Annual Report 2007

The year ended March 31, 2007 was the first year under this mid-term plan. Positive external factors helped us to reach our targets for both sales and operating income. Instead of being satisfied with this success, we will strive to build a strong corporate structure that does not depend solely on quantity by implementing quality-seeking growth strategies and profitability enhancement centering on the mid-term vision “To Become No. 1 in Total Quality.”

Our four Group policies for the realization of this mid-term vision are as follows: reinforcement of manufacturing capability, reinforcement of product development capability, reinforcement of overseas profitability and reinforcement of global management capability.

We have identified the industrial machinery bearings segment as our income growth driver and will invest aggressively to improve production capacity of roller bearings, which are high value-added products. Along with this, we will expand our global sales by enhancing marketing and production capabilities.

For us, the automotive products segment is a stable source of income. We will intensify our efforts to win orders from Japanese and non-Japanese automotive manufacturers, and strengthen profitability by reducing costs with measures such as enhancing pre-processing operations, promoting global procurement, increasing the percentage of in-house manufacturing at overseas plants, and developing new facilities and processing technology.

In the precision machinery and parts segment, we will enhance customer satisfaction levels by responding quickly to users’ needs and delivering our products in a timely manner. Within the context of our mid-term plan, we will rely on this segment for a consistent contribution to income, and reinforce our marketing capability in Japan and overseas, while improving profitability.

NSK recognizes that contributing to the reduction of global energy loss through our business activities is our social responsibility for which we will steadily improve our environmental management levels. We contribute to global environmental protection by meeting increasingly tough customer demands for energy saving, and by further expanding our line-up of environment-friendly products. Also, we will comply with tightening toxic chemical substances regulations, and strengthen the management of chemical substances in each process, from procurement of parts and raw materials, to production and shipment. Therefore, we will globally supply products that quickly respond to changing regulations.

With these initiatives, NSK will focus on achieving the mid-term vision and make efforts to enhance its corporate value.

NSK resolved the following “Basic Policy Concerning Parties Who Control NSK’s Decisions on Financial and Business Policies” at the NSK board of directors meeting held on May 24, 2007.
(Basic Policy Concerning Parties Who Control NSK’s Decisions on Financial and Business Policies) The NSK Group is built upon a wide array of mutual relationships with various stakeholders, including shareholders and investors, customers, suppliers and distributors within and outside Japan, local communities, and employees. The Group’s mission is to enhance corporate value by devoting itself to its main business while fulfilling its social responsibilities to all stakeholders by keeping its operations optimally balanced in all aspects of society, environment and economy.

NSK is a joint-stock corporation that is publicly traded on the stock market. Accordingly, NSK understands that NSK’s shareholders have, in their best judgment, consented to entrust the management of NSK to its executive team. In line with this understanding, NSK regards parties who are responsible for decisions on NSK’s financial and business policies as ultimately subject to shareholders’ judgment. Therefore, NSK believes that decisions to approve or disapprove the acquisition of large amounts of NSK’s stock should ultimately be left to the judgment of the shareholders.

However, NSK recognizes that a growing number of such large-scale stock acquisition offers are being revealed in Japan’s recent capital market as motivated by individuals’ desires for short-term gain, while ignoring the existence of the stakeholders who comprise the targeted company’s corporate value. NSK cannot deny the possibility that its stock would be subject to a future unsolicited large-scale acquisition of this type. If NSK should receive a proposal to buy a large volume of its shares, after deliberations about the propriety of such a proposal, the executive team would offer the shareholders and investors the results and its opinion to enable shareholders and investors to form proper judgments. The executive team sees it as its responsibility to do so, as the shareholders have entrusted NSK’s management to the team.

The foregoing is NSK’s “Basic Policy Concerning Parties Who Control NSK’s Decisions on Financial and Business Policies.” NSK is currently considering implementing specific measures as part of special actions to realize the Basic Policy. Specifically, NSK is considering forming a project team, composed of outside professionals such as lawyers and financial advisers who are knowledgeable about corporate buyouts, which would monitor the status of the company’s stock trading on a daily basis, and analyze and assess moves to acquire large volumes of the company’s stock when the signs of such moves are identified. This would create an in-house system that would enable NSK’s executive team to flexibly deliberate the propriety of proposals to buy a large volume of NSK’s stock when they are received and to provide shareholders and investors with the results of those deliberations and its opinions.

NSK intends to announce these measures in an appropriate and timely manner, in conformity with applicable laws and regulations and securities exchange rules, once an official decision has been made.

In addition, based on the philosophy expressed above in NSK’s mission, in February 2006, NSK established and has been carrying out a three-year mid-term plan running through fiscal 2008, for the purpose of enhancing NSK’s corporate value. In the mid-term plan, NSK has set out a mid-term vision of “To Become No. 1 in Total Quality.” This would encompass the quality of all services in addition to the quality of products, which is the foundation of NSK’s reputation as a manufacturer. To achieve this mid-term vision, based on NSK’s two major basic policies of driving forward with its growth strategies and profitability enhancement, NSK is pursuing profitability-focused growth and striving to build a company that is strong regardless of its large size, in addition to intensively promoting a policy of (1) reinforcement of manufacturing capability; (2) reinforcement of product development capability; (3) reinforcement of overseas profitability; and (4) reinforcement of global management capability. Moreover, NSK sees as its social responsibility the reduction of the world’s energy loss through its business activities. Accordingly, NSK is striving to steadily raise the level of its environmental management, and to build relationships of trust with various stakeholders to contribute to the protection of the global environment and the sustainable development of society.