Financial Information: Annual Report 2004

	Notes to Consolidated Financial Statements
	NSK Ltd. and Subsidiaries For the year ended March 31, 2004

4. Inventories

	Millions of yen		Thousands of U.S. dollars
As of March 31	2004	2003	2004
Finished products	\42,891	\46,096	$404,632
Work in process	19,292	20,972	182,000
Raw materials and supplies	13,720	16,418	129,434
	\75,905	\83,487	$716,085

5. Depreciation

Depreciation of property, plant and equipment for the years ended March 31, 2004 and 2003 amounted to ¥26,597 million ($250,915 thousand) and ¥28,580 million, respectively.

6. Short-Term Debt

	Millions of yen		Thousands of U.S. dollars
As of March 31	2004	2003	2004
Bank loans	\75,249	\87,265	$709,896
	\75,249	\87,265	$709,896

Short-term bank loans are principally unsecured and consist of notes maturing generally within one year. The interest rates applicable to the loans at March 31, 2004 and 2003 ranged principally from 0.3892 percent to 7.48 percent and from 0.40 percent to 26.14 percent, respectively.

7. Income Taxes

Income taxes applicable to the Company and its domestic subsidiaries comprise corporation tax, inhabitants’ taxes and enterprise tax which, in the aggregate, resulted in a statutory tax rate of 42.0 percent for 2004 and 2003. Income taxes of the foreign subsidiaries are based generally on the tax rates applicable in their countries of incorporation.

For the year ended March 31		2003
Statutory tax rate		(42.0)%
Effect of:
	Net loss carryforward	122.6
	Effect of tax rate change	(6.9)
	Expenses not deductible for income tax purposes	63.9
	Dividends and other income deductible for income tax purposes	(15.8)
	Different tax rates applied to income of foreign subsidiaries	31.7
	Changes in valuation allowance	(197.0)
	Unrealized profit on inventories in consolidation	74.8
	Other, net	14.3
Effective tax rates		45.6%

The difference between the effective tax rate and the statutory tax rate reflected in the accompanying consolidated statement of operations for the year ended March 31, 2004 is less than 5% and, therefore, no reconciliation has been disclosed.

		Millions of yen		Thousands of U.S. dollars
As of March 31		2004	2003	2004
Deferred tax assets:
	Accrued retirement benefits	\15,651	\13,284	$147,651
	Property, plant and equipment	2,042	2,531	19,264
	Accrued payroll expenses	2,491	2,277	23,500
	Accrued bonuses	3,377	2,684	31,858
	Net loss carryforward	24,135	26,823	227,689
	Inventories	1,387	1,179	13,085
	Loss on devaluation of investment securities	910	852	8,585
	Other	6,625	4,363	62,500
	Valuation allowance	(21,139)	(18,489)	(199,425)
Total deferred tax assets		35,482	35,506	334,736
Deferred tax liabilities:
	Depreciation	5,108	5,678	48,189
	Unrealized holding gain on securities	12,559	3,459	118,481
	Gain on contribution of securities to employees’ retirement benefit trust	13,601	13,513	128,311
	Other	6,230	4,483	58,774
Total deferred tax liabilities		37,499	27,135	353,764
Net deferred tax assets (liabilities)		\(2,016)	\8,371	$(19,019)

New legislation was enacted in March 2003 which will change the aggregate statutory tax rate from 42% to 40% effective the fiscal year beginning after March 31, 2004. The effect of this tax rate change was to increase net deferred assets by ¥322 million at March 31, 2003 and to decrease income tax expense by ¥146 million for the year ended March 31, 2003.