.

Utilizing state-of-the-art testing, inspection and measurement equipment, we are increasing our understanding and use of various basic technologies, not only precision motor machining technology, but also in fields such as mechanical and materials engineering and applied chemistry. Accurate and prompt inspection, analysis and measurement performed using state-of-the-art equipment are an integral element of our product and process development. The manufacture of precision motors requires high precision, measurement and analysis at the level of hundredths of a micron. Each material must be analyzed at the molecular level in order to prevent contamination, dust and gases, which are generated by adhesives and other materials and which can infiltrate minute gaps between the disk surface and the head. Using the latest equipment, our Research and Development Department conducts rigorous inspection, measurement and analysis, and utilizes the results to improve product design and process capabilities.

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Similarly, we respond to challenges such as noise reduction, using advanced equipment and our own methods. Today, noise reduction is a significant issue in the computer and consumer electronics fields. In order to address this issue, we have constructed acoustic test rooms, consisting of reverberation and sound anechoic chambers which conform to international standards, where we conduct tests, measurement and analysis.

In addition to its motor business, Nidec Copal operates technology development centers in Itabashi, Tokyo and Koriyama, Fukushima Prefecture. Nidec Copal Electronics has technology development centers in Tajiri, Miyagi Prefecture and Sano, Tochigi Prefecture. Nidec Sankyo operates its technology development centers in Shimosuwa, Komagane and Chino in Nagano Prefecture and Itabashi, Tokyo.

We incurred research and development expenses of ¥8,751 million for the year ended March 31, 2004, ¥25,918 million for the year ended March 31, 2005 and ¥29,232 million for the year ended March 31, 2006.

Much of our research and development is conducted by our domestic subsidiaries, which we then reimburse for costs incurred. We also cooperate with our affiliates to conduct significant research and development. We anticipate spending approximately ¥33,000 million on research and development in the year ending March 31, 2007. We believe that our research and development expenses are sufficient for sustaining our competitiveness in the motor industry and other industries.

D. Trend Information.

The information required by this item is set forth in Item 5.A of this annual report.

E. Off-Balance Sheet Arrangements.

Contingent liabilities for guarantees given in the ordinary course of business amounted to approximately ¥587 million ($4,997 thousand) at March 31, 2006. On April 2002, Nidec’s consolidated subsidiary, Nidec Tosok Corporation, agreed to guarantee for Okaya Seiken Corporation, subcontractor of Nidec Tosok Corporation, totaling ¥265 million ($2,256 thousand) in order to provide funds for Okaya’s manufacturing facilities in Vietnam.

In addition, we have guaranteed approximately ¥322 million ($2,741 thousand) of bank loans for employees for their housing costs. If an employee defaults on his/her loan payments, we are required to perform under such guarantees. The undiscounted maximum amount of our obligation to make future payments in the event of defaults is approximately ¥587 million ($4,997 thousand). The current carrying amount of the liabilities for our obligations under the guarantees is zero.

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F. Tabular Disclosure of Contractual Obligations.

The following tables represent our contractual obligations and other commercial commitments as of March 31, 2006.

	(Yen in millions)
Contractual Obligations	Payments Due by Period
	Total	Less than 1 year	2-3 years	4-5 years	After 5 years
Long-term Debt	¥ 30,935	¥ 2,747	¥ 28,127	¥ 9	¥ 52
Capital Lease Obligations	5,846	1,900	2,818	1,074	54
Interest on debt *1	324	152	140	29	3
Operating Leases	2,995	448	679	537	1,331
Purchase Commitments for Fixed Aseets	1,630	1,630	-	-	-
Total Contractual Cash Obligations	¥ 41,730	¥ 6,877	¥ 31,764	¥ 1,649	¥ 1,440
Contribution under pension plans *2	¥ 2,275	¥ 2,275	-	-	-
Other Commercial Commitments	Total Amounts Committed	Amount of Commitment Expiration per Period
		Less than 1 year	2-3 years	4-5 years	Over 5 years
Guarantees	¥ 587	¥ 62	¥ 109	¥ 109	¥ 307
Total Commercial Commitments	¥ 587	¥ 62	¥ 109	¥ 109	¥ 307
	(U.S. dollars in thousands)
Contractual Obligations	Payments Due by Period
	Total	Less than 1 year	2-3 years	4-5 years	After 5 years
Long-term Debt	$ 263,344	$ 23,385	$ 239,440	$ 77	$ 442
Capital Lease Obligations	49,766	16,174	23,989	9,143	460
Interests on debt *1	2,758	1,294	1,192	247	25
Operating Leases	25,496	3,814	5,780	4,571	11,331
Purchase Commitments for Fixed Aseets	13,876	13,876	-	-	-
Total Contractual Cash Obligations	$ 355,240	$ 58,543	$ 270,401	$ 14,038	$ 12,258
Contribution under pension plans *2	$ 19,367	$ 19,367	-	-	-
Other Commercial Commitments	Total Amounts Committed	Amount of Commitment Expiration per Period
		Less than 1 year	2-3 years	4-5 years	Over 5 years
Guarantees	$ 4,997	$ 528	$ 928	$ 928	$ 2,613
Total Commercial Commitments	$ 4,997	$ 528	$ 928	$ 928	$ 2,613

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*1 Interests at variable interest rates are assumed based on the current applicable rate, ranging from 1.2% to 3.6%.

*2 Amounts are only available for payments due in less than one year.

Our capital commitments as of March 31, 2006 principally consisted of commitments to purchase property, plant and equipment. Commitments outstanding for the purchase of property, plant and equipment and other assets decreased from approximately ¥4,925 million on March 31, 2005 to approximately ¥1,630 million on March 31, 2006, and from approximately ¥5,948 million on March 31, 2004 to approximately ¥4,925 million on March 31, 2005, respectively. These decreases are due mainly to a reduction in investments in facilities equipment compared to the previous year. See Note 24 to our consolidated financial statements included in this annual report. We expect to make capital expenditures in addition to those for which we have outstanding commitments.

Annual maturities on long-term debt and lease obligations during the next five years are as follows:

Year ending March 31		(Yen in millions)	(U.S. dollars in thousands)
	2007	¥ 4,647	$ 39,559
	2008	29,830	253,937
	2009	1,115	9,492
	2010	762	6,487
	2011	321	2,733
	2012 and thereafter	¥ 106	$ 902

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Item 6. Directors, Senior Management and Employees.

A. Directors and Senior Management.

Directors, Executive Officers and Corporate Auditors

The following table provides information about our Directors, Executive Officers and Corporate Auditors as of the date of this annual report:

Name	Position	Date of birth	Month in which current term expires	Number of  Nidec shares owned as of March 31, 2006	Percentage of common stock outstanding as of March 31, 2006
				(in thousands)
Shigenobu Nagamori	President, Chief Executive Officer and Representative Director	August 28, 1944	June 2007	23,417	16.2%
Hiroshi Kobe	Executive Vice President, Chief Operating Officer and Director	March 28, 1949	June 2007	236	*
Yasunobu Toriyama	Executive Vice President, Chief Financial and Accounting Officer and Director	September 18, 1938	June 2007	15	*
Kenji Sawamura	Executive Vice President	February 15, 1942	June 2007	4	*
Juntaro Fujii	Executive Vice President	February 20, 1945	June 2007	-	*
Yasuo Hamaguchi	Senior Managing Director	September 27, 1949	June 2007	265	*
Seizaburo Kawaguchi	Managing Director	October 27, 1953	June 2007	21	*
Tadaaki Hamada	Managing Director	August 14, 1948	June 2007	1	*
Seiichi Hattori	Director	December 30, 1953	June 2007	20	*
Tetsuo Inoue	Director	June 22, 1948	June 2007	5	*
Satoru Kaji	Director	October 4, 1947	June 2007	6	*
Takashi Iwata	Director	April 9, 1947	June 2007	2	*
Akira Kagata	Director	March 7, 1943	June 2007	1	*
Kiyoyoshi Takegami	Director	December 28, 1954	June 2007	49	*
Toru Kodaki	Director	September 13, 1949	June 2007	-	*
Hideo Asahina	Corporate Auditor	March 28, 1938	June 2007	1	*
Tadayoshi Sano	Corporate Auditor	April 13, 1944	June 2007	2	*
Tsutomu Katsuyama	Corporate Auditor	June 5, 1932	June 2007	-	*
Shiro Kuniya	Corporate Auditor	February 22, 1957	June 2010	-	*
Yoshiro Kitano	Corporate Auditor	September 30, 1935	June 2010	-	*

__________

Note: The asterisk represents beneficial ownership of less than 1%.

78

Shigenobu Nagamori has served as our President, Chief Executive Officer and Representative Director since our establishment in July 1973. In June 1995 he became Chairman and Director of Simpo Industries Co., Ltd., currently Nidec-Shimpo Corporation, and from October 2003 became Chairman and Representative Director of Nidec-Shimpo Corporation. He became Chairman and Director of Nidec Tosok Corporation in June 1997 and Nidec-Read Corporation in April 1997. He joined Nidec-Kyori Corporation as Chairman and Representative Director in June 1997. He became Chairman and Director of Nidec Copal Corporation in June 1998. He became Chairman and Representative Director of Nidec Machinery Corporation and Nidec Shibaura Corporation in January 1998 and October 1998, respectively. In March 2002, he became Chairman and Representative Director of Nidec System Engineering (Zhejiang) Corporation and in September 2002, Nidec Copal Electronics Corporation. In March 2004, he became Chairman and Representative Director of Sankyo Seiki Mfg. Co., Ltd.(changed name to Nidec Sankyo Corporation in October 2005), Sankyo Shoji Co., Ltd.(changed name to Nidec Sankyo Shoji Corporation in October 2005), Sankyo Ryutsu Kogyo Co., Ltd. (changed name to Nidec Logistics Corporation in April 2004) Tokyo Pigeon Co., Ltd.(changed name to Nidec Pigeon Corporation in October 2005) and Nissin Kohki Co., Ltd.(changed name to Nidec Nissin Corporation in October 2005). He became Chairman and Director of Nidec Copal Electronics Corporation in September 2004.

Hiroshi Kobe has served as Executive Vice President, Chief Operating Officer and Representative Director of Nidec Corporation since 2006. He joined Nidec in 1973 and served as Managing Director, Director of Sales, Domestic Business and Senior Managing Director in charge of overall business operations. He is also Chairman and Representative Director of Nidec Korea Corporation. He became Chairman and Representative Director of Nidec Total Service Corporation in June 2006. He takes charge of Sales, Compliance Office, Risk Management, Motor Engineering Research Laboratory, and SPM Corporate Quality Control.

Yasunobu Toriyama has served as our Executive Vice President, Chief Financial and Accounting Officer and Director since April 2002. He became our Managing Director in 1996 and has served as General Manager of Administrative Department since then. He became our Senior Managing Director in 1997. Since 1998 he has been General Manager of various departments, in June 2004 he was appointed to be General Manager of Investor Relations, Public Relations & Advertising, Accounting, Finance and Systems Department.

Kenji Sawamura joined Nidec Corporation in October 1998 as Executive Director (Riji). He has served as our Senior Managing Director since April 2002. And he has served as our Executive Vice President since April 2006 and he takes the responsible role in DC / FAN motor business, Shiga Technical Center, Tottori Technical Center, Corporate Purchasing Department, ADF Corporate Quality Control and Molds Preparation. He became Chairman and Representative Director of Nidec (Dalian) Limited in April 2002, and Nidec (Dongguan) Limited in July 2002. He became Chairman, Chief Executive Officer and Director of Nidec America Corporation in July 2004. He became Chairman and Representative Director of Nidec Nemicon Corporation in October 2005. He also became Chairman and Representative Director of Nidec Shibaura Corporation, Nidec Power Motor Corporation, Nidec Automobile Motor (Zhejiang) Corporation, and Nidec Vietnam Corporation in April 2006. He became Chairman and Representative Director of Nidec Electronics GmbH in June 2006.

Juntaro Fujii had a previous job in Mitsubishi UFJ Research and Consulting Co., Ltd. as Deputy President, and he joined Nidec Corporation in June 2006 as Executive Consultant (Komon). In June 2006, he has served as Executive Vice President our Director, and became General Manager of Corporate Strategy Office.

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Yasuo Hamaguchi became our Managing Director in June 1998, and he has been responsible for the spindle motor business since April 2000. He has served as our Senior Managing Director since April 2002. He became Chairman and Representative Director of Nidec Electronics (Thailand) Co.,Ltd.,and Nidec (Zhejiang) Corporation in April 2003. In July 2004, he became President and Representative Director of Nidec Philippines Corporation, and he became Chairman and Representative Director of Nidec Philippines Corporation and Nidec Singapore Pte. Ltd. in April 2006.

Seizaburo Kawaguchi has served as our Director since June 2000. From March 1989 to March 2003, he served as President and Representative Director of Nidec Singapore Pte. Ltd.  He became President and Representative Director of Nidec Electronics (Thailand) Co., Ltd. in April 2003. He has served as our Managing Director since April 2004.

Tadaaki Hamada had a previous job in Bank of Tokyo-Mitsubishi, and he joined Nidec Corporation in February 2000 as Executive Director (Riji) and has served as General Manager of Corporate Planning since March 2000. From August 2001 to March 2003, he was appointed to be Executive Vice President of Nidec America Corporation. He became General Manager of International Projects Administration in April 2003. He has served as our Director since June 2004, and he has served as our Managing Director since April 2005. He is presiding over Intellectual Property and Legal Department, and he is in charge of Secretarial Office, Corporate Planning,  General Affairs, Personnel, International Projects Administration Department.

Seiichi Hattori has served as our Director since June 1999. He was Director of the Sales Department from October 1996 to March 1998. From April 1998 to March 1999, he served as Executive Director of our Sales Department. He was appointed to be in charge of domestic sales in April 2002. He has been a deputy for presiding over Sales division since April 2005. He became President and Director of Nidec (H.K.) Co., Ltd. and Nidec (Shanghai) International Trading Co., Ltd. in April 2003. He became Chairman and Representative Director of Nidec Taiwan Corporation, Nidec (H.K.) Co., Ltd. and Nidec (Shanghai) International Trading Co., Ltd in June 2006..

Tetsuo Inoue has served as our Director since June 2002. He joined Nidec Corporation in December 1999 and has served as General Manager of our Management of Affiliated Companies Department since then.

Satoru Kaji has served as our Director since June 2003. He became Executive Vice President of Nidec America Corporation in January 1994 and Executive Director (Riji) in April 2001. He became General Manager of No. 1 International Sales and Marketing in July 2001 and has been in charge of International Sales and Marketing as General Manager of International Sales Administration since April 2002. In April 2003, he became President and Representative Director of  Nidec Singapore Pte.Ltd. He became Vice Chairman and President of Nidec (Zhejiang) Corporation, and became in charge of Nidec Pinghu City Industrial Park in May 2005.

Takashi Iwata had a previous job in Matsushita Electric Industrial Co., Ltd., and he joined Nidec Corporation in December 2003 as Executive Director (Riji) and has served as a General Manager of Accounting Department. He became General Manager of Internal Audit & Management Advisory in April 2004. He has served as our Director since June 2004.

Akira Kagata had a previous job in Matsushita Electric Industrial Co., Ltd. He joined Nidec Corporation in March 2002, and he became Executive Director (Riji) in April 2003. He became General Manager of Central Technical Laboratory in April 2004. He has served as our Director since June 2005 and he was appointed to be responsible for the research and development of spindle motor business.

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Kiyoyoshi Takegami joined Nidec in April 1978, and has held important job on various sections for engineering. He became General Manager of Development of Shiga Factory in April 1991, and from April 1994 to March 2003, he was appointed to be Vice President of Nidec Electronics (Thailand) Co., Ltd. He became General Manager of Nagano Technical Center in April 2003. He has served as our Director since June 2004. In July 2005, he has doubled as General Manager and Director of Quality Assurance of Nagano Technical Center.

Toru Kodaki had a previous job in The Japan Foundation (an independent administrative institution) as an Executive Vice President. He joined Nidec Corporation in June 2006. He has served as our Director since June 2006. He is in charge of Intellectual Property and Legal Department.

Hideo Asahina has served as our full-time Corporate Auditor since June 2003. He became Director of Kobe Customs, Ministry of Finance in June 1985 and Finance Minister’s Secretariat Councilor in charge of International Finance Bureau in June 1986.  He became Director of Finance Corporation of Local Public Enterprise in October 1988 and President of Osaka Securities Finance Co., Ltd. in June 1991. He has been Director General of Commemorative Association for the Japan World Exposition 1970 since July 1996.

Tadayoshi Sano has served as our full-time Corporate Auditor since June 2003. He joined Nidec Corporation in November 1995 and has served as General Manager of Accounting since April 1996 and Executive Director (Riji) since April 1998.

Tsutomu Katsuyama was enrolled in the Kyoto Bar Association and established Tsutomu Katsuyama Law Firm in April 1972. He has been a practicing attorney since then. He served as our Corporate Auditor since June 2003.

Shiro Kuniya was enrolled in the Osaka Bar Association and joined Oh-Ebashi Law Office (currently Oh-Ebashi LPC & Partners) in April 1982. He is a Senior Partner in Oh-Ebashi LPC & Partners. He served as our Corporate Auditor since June 2006.

Yoshiro Kitano was registered as a certified public accountant in September 1980 and as a licensed tax accountant in February 1990. He established Yoshiro Kitano Certified Public Accountant Office in January 2001. He served as our Corporate Auditor since June 2006.

Our Board of Directors has the ultimate responsibility for the administration of our affairs. Our Articles of Incorporation provide for not more than twenty Directors. Directors are elected at a general meeting of shareholders, and the normal term of office of Directors is one year, although they may serve any number of consecutive terms. The Board of Directors elects one or more Representative Directors, who have the authority individually to represent us. The Board of Directors may also elect one Chairman of the Board of Directors, one President, one or more Executive Vice Presidents, Senior Managing Directors and Managing Directors. Shigenobu Nagamori is the President and Chief Executive Officer, Hiroshi Kobe is the Executive Vice President and Chief Operating Officer and Yasunobu Toriyama is the Executive Vice President and Chief Financial and Accounting Officer. Our Executive Officers serve at the discretion of the Board of Directors.

Corporate Auditors

Our Articles of Incorporation provide for not more than five Corporate Auditors. Currently, we have five Corporate Auditors: Hideo Asahina, Tadayoshi Sano, Tsutomu Katsuyama, Shiro Kuniya and Yoshiro Kitano. The Corporate Auditors may not at the same time be directors, officers or employees of us or any of our subsidiaries, and at least one-half of them must be a person who has never been a director, officer or employee of us or any of our subsidiaries at any time prior to their election as a Corporate Auditor.Corporate Auditors are elected at a general meeting of shareholders, and the normal term of office of a Corporate Auditor is four years, although they may serve any number of consecutive terms.

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Two of our Corporate Auditors, Hideo Asahina and Tadayoshi Sano, are full-time Corporate Auditors. Except Tadayoshi Sano, all of our Corporate Auditors are from outside the Nidec group. Our five Corporate Auditors form our Board of Corporate Auditors. Corporate Auditors are under a statutory duty to review the administration of our affairs by the Directors, to examine our financial statements and business reports to be submitted by the Board of Directors to the general meetings of shareholders and to report their opinions thereon to the shareholders. They are required to attend meetings of the Board of Directors and are entitled to express their opinions, but they are not entitled to vote. Corporate Auditors also have a statutory duty to provide their report to the Board of Corporate Auditors, which must submit its auditing report to the Representative Directors. The Board of Corporate Auditors also determines matters relating to the duties of the Corporate Auditors, such as auditors’ policy and methods of investigation of our affairs.

In addition to Corporate Auditors, we must appoint independent certified public accountants, who have the statutory duties of examining the financial statements to be submitted by the Board of Directors to the annual general meetings of shareholders, reporting thereon to the Board of Corporate Auditors and the Representative Directors, and examining the financial statements to be filed with the Minister of Finance of Japan.

B. Compensation.

The aggregate compensation, including bonuses, paid by us to our Directors and Corporate Auditors as a group during the year ended March 31, 2006 was ¥1,848 million. In accordance with customary Japanese business practices, a retiring Director or Corporate Auditor receives a lump-sum retirement payment, which is subject to the approval of the general meeting of shareholders. In the year ended March 31, 2006, retirement payments in the aggregate amount of ¥96 million were made.

We are currently authorized to issue rights to subscribe for or purchase up to 593,400 shares (after an adjustment to reflect the effect of the stock split discussed below) of our common stock to our directors, corporate auditors and employees for no consideration for the purposes of increasing their incentive and motivation to enhance our business performance and to promote shareholder-oriented management. On November 18, 2005, we completed a two-for-one stock split. As a result, the exercise price changed to ¥3,675 per share of common stock.

C. Board Practices.

The information required by this item is set forth in Item 6.A and 6.B of this annual report.

D. Employees.

The information required by this item is set forth in Item 4.B of this annual report.

E. Share Ownership.

The information required by this item is set forth in Item 6.A of this annual report. On May 14, 2003, we issued rights to purchase 296,700 shares of our common stock to directors, corporate auditors and certain employees for no consideration. These rights are exercisable under certain conditions for the period between July 1, 2004 and June 30, 2007, and the exercise price is set at ¥7,350 per share of common stock, subject to certain adjustments.

On November 18, 2005, we completed a two-for-one stock split. As a result, the exercise price changed to ¥3,675 per share of common stock.

We are currently authorized under this plan to issue rights to purchase 332,000 shares as of August 31, 2006.

82

Item 7. Major Shareholders and Related Party Transactions.

A. Major Shareholders.

To our knowledge, as of March 31, 2006, the following persons beneficially owned more than 5% of our outstanding common stock:

Shareholders	Number of shares of common stock owned (thousands)	Percentage of common stock outstanding
Shigenobu Nagamori	23,417	16.2	%
Fidelity Investments Japan (1)	11,095	7.7	%
JP Morgan Asset Management (2)	8,770	6.1	%

__________

(1) As of March 31, 2006, and based on the report filed on that date by Fidelity Investments Japan with the Financial Services Agency in Japan, which disclosed its and its affiliates’ beneficial ownership of our common stock.

(2) As of March 31, 2006, and based on the report filed on that date by JP Morgan Asset Management  with the Financial Services Agency in Japan, which disclosed its and its affiliates’ beneficial ownership of our common stock.

The voting rights of the shareholders described above are identical to those of our other shareholders.

As of March 31, 2006, there were 144,661,292 shares of our common stock outstanding held by 21,567 shareholders of record, including 104 shareholders of record with addresses in the United States who held 18,614,683 shares, representing approximately 12.9% of our outstanding common stock as of that date.

To our knowledge, we are not, directly or indirectly, owned or controlled by any other corporation or by any government or by any other natural or legal persons, severally or jointly. We know of no arrangements the operation of which may at a later time result in a change of control of Nidec.

B. Related Party Transactions.

Since April 1, 2003, except as described below, we have not entered into any material transactions with our directors, officers, corporate auditors or their respective family members or enterprises over which they can exert significant influence.

As of March 31, 2006, President Nagamori held of record 8.3％ and S. N Kohsan, a business entity indirectly owned by him, held of record 6.1％ of our outstanding shares. President Nagamori’s immediate family held an additional 1.8％ of our outstanding shares as of the same date.

We have entered into various manufacturing, sales and purchase arrangements with our affiliates, most of which involve the production of components or products that we sell.

C. Interests of Experts and Counsel.

Not applicable.

83

Item 8. Financial Information.

A. Consolidated Statements and Other Financial Information.

Financial Statements

The information required by this item is set forth in our consolidated financial statements included in this annual report.

Legal or Arbitration Proceedings

The information on legal or arbitration proceedings required by this item is set forth in Item 4.B. of this annual report.

Dividend Policy

We normally pay cash dividends twice per year. Our Board of Directors recommends the dividend to be paid following the end of each fiscal year. This recommended dividend must then be approved by shareholders at the general meeting of shareholders required to be held in June of each year. Immediately following approval of the dividend at the shareholders’ meeting, we pay the dividend to holders of record as of the immediately preceding March 31. In addition to these year-end dividends, we normally pay interim dividends in the form of cash distributions from our retained earnings to our shareholders of record as of September 30 in each year by resolution of our Board of Directors and without shareholder approval. We normally pay the interim dividend in December.

The following table sets forth the year-end and interim dividends paid to holders of record of our common stock for each of the record dates shown. Yen per share dividend amounts are translated solely for your convenience into U.S. dollars at the noon buying rate for Japanese yen announced by the Federal Reserve Bank of New York on the dividend payment date.

Record date	Dividends per share
	Yen			U.S. dollar
September 30, 2002	¥	5.0	*	$	0.041
March 31, 2003		7.5	*		0.063
September 30, 2003		7.5	*		0.069
March 31, 2004		7.5	*		0.070
September 30, 2004		10.0	*		0.095
March 31, 2005		12.5	*		0.115
September 30, 2005		12.5	*		0.104
March 31, 2006	¥	20.0		$	0.173

* A two-for-one stock split on the Company’s common stock effective November 18, 2005 was implemented for shareholders of record as of September 30, 2005. Therefore the dividends per share have been accordingly adjusted to reflect the effect of the stock split.

It is the present intention of the Board of Directors to continue to pay cash dividends on a semiannual basis and to provide a stable level of dividends to our shareholders The declaration and payment of dividends are, however, subject to our future earnings, financial condition and other factors, including statutory and other restrictions with respect to the payment of dividends.

84

Dividends paid to shareholders outside Japan on shares of common stock or ADSs are generally subject to a Japanese withholding tax at the maximum rate of 20%. Reduced rates for withholding apply to shareholders in some countries which have income tax treaties with Japan. U.S. holders are generally subject to a maximum withholding rate of 10%.

B. Significant Changes.

We are not aware of any significant change in our financial position since March 31, 2006, the date of our last audited financial statements.

85

Item 9. The Offer and Listing.

A. Offer and Listing Details.

In Japan, our common stock is listed on the First Section of the Osaka Securities Exchange, Co., Ltd. and the First Section of the Tokyo Stock Exchange, Inc. both of which are reserved for larger, established companies.

The following table sets forth, for the periods indicated, the closing high and low sales prices, as adjusted to reflect the 2-for-1 stock split that took effect on May 19, 2000 as well as the 2-for-1 stock split that took effect on November 18, 2005 but excepting the 4-for-1 ratio change that took effect on January 1, 2004, and the average daily trading volume of our common stock on the Osaka Securities Exchange, and the closing highs and lows of the Nikkei Stock Average:

	Price Per Share		Average Daily Trading Volume	Nikkei Stock Average
	High	Low		High	Low
			(in thousands of shares)
Year ended March 31,
2001	¥ 5,100	¥ 2,445	226	¥ 20,833.21	¥ 11,819.70
2002	4,645	1,825	401	14,529.41	9420.85
2003	4,920	2,750	435	11,979.85	7,862.43
2004	5,700	2,800	361	11,770.65	7,607.88
2005
First Quarter	6,195	5,390	473	12,163.89	10,505.05
Second Quarter	5,675	4,795	437	11,896.01	10,687.81
Third Quarter	6,370	5,405	520	11,488.76	10,659.15
Fourth Quarter	6,675	5,810	378	11,966.69	11,238.37
2006
First Quarter	6,720	5,735	516	11,874.75	10,825.39
Second Quarter	6,900	5,810	642	13,617.24	11,565.99
Third Quarter	10,330	6,360	568	16,344.20	13,106.18
Fourth Quarter	10,930	8,520	722	17,059.66	15,341.18
2007
First Quarter	9,660	7,500	617	17,563.37	14,218.60
Calendar period
January 2006	10,930	9,160	557	16,649.82	15,341.18
February 2006	10,820	8,670	1,127	16,747.76	15,437.93
March 2006	9,660	8,520	497	17,059.66	15,627.49
April 2006	9,660	8,530	682	17,563.37	16,906.23
May 2006	8,850	8,350	569	17,291.67	15,467.33
June 2006	8,460	7,500	602	15,789.31	14,218.60
July 2006	8,290	7,030	640	15,638.50	14,437.24
August 2006	¥ 8,590	¥ 7,720	430	¥ 16,181.17	¥ 15,154.06

86

Our ADSs have been listed on the New York Stock Exchange since September 27, 2001. The following table sets forth, for the periods indicated, the closing high and low sales price in U.S. dollars as adjusted to reflect the 2-for-1 stock split that took effect on November 18, 2005, and the average trading volume of our ADSs on the New York Stock Exchange:

	Price Per ADS		Average Daily Trading Volume	Dow Jones Industrial Average
	High	Low		High	Low
			(in ADSs)
Year ended March 31,
2002
Third Quarter	$ 7.38	$ 4.24	42,573	$ 10,136.99	$ 8,836.83
Fourth Quarter	9.13	6.53	90,373	10,635.25	9,618.24
2003
First Quarter	9.78	7.80	10,225	10,381.73	9,120.11
Second Quarter	9.38	6.25	3,019	9,379.50	7,591.93
Third Quarter	8.16	5.47	6,020	8,931.68	7,286.27
Fourth Quarter	7.93	6.63	3,943	8,842.62	7,524.06
2004
First Quarter	8.75	5.88	8,276	9,323.02	8,069.86
Second Quarter	10.44	8.41	5,151	9,659.13	9,036.04
Third Quarter	12.96	10.32	6,756	10,453.92	9,469.20
Fourth Quarter	13.31	11.50	15,584	10,737.70	10,048.23
2005
First Quarter	14.10	12.33	11,377	10,570.81	9,906.91
Second Quarter	12.94	11.05	13,984	10,342.79	9,814.59
Third Quarter	15.37	12.47	7,222	10,854.54	9,749.99
Fourth Quarter	16.20	14.14	10,633	10,940.55	10,368.61
2006
First Quarter	15.63	13.25	15,719	10,623.07	10,012.36
Second Quarter	15.38	13.01	23,991	10,705.55	10,270.68
Third Quarter	22.56	14.08	18,779	10,931.62	10,215.22
Fourth Quarter	23.32	18.31	29,855	11,317.43	10,667.39
2007
First Quarter	20.82	16.73	23,667	11,642.65	10,706.14
Calendar period
January 2006	23.32	19.95	19,915	11,043.44	10,667.39
February 2006	22.53	18.34	42,526	11,137.17	10,749.76
March 2006	20.65	18.31	28,030	11,317.43	10,958.59
April 2006	20.82	18.74	25,826	11,382.51	11,073.78
May 2006	19.84	18.65	29,377	11,642.65	11,094.43
June 2006	19.10	16.73	16,091	11,260.28	10,706.14
July 2006	18.35	15.28	28,190	11,228.02	10,739.35
August 2006	$ 18.41	$ 16.83	12,617	$ 11,382.91	$ 11,076.18

* The Ratio of ADS to shares was changed from each ADS representing on share to each ADS representing one-fourth of one share, effective January 1, 2004. Accordingly price per ADS information has been restated for all prior periods presented to reflect this ratio change.

87

B. Plan of Distribution.

Not applicable.

C. Markets.

See Item 9.A. of this annual report for information on the markets on which our common stock is listed or quoted.

D. Selling Shareholders.

Not applicable.

E. Dilution.

Not applicable.

F. Expenses of the Issue.

Not applicable.

88

Item 10. Additional Information.

A. Share Capital.

Not applicable.

B. Memorandum and Articles of Association.

Objects and Purposes in Our Articles of Incorporation

Article 2 of our Articles of Incorporation, which are attached as an exhibit to this annual report, states our objects and purposes.

Provisions Regarding Our Directors

Our Articles of Incorporation do not permit a Director to vote on a proposal in which a Director is materially interested and, under the new Company Law of Japan, which came into effect on May 1, 2006, a Director is required to refrain from voting on such matters at meetings of the Board of Directors.

The Company Law provides that compensation for directors is determined at a general meeting of shareholders of a company. Within the upper limit approved by the shareholders’ meeting, the board of directors will determine the amount of compensation for each director. The board of directors may, by its resolution, leave such decision to the discretion of the company’s representative director.

The Company Law requires directors to “perform their duties faithfully on behalf of the company,” thus subjecting directors to a duty of loyalty ( chujitsu gimu). This duty is supplemented by other duties such as to avoid self-dealing and competition with the corporation as well as to abide by all laws and regulations, articles of incorporation and resolutions of general meetings of shareholders.

Directors can be held liable for damages caused by their negligence in performing their duties, including any action to violate a law, an ordinance or articles of incorporation. For example, directors can be liable for damages caused by declaring an unlawful dividend or distribution of money or by offering some benefit to a shareholder in exchange for the exercise of that shareholder’s rights as shareholder.

There is no mandatory retirement age for our Directors under the Company Law or our Articles of Incorporation.

There is no requirement concerning the number of shares one individual must hold in order to qualify him or her as a Director either under the Company Law or our Articles of Incorporation.

Holding of Our Shares by Foreign Investors

There are no limitations on the rights of non-residents or foreign shareholders to hold or exercise voting rights on our shares imposed by the laws of Japan or our Articles of Incorporation or our other constituent documents.

Rights of Our Shareholders

Set forth below is information relating to our common stock, including brief summaries of the relevant provisions of our Articles of Incorporation and Share Handling Regulations, as currently in effect, and of the Company Law and related legislation.

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General

Our authorized share capital is 480,000,000 shares, of which 144,661,292 shares were issued and outstanding as of March 31, 2006. Under the Company Law, shares must be registered and are transferable by delivery of share certificates. In order to assert shareholders’ rights against us, a shareholder must have its name and address registered on our register of shareholders in accordance with our 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 to directly assert shareholders’ rights such as the right to bring a derivative action, examine our accounting books and records or exercise appraisal rights.

A holder of shares may choose, at its discretion, to participate in the central clearing system for share certificates under the Law Concerning Central Clearing of Share Certificates and Other Securities of Japan. Participating shareholders must deposit certificates representing all of the shares to be included in this clearing system with the Japan Securities Depository Center. If a holder is not a participating institution in the Securities Center, it must participate through a participating institution, such as a securities company or bank having a clearing account with the Securities Center. All shares deposited with the Securities Center will be registered in the name of the Securities Center on our register of shareholders. Each participating shareholder will in turn be registered on our register of beneficial shareholders and be treated in the same way as shareholders registered on our register of shareholders. For the purpose of transferring deposited shares, delivery of share certificates is not required. Entry of the share transfer in the books maintained by the Securities Center for participating institutions, or in the book maintained by a participating institution for its customers, has the same effect as delivery of share certificates. The registered beneficial owners may exercise the rights attached to the shares, such as voting rights, and will receive dividends (if any) and notices to shareholders directly from us. The shares held by a person as a registered shareholder and those held by the same person as a registered beneficial owner are aggregated for these purposes. Beneficial owners may at any time withdraw their shares from deposit and receive share certificates, subject to the limitations caused by the Japanese unit share system described below.

A new law to establish a new central clearing system for shares of listed companies and to eliminate the issuance and use of certificates for such shares was promulgated in June 2004 and the relevant law will come into effect within five years of the date of promulgation.  On the effective date, a new central clearing system will be established and the shares of all Japanese companies listed on any Japanese stock exchange, including our shares, will be subject to the new central clearing system.  On the same day, all existing share certificates for share of all Japanese companies listed on any Japanese stock exchange, including our shares, will become null and void and the transfer of such shares will be effected through entry in the books maintained under the new central clearing system.

Shareholders’ Rights to Bring Actions Against Directors

The Company Law provides for the Japanese shareholder derivative action mechanism, which allows any shareholder who has held a share for the previous six months to demand that the corporation take action to protect the company and enforce a director’s duties. Derivative actions may be brought to “enforce the liability of directors” which refers to situations including, but not limited to, that where directors engage in self-interested transactions, or violate any law, ordinance or the articles of incorporation. If the board has not instituted an action within sixty days, the plaintiff-shareholder may initiate a lawsuit as a derivative action. The Company Law provides an exception to the sixty day waiting period, however, for cases in which waiting sixty days might cause the company “irreparable damage.” In such cases, the shareholder may institute the action immediately, but after having brought the action must notify the company “without delay.” So, for example, if a company might suffer irreparable damage from an illegal act of a director, a shareholder who has owned a share continuously for the previous six months may seek a provisional injunction prohibiting the director from performing the illegal act.

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Distribution of Surplus

General

Under the Company Law, distributions of cash or other assets by joint stock corporations to their shareholders, so called “dividends”, are referred to as “distributions of Surplus” (“Surplus” is defined in “Restriction on Distributions of Surplus” below). A company may make distributions of Surplus to the shareholders any number of times per fiscal year, subject to certain limitations described in “Restriction on Distributions of Surplus”. Under the Company Law, distributions of Surplus are required to be authorized by a resolution of a general meeting of shareholders; however, such distributions can be authorized by the board of directors if its articles of incorporations so provide, so long as the following requirements are met:

(a)

the normal term of office of directors is not longer than one year; and

(b)

non-consolidated annual financial statements and certain documents for the last fiscal year present fairly its assets and profit or loss, as required by the ordinances of the Ministry of Justice.

Our Articles of Incorporation provide that the term of our Directors shall be no longer than one year and that our Board of Directors is authorized to decide distributions of Surplus. Therefore, our Board of Directors has the authority to decide to make future distributions of Surplus upon meeting the requirement (b) above.

Under our Articles of Incorporation, year-end dividends and interim dividends, if any, may be distributed to shareholders (or pledgees) appearing in the register of shareholders as of March 31 and September 30 of each year, respectively, pursuant to a resolution of our Board of Directors. In addition, as stated above, under the Company Law and our Articles of Incorporation, we may make further distributions of Surplus by resolution of our Board of Directors. Under our Articles of Incorporation, we are not obliged to pay any dividends in the form of cash that are left unclaimed for a period of three years after the date on which they first became payable.

Distributions of Surplus, may be distributed in cash or in kind in proportion to the number of shares held by each shareholder. A resolution of our Board of Directors authorizing a distribution of Surplus must specify the kind and aggregate book value of the assets to be distributed, the manner of allocation of such assets to shareholders, and the effective date of the distribution. If a distribution of Surplus is to be made in kind, we may, pursuant to a resolution of our Board of Directors, grant a right to our shareholders to require us to make such distribution in cash instead of in kind. If no such right is granted to shareholders, the relevant distribution of Surplus must be approved by a special resolution of a general meeting of shareholders.

Restriction on Distributions of Surplus

When we make a distribution of Surplus, we must, until the aggregate amount of our additional paid-in capital and legal reserve reaches one-quarter of our stated capital, set aside in our additional paid-in capital and/or legal reserve an amount equal to one-tenth of the amount of Surplus so distributed.

The amount of Surplus at any given time must be calculated in accordance with the following formula:

A + B + C + D – (E + F + G)

In the above formula:

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“A” = the total amount of ‘other capital surplus’ and ‘other retained earnings’, each such amount being that appearing on our non-consolidated balance sheet as of the end of the last fiscal year;

“B” = (if we have disposed of our treasury stock after the end of the last fiscal year) the amount of the consideration for such treasury stock received by us less the book value thereof;

“C” = (if we have reduced our stated capital after the end of the last fiscal year) the amount of such reduction less the portion thereof that has been transferred to additional paid-in capital or legal reserve (if any);

“D” = (if we have reduced our additional paid-in capital or legal reserve after the end of the last fiscal year) the amount of such reduction less the portion thereof that has been transferred to stated capital (if any);

“E” = (if we have cancelled our treasury stock after the end of the last fiscal year) the book value of such treasury stock;

“F” = (if we have distributed Surplus to our shareholders after the end of the last fiscal year) the total book value of the Surplus so distributed;

“G” = certain other amounts set forth in the ordinances of the Ministry of Justice, including (if we have reduced Surplus and increased our stated capital, additional paid-in capital or legal reserve after the end of the last fiscal year) the amount of such reduction and (if we have distributed Surplus to our shareholders after the end of the last fiscal year) the amount set aside in our additional paid-in capital or legal reserve (if any) as required by the ordinances of the Ministry of Justice.

The aggregate book value of Surplus distributed by us may not exceed a prescribed distributable amount (the “Distributable Amount”), as calculated on the effective date of such distribution. The Distributable Amount at any given time shall be equal to the amount of Surplus less the aggregate of the followings:

(a)

the book value of our treasury stock;

(b)

the amount of consideration for our treasury stock disposed of by us after the end of the last fiscal year; and

(c)

certain other amounts set forth in the ordinances of the Ministry of Justice, including (if the sum of one-half of good will and the deferred assets exceeds the total of stated capital, additional paid-in capital and legal reserve, each such amount being that appearing on our non-consolidate balance sheet as of the end of the last fiscal year) all or certain part of such exceeding amount as calculated in accordance with the ordinances of the Ministry of Justice.

If we have become at our option a company with respect to which consolidated balance sheets should also be taken into consideration in the calculation of the Distributable Amount (renketsu haito kisei tekiyo kaisha), it will be required to further deduct from the amount of Surplus the excess amount (if the amount is zero or below zero, zero) of (x) the total amount of shareholders’ equity appearing on our non-consolidated balance sheet as of the end of the last fiscal year and certain other amounts set forth in the ordinances of the Ministry of Justice over (y) the total amount of shareholders’ equity and certain other amounts set forth in the ordinances of the Ministry of Justice appearing on our consolidated balance sheet as of the end of the last fiscal year.

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If we have prepared interim financial statements as described below, and if such interim financial statements have been approved (unless exempted by the Company Law) by a general meeting of shareholders, the Distributable Amount must be adjusted to take into account the amount of profit or loss, and the amount of consideration for our treasury stock disposed of by us, during the period in respect of which such interim financial statements have been prepared. We may prepare non-consolidated interim financial statements consisting of a balance sheet as of any date subsequent to the end of the last fiscal year and an income statement for the period from the first day of the current fiscal year to the date of such balance sheet. Interim financial statements so prepared by us must be approved by the Board of Directors and audited by our independent auditors, as required by the ordinances of the Ministry of Justice.

For information as to Japanese taxes on dividends, see “Tax Considerations ― Japanese Taxation.”

Capital and Reserves

When we issue new shares, the entire amount of cash or other assets paid or contributed by subscribers for those new shares is required to be accounted for as stated capital, although we may account for an amount not exceeding one-half of the amount of such cash or assets as additional paid-in capital by resolution of the Board of Directors.

The Company Law permits us, generally by resolution of our Board of Directors, to reduce our additional paid-in capital or legal reserve, and in the case of reduction of additional paid-in-capital, if so decided by the same resolution, may account for the whole or any part of the amount of such reduction as stated capital. On the other hand, we may reduce our stated capital generally by special resolution of a general meeting of shareholders and, if so decided by the same resolution, may account for the whole or any part of the amount of such reduction as additional paid-in capital. In additional we may reduce our Surplus and increase either (i) stated capital or (ii) additional paid-in capital and/or legal reserve by the same amount, in either case by resolution of a general meeting of shareholders.

Stock Splits

We may at any time split the issued shares into a greater number of shares by resolution of our Board of Directors. When a stock split is to be made, so long as the only class of outstanding shares is the shares, we may increase the number of authorized shares in the same ratio as that of such stock split by amending our Articles of Incorporation, which amendment may be made by a representative director without approval by shareholders.

Generally, shareholders do not need to exchange share certificates for new ones following a stock split, but certificates representing the additional shares resulting from the stock split will be issued to shareholders. Before a stock split, we must give public notice of the stock split, specifying the record date therefor, not less than two weeks prior to such record date.

Japanese Unit Share System

Our Articles of Incorporation provide that 100 shares of common stock constitute one “unit.” The Company Law permits us, by resolution of our Board of Directors, to reduce the number of shares that constitutes one unit or abolish the unit share system, and amend our Articles of Incorporation to this effect without the approval of a shareholders’ meeting. The number of shares constituting a unit may not exceed 1,000 shares.

Transferability of Shares Representing Less Than One Unit

We have made ADS Ratio Change from the ratio of one share of the common stock to the ratio of the one-fourth of one share of the common stock. As a result, the minimum trading unit of the ADS was the ratio of the one-fourth of one share of the common stock.

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We may not issue share certificates for a number of shares not constituting an integral number of units, except in limited circumstances. Because the transfer of shares normally requires delivery of the share certificates for the shares being transferred, shares constituting a fraction of a unit and for which no share certificates are issued may not be transferable.

Because transfer of ADRs does not require a change in the ownership of the underlying shares, holders of ADRs evidencing ADSs that constitute less than one unit of shares are not affected by these restrictions in their ability to transfer the ADRs. However, because transfers of less than one unit of the underlying shares are normally prohibited under the unit share system, the deposit agreement provides that the right of ADR holders to surrender their ADRs and withdraw the underlying shares for sale in Japan may only be exercised as to whole units.

Right of a Holder of Shares Representing Less Than One Unit to Require Us to Purchase Its Shares

A holder of shares representing less than one unit may at any time require us to purchase our shares. These shares will be purchased at:

•

the closing price of the shares reported by the Osaka Securities Exchange Co., Ltd. (the “Osaka Securities Exchange”) on the day when the request to purchase is made; or

•

if no sale takes place on such stock exchange on that day, the closing price of the shares reported by the Tokyo Stock Exchange, Inc. (the “Tokyo Stock Exchange”) on such day; or

•

if no sale takes place on either of such stock exchanges on such day, the price at which the shares are first traded on the Osaka Securities Exchange on the next day; or

•

if no sale takes place on such stock exchange on such day, the price at which the shares are first traded on the Tokyo Stock Exchange on such day; or

•

if no sale takes place on either of such stock exchanges on such day, the price at which the shares are first traded on either of such stock exchanges, provided that, if the shares are traded on both such exchanges on the same day, the relevant price shall be the price at which the shares are first traded on the Osaka Securities Exchanges.

In such case, we will request payment of an amount equal to the brokerage commission applicable to the shares purchased. However, because holders of ADSs representing less than one unit are not able to withdraw the underlying shares from deposit, these holders will not be able to exercise this right as a practical matter.

Voting Right of a Holder of Shares Representing Less Than One Unit

A holders of shares representing less than one unit cannot exercise any voting rights pertaining to those shares. In calculating the quorum for various voting purposes, the aggregate number of shares representing less than one unit will be excluded from the number of outstanding shares. A holder of shares representing one or more whole units will have one vote for each unit of shares, except as stated in “— Voting Rights” below.

A shareholder who owns shares representing less than one unit will not be able to exercise any rights relating to voting rights, such as the right to participate in a demand for the resignation of a director, the right to participate in a demand for the convocation of a general meeting of shareholders and the right to join with other shareholders to propose an agenda item to be addressed at a general meeting of shareholders. In addition, a holder of shares constituting less than one unit does not have the right to require us to issue share certificates for those shares.

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Other Rights of a Holder of Shares Representing Less Than One Unit

In accordance with the Company Law, our Articles of Incorporation provide that a holder of shares representing less than one unit does not have any other rights of a shareholder in respect of those shares, other than those provided by our Articles of Incorporation including the following rights:

•

to receive distribution of dividends;

•

to receive shares, cash or other assets in case of acquisition of shares by us, consolidation or split of shares, exchange or transfer of shares or corporate merger;

•

to be allotted rights to subscribe for new shares and other stock acquisition rights when such rights are granted to shareholders; and

•

to participate in any distribution of surplus assets upon liquidation.

Annual General Meeting of Shareholders

We normally hold our annual general meeting of shareholders in June of each year. In addition, we may hold an extraordinary general meeting of shareholders whenever necessary by giving at least two weeks’ advance notice. Under the Company Law, notice of any shareholders’ meeting must be given to each shareholder having voting rights or, in the case of a non-resident shareholder, to his resident proxy or mailing address in Japan in accordance with our Share Handling Regulations, at least two weeks prior to the date of the meeting.

Voting Rights

A shareholder is generally entitled to one vote per one unit of shares, as described under “— Japanese Unit Share System” above. In general, under the Company Law, a resolution can be adopted at a general meeting of shareholders by a majority of the voting rights represented at the meeting. The Company Law and our Articles of Incorporation require a quorum for the election of Directors and Corporate Auditors of not less than one-third of the voting rights. Our shareholders are not entitled to cumulative voting in the election of Directors. A corporate shareholder whose outstanding voting rights are in turn more than one-quarter directly or indirectly owned by us does not have voting rights. Shareholders may exercise their voting rights through proxies, provided that those proxies are also shareholders who have voting rights.

The Company Law and our Articles of Incorporation provide that certain important matters shall be approved by a “special resolution” of general meeting of shareholders.  Our Articles of Incorporation provide that the quorum for a special resolution is one-third of the total number of voting rights and the approval of at least two-thirds of the voting rights presented at the meeting is required for adopting a special resolution. Such important matters include:

•

a reduction of the stated capital;

•

amendment of the Articles of Incorporation (except amendments which the Board of Directors are authorized to make under the Company Law);

•

the removal of a Corporate Auditor;

•

establishment of a 100% parent-subsidiary relationship by way of share exchange or share transfer requiring shareholders’ approval;

•

a dissolution, merger or consolidation requiring shareholders’ approval;

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•

a company split requiring shareholders’ approval;

•

the transfer of the whole or an important part of our business;

•

the taking over of the whole of the business of any other corporation requiring shareholders’ approval;

•

any issuance of shares or transfer of existing shares as treasury stock to persons other than the shareholders at a “specially favorable” price;

•

any issuance of stock acquisition rights (including those incorporated in bonds with stock acquisition rights) to persons other than the shareholders under “specially favorable” conditions;

•

purchase of shares by us from a specific shareholder other than our subsidiary;

•

consolidation of shares;

•

distribution of Surplus in kind with respect to which shareholders are not granted the right to require us to make such distribution in cash instead of in kind; and

exemption from a portion of liability of the Directors, Corporate Auditors or independent auditors. The voting rights of holders of ADSs are exercised by the depositary based on instructions from those holders. With respect to voting by holders of ADRs, please see Item 10 of our registration statement on Form 20-F filed on September 18, 2001.

Subscription Rights

Holders of shares have no pre-emptive rights. Authorized but unissued shares may be issued at such times and upon such terms as our Board of Directors determines, subject to the limitations as to the issue of new shares at a “specially favorable” price in which case a special resolution of general meeting of shareholders is required as described in “- Voting Rights” above. The Board of Directors may, however, determine that shareholders be given subscription rights in connection with a particular issue of new shares. In this case, such rights must be given on uniform terms to all shareholders as of a specified record date of which not less than two weeks’ prior public notice must be made. Each of the shareholders to whom such rights are given must also be given at least two weeks’ prior notice of the date on which such rights will expire.

Stock Acquisition Rights

We may issue stock acquisition rights ( shinkabu yoyakuken ) or bonds with stock acquisition rights ( shinkabu yoyakuken-tsuki shasai ). Except where the issue would be on “specially favorable” conditions, the issue of stock acquisition rights or bonds with stock acquisition rights may be authorized by a resolution of the Board of Directors. Subject to the terms and conditions thereof, holders of stock acquisition rights may acquire a prescribed number of shares by exercising their stock acquisition rights and paying the exercise price at any time during the exercise period thereof. Upon exercise of stock acquisition rights, we will be obliged to either issue the relevant number of new shares or transfer the necessary number of existing shares held by us as treasury stock to the holder.

Pursuant to the special resolution of our annual general meeting of shareholders held on June 26, 2002 and the resolutions of the Board of Directors held on May 14, 2003, 2,967 stock acquisition rights, which represent rights to acquire 296,700 shares of common stock were issued on May 14, 2003 to our and our subsidiaries’ directors, corporate auditors and employees without consideration for stock acquisition rights.

Pursuant to the resolution of the Board of Directors held on September 30, 2003, 15,000 stock acquisition rights, which represent rights to acquire 2,284,151 shares of common stock were issued on October 17, 2003 with the conversion price of ¥13,828 per share (as adjusted), in connection with the public offering of ¥30 billion zero coupon convertible bonds due 2008 with an issue price of 103% of the principal amount of the bonds.

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Liquidation Rights

In the event of liquidation, the assets remaining after payment of all debts, liquidation expenses and taxes will be distributed among the shareholders in proportion to the number of shares they own.

Liability to Further Calls or Assessments

All of our currently outstanding shares, including shares represented by the ADSs, are fully paid and nonassessable.

Share Registrar

The Sumitomo Trust and Banking Company, Limited is the share registrar for the shares. Sumitomo Trust’s office is located at 5-33, Kitahama 4-chome, Chuo-ku, Osaka, 540-0041, Japan. Sumitomo Trust maintains our register of shareholders and records transfers of record ownership upon presentation of share certificates.

Record Date

The close of business on March 31 is the record date for our year-end dividends, if paid, and the close of business on September 30 is the same for our interim dividends, if paid. A holder of shares constituting one or more “units” who is registered as a holder on our register of shareholders at the close of business as of March 31 is also entitled to exercise shareholders’ voting rights at the annual general meeting of shareholders with respect to the fiscal year ending on March 31. In addition, we may set a record date for determining the shareholders entitled to other rights and for other purposes by giving at least two weeks’ public notice.

The shares generally trade ex-dividend or ex-rights in the Japanese stock exchanges on the third business day before 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.

Repurchase by Nidec of Shares

Under the Company Law and our Articles of Incorporation, we may acquire our shares (i) by soliciting all our shareholders to offer to sell our shares held by them (in this case, the certain terms of such acquisition, such as the total number of the shares to be purchased and the total amount of consideration, shall be set by an ordinary resolution of a general meeting of shareholders in advance, and acquisition shall be effected pursuant to a resolution of the Board of Directors), (ii) from a specific shareholders other than any of our subsidiaries (pursuant to a special resolution of a general meeting of shareholders), (iii) from any of our subsidiaries (pursuant to a resolution of our Board of Directors), or (iv) by way of purchase on any Japanese stock exchange on which our shares are listed or by way of tender offer (in either case pursuant to an ordinary resolution of a general meeting of shareholders). In the case of (ii) above, any other shareholder may make a request to the Board of Directors that such other shareholder be included as a seller in the proposed purchase, provided that no such right will be available if the purchase price or any other consideration to be received by the relevant specific shareholder will not exceed the last trading price of the shares calculated in a manner set forth in the ordinances of the Ministry of Justice.

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These acquisitions are subject to the condition that the aggregate amount of the purchase price must not exceed the Distributable Amount as described in “— Distribution of Surplus” above. We may hold our shares acquired in compliance with the provisions of the Company Law, and may generally dispose of or cancel such shares by resolution of the Board of Directors.

In addition, we may acquire our shares by means of repurchase of any number of shares constituting less than one “unit” upon the request of the holder of those shares, as described under “― Japanese Unit Share System” above.

American Depositary Receipts

For information regarding American Depositary Receipts and our depositary, please see Item 10 of our registration statement on Form 20-F filed on September 18, 2001.

Reporting of Substantial Shareholdings

The Securities and Exchange Law of Japan and its related regulations require any person who has become, solely or jointly, a holder of more than 5% of the total issued shares with voting rights of a company that is listed on any Japanese stock exchange to file a report with the Director of the competent Local Finance Bureau of the Ministry of Finance within five business days. With certain exceptions, a similar report must also be filed in respect of any subsequent change of 1% or more in the holding of shares with voting rights or of any specified changes set out in any previously-filed reports. For this purpose, shares issuable to such person upon exercise of stock acquisition rights are taken into account in determining both the number of shares with voting rights held by the holder and the issuer’s total issued shares with voting rights. Copies of each report must also be furnished to the issuer of the shares and to all Japanese stock exchanges on which the shares are listed.

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Daily Price Fluctuation Limits under Japanese Stock Exchange Rules

Share prices on Japanese stock exchanges are determined on a real-time basis by the equilibrium between bids and offers. These exchanges are order-driven markets without specialists or market makers to guide price formation. To prevent excessive volatility, these exchanges set daily upward and downward price fluctuation limits for each share, based on the previous day’s closing price. Although transactions may continue at the upward or downward limit price if the limit price is reached on a particular trading day, no transactions may take place outside these limits. Consequently, an investor wishing to sell at a price above or below the relevant daily limit may not be able to sell shares at such price on a particular trading day, or at all.

On September 19, 2006, the closing price of our shares on the Osaka Securities Exchange was ¥8,470 per share. The following table shows the daily price limit for a stock on the Osaka Securities Exchange with a closing price of between ¥5,000 and ¥10,000 per share, as well as the daily price limit if our per share price were to rise to between ¥10,000 and ¥20,000, or fall to between ¥3,000 and ¥5,000. Other daily price limits would apply if our per share price moved to other ranges.

Selected Daily Price Limits

Previous Day’s Closing Price or Special Quote				Maximum Daily Price Movement
Over	¥ 3,000	Less than	¥ 5,000	¥ 500
Over	5,000	Less than	10,000	1,000
Over	10,000	Less than	20,000	2,000

For a history of the trading price of our shares on the Osaka Securities Exchange, see Item 9.A of this annual report.

C. Material Contracts.

We have not entered into any material contracts, other than in the ordinary course of business, within the two years immediately preceding the date of this document or any contract, other than in the ordinary course of business, which contains any provision under which we have any obligation or entitlement which is material to us as at the date of this document.

D. Exchange Controls.

Acquisition or Disposition of Shares or ADS

Under the Foreign Exchange and Foreign Trade Law, all aspects of regulations on foreign exchange and foreign trade transactions are, with minor exceptions relating to inward direct investments which are not generally applicable to our shares, only subject to post transaction reporting requirements. Nonresidents of Japan, including foreign corporations not resident in Japan, who acquire or dispose of shares of common stock or ADSs, are generally not required to submit such post transaction reports.

Dividends and Proceeds of Sale

Under the Foreign Exchange and Foreign Trade Law, dividends paid on, and the proceeds of sales in Japan of shares held by non-residents of Japan may in general be converted into any foreign currency and repatriated abroad. Under the terms of the deposit agreement pursuant to which our ADSs are issued, the depositary is required, to the extent that in its judgment it can convert yen on a reasonable basis into dollars and transfer the resulting dollars to the United States, to convert all cash dividends that it receives in respect of deposited shares into dollars and to distribute the amount received (after deduction of applicable withholding taxes) to the holder of ADSs. For additional information regarding our ADSs, please see Item 10 of our registration statement on Form 20-F filed on September 18, 2001.

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E. Taxation.

This section describes the material United States federal income and Japanese tax consequences of owning shares or ADSs. It applies to you only if you hold your shares or ADSs as capital assets for tax purposes. This section does not apply to you if you are a member of a special class of holders subject to special rules, including:

•

a dealer in securities;

•

a trader in securities that elects to use a mark-to-market method of accounting for your securities holdings;

•

a tax-exempt organization;

•

a life insurance company

•

a person liable for alternative minimum tax;

•

a person that actually or constructively owns 10% or more of the voting stock of Nidec;

•

a person that holds shares or ADSs as part of a straddle or a hedging or conversion transaction; or

•

a person whose functional currency is not the U.S. dollar.

This section is based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations, published rulings and court decisions and the laws of Japan all as currently in effect, as well as on the income tax treaty between the United States of America and Japan (the “Treaty”). These laws are subject to change, possibly on a retroactive basis. In addition, this section is based in part upon the representations of the depositary and the assumption that each obligation in the deposit agreement and any related agreement will be performed in accordance with its terms.

You are a U.S. holder if you are a beneficial owner of shares or ADSs and you are:

•

a citizen or resident of the United States;

•

a domestic corporation;

•

an estate whose income is subject to United States federal income tax regardless of its source; or

•

a trust if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust.

You should consult your own tax advisor regarding the United States federal state and local and the Japanese and other tax consequences of owning and disposing of shares and ADSs in your particular circumstances.

In general, and taking into account the earlier assumptions, for United States federal income tax purposes, if you hold ADRs evidencing ADSs, you will be treated as the owner of the shares represented by those ADRs. Exchanges of shares for ADRs, and ADRs for shares, generally will not be subject to United States federal income tax.

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United States Federal Income Taxation

Taxation of Dividends

Under the United States federal income tax laws, and subject to the passive foreign investment company, or PFIC, rules as discussed below, if you are a U.S. holder, the gross amount of any dividend paid by Nidec out of its current or accumulated earnings and profits (as determined for United States federal income tax purposes) will be subject to U.S. federal taxation. If you are a noncorporate U.S. holder, dividends paid to you in taxable years beginning before January 1, 2009 that constitute qualified dividend income will be taxable to you at a maximum tax rate of 15% provided that you hold the shares or ADSs for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date and meet other holding period requirements. Dividends we pay with respect to the shares or ADSs will be qualified dividend income. You must include any Japanese tax withheld from the dividend payment in this gross amount even though you do not in fact receive it. The dividend will be taxable to you when you, in the case of shares, or the depositary, in the case of ADSs, receive the dividend, actually or constructively. The dividend will not be eligible for the dividends-received deduction generally allowed to United States corporations in respect of dividends received from other United States corporations. The amount of the dividend distribution that you must include in your income as a U.S. holder will be the U.S. dollar value of the yen payments made, determined at the spot yen/U.S. dollar rate on the date the dividend distribution is includible in your income, regardless of whether the payment is in fact converted into U.S. dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date you include the dividend payment in income to the date you convert the payment into U.S. dollars will be treated as ordinary income or loss and will not be eligible for the special tax rate applicable to qualified dividend income. The gain or loss generally will be income or loss from sources within the United States for foreign tax credit limitation purposes. Distributions in excess of current and accumulated earnings and profits, as determined for United States federal income tax purposes, will be treated as a non-taxable return of capital to the extent of your basis in the shares or ADSs and thereafter as capital gain.

Subject to generally applicable limitations on the ability to claim a credit on the foreign taxes paid, the Japanese tax withheld in accordance with the Treaty and paid over to Japan will be creditable against your United States federal income tax liability. Special rules apply in determining the foreign tax credit limitation with respect to dividends that are subject to the maximum 15% tax rate. To the extent a refund of the tax withheld is available to you under Japanese law or under the Treaty, the amount of tax withheld that is refundable will not be eligible for credit against your United States federal income tax liability.

Dividends will be income from sources outside the United States. Dividends paid in taxable years beginning before January 1, 2007 generally will be “passive” or “financial services” income, and dividends paid in taxable years beginning after December 31, 2006 will, depending on your circumstances, be “passive” or “general” income which, in either case, is treated separately from other types of income for purposes of computing the foreign tax credit allowable to you.

Taxation of Capital Gains

Subject to the PFIC rules as discussed below, if you are a U.S. holder and you sell or otherwise dispose of your shares or ADSs, you will recognize capital gain or loss for United States federal income tax purposes equal to the difference between the U.S. dollar value of the amount that you realize and your tax basis, determined in U.S. dollars, in your shares or ADSs. Capital gain of a noncorporate U.S. holder that is recognized before January 1, 2009 is generally taxed at a maximum rate of 15% where the holder has a holding period greater than one year. The gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes.

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PFIC Rules

Nidec believes that shares and ADSs should not be treated as stock of a PFIC for United States federal income tax purposes, but this conclusion is a factual determination that is made annually and thus may be subject to change.  If Nidec were to be treated as a PFIC, unless a U.S. holder elects to be taxed annually on a mark-to-market basis with respect to the shares or ADSs, gain realized on the sale or other disposition of your shares or ADSs would in general not be treated as capital gain.  Instead, if you are a U.S. holder, you would be treated as if you had realized such gain and certain “excess distributions” ratably over your holding period for the shares or ADSs and would be taxed at the highest tax rate in effect for each such year to which the gain was allocated, together with an interest charge in respect of the tax attributable to each such year. With certain exceptions, your shares or ADSs will be treated as stock in a PFIC if Nidec were a PFIC at any time during your holding period in your shares or ADSs. Dividends that you receive from Nidec will not be eligible for the special tax rates applicable to qualified dividend income if Nidec is treated as a PFIC with respect to you either in the taxable year of the distribution or the preceding taxable year, but instead will be taxable at rates applicable to ordinary income.

Japanese Taxation

The following is a summary of the principal Japanese tax consequences to owners of our shares who are non-resident individuals or non-Japanese corporations without a permanent establishment in Japan to which the relevant income is attributable. The changes are subject to changes in the applicable Japanese laws or double taxation conventions occurring after that date. This summary is not exhaustive of all possible tax considerations which may apply to a particular investor. Potential investors should satisfy themselves as to:

•

the overall tax consequences of the acquisition, ownership and disposition of shares or ADSs, including specifically the tax consequences under Japanese law;

•

the laws of the jurisdiction of which they are resident; and

•

any tax treaty between Japan and their country of residence, by consulting their own tax advisers.

Generally, a non-resident shareholder is subject to Japanese withholding tax on dividends on the shares paid by us. A stock split is not subject to Japanese income or corporation tax, as it is characterized merely as an increase of number of shares (as oppose to an increase of value of shares) from Japanese tax perspectives. A conversion of retained earnings or legal reserve (but other than additional paid-in capital, in general) into stated capital on a non-consolidated basis is not characterized as a deemed dividend for Japanese tax purposes, and therefore such a conversion does not trigger Japanese withholding taxation (Article 2 (16) of the Japanese Corporation Tax Law and Article 8 (1) (xv) of the Japanese Corporation Tax Law Enforcement Order).

If we purchase our listed shares by way of a tender offer for the purpose of cancellation with retained earnings, the selling shareholders (both individuals and corporations) are in general required to recognize (i) deemed dividend corresponding to a price into share capital portion (including additional paid-in capital) and retained earnings portion on a non-consolidated basis under Article 24(1)(v) of the Japanese Corporation Tax Law, and (ii) capital gain or loss computed as a difference between the basis of the shares subject to the tender offer at the shareholders level and the amount of the consideration for the tender offer (deducting the amount corresponding to the deemed dividend computed as (i) above) under Article 61-2(1) of the same law. On the other hand, no deemed dividend is required to recognize if we purchase our shares at/through the stock market due to the difficulty to identify each shareholder sold our shares (Articles 24(1) (iv) and 61-2(xi) of the Japanese Corporation Tax Law and Article 23(3) of the Japanese Corporation Tax Law Enforcement Order). In addition, in the case of individual shareholders who sell our shares on an over-the-counter basis, no deemed dividend is required to be recognized until March 31, 2007 due to the operation of a temporary measurement (Article 9-6 of the Japanese Special Tax Measurement Law) and therefore they are only required to recognize capital gain or loss of the shares subject to the tender offer. In the meantime, when shares are acquired by us (whether by way of a tender offer or otherwise) for the purpose of cancellation with retained earnings, the shareholders (both individuals and corporations) whose shares were not canceled are not subject to the deemed dividend taxation (such a tax treatment is introduced under the 2001 tax legislation).

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Unless an applicable tax treaty, convention or agreement reduces the maximum rate of withholding tax, the rate of Japanese withholding tax applicable to dividends on the listed shares such as those paid by us to non-resident shareholders is currently 7% which is applicable for the period from January 1, 2004 to March 31, 2008 (15% rate will apply thereafter) except for dividends paid to any individual shareholder who holds 5% or more of the issued shares for which the applicable rate is 20%. Japan has income tax treaties, conventions or agreements whereby the above mentioned withholding tax rate is reduced, generally to 15% 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 and the United Kingdom. Under the tax treaty between the United States and Japan of which withholding tax treatments is applicable effective from July 1, 2004, the withholding tax rate on dividends (those declared on or after July 1, 2004) is 10% for portfolio investors, if they do not have a permanent establishment in Japan and the shares with respect to which such dividends are paid are not related in-fact to such permanent establishment, and if they are qualified US residents eligible to enjoy treaty benefits. It shall be noted that, under the tax treaty between the US and Japan, withholding tax on dividends declared after July 1, 2004 is exempt from Japanese taxation by way of withholding or otherwise for pension funds which are qualified US residents eligible to enjoy treaty benefits unless such dividends are derived from the carrying on of a business, directly or indirectly, by such pension funds. Non-resident shareholders who are entitled to a reduced rate of Japanese withholding tax on payment by us of dividends on the shares are required to submit an Application Form for Income Tax Convention regarding Relief from Japanese Income Tax on Dividends in advance through us to the relevant tax authority before payment of dividends. A standing proxy for non-resident shareholders may provide such application service. See Item 10.B. of this annual report. Non-resident shareholders who do not submit an application in advance will be entitled to claim the refund of withholding taxes withheld in excess of the rate of an applicable tax treaty from the relevant Japanese tax authority. For Japanese tax purposes, the treaty rate normally applies superseding the tax rate under the domestic law. However, due to the so-called preservation doctrine under Article 1(2) of the Treaty, and/or due to Article 3-2 of the Japanese Special Measurement Law for the Income Tax Law, Corporation Tax Law and Local Taxes Law with respect to the Implementation of Tax Treaties, if the tax rate under the domestic tax law is lower than that promulgated under the applicable income tax treaty, then the domestic tax rate is still applicable. If the domestic tax rate still applies, no treaty application is required to be filed, consequently.

Gains derived from the sale of shares outside Japan, or from the sale of shares within Japan by a nonresident shareholder as a portfolio investor, are generally not subject to Japanese income or corporation taxes.

Japanese inheritance and gift taxes may be assessed against an individual who has acquired shares as a legatee, heir or donee, even if the individual is not a Japanese resident.

F. Dividends and Paying Agents.

Not applicable.

G. Statement by Experts.

Not applicable.

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H. Documents on Display.

We file periodic reports and other information with the Securities and Exchange Commission. You may read and copy any document that we file with the SEC at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of its public reference room. The Securities and Exchange Commission also maintains a web site at www.sec.gov that contains reports, proxy statements and other information regarding registrants that file electronically with the Securities and Exchange Commission.  You may also inspect our SEC reports and other information at the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. Some of this information may also be found on our website at www.nidec.co.jp/english/ir/index.html. Information on our website does not form part of this annual report.

As a foreign private issuer, we are exempt from the rules under the Securities Exchange Act of 1934 prescribing the furnishing and content of proxy statements to shareholders.

I. Subsidiary Information.

Not applicable.

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Item 11. Quantitative and Qualitative Disclosure About Market Risk.

We hold financial instruments in the normal course of business and are exposed to market risk, including changes in foreign exchange rates, interest rates and equity prices. We employ a variety of measures to manage market risk related to our financial instruments, including cash and cash equivalents, financial receivables, securities investments, long-term debt and short-term borrowings.

We do not have a policy of hedging all or a defined portion of specific risks. Accordingly, our decisions with regard to the use of derivative instruments are made on a case-by-case basis, and the nature and quantity of open derivative contracts can vary significantly over time. However, from time to time, we enter into derivative financial instruments which include foreign exchange forward contracts, foreign currency option agreements, interest rate swap agreements and interest rate cap agreements. Interest rate swap and cap agreements are designed to reduce our exposure to losses resulting from adverse fluctuations in interest rates on the underlying financial instruments. Foreign currency option agreements are designed to reduce our exposure to losses resulting from adverse fluctuations in foreign exchange rates on underlying accounts payable and anticipated purchase transactions in foreign currency. Foreign exchange forward contracts are designed to reduce our exposure to losses resulting from adverse fluctuations in foreign exchange rates on our foreign currency accounts receivables, other receivables and accounts payable.

Foreign currency exchange rate risk

Transaction risk

A significant portion of our business is conducted in currencies other than yen, most significantly the U.S. dollar. While sales denominated in U.S. dollars are, to a significant extent, offset by U.S. dollar denominated costs, we generally have had a significant net long U.S. dollar position. To the extent that there are any open foreign currency, i.e., U.S. dollar denominated positions, we are exposed to the risk of foreign currency fluctuations. Any gains and losses that result are recorded in our results of operations for the period. The foreign exchange gain (loss), net represents the differences between the value of monetary assets and liabilities when they are originated at exchange rates current when a purchase or sale occurs and their value at the prevailing exchange rate when they are settled or translated at year-end. Foreign currency denominated monetary assets may include bank deposits, trade receivables and other receivables and monetary liabilities may include trade and notes payable, borrowings and debt.

Translation risk

Our reporting currency is the Japanese yen. We have assets and liabilities outside Japan that are subject to fluctuations in foreign currency exchange rates. Our assets and liabilities that are outside Japan are primarily located in Singapore, Thailand, the Philippines and China. We prepare financial statements of our foreign operations in their functional currencies prior to consolidation in our financial statements. Translation gains and losses arising from changes in the value of the reporting currency relative to the functional currencies of the underlying operations are recorded outside of our statement of operations in other comprehensive income until we dispose of or liquidate (which has not occurred in the past, nor do we expect it to occur frequently in the future) the relevant foreign operation.

Foreign currency derivatives

As our investments in foreign subsidiaries with a functional currency other than the Japanese yen are generally considered long-term, we do not hedge these net investments.

From time to time we utilize foreign currency forward contracts and foreign currency options derivative instruments to manage exposure to exchange rate volatility for accounts payable, accounts receivable and anticipated transactions denominated in foreign currencies. However, we do not use instruments with leverage, nor exotic options, to mitigate market risk. Changes in the fair values of our foreign exchange forward contracts and options are recognized as gains and losses on derivative instruments within our results of operations. The table below sets forth the aggregate contract amounts and weighted-average contracted forward rates for annual maturities of the foreign exchange forward contracts for the next five years.

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Foreign currency derivatives at March 31, 2005

	Maturity date
	For the year ending March 31
	2006	2007	2008	2009	2010	Thereafter	Total	Fair Value
Foreign Exchange Forward Contracts
Sell U.S. dollars
Contract amounts (in millions)	¥ 1,444	-	-	-	-	-	¥ 1,444	¥ (31	)
Weighted-average contracted forward Rate (yen per U.S.$1)	104.54	-	-	-	-	-	104.54
Sell THB
Contract amounts (in millions)	¥ 110	-	-	-	-	-	¥ 110	¥ (1	)
Weighted-average contracted forward Rate (yen per THB1)	2.70	-	-	-	-	-	2.70
Buy U.S. dollars
Contract amounts (in millions)	¥ 207	-	-	-	-	-	¥ 207	¥ 7
Weighted-average contracted forward Rate (yen per U.S.$1)	103.71	-	-	-	-	-	103.71

Foreign currency derivatives at March 31, 2006

	Maturity date
	For the year ending March 31
	2007	2008	2009	2010	2011	Thereafter	Total	Fair Value
Foreign Exchange Forward Contracts
Buy U.S. dollars
Contract amounts (in millions)	¥ 1,423	-	-	-	-	-	¥ 1,423	¥ (1	)
Weighted-average contracted forward Rate (yen per U.S.$1)	116.39	-	-	-	-	-	116.39
Buy THB
Contract amounts (in millions)	¥ 40	-	-	-	-	-	¥ 40	¥ (0	)
Weighted-average contracted forward Rate (yen per THB1)	3.00	-	-	-	-	-	3.00

Interest rate risk

We enter into interest rate swaps and other contracts to reduce our market risk exposure from changes in interest rates. We have long-term receivables and debt, with fixed and variable rates, and we enter into interest rate swaps and other contracts in order to stabilize the fair values and cash flows of those receivables and debts.

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The table below sets forth information about our derivative financial instruments and other financial instruments that are sensitive to changes in interest rates. For our debts and receivables, it indicates whether the interest component is fixed or variable, the amount of the cash flows and the expected weighted-average interest rate for the next five years and thereafter and the items’ fair value. For our interest rate caps, the table presents payment type, notional principal amounts and weighted-average interest strike rates by expected (contracted) maturity dates and the items fair value. Notional amounts are used to calculate the contractual payments to be exchanged under the contracts.

Interest rate risk at March 31, 2005
(Yen in millions)
	Maturity date
	For the year ending March 31
	2006		2007		2008		2009		2010		Thereafter		Total		Fair Value
Long-term Loan Receivable	(Yen in millions)
Fixed Rate
Principal cash flows	¥ 18		¥ 25		¥ 54		¥ 24		¥ 4		¥ 78		¥ 203		¥ 184
Weighted-average interest rate	2.61	%	2.13	%	1.81	%	2.10	%	4.29	%	4.01	%	2.85	%
Floating Rate
Principal cash flows	83		73		57		37		12		16		278		278
Weighted-average interest rate	2.79	%	2.99	%	3.27	%	3.47	%	4.44	%	4.31	%	3.19	%
Long-term Debt
Fixed Rate (long-term loan)
Principal cash flows	1,037		845		652		16		5		68		2,623		2,591
Weighted-average interest rate	1.02	%	1.06	%	0.75	%	2.97	%	3.86	%	3.62	%	1.05	%
Fixed Rate (convertible bonds)
Principal cash flows	5,394		-		-		30,638		-		-		36,032		36,032
Weighted-average interest rate	0.80	%	-		-		0.00	%	-		-		0.12	%
Floating Rate (long-term loan)
Principal cash flows	2		2,001		2		2		2		16		2,025		2,025
Weighted-average interest rate	1.80	%	2.53	%	2.46	%	2.77	%	3.09	%	3.57	%	0.039	%
Interest Rate Derivatives
Interest Rate Swaps
Fixed rate payments
Notional amounts	-		-		-		1,200		-		-		1,200		(46	)
Weighted-average interest rate	-		-		-		1.42	%	-		-		1.42	%	-
Floating rate receives
Notional amounts	-		-		-		1,200		-		-		1,200		-
Weighted-average interest rate	-		-		-		0.30	%	-		-		0.30	%
Interest Rate Caps
Purchased Caps
Notional amounts	-		¥ 2,500		-		-		-		-		¥ 2,500		¥ (24	)
Weighted-average interest rate	-		1.00	%	-		-		-		-		1.00	%

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Interest rate risk at March 31, 2006
(Yen in millions)
	Maturity date
	For the year ending March 31
	2007		2008		2009		2010		2011		Thereafter		Total		Fair Value
Long-term Loan Receivable	(Yen in millions)
Fixed Rate
Principal cash flows	¥ 19		¥ 7		¥ 5		¥ 5		¥ 5		¥ 44		¥ 85		¥ 89
Weighted-average interest rate	4.00	%	4.05	%	4.44	%	4.43	%	4.43	%	4.47	%	4.33	%
Floating Rate
Principal cash flows	84		71		56		36		12		17		276		276
Weighted-average interest rate	2.97	%	3.12	%	3.13	%	3.10	%	3.87	%	2.64	%	3.07	%
Long-term Debt
Fixed Rate (long-term loan)
Principal cash flows	737		680		20		1		1		6		1,445		1,456
Weighted-average interest rate	0.91	%	0.78	%	2.36	%	4.52	%	4.52	%	4.47	%	0.89	%
Fixed Rate (convertible bonds)
Principal cash flows	-		27,413		-		-		-		-		27,413		39,807
Weighted-average interest rate	-		0.00	%	-		-		-		-		0.00	%
Floating Rate (long-term loan)
Principal cash flows	2,017		5		4		4		4		48		2,082		2,082
Weighted-average interest rate	1.35	%	3.38	%	3.46	%	3.61	%	3.74	%	4.21	%	1.44	%
Interest Rate Derivatives
Interest Rate Swaps
Fixed rate payments
Notional amounts	-		-		1,200		-		-		-		1,200		(12	)
Weighted-average interest rate	-		-		1.42	%	-		-		-		1.42	%	-
Floating rate receives
Notional amounts	-		-		1,200		-		-		-		1,200		-
Weighted-average interest rate	-		-		1.11	%	-		-		-		1.11	%
Interest Rate Caps
Purchased Caps
Notional amounts	¥ 2,500		-		-		-		-		-		¥ 2,500		¥ (8	)
Weighted-average interest rate	1.00	%	-		-		-		-		-		1.00	%

Equity security price risk

We have marketable equity securities classified as available-for-sale securities. At March 31, 2005, the fair value of these securities was ¥16,554 million and at March 31, 2006 it was ¥19,676 million. If the fair value of these securities were to change by 10%, the impact on the carrying amount of those securities as of March 31, 2005 would be ¥1,655 million and as of March 31, 2006 would be ¥1,968 million, respectively. We had no open equity derivative positions during the year ended March 31, 2005 or 2006.

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Commodity price risk

We had no open commodity derivative positions for the year ended March 31, 2005 or 2006.

Item 12. Description of Securities Other Than Equity Securities.

Not applicable.

PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies.

None.

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.

None.

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Item 15. Controls and Procedures.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within us have been detected.  There inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.  Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.  The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.  Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Management carried out an evaluation, with the participation of the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of March 31, 2006 pursuant to Rule 13a-15(b) under the Exchange Act.  Based upon the evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2006.  Management also carried out an evaluation, with the participation of the Chief Executive Officer and the Chief Financial Officer, of changes in our internal control over financial reporting that occurred during the year ended March 31, 2006 pursuant to Rule 13a-15(d) of the Exchange Act.  Based upon that evaluation, other than the changes described below, there was no change during the fiscal year ended March 31, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

In connection with the audit of our consolidated financial statements for the year ended March 31, 2005, our principal accountant reported to our Board of Corporate Auditors the following reportable conditions pursuant to AU Section 325, Communication of Internal Control Related Matters Noted in an Audit, of the American Institute of Certified Public Accountants’ Professional Standards:

1.     During the course of its audit of one of our subsidiaries, the principal accountant noted unusual transactions including sales to an agent, sales to a foreign subsidiary with unusually high margins and no eliminating adjustments for profits on certain inter-company transactions at the subsidiary, which our internal control procedures did not identify as irregular transactions.

2.     Our management evaluated subsidiary business performance on a monthly basis based on non-consolidated financial data which did not include consolidation adjustments, such as the elimination of inter-company transactions.  Also, for management evaluation purposes, we only consolidate our accounts at the parent company level, with no sub-consolidations at subsidiaries.  In light of these and other circumstances, the principal accountant identified a significant risk that, even with the quarterly closing and preparation of consolidated financial statements that we conducted, the types of irregular transactions described above would not be identified in a timely manner.

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3.     The principal accountant pointed out that appropriate controls and procedures would need to be implemented to address risks in the area of improper recording of inter-company and/or consolidation adjustments, including the strengthening of the existing anti-fraud program, amendments to procedures for closing of consolidated financial statements and the dedication of additional resources to ensure newly implemented controls can be effectively applied.

Management examined the reportable conditions described above and concluded that they would have constituted material weaknesses in internal control over financial reporting.  To remediate these reportable conditions, during the fiscal year ended March 31, 2006, we took steps to strengthen our internal controls by implementing certain measures such as increasing the level of internal audit review at the subsidiary at which the principal accountant identified irregular transactions, issuing notices, developing internal regulations, and requiring all of our subsidiaries to prepare their financial statements in a manner consistent with generally accepted accounting principles in the United States, including those relating to consolidation.  Corrected control deficiencies were retested by management to assure that our remediation efforts were successful.  As a result of these steps, the reportable conditions described above were remediated by the end of the fiscal year ended March 31, 2006.  

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Item 16A. Audit Committee Financial Expert.

The Board of Corporate Auditors of Nidec has determined that Nidec does not have an “audit committee financial expert” as defined in Item 16A of Form 20-F serving on the Board of Corporate Auditors. Nidec believes that the combined knowledge, skills and experience of the Board of Corporate Auditors enables them, as a group, to act effectively in the fulfillment of their tasks and responsibilities, including those under the Sarbanes-Oxley Act of 2002. In addition, the Corporate Auditors have the power and authority to engage outside experts as they deem appropriate to provide them with advice on matters related to their responsibilities.

Item 16B. Code of Ethics.

Nidec has adopted a written code of ethics for its chief executive officer, chief financial officer, chief accounting officer and other senior officers which has been effective as of April 1, 2004. Nidec’s code of ethics is attached to this annual report on Form 20-F as exhibit 11.1.

Item 16C. Principal Accountant Fees and Services

Principal Accountant Audit Fees and Services Fees

The following table presents the fees paid or accrued by us for the audit and non-audit services rendered by our principal accountants, Misuzu Audit Corporation, a network firm of PricewaterhouseCoopers International Limited (Misuzu Audit Corporation changed its name from ChuoAoyama PricewaterhouseCoopers to its current name as of September 1, 2006), during the fiscal years ended March 31, 2005 and 2006.

	Yen in millions		U.S. dollars in thousands
	For the year ended March 31,		For the year ended
Type of Fee	2005	2006	March 31, 2006
Audit Fees (1)	¥ 352	¥ 424	$ 3,609
Audit Related Fees (2)	35	80	681
Tax Fees (3)	15	22	187
All Other Fees (4)	2	9	77
Total	¥ 404	¥ 535	$ 4,554

(1) Audit fees consist of the fees for professional services provided in connection with the audit of our annual financial statements and review of our quarterly financial statements and audit services provided in connection with other statutory or regulatory filing.

(2) Audit related fees are fees for assurance and related services that were reasonably related to the performance of the audit or review of our financial statements and were not otherwise included in Audit Fees. This includes fees for employment benefit plan audits, due diligence to related mergers and acquisitions, attestations by Misuzu Audit Corporation (formerly ChuoAoyama PricewaterhouseCoopers) that are not required by statute or regulation, and consulting on financial accounting/reporting standards.

(3) Tax fees represent fees for professional services rendered by Misuzu Audit Corporation (formerly ChuoAoyama PricewaterhouseCoopers) for tax compliance, tax advise and tax planning.

(4) All other fees include fees for products and services provided by Misuzu Audit Corporation (formerly ChuoAoyama PricewaterhouseCoopers) other than the services reported above.

The Board of Corporate Auditors has concluded the provision of the non-audit services listed above is compatible with maintaining the independence of Misuzu Audit Corporation (formerly ChuoAoyama PricewaterhouseCoopers).

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Pursuant to Rule 2-01(c)(7) of Regulation S-X, the Board of Corporate Auditors pre-approves the engagement of our principal accountants and their affiliates to render audit and non-audit services to us. As a general rule, the Board of Corporate Auditors specifically pre-approves the engagement of such services after examining the details of the proposal engagement submitted by our management. With respect to certain specified audit and non-audit services, once every year, the Board of Corporate Auditors generally pre-approves the engagement of our principal accountants and their affiliates to render such services pursuant to the Board’s pre-approval policies and procedures. Under the pre-approval policies and procedures, services that are the subject of general pre-approval are specifically identified, together with the maximum aggregate fee amount that may be paid for each such service. The Board of Corporate Auditors reviews this list of specific services and related matters on an annual basis. All services to be rendered by our principal accountants or their affiliates that are not specifically identified must be specifically pre-approved by the Board of Corporate Auditors. Even for those services that are specifically identified, the rendering of such services for fees in excess of the maximum aggregate fee amount under the pre-approval policies and procedures must be specifically pre-approved by the Board of Corporate Auditors.

None of the services described above under this Item 16C were waived from the pre-approval requirement pursuant to Rule 2-01(c)(7)(i)(C) of Regulation S-X.

Item 16D. Exemptions from the Listing Standards for Audit Committees.

With respect to the requirements of Rule 10A-3 under the Securities Exchange Act of 1934 relating to listed company audit committees, which apply to us through Section 303A.06 of the New York Stock Exchange’s Listed Company Manual, we rely on an exemption provided by paragraph (c)(3) of that Rule available to foreign private issuers with boards of corporate auditors meeting certain requirements. For a New York Stock Exchange-listed Japanese company with a board of corporate auditors, the requirements for relying on paragraph (c)(3) of Rule 10A-3 are as follows:

(a)       The board of corporate auditors must be established, and its members must be selected, pursuant to Japanese law expressly requiring such a board for Japanese companies that elect to have a corporate governance system with corporate auditors.

(b)       Japanese law must and does require the board of corporate auditors to be separate from the board of directors.

(c)       None of the members of the board of corporate auditors is elected by management, and none of the listed company’s executive officers is a member of the board of corporate auditors.

(d)       Japanese law must and does set forth standards for the independence of the members of the board of corporate auditors from the listed company or its management.

(e)       The board of corporate auditors, in accordance with Japanese law or the listed company’s governing documents, must be responsible, to the extent permitted by Japanese law, for the appointment, retention and oversight of the work of any registered public accounting firm engaged (including, to the extent permitted by Japanese law, the resolution of disagreements between management and the auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the listed company, including its principal accountant which audits its consolidated financial statements included in its annual reports on Form 20-F.

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(f)       To the extent permitted by Japanese law:

-     the board of corporate auditors must establish procedures for (i) the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls, or auditing matters, and (ii) the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters;

-     the board of corporate auditors must have the authority to engage independent counsel and other advisers, as it determines necessary to carry out its duties; and

-     the listed company must provide for appropriate funding, as determined by its board of corporate auditors, for payment of (i) compensation to any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for us, (ii) compensation to any advisers employed by the board of corporate auditors, and (iii) ordinary administrative expenses of the board of corporate auditors that are necessary or appropriate in carrying out its duties.

In our assessment, our Board of Corporate Auditors, which meets the requirements for reliance on the exemption in paragraph (c)(3) of Rule 10A-3 described above, is not materially less effective than an audit committee meeting all the requirements of paragraph (b) of Rule 10A-3 (without relying on any exemption provided by that Rule) at acting independently of management and performing the functions of an audit committee as contemplated therein.

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Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchases.

The following table sets forth information concerning purchases made by us during the fiscal year ended March 31, 2006.

		Shares	Yen	Shares	Shares
		Total number of shares purchased	Average price paid per share	Total number of shares purchased as part of publicly announced plans or programs	Maximum numbers of shares that may yet be purchased under the plans or programs
2005
	April 1 - 30	304	¥ 13,287	-	-
	May 1 - 31	178	12,232	-	-
	June 1 - 30	175	11,914	-	-
	July 1 - 31	371	11,865	-	-
	August 1 - 31	269	12,347	-	-
	September 1- 30	450	12,645	-	-
	October 1 - 31	478	6,632	-	-
	November 1 - 30	661	7,966	-	-
	December 1- 31	2,344	9,160	-	-
2006
	January 1 - 31	1,371	10,028	-	-
	February 1 - 28	1,065	9,716	-	-
	March 1 - 31	1,493	8,917	-	-
Total		9,159	¥ 9,721	-	-

All of the purchase shown above represent with the purchase of fractional shares from fractional share owners under the Japanese Commercial Code. For an explanation of the right of such shareholders, see “Japanese Unit Share System— Right of a Holder of Shares Representing Less Than One Unit to Require Us to Purchase Its Shares.” under Item 10.B of this Annual Report.

Currently, we don’t have any publicly announced repurchase plans or programs.

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PART III

Item 17. Financial Statements.

In lieu of responding to this item, we have responded to Item 18 of this annual report.

Item 18. Financial Statements.

The information required by this item is set forth in our consolidated financial statements included in this annual report.

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Item 19. Exhibits.

Exhibit Number	Description
1.1	Articles of Incorporation of Nidec Corporation (English translation)
1.2	Share Handling Regulations of Nidec Corporation (English translation)
1.3	Regulations of the Board of Directors of Nidec Corporation (English translation)
1.4	Regulations of the Board of Corporate Auditors of Nidec Corporation (English translation)
2.1	Specimen common stock certificates of Nidec Corporation (English translation)*
2.2	Form of Deposit Agreement among Nidec Corporation, Morgan Guaranty Trust Company of New York as Depositary and all owners and holders from time to time of American Depositary Receipts, including the form of American Depositary Receipt**
8.1	Subsidiaries of Nidec Corporation
11.1	Code of Ethics***
12.1	Certification of the Chief Executive Officer required by Rule 13a-14(a)
12.2	Certification of the Chief Financial Officer required by Rule 13a-14(a)
13.1	Certification of the Chief Executive Officer required by Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code
13.2	Certification of the Chief Financial Officer required by Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code

We have not included as exhibits certain instruments with respect to our long-term debt, the amount of debt authorized under each of which does not exceed 10% of our total assets, and we agree to furnish a copy of any such instrument to the Securities and Exchange Commission upon request.

____________

*     Incorporated by reference to Nidec’s annual report on Form 20-F for the year ended March 31, 2002 filed on July 5, 2002.

**   Incorporated by reference to the Registration Statement on Form F-6 (file no. 333-13894) filed on September 7, 2001.

*** Incorporated by reference to Nidec’s annual report on Form 20-F for the year ended March 31, 2005 filed on August 12, 2005.

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SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

	NIDEC CORPORATION
	By:    /s/ Shigenobu Nagamori
	Name:	Shigenobu Nagamori
	Title:	President, Chief Executive Officer and  Representative Director
Date:  September 25, 2006

INDEX OF EXHIBITS

Exhibit Number	Description
1.1	Articles of Incorporation of Nidec Corporation (English translation)
1.2	Share Handling Regulations of Nidec Corporation (English translation)
1.3	Regulations of the Board of Directors of Nidec Corporation (English translation)
1.4	Regulations of the Board of Corporate Auditors of Nidec Corporation (English translation)
2.1	Specimen common stock certificates of Nidec Corporation (English translation)*
2.2	Form of Deposit Agreement among Nidec Corporation, Morgan Guaranty Trust Company of New York as Depositary and all owners and holders from time to time of American Depositary Receipts, including the form of American Depositary Receipt**
8.1	Subsidiaries of Nidec Corporation
11.1	Code of Ethics***
12.1	Certification of the Chief Executive Officer required by Rule 13a-14(a)
12.2	Certification of the Chief Financial Officer required by Rule 13a-14(a)
13.1	Certification of the Chief Executive Officer required by Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code
13.2	Certification of the Chief Financial Officer required by Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code

We have not included as exhibits certain instruments with respect to our long-term debt, the amount of debt authorized under each of which does not exceed 10% of our total assets, and we agree to furnish a copy of any such instrument to the Securities and Exchange Commission upon request.

____________

*     Incorporated by reference to Nidec’s annual report on Form 20-F for the year ended March 31, 2002 filed on July 5, 2002.

**   Incorporated by reference to the Registration Statement on Form F-6 (file no. 333-13894) filed on September 7, 2001.

*** Incorporated by reference to Nidec’s annual report on Form 20-F for the year ended March 31, 2005 filed on August 12, 2005.

NIDEC CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm		F-2
Consolidated balance sheets at March 31, 2005 and 2006		F-3
Consolidated statements of income for the years ended March 31, 2004, 2005 and 2006		F-5
Consolidated statements of shareholders’ equity and comprehensive income (loss) for the years ended March 31, 2004, 2005 and 2006		F-6
Consolidated statements of cash flows for the years ended March 31, 2004, 2005 and 2006		F-8
Notes to consolidated financial statements		F-10

F-1

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of

Nihon Densan Kabushiki Kaisha

(“NIDEC Corporation”)

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of NIDEC Corporation and its subsidiaries at March 31, 2005 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2006 in conformity with accounting principles generally accepted in the United States of America.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.  We conducted our audits of these statements 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

/s/ ChuoAoyama PricewaterhouseCoopers

Kyoto, Japan

June 22, 2006

F-2

NIDEC CORPORATION

CONSOLIDATED BALANCE SHEETS

ASSETS

		Yen in millions		U.S. dollars in thousands
		March 31		March 31,
		2005	2006	2006
Current assets:
	Cash and cash equivalents	¥ 70,111	¥92,079	$ 783,851
	Trade notes and accounts receivable, net of allowance for doubtful accounts of   ¥484 million in 2005 and ¥538 million ($4,580 thousand) in 2006:
	Notes	17,351	15,740	133,992
	Accounts