Year ended March 31, 2006

ANNUAL REPORT

2006

2 A n n u a l R e p o r t 2 0 0 6

Prof ile

2348

121314

Prof ileFinancial highlightsTo our shareholdersReview of operations byproduct sector Capacitors for electronics

Circuit products

Capacitors for electric apparatus

and power utilities, capacitor

applied system/others

Global operationsNews & TopicsCorporate governance / Corporatesocial responsibility (CSR)

Nichicon develops, manufactures, and sells capacitors and other electronic components essential for a broad range of electronic devices. We expanded the size of our business in line with advances in electronic technology since we started manufacturing capacitors for a receiving/transforming electricity facility in Kusatsu, Shiga Prefecture, in 1950. Currently, we have three product sectors: capacitors for electronics, circuit products, and capacitors for electric apparatus and power utilities, capacitor applied system/others. We strive to strengthen our competitiveness by focusing management resources on the high priority markets of digital home appliances, automotive-related devices, inverter-equipped products, and information and communications devices. As a valued supplier for our customers, we provide strong technology development capabilities, maintain close relationships with customers based on a global product and sales system, and pursue the highest level of customer satisfaction.

Cover Sheet :ContentsHaving solidified our business foundation through approximately three years of structural reforms, which began in the latter half of the 2002 business year, we began promoting our core businesses aggressively. As a result, the current year saw an increase in both sales and profit for the second consecutive year. The reinforcement of production and sales sites in China is also beginning to bear fruit, and our foreign sales are increasing steadily. Also during the current year, we took steps toward furthering medium to long-term growth. These included the construction and operation of new plant facilities at two production sites, and the initiation of efforts to cultivate engineers who understand business management. The photograph on the cover sheet expresses the Nichicon Group, as it courageously takes on challenges in order to make a big leap forward.

9

10

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Research and development activitiesRisk informationFinancial section Financial review

Consolidated balance sheets

Consolidated statements of income

Consolidated statements of

shareholders’ equity

Consolidated statements of cash flows

Notes to the consolidated financial

statements

Report of independent auditors

Consolidated subsidiariesCorporate data / Investor information

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3839

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37

3A n n u a l R e p o r t 2 0 0 6

NICHICON CORPORATION AND CONSOLIDATED SUBSIDIARIESYears ended March 31

Financial highlights

Forward Looking Statements

Projections of operating results and changes in the operating environment are based on information available to management at the time this report was prepared. As such. these projections entail risks and uncertainties. Readers should be aware that actual results and events may differ substantially from these projections.

Net Income (Millions of Yen) Total Assets (Millions of Yen)Net Sales (Millions of Yen)

Net Income per Share (Yen) Total Shareholders’ Equity (Millions of Yen)Operating Income (Millions of Yen)

106,871

0 30,000

2006/3

105,892

110,071

100,849

104,096

2002/3

2003/3

2004/3

2005/3

60,000 90,000 120,000

0 2,000 4,000 6,000 8,000

0 1,000

4,0812006/3

4,071

2,191

3,302

2,9882002/3

2003/3

2004/3

2005/3

2,000 3,000 4,000 5,000

157,546

155,084

145,511

155,879

166,840

0 30,000 60,000

2002/3

2003/3

2004/3

2005/3

2006/3

90,000 120,000 150,000 180,000

6,0472006/3

6,314

4,618

7,664

5,0802002/3

2003/3

2004/3

2005/3

36.88

40.57

27.28

51.46

51.61

0 20.00

2002/3

2003/3

2004/3

2005/3

2006/3

40.00 60.00

128,6132006/3

119,825

118,505

117,883

122,024

2002/3

2003/3

2004/3

2005/3

0 30,000 60,000 90,000 120,000 150,000

U.S. dollars

Thousands ofU.S. dollars

$ 909,77751,47856,94634,74193,41176,022

1,420,2801,094,861

$ 0.440.14

14.13

77.1% 3.3

¥ 106,8716,0476,6894,081

10,9738,930

166,840128,613

¥ 51.6117.00

1,659.75

77.1%3.3

2006

¥ 104,0966,3146,3544,071

12,3708,808

155,879122,024

¥ 51.4615.00

1,555.42

78.3%3.4

2005

Notes: 1. Amounts less than 1 million yen have been rounded off.2. The U.S.dollar amounts are provided solely for convenience at the rate of ¥117.47 to U.S. $1, the approximate exchange rate at March 31, 2006.3. Certain reclassifications of previously reported amounts have been made to conform with current classifications.

¥ 110,0717,6646,9463,3028,098

13,212

155,084118,505

¥ 40.5713.00

1,483.68

76.4%2.8

¥ 105,8925,0805,3332,988

16,04614,619

157,546119,825

¥ 36.88

13.001,483.04

76.1% 2.5

2003

¥ 100,8494,6185,4842,1912,5649,737

145,511117,883

¥ 27.2813.00

1,502.66

81.0%1.9

20022004 2006Millions of Yen

Yen

・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

・・・・・・・・・・・・・・・・・・・

・・・・・・・・・・・・・・・・・・・・・・・

For the year :Net salesOperating incomeIncome before income taxes and minority interestNet incomeCapital expendituresDepreciation and amortization

At year-end :Total assetsShareholders’ equity

Per share of common stock :Net income (yen)Cash dividends (yen)Shareholders’ equity (yen)

Shareholders’ equity ratioRatio of net income to Shareholders’ equity

To our shareholders

The Japanese economy remained somewhat stagnant during the first half of the current year (ending in March 2006), due in part to the effect of continued production adjustments of digital home appliances, which began during the second half of the previous year. However, an increase in capital invest-ment, as well as personal consumption, during the second half resulted in a mild overall recovery for the year. In overseas markets, the U.S. economy remained solid in spite of concerns regarding rising crude oil prices and the effects of major hurricanes. With the employment rate stabilizing, this helped maintain steady personal consumption and capital investment. The economies of Asian countries, including China, showed signs of healthy growth, having completed the inventory adjustment cycle for IT-related products. In this business environment, the Nichicon Group worked to promote the sales of differentiated and high value-added products, in order to reinforce the four primary product groups. They are aluminum electrolytic capacitors, tantalum electrolytic capacitors, circuit products, and capacitors for electric apparatus and power utilities. At the same time, we continued with our efforts to reduce costs and improve productivity. This was done in order to compete successfully and secure profits under the

From Laying the Foundation to Making a Leap ForwardWe Will Boldly Continue to Take on Challenges,Boosted by Recovering Markets

Increases in Sales and Profit Achievedthrough Independent Efforts andEconomic Recovery of Target Markets

Ippei Takeda President & C.E.O. Nichicon Corporation

Business Performance, Policies, andMeasures for the Year Ending March 2006

4 A n n u a l R e p o r t 2 0 0 6

severe conditions of intensifying pricing competition as well as, rising material costs, due to surging crude oil prices. As a result, consolidated sales was 106,871 million yen (up 2.7% from the previous fiscal year), operating income was 6,047 million yen (down 4.2% from the previous fiscal year), ordinary income was 7,487 million yen (up 11.9% from the previous fiscal year), and profit was 4,081 million yen (up 0.2% from the previous fiscal year). 　 Foreign sales amounted to 63,517 million yen (up 13.2% from the previous fiscal year), due to the strong sale of products for information and communications devices in the Asian market, particularly the Chinese market. The foreign sales ratio, at 59.4%, came very close to the 60% that has always been our goal. In the future our intent is to achieve balanced growth by increasing domestic and foreign sales.

The Nichicon Group suffered the effects of the so-called “IT depression” and its aftermath, and experienced sluggish business growth until the fiscal year ending in March 2004, after achieving record high sales in the fiscal year ending in March 2001. However, for the second consecutive fiscal year, both sales and net income increased this fiscal year (ending March 2006). Nichicon believes that this was the result not only of the upturn in the economy, but also of the structural reform efforts made from the latter half of the fiscal year ending in March 2002 to the fiscal year ending in March 2004. This was done in order to focus business resources on the “four major target markets” and “four primary product groups.” The focus of ongoing structural reform has been to solidify the business foundation by investing in the vertical integration of everything from materials to products. This involved the reinforcement of business structures, through the streamlining of production and business sites, to the establishment of new and the enhancement of existing manufacturing facilities for

aluminum electrode foil, which is a basic material for aluminum electrolytic capacitors. These reforms, however, do not contribute immediately to improved business performance. Based on these reforms, a total of 12,370 million yen was invested both domestically and overseas during the previous fiscal year to expand and enhance the production sites and reinforce the sales sites for the “four primary products groups,” including aluminum electrolytic capacitors and tantalum electrolytic capacitors for digital home appliances (e.g., flat-screen televisions, DVD players/recorders) and information and communications devices (e.g., cellular phones) market. A further 10,973 million yen was spent in capital investment this fiscal year to reinforce the overall strengthening of the Nichicon Group in the medium and long-term. This primarily involved investments in development and increased production of the four product categories, which comprise the core of Nichicon’s business. For example, a new plant facility was constructed at Nichicon Kusatsu to increase production of capacitor modules for automobiles. The plant has been in full operation since March 2006. Furthermore, a new facility for the production of cutting-edge modules with a 10 to 20-year perspective was built at Nichicon Kameoka, which is the primary manufacturing site for circuit products. The facility began operating in May 2006. Nichicon will continue to make “positive investments,” which lead directly to improved business performance.

Now that there is a solid foundation and a new phase is starting, the Nichicon Group is beginning to invest actively in human resources, which is our a company’s most important asset. One such attempt is the implementation of various measures to reinforce sales. They include training aimed at developing innovative sales methods that are responsive to changes in market conditions and help the company make the most of

From “Capital Investment for Solidifying theFoundation” to “Capital Investment LeadingDirectly to Improved Business Performance”

Promotion of Diverse Human ResourceDevelopment Programs for FurtherEnhancement of Technological Capabilities

DigitalHome

Appliances

Inverter-equipmentProducts

AluminumElectrolyticCapacitors

Capacitorsfor

ElectronicApparatusand Power

Utilities

CircuitProducts

TantalumElectrolyticCapacitors

Automotive-relatedDevices

Informationand

Communi-cationsDevices

Four Markets Where Demand is Increasing

Four Products That Address the Demand

5A n n u a l R e p o r t 2 0 0 6

To our shareholders

market demands, as well as the adoption of proposal-based sales, which focus on need-specific development projects that satisfy individual customer requirements. Furthermore, Nichicon signed a comprehensive “Joint Research and Education Program Agreement” with Ritsumeikan University on August 4, 2005, aimed at “technical research and development” and the “cultivation of human resources,” in order to commemorate the Nichicon’s 55th anniversary. One reason for choosing Ritsumeikan University as a partner was that the University has one of the best track records in Japan for business-academia collaboration and is believed to have the best understanding of such relationships. Another reason is that the University's ideas about business-academia collaborations were in agreement with Nichicon’s. Two things are necessary in order for Nichicon to continue to make phenomenal improvements in business performance. The first is “advanced technology development capabilities” to create new differentiated products. The second is “engineers who understand business management” and are able to take full advantage of technology in managing business. Ritsumeikan University, on the other hand, established the Graduate School of Management of Technology (MOT) in April 2005. With a structure in place for the cultivation of human resources for advanced technology management, the University is seeking to strengthen its educational capabilities. Because the two parties could provide what the other needed, it was decided that 30 Nichicon engineers will be selected each year, beginning in September 2005, to be trained as “engineers who understand business management.” It goes without saying that “a company is only as good as its people.” It appears that many companies are increasing the number of new recruits next spring (April 2007), in keeping with the recovering economy. The Nichicon Group is a step ahead of the others, already doubling the number of new recruits this spring (April 2006) and planning a further increase for April 2007.

All of the “four priority markets” – namely digital home appliances, automotive-related devices, inverter-equipped products, and information and communications devices – are expected to grow in the next fiscal year. The global demand for flat-screen digital televisions is expected to surge by 60% from last year. The demand for devices such as cellular phones and PCs are also expected to continue to show strong growth. All of these devices use small, low-impedance long-life aluminum electrolytic capacitors and tantalum electrolytic capacitors that the Nichicon Group developed this fiscal year. Furthermore, the launch of next-generation game consoles is planned for fall 2006. Given the number of electronic parts used in consoles, an explosive increase in demand can be expected. Demand is also expected to continue to increase in the inverter market, which is attracting attention due to its eco-friendliness and energy-saving effects. There are favorable elements in the automobile market, with the demand for hybrid cars increasing rapidly and various automobile manufacturers accelerating production plans. It is believed that the Nichicon Group, which is one of the few manufacturers capable of supplying both aluminum electrolytic capacitors and plastic film capacitors for hybrid cars, has an advantage in this developing market. Additionally, the high quality and advanced technology of Nichicon products have earned the company a reputation as a “key supplier” among leading automobile manufacturers. As such, the outlook for the next fiscal year is bright in terms of the market environment surrounding the Nichicon Group. It is the intent of the group to implement positive and aggressive measures, while strengthening trust-based relationships with the users, in order to achieve double-digit growth.

Ritsumeikan University-Nichicon Researchand Education Program

NichiconCorporation

RitsumeikanUniversity

Enhancement ofResearch Capabilities

Enhancement ofEducation Capabilities

Development ofNew Products

Generation ofNew Business

Achievement of Two-Digit Growth byFocusing on “Four Major Target Markets”and “Four Primary Product Categories”

Measures, Policies, and the Business Forecastfor the Fiscal Year Ending in March 2007

6 A n n u a l R e p o r t 2 0 0 6

With customers’ shifting their production functions onward to China and Asia, the Nichicon Group will leverage Nichicon Electronics (Wuxi) Co., Ltd., which produces aluminum electrolytic capacitors and circuit products, and Nichicon Electronics (Tianjin) Co., Ltd., which produces tantalum electrolytic capacitors, as core production sites to expand the production and sales of these products in China. Nichicon will make concentrated efforts next fiscal year, including the doubling of the production capabilities of Nichicon Electronics (Wuxi) Co., Ltd., to achieve a foreign sales ratio of 60% and become a “global winner.”

Nichicon recognizes the return of profit to shareholders as a key issue in the management of the Company. One of the fundamentals of business management at Nichicon is to achieve a stable increase in dividends by enhancing corporate value and strengthening the corporate structure to increase profits. The end-of-year dividend for this fiscal year was 9.5 yen per share. Together with the interim dividend of 7.5 yen, the dividend for the year was 2 yen higher than last fiscal year at 17 yen. This is the second consecutive yearly increase in dividends, following last fiscal year when the Company’s finances made a turnaround and increases were achieved in sales and profit. In moving forward, Nichicon’s goal is a dividend to consolidated earning ratio of 30% to 35%, managing business in order to clarify further the company’s stance regarding the return of profits to shareholders.

The Nichicon Group is going on the “offensive” in all facets of its business. Your continued support and understanding would be greatly appreciated.

President & C.E.O.

Achieve 60% Foreign Sales Ratio by Doubling Production Capabilitiesof Wuxi Plant

Pursuing a Dividend to Consolidated EarningRatio of 30% to 35%

Ippei Takeda

June 29, 2006

7A n n u a l R e p o r t 2 0 0 6

Nichicon’s products are broadly classified into three sectors: capacitors for electronics, circuit products, and capacitors for electric apparatus and power utilities, capacitor applied system/others.　The Capacitors for electronics sector is Nichicon’s main sector, and it produces the aluminum electrolytic capacitors and the tantalum electrolytic capacitors, which boast top world class shares, as well as plastic film capacitors (which excel in their high frequency characteristics and can address high-voltages) and positive thermistors (which utilize changes in resistance values caused by temperature fluctuations).　This sector's sales for the current year amounted to 81,469 million yen (increasing by 4.0% from the previous year), and its sales rate stood at 76.3% (increasing by 1.0 points from the previous period). The circuit products sector provides switching power supplies that serve as the heart of electronic equipment. Hybrid IC/circuit modules, on which various electronic components such as IC chips, capacitors, and transistors are mounted, also come under this category. This sector’s sales for the current year amounted to 16,603 million yen (down 3.0% from the previous year), and its sales rate stood at 15.5% (down slightly by 0.9 points from the previous period). Capacitors for electronic apparatus/power utilities, as well as, capacitor applied system provides buildings and factories with the necessary industrial equipment to receive/transform electricity. These capacitors are also used for railroads/vehicles, as well as special equipment that employs high-voltage/large current control technology. This sector's sales for the current year amounted to 8,798 million yen (increasing by 1.8% from the previous year), and sales rate stood at 8.2% (down 0.1 points from the previous period).

Review of operations by product sector

Inside Automobiles

Inside DVD players/recorders

Inside Portablemusic players

At Buildings andFactories

Net Sales by Product Sector (Millions of yen)

Sales Breakdown by Product Sector

Capacitors for electronics

76.3%

8.2%

15.5%

2006/3

8,798 106,871

0 125,000100,00075,00050,00025,000

2006/3 81,469 16,604

2005/3 104,09678,346 17,110

2004/3 100,84974,414 19,881 6,554

2003/3 110,07180,064 23,220

2002/3 105,89173,505 24,658 7,728

8,640

6,787

Aluminum electrolytic capacitorsTantalum electrolytic capacitorsPlastic film capacitorsPositive thermistors “Posi-R®”

Circuit productsSwitching power suppliesHybrid ICs/Circuit modules

Capacitors for electricapparatus and power utilities,capacitor applied system/othersPlastic film capacitorsCapacitor applied systemCapacitor raw materials

8 A n n u a l R e p o r t 2 0 0 6

Sales of capacitors for the electronics sector amounted to 81,469 million yen for the current year (increasing by 4.0% from the previous year). The main factor for the domestic increase in sales was the increasing demand for digital consumer electronics (flat-screen televisions, DVD players/recorders, digital cameras), information and communications devices (cellular phones, PCs) and automotive products. The fastest growing segment in foreign sales, which is a continuing trend from last year, was the Asian market, particularly China, where sales increased dramatically in the information and communications field. As electronics become more advanced, components used in those devices must be smaller and thinner in size, durable for use in high atmospheric temperatures, have high voltages, low-impedance, a long-life cycle, and be eco-friendly. Nichicon has kept its focus on developing aluminum electrolytic capacitors that meet these needs. First, the CD Series ❶ low-impedance chip-type aluminum electrolytic capacitors, with tolerances of up to 105°C and guaranteed for up to 5000 hours (2000 hours for some types). The CW Series long-life low-impedance products, with tolerances of up to 105°C and up to 7000 guaranteed hours, and the WJ・WZ・WH・WS・

WD Series ❷ reflow-capable high-temperature chip-type aluminum electrolytic capacitors, with tolerances of up to 260°C, were developed successively for use in digital appliances (mainly LCD televisions, PDPs, and flat-screen displays) and automotive products. This was followed by the development of decoupling devices for high-speed CPUs ❸, used for personal computers and next-generation game consoles, featuring ultra-low ESR/ESL in a wide range of frequencies. The LF Series ❹ conductive polymer aluminum solid electrolytic capacitors for digital equipment, with ultra-low ESR and high-allowances for ripple currents is another new addition. Also developed were the KW Series ❺ small-size aluminum electrolytic capacitors for audio equipment, which enable such audiovisual equipment such as DVD recorder/players and miniature component stereo sets to produce high-quality sound. In addition, the QS Series ❻ high-speed charge/discharge-capable snap-in terminal type aluminum electrolytic smoothing capacitors were developed for servomotor AC power supplies, which are used widely in industrial machinery such as machines tools, component mounting devices, and semiconductor production equipment. These new products are all ecologically friendly and meet the requirements of the RoHS Directive*.

Current Year

Capacitors for electronics

Sales of Capacitors for electronics (Millions of yen)

0 80,000 100,00060,00040,00020,000

2006/3

73,505

81,469

2002/3

2003/3

2004/3

2005/3

73,505

80,064

74,414

78,346

Low-Impedance Chip-TypeAluminum Electrolytic Capacitors CD Series

Reflow-Capable High-Temperature (Up to 260°C)Chip-Type Aluminum Electrolytic CapacitorsWJ・WZ・WH・WS・WD Series

Decoupling Devices for High-Speed CPUswith Ultra-Low ESR/ESL

Conductive Polymer AluminumSolid Electrolytic Capacitors LF Series

Small-Size Aluminum ElectrolyticCapacitors for Audio Equipment KW Series

High-Speed Charge/Discharge-CapableSnap-In Terminal TypeAluminum Electrolytic Capacitors QS Series

❶ ❷

❸ ❹

❺ ❻

9A n n u a l R e p o r t 2 0 0 6

Current Year

Review of operations by product sector

In the Future

Toner Concentration Sensor(Second Generation)

In regards to our tantalum electrolytic capacitors, the product line-up has been enhanced with the FramelessTM Series, which is enjoying a favorable reputation for its higher volumetric efficiency compared to regular mold-type capacitors. The MUSE F95 Series, tantalum electrolytic capacitors for audio devices, was launched. This small but high-capacity product series is capable of reproducing robust bass tones and clear sounds because it does not have an oscillation source, which causes the deterioration of sound quality. The series has been highly regarded ever since its launch and is used widely in portable music players and mobile phones.

The demand for capacitors for electronics is believed to remain strong due to the expansion of the market for digital consumer electronics, information and communications devices, automobile electronics, as well as the increasing use of inverters in white goods. Especially with respect to aluminum electrolytic capacitors, efforts will be made to enhance competitiveness by reinforcing and expanding the production facilities for aluminum electrode foil, which is a primary material for the capacitors. Focusing on the development of high value-added products by engaging in customer-oriented proposal-based sales, which involve development of products that address customer needs, is another area in which we will focus. With respect to tantalum electrolytic capacitors, emphasis will be placed on the development of new products. Differentiated merchandise will be launched for mobile devices including cellular phones and portable music players, for which miniaturization and enhancement of functionality are especially important. Overseas, the production capacities of Nichicon Electronics (Wuxi) Co., Ltd., responsible for the production of aluminum electrolytic capacitors, and Nichicon Electronics (Tianjin) Co., Ltd., responsible for the production of tantalum electrolytic capacitors, will be augmented in response to the shifting of customer production sites to China and Asia, and to accommodate the increase in demand.

*RoHS (Restriction of Hazardous Substances) Directive: An environmental directive established by the European Union (EU) prohibiting the use of hazardous chemical materials found in electric and electronic equipment. The Directive, which takes effect in July 2006, targets six substances from the heavy metal group (lead, cadmium, mercury, chromium VI) and flame retardant bromides (PBB, PBDE).

Sales of Circuit products (Millions of yen)

0 20,000 30,00010,000

2006/3 16,604

2002/3

2003/3

2004/3

2005/3

24,658

23,220

19,881

17,110

Circuit products

Sales of circuit products this year were 16,604 million yen (down 3.0% from the previous year). Although efforts were made to promote the sale of switching power supplies for information and communications devices, and office appliances, revenue fell due to the fact that the demand for amusement devices, such as family-use game consoles, have completed their cycle. In the case of hybrid ICs and circuit modules as well, products for the information and communications market saw sluggish growth, while sensor and control modules for automobiles enjoyed stable growth. Because a large majority of the circuit products are custom made, volume can be directly affected by the production trends and new product developments of the various users. That effect was particularly prominent this year. A new product that was launched from this sector this past year, is the (second-generation) toner concentration sensor. The sensor is used in color copiers and laser printers. It maintains high accuracy in

10 A n n u a l R e p o r t 2 0 0 6

Sales for the “Capacitors for electric apparatus and power utilities, capacitor applied system /others” sector amounted to 8,798 million yen for the current year (increased by 1.8% from the previous year). On a product basis, the sales of Capacitors for electric apparatus and power utilities, capacitor applied system increased to 8,271 million yen (increased by 25.7% from the previous year). This is due to the increase in new orders based on need-specific product development and the growth of private capital invest-ment. The focus is on the development of ecologically friendly products for capacitors of power utilities. Products that meet the RoHS Directive requirements were developed, namely the disaster-prevention dry-type advanced-phase high/low-voltage capacitor GeoDRY ❶ and the dry mold-type series reactors ❷. The sales for “others” totaled 527 million yen (down 74.4% from the previous year).

With regards to capacitors used for electronic apparatus, the demand for film capacitor modules used in automotive drive inverter circuits is expected to grow rapidly, given that hybrid cars have entered the full distribution and sales stage. In anticipation of this growth, a new plant facility specializing in the development and production of capacitor modules for hybrid cars was constructed at Nichicon Kusatsu and has been in full-scale operation since March 2006. The demand for capacitors for power utilities is expected to remain stable, since private capital investment is expected to continue at a relatively steady pace.

Current Year

In the Future

Capacitors for electric apparatusand power utilities, capacitorapplied system /others

Sales of Capacitors for electric apparatusand power utilities, capacitor applied system/others (Millions of yen)

0 10,0008,0006,0004,0002,000

2006/3 8,798

2002/3

2003/3

2004/3

2005/3

7,728

6,787

6,554

8,640

❶ ❷

Dry Mold-Type Series Reactor

the reproduction of colors by measuring the amount of toner adhesion. The first generation sensor was launched in FY2003. In addition to enhancing toner detection capabilities, optical elements were mounted onto the board for a smaller and thinner form with a view to increasing market share.

The demand for switching power supplies for use in amusement devices, which had completed one demand cycle, is expected to pick up again later this year. Therefore, sales are expected to increase, and the development of new products is already under way. The demand for hybrid ICs and circuit modules is expanding in the automobile market where the use of car electronics and electronics in general is increasing, as well as the information and communications sector where the need for higher functionality, improved performance and miniaturization is growing. Continued efforts will be made to promote sales and the functional capabilities of Nichicon Kameoka. Kameoka has been reborn as “a cutting-edge module production site” with the construction of a new plant facility. This facility will be fully leveraged to develop and produce high value added products.

In the Future

Disaster-Prevention Dry-TypeAdvanced-Phase High/Low-VoltageCapacitor GeoDRY

11A n n u a l R e p o r t 2 0 0 6

12 A n n u a l R e p o r t 2 0 0 6

ASIAEUROPEEUROPERRR P UU.S.A.U

Current YearDomestic sales for the current year were 43,354 million yen (down 9.7% from the previous year), and foreign sales were 63,517 million yen (up 13.2% from the previous year). Although regional sales in the Americas and Europe decreased to 10,100 million yen (down 8.5% from the previous year) and 5,418 million yen (down 4.1% from the previous year) respectively, Asia enjoyed sales of 47,999 million (up 21.8% from the previous year), due to brisk sales in the Chinese market mainly from products for use in information and communications devices. At 59.4% (up 5.5 points from the previous year), the foreign sales ratio is infinitely close to our 60% target. Next year, by specializing in differentiated merchandise and high value-added products domestically, while expanding overseas production, well-balanced growth will be achieved in both domestic and foreign markets.

Nichicon Group started up several production and sales sites in China, beginning in December 2001. With these new sites, the sales subsidiaries in Europe, the Americas, Singapore, Thailand, Hong Kong, and Taiwan, and the production subsidiary in Malaysia, a global structure for providing Nichicon products to customers worldwide in a timely manner is taking shape. The future strategy is to reinforce the production sites in China and aim for further sales increases in Asia, given that the Chinese economic bloc, including ASEAN, is increasing in importance as a market. In addition to the Chinese market, advances into the BRICs (Brazil, Russia, India) markets are also being planned, and efforts are under way to develop the Indian market through the sales subsidiary in Singapore.

Global operations

We will continue to focus onAsia, including China.

106,871

Net Sales by Location (Millions of yen)

0 75,00050,00025,000

2006/3

2002/3

2003/3

2004/3

2005/3

105,89124,669 14,3345,880

5,647

110,07136,2316,625

13,537

100,84937,761 11,3795,301

104,09639,413

61,008

53,678

46,408

48,000 11,036

Regional Sales Breakdown

44.9%

9.4% 5.1%

40.6%

47,999 10,10043,354

125,000100,000

5,418

2006/3

NICHICON ELECTRONICS (WUXI) CO., LTD.Established in December 2001 as a production site for aluminumelectrolytic capacitors and circuit products

NICHICON ELECTRONICS TRADING (SHANGHAI) CO., LTD.Established in June 2002 as a sales siteAlso opened a representative office in Dalian in April 2003

NICHICON ELECTRONICS (TIANJIN) CO., LTD.In operation since October 2004 as a production site for tantalum electrolytic capacitors

TIANJIN SAMWHAELECTRIC CO., LTD.

NICHICON (HONG KONG) LTD.

SUZHOU TAICONCORPORATION

NICHICON ELECTRONICS(TIANJIN) CO., LTD.

NICHICON ELECTRONICSTRADING (SHANGHAI) CO., LTD.

NICHICON ELECTRONICS(WUXI) CO., LTD.

Japan

AsiaChina and ASEAN

The AmericasThe U.S., Brazil, Mexico

Europe and othersBritain, France, Austria

In the Future

13A n n u a l R e p o r t 2 0 0 6

NICHICON (KUSATSU) CORPORATIONBegins Production of Film Capacitor Modules for Hybrid CarsNichicon Group has constructed a new plant facility at Nichicon Kusatsu to respond to the increasing demand for film capacitor modules used in inverters for the drive mechanism of hybrid cars. The facility has been in full operation since March 2006. State-of-the-art vacuum roll coater for ultra thin film have been implemented at the new plant facility for the realization of in-house production of metallized films. They will also enable Nichicon to develop its own pattern of metallization. In addition to being equipped with clean rooms, since film capacitor modules for hybrid cars with their ever-increasing voltage particularly dislike dust and static electricity, the facility employs inverters for air conditioning, lighting, and utilities for conservation of energy. There are plans for a gradual increase of the facility's production capacity.

NICHICON (KAMEOKA) CORPORATIONParent Mounting Plant for the Development and Production of Cutting-Edge ModulesNichicon Group completed the new plant facility at Nichicon Kameoka in May 2006 to address the need to design and manufacture cutting-edge modules required by the diversification, increased functionality, higher performance, and miniaturization of electronic products. The new facility places emphasis on the product development environment, structure of production floors, and appeal to customers, and is positioned as the parent mounting plant capable of developing and manufacturing cutting-edge products even 10 to 20 years from now. Production floors are layout free to allow for future changes, and bare chip mounting technology application products*1 requiring advanced production technology and quality management will be produced in an all-clean environment. The facility will be taking on the challenges of performing 3D mounting*2 and producing MEMS chip application products in the future*3.

New Plant Facilities Constructed at NichiconKusatsu and Nichicon Kameoka

Akira Tokuchi (Nichicon Kusatsu), who led the development of the high-voltage pulse modulator supplied to High Energy Accelerator Research Organization (HEARO), received the 2006 Minister of Education, Culture, Sports, Science and Technology Award for Science and Technology (Research Division) in recognition of the functionality of the modulator. The modulator drives the induction acceleration cell of induction acceleration synchrotrons*, which are attracting attention as a new type of accelerator, and features stable generation of high voltage pulses at an unprecedented rate of up to 1 million per second (1 megahertz) to accelerate electrons and ions. The award recognized the modulator’s contribution to the performance demonstrated by induction accelera-tion synchrotrons*, which are expected to be benef icial for nuclear fusion research and medical research, including studies on cancer treatment.

Products employing the technology of mounting chips directly onto the boards using microfine wires and ultramicro metal balls Mounting method where multiple chips, including memory and microcomputers, are layered sterically within packages for increased integration MEMS, or Micro Electro Mechanical Systems, is a term used to refer collectively to microfabri-cated parts made with fine processing technology used in the production of semiconductors

*1

*2

*3

“2006 Minister of Education, Culture, Sports,Science and Technology Award for Science andTechnology” Received for Research on InducedAcceleration in High-Energy Circular Accelerators

News & Topics

The new plant facility at Nichicon Kusatsu

The new plant facility at Nichicon Kameoka

*

Ribbon-cutting at the completionceremony for the new plant facilityat Nichicon Kameoka

High-voltage pulses generatedconsecutively at 1 megahertz

High-Voltage Pulse Modulator

Synchrotron: The circular accelerator accelerates particles along a set circular orbit, changing the acceleration frequency in accordance with the strength of the magnetic field.

Akira Tokuchi receiving a plaque at the Award Ceremony

14 A n n u a l R e p o r t 2 0 0 6

The Nichicon Group’s CSR Charter

CSR PrinciplesNichicon Group recognizes that the Group’s highest priority is to fulfill CSR (Corporate Social Responsibility) in all aspects of management as a good corporate citizen and to work cooperatively with all people in the future. We fully understand and abide by the intent and spirit of all applicable laws and international regulations in our business activities, and we conform our behavior to the ethical standards of society.

Action policy1. As a good corporate citizen, our group will advance our

business activities to harmonize with society under the motto “Whole-heatedly” “With heart and soul”.

(1) When offering our products and services, we will always keep in mind that we shall provide customer satisfaction, secure the quality/safety/reliability of our products, and consider the environmental impact.

(2) We shall comply with the Nichicon Group Codes of Conduct enacted in October 2002; practice fair, transparent, free competi-tion, as well as abide by applicable laws; and conduct wholesome and faithful business according to social ethics.

(3) We shall esteem the history and culture of the local region and all countries of the world, strive to maintain good communication with all people, and contribute to the development and the prosperity/harmony of the regional economy through our business activities.

2. We shall aim for harmony with the environment in order to attain the goals of Harmonious Coexistence with the Global Environment and a Society Sensitive to Humankind and the Environment.

(1) Based on the Nichicon Group’s Environmental Charter enacted in December 1997, we shall strive in every aspect of our business activities to take care of this irreplaceable earth.

(2) Not only do we advance technical development that will help us provide an ecologically friendly product but we also strive for sustainable environmental improvement.

3. With the key words, “Respect a person’s life and dignity by improving his/her ability” as our fundamental policy, we shall aim for building an agreeable workplace free from discrimination.

(1) In our business with all stakeholders, including our customers, we shall value the personality and fundamental human rights of all individuals.

(2) Not only will we construct a work environment where employees can work safely and comfortably, but we will also aim for a workplace where employees can demonstrate their initiative and express their creativity.

Corporate governance / Corporate social responsibility (CSR)

Enacted December, 2005

Corporate Governance System

Group companies

CSRoffice

President& C.E.O.

Executiveoffice

operating officers

Business Divisions

Auditoffice

Accountingauditor

Board meeting Board of auditors

Shareholders’ meeting

Ideas and framework concerning corporategovernanceIn order to secure the efficiency, soundness, and transparency of management, and to continuously improve our corporate value while fulfilling the social responsibilities of a corporation, we have targeted the strengthening of corporate governance as one of our most important challenges. Nichicon introduced the “operating officer system” in June 2003, and through close cooperation with our board of directors, we have made efforts to improve management system and organization so that it can effectively address ongoing changes in the business climate. Members of the board of auditors regularly attend board of directors and other important meetings to give their input. They carry out compliance audits, including investigations on our directors’ business execution, our group’s business, and the current status of company assets. We have also set up the Audit Office, which reports directly to the president, and executes scheduled audits on the progress of operations for each business office. Furthermore, our company has made efforts to develop the “Internal Control System” under the former Commercial Law to let directors fulfill the “Bona-fide duty of care” and “Duty of loyalty” smoothly. We are aiming at a more focused development and implementation of the “Internal Control System” based on the spirit of the Corporate Law as enforced on May 1, 2006.

Enactment of the Nichicon Group’sCSR CharterWork on the CSR in October 2002, it started with the creation of “The Nichicon Group Code of Conduct”, which established rules of compliance and the prohibition of anti-social actions. Following this was the “CSR Office”, a special section established in June 2003, a framework designed to fulfill our social responsibility by administering such things as compliance, corporate governance, and risk management more comprehensively. In order to inform group members of our efforts these actions were announced in December 2005 as the Nichicon Group’s CSR Charter. A corporation must be aware of its relationship with society, and if we are to continue to stay in business we must take on the initiatives in the CSR in a positive and serious manner. The Nichicon Group’s CSR Charter is an important code and guideline for all members of the Nichicon Group.

A quality policy to build trust with customersThe Nichicon Group is always striving to provide the highest quality and functionality in our products. Aiming for “zero defects” in our products, we have created an original production management system which enables us to manage and verify when, where and what product, as well as under what conditions our products are being made. All of our production facilities domestic as well as international have already obtained ISO 9000 Series certification. The international standard of the automotive industry, the ISO/TS 16949 certification, has been granted at five of our domestic facilities and one of our international facilities.

Respect for basic human rights and humanrights educationAwareness of basic human rights is one of the most fundamental needs of society. It is something that we in the Nichicon Group value tremendously and “Respect all people’s basic human rights” is written into the group’s code of conduct. Human rights education is given once every month at the “general assembly” that all employees attend. It is also brought up, as a theme, in the general reading of our code of conduct at the regular morning meetings. Additionally other themes related to human rights, such as the prevention of sexual harassment, are brought up in training sessions.

15A n n u a l R e p o r t 2 0 0 6

Environmental conservation activities, aiming at “Harmonious Coexistence with the Earth”and “Society Sensitive to Humankind and the Environment.”• • Prevention of Global WarmingTo assist in the prevention of global warming, our group regularly promotes energy-saving activities. Our manufacturing facilities work aggressively on the reduction of the energy consumption per unit of sales through elimination of energy waste, increased production efficiency and the reduction of defects. Employees participate in other energy saving measures including the monitoring of air-conditioning usage and the powering off of unnecessary lighting and equipment, which all employees participate in.

• • Compliance to the RoHS directiveOur group has discontinued the use of six specified substances (lead, cadmium, hydrargyrum, hexavalent, PBB and PBDE) in advance of the enactment of the RoHS Directive in the EU. We have already been selling lead-free products on a regular basis and in regard to PVCs for which lead is used as a stabilizing material, we have standard set products containing no PVC, such as PET (polyethylene terephthalate) .

• • Promotion of Environmental EducationIn order to develop heightened level of environmental awareness and conservation activism among our employees, it is important that they are familiar with the environmental problems that exist. Therefore, we provide environmental education, and are executing a curriculum based on the Environmental Management System (EMS Education) in each factory. Education is provided for every department: new employees, special training for internal environmental auditors, as well as other company professionals.

PVC-free product that considers environmental problems, lead-freeproduct

Electricallyconductive

Adhesive

Anodeelemental device

Weld

Anode tantalum lead

Epoxy resin

Cathode frame (Sn coat)Anode frame (Sn coat)

Structural drawing of mold product

Nichicon has not used lead in thisproduct since 1986. Sn coated

terminal electrode (Lead-free)

Lead-free Sn metallikon・Zn system alloy Fe Fe Sn coat

Cu coat

Resin-molded chip type, tantalum solid electrolytic capacitors

Snap-in terminal type, aluminum electrolytic capacitors

Screw terminal type, aluminum electrolytic capacitors

Development of lead-free metallikonfor plastic film capacitors

Sleeve：Polyolefin (PVC-free)

Sleeve: PET or polyolefin (PVC-free)

Terminal: Sn coat (Lead-free)

Bottom plate：Polyester (PVC-free)

Research and development activities

Based on the management principle of “How to serve and contribute to the creation of a brighter future,” the Nichicon Group has been aspiring to develop “innovative and environmentally friendly products” and produce “merchandise that satisfies customers” to meet the diversified and sophisticated needs in today’s society. These aspirations have enabled the group to develop and supply the market mainly with various new products such as aluminum electrolytic capacitors, tantalum electrolytic capacitors, and plastic film capacitors, as well as switching power supplies, functional modules, and capacitor applied system. Research and development expenses for the Group in the current consolidated fiscal year stood at 2,853 million yen. The status of research and development by business segment is as follows.

(1) Capacitors for ElectronicsThe Nichicon Group has positioned “digital home appliances,” “automotive-related devices,” “ inverter-equipped products,” and “information and communications devices” as its four major target markets and is working to expand them.

① Regarding aluminum electrolytic capacitors, new products are being developed for the four major target markets above, starting with research and development for such basic materials as electrode foils and electrolytes. The requirements in the areas of digital home appliances and information and communications devices are reduction in size, higher performance, and tolerance to high temperatures by means of high-density mountings, longer life, and lower impedance. To respond to these demands, Nichicon began the commercial production of the “PA Series” long-life, low-impedance lead wire terminal type aluminum electrolytic capacitors, with up to 5000 hours (2000 hours for some models) and heat tolerances of up to 105˚C guaranteed, as well as the “CW Series” long-life, low-impedance-chip-type aluminum electrolytic capacitors, with up to 7000 hours guaranteed and heat tolerances of up to 105˚C guaranteed. The “LF Series (lead wire terminal type)” and the “CF Series (chip type)” conductive polymer aluminum solid electrolytic capacitors, which employ solid electro conductive polymer as the electrolyte, were developed to respond to the demand for lower impedance products required by higher-performance CPUs and image engines. Furthermore, higher definition imagery and better sound quality are being pursued along with the popularization of flat-screen televisions. This has resulted in demand for capacitors with higher sound quality and smaller size. In response to this demand, Nichicon developed the “KW Series” eco-friendly, lead wire terminal type aluminum electrolytic capacitors for audio equipment, which also meet the requirements of the RoHS Directive. In the area of inverters, in 2004 Nichicon began the commercial production of the “QR Series” screw-terminal, high-speed charge/discharge aluminum electrolytic capacitors for uses requiring repeated high-speed charges and discharges, particularly for use in AC servomotors used widely in industrial machinery. Subsequent to this Series, commercial production was started this year of the “QS Series” snap-in terminal type capacitors for the low capacitance domain, which includes general-purpose inverters and inverters for home appliances. In response to environmental concerns, solder used in mounting electronic components on to the boards is being switched to a lead-free type that melts at higher temperatures. As a result, electronic components that have higher heat tolerances are in demand. In addition, considering changes in soldering reflow conditions with peak temperatures from the current 250˚C to 260˚C the “WJ, WZ, WD, WS, and WH Series” chip-type aluminum electrolytic capacitors with heat tolerances of up to 260˚C were developed.

② Concerning tantalum electrolytic capacitors, the rating was expanded for the “FramelessTM” Series, which boasts the largest capacitance per unit volume in the market, in order to promote aggressive sales in the mobile electronics sector where cellular phones and other devices are becoming

increasingly smaller, higher in performance, and more diverse in functionality. In the area of audio/speech output circuits for portable digital audio equipment and high-performance cellular phones requiring clear sound quality, Nichicon developed the specialized “MUSE F95 Series” frameless conformal-coated tantalum electrolytic capacitors, which do not have oscillating sources that cause deterioration in sound quality. Frameless resin-mold capacitors are aimed at achieving both “high volumetric efficiency” and “high-density mounting.” In the case of 2012 size capacitors (L2.0 mm x W1.2 mm), Nichicon was able to achieve a 75% reduction in size, as compared to general-purpose molded products, by packing 6.3V/47μF into S size cases that are 0.8 mm high. They are capitalizing on uses that have strict height restrictions, such as camera modules and power supply circuits for cellular phones, to increase their market share.

③ In the area of plastic film capacitors, Nichicon is working aggressively to develop products for the automotive and railway equipment sectors, particularly the inverter circuits for the motor drive units of hybrid cars and fuel-cell cars which are expected to become more prevalent. Smoothing film capacitors were developed with improved voltage resistance and smaller sizes, as a result of the implementation of a new electrode structure. Measure volume production began in spring 2006.

④ Electric double-layer capacitors are attracting attention as ecologically friendly storage devices, since they do not use heavy metals like secondary cells in spite of their high capacity, as measured in farads. Nichicon is expanding market share by enhancing the product line-up, launching the lead wire terminal type “UC series,” as well as the snap-in terminal type and screw-terminal type “JC series.”

(2) Capacitors for electric apparatus and power utilitiesBecause energy conservation is also increasingly important for power facilities, Nichicon developed the SH-type high-reliability, low-internal-loss, high-voltage, advanced-phase capacitors. Compared to the existing “ACEVAR®,” the internal-loss is reduced by 30 % while being the same size. In addition, ahead of our competitors, we have lined up Geo DRY®, ranging from high voltages (circuit voltages of 3300 and 6600) to low voltages (circuit voltages of 220 and 440), which is the advanced phase capacitor of the fire prevention type filled with nitrogen gas instead of SF6 (sulfur hexafluoride) gas, a substance harmful to the environment. Consequently, we are expanding its market share as an environmentally friendly product that does not contain SF6 gas, polyvinyl chloride, or lead.

(3) Circuit ProductsAs color copiers and laser printers grow smaller, while producing higher definition images, reduction in size and higher performance are also required of toner concentration sensors, which measure the amount of toner adhesion to ensure accurate color reproduction. Therefore, Nichicon began the commercial production of toner concentrations sensors, employing bare chip optical elements and applying the COB (Chip On Board) technology for high-density mounting. Regarding switching power supplies, Nichicon is providing small, high-efficiency power supplies by implementing independently developed circuits to reduce internal loss, together with Nichicon’s own electrolytic capacitors, as well as applying a combination of circuit mounting technology and component parts technology.

(4) Environmentally Friendly ProductsThe RoHS (Restriction of Hazardous Substances) Directive (with minor exceptions) restricts the use of hazardous substances, will go into effect in Europe as of July 1, 2006. Compliance with the Directive is sought, not only in Europe, but also on a global basis. Furthermore, Europe is moving toward the legislation of REACH (Registration, Evaluation, and Authorization of Chemicals) regulations, which will impose stricter environmental restrictions. Nichicon currently provides the market with a group of eco-friendly

16 A n n u a l R e p o r t 2 0 0 6

Risk information

The following risks may affect the Group’s future operating results, stock prices, and financial standing. And matters reported regarding the future were determined by our group as of the end of this consolidated business year.

(1) Economic SituationThe Group manufactures and sells capacitors for electronics and other products worldwide. Consequently, demand for the Group’s products is affected by the economic situation of the countries or regions in which products are sold.

(2) Risk of Currency Exchange FluctuationsIn the Group’s business, achievements, and financial standing, items denominated in the local currency outside Japan are converted into yen in order to prepare the consolidated financial statements. The value of these items after the conversion to yen may be affected by fluctuations in the exchange rate. Although the Group enters into an exchange contract to reduce and hedge exchange risks, it is not guaranteed that effects on the Group’s achievements and financial standing can be completely eliminated.

(3) Risk of Price CompetitionThe Group expands domestic and foreign production bases, improves the sales structure, and promotes the speedy development of new products aiming to improve the core business, including aluminum electrolytic capacitors, tantalum electrolytic capacitors, circuit products and capacitors for electric apparatus and power utilities/others, and to develop a global structure. Under the circumstances, when the Group’s products and services face price competition from competitors, the Group’s business, achievements, and economic standing may be adversely affected.

(4) Development Risk of New ProductsThe Group thinks that it is possible to develop and provide attractive new products to anticipate customer needs into the future. When the Group lacks the following abilities, however, the Group’s business, achievements, and economic standing may be adversely affected.① Ability to deal with customer needs for greater diversity and

sophistication② Ability to develop and produce appropriate new products at a

reasonable price③ Ability to make customers use the Group’s new products.④ Ability to use and develop new products, services, and technologies⑤ Ability to improve existing products, services, and technologies⑥ Ability to adequately predict changes in the industry and market

(5) Potential Risk of Overseas PresenceChanges in the taxation system or tax rate; other economic, social, and political fluctuations; and shifts in exchange policy and modification of regulations, etc., about exports or imports in countries and regions

where the Group develops businesses may have harmful effects on the Group’s business, achievements, and economic standing. The Group set up manufacturing bases for aluminum electrolytic capacitors, etc., in Wuxi and for tantalum electrolytic capacitors in Tianjin, China, respectively. When unforeseen circumstances occur in the political climate, legal environment, and economic situation, it is likely that problems are found in business performance and the Group’s business, achievements, and economic standing are adversely affected.

(6) Escalation of purchase price of raw materialsEscalation of the purchase price for raw materials, which is significantly affected by international market conditions among raw materials used for the main products of the Group, may adversely affect the Group’s financial condition and result of operations.

(7) Product LiabilityAlthough the Group places strict controls on product quality and manufactures products according to global quality control standards, products and services provided by the Group may be defective. And although the Group takes out product-liability insurance, it is not guaranteed that claimable amounts can be fully recompensed.

The loss resulting from any defect may have a negative effect on the Group’s business, achievements, and financial standing through a large amount of costs and derogation of assessment of the Group.

(8) Change and Reinforcement of Legal RestrictionsImportant changes in laws and regulations in countries and regions where the Group develops business may have a negative effect on the Group’s business, achievements, and economic standing. In addition, the business of the Group is covered by various environmental laws and faces the risk of environmental responsibility regarding past, current, and future production activities. When regulations relating to the environment tighten and obligations to remove hazardous substances, etc., are added in the future, costs for meeting these changes may have a negative effect on the Group’s business, achievements, and economic standing.

(9) Effect of Disasters, etc.Although the Group regularly inspects and checks all equipment to prevent disasters, it is not guaranteed that negative impacts from disasters, etc., can be completely prevented or alleviated. Those may have a negative effect on the Group’s business, achievements, and economic standing.

(10) OthersThe risk factors listed above do not cover all risks regarding the development of business and others. Also, other risks might develop and have a negative effect on the Group’s business, achievements, and economic standing.

17A n n u a l R e p o r t 2 0 0 6

products, the “Geo Cap®” series, which do not contain hazardous substances and are in compliance with the RoHS Directive. In regards to our environment-responsive Geo Cap, both PVC (polyvinyl chloride), which emits dioxin when incinerated, as well as lead are not used at all. Resin molded chip tantalum electrolytic capacitors have not included lead since their development. As for Conformal-coated tantalum electrolytic capacitors, the company switched to lead-free products in 2001. In addition, we started making the switch to resin coating materials that do not contain bromine series flame-retardants. For plastic film capacitors, we have completed the switch to lead-free

terminals. In 2005 we are completing the switch to totally lead-free products including our internal elements. This will be accomplished through the development of high-efficiency energy-saving switching power supplies as well as equipment that compensates for momentary voltage reduction, which employ electric double-layer capacitors as a storage device to more effectively use electric energy. It is through these and other measures such as energy conservation, through the development of high-efficiency energy-saving switching power supplies as well as equipment that compensates for momentary voltage reduction, which employ electric double-layer capacitors as a storage device to more effectively use electric energy that Nichicon contributes to society.

Financial review

SalesThanks to the expanded sales of our differentiated/high value-added products, our sales for the current year amounted to 106,871 million yen (up 2.7% from the previous year). Of the total sales, overseas sales occupied 59.4% (63,517 million yen, up 13.2% from the previous year). Overseas sales results have surpassed domestic sales (43,354 million yen in the current year) for four years in a row. There were various factors for this positive result, but the main factor was that the sales in the Asian region showed favorable progress resulting in sales of 47,999 million yen (up 21.8% from the previous year's 39,413 million yen). With regard to sales according to sector, sales in the capacitors for electronics sector amounted to 81,469 million yen (up 4.0% from the previous year) because digital home appliances such as flat-screen TVs, information and communications-related products such as cellular phones and PCs, as well as automotive-related products showed steady growth. Regarding the circuit products sector, sales of hybrid ICs for automotive products increased steadily, while growth for information and communications-related products was sluggish. Sales of switching power supplies were affected by the completion of the sales cycle for amusement devices. Overall sales decreased 3.0% from the previous year to 16,604 million yen. As for the sales of capacitors for electric apparatus and power utilities, capacitor applied system sector, they amounted to 8,271 million yen (up 25.7% from the previous year), due to new orders based on need-specific development projects and the start of private capital investment.

Cost of sales and selling, general and administrative expensesThe cost of sales amounted to 88,236 million yen (up 2.3% from the previous year). This increase is due mainly to the effect of the rise in the price of crude oil, which in turn caused the prices of various materials to appreciate. Although labeled prices fell for the current year, as a result of our continuous cost reduction efforts from the previous year, such as reduction in fixed costs, cost reduction by improved productivity, etc., the cost rate of the sales settled at 82.6% (improved by 0.3 points from the previous year). Selling, general and administrative expenses amounted to 12,588 million yen (up 9.4% from the previous year). This was due mainly to the increase in research and development expenses by 537 million yen from the previous year. Consequently, the administrative expenses rate of sales settled at 11.7% (up 0.7 points from the previous year).

Operating income and income before income taxes and minority interestAs a result of the above performance, the current year’s operating income amounted to 6,047 million yen (down 4.2% from the previous year), and the operating income rate of sales stood at 5.7% (down 0.4 points from the previous year). On a regional basis, the domestic operating income amounted to 6,365 million yen. As for overseas, the sluggish demand for consumer appliances in the U.S., together with the higher depreciation costs in Asia, due to increased capital investment, resulted in an operating deficit. Within the non-operating profit and loss (P/L) category, interest income and cash dividends increased by 125 million yen from the previous year. Foreign exchange gains and losses increased by 1,199 million yen from the previous year. As a result, the current year’s ordinary income amounted to 7,487 million yen (up 11.9% from the previous year), and the ordinary income to sales ratio fell 0.6 points to 7.0%. In the extraordinary profit and loss category, losses of 568 million yen and 294 million yen were recorded for disposal of fixed assets and disposal of obsolete inventories, respectively. As a result, compared to the previous year, the current year’s income before income taxes and minority interest increased by 5.3% to 6,689 million yen.

Income taxesTaxable income for the previous year increased from the year before, due to increases in sales and reduction of costs, which resulted in a higher net income before taxes and other adjustments. Taxable income increased again this year, due to an increase in net income before taxes and other adjustments, which resulted from increased sales, improved

financial account balance, and foreign exchange profit.　 Consequently, income taxes increased to 2,778 million yen (up 39.5% from the previous year). The amount to be adjusted for income taxes according to the tax effect accounting system was -209 million yen. The effective tax rate for the current year has increased to 38.4% from the 35.1% of the previous year.

Minority interestMinority interest, deductible from the net income before taxes and other adjustments, was 39 million yen in the current year, although it was 56 million yen for the previous year. This is due mainly to the decrease in the net income of consolidated subsidiaries corresponding to the interest held by minority shareholders.

18 A n n u a l R e p o r t 2 0 0 6

Net incomeThe net income in the current year amounted to 4,081 million yen (up 0.2% from the previous year). The net income rate for sales in the current year increased to 3.8% (down 0.1 points from the previous year). Also, the current year’s net income per share settled at 51.61 yen.

On the fluidity of fundsThe outstanding balance of cash and cash equivalents at the end of the current year amounted to 13,253 million yen, which is a decrease of 817 million yen from 14,070 million yen at the end of the previous year. The factors causing these changes are as follows. Cash flow for operating activities amounted to 13,822 million yen, which is an increase of 1,246 million yen in comparison with the previous year. This was due mainly to the increase in financial balance resulting from fluctuations in accounts receivable and inventory assets as well as income before income taxes. Expenditures in cash flow for investing activities amounted to 12,584 million yen, which is an increase of 486 million yen in comparison with the previous year. This increase was due mainly to the increase in expenditures resulting from the acquisition of fixed tangible assets. In the current year, free cash flow (based on the formula: Excess income in cash flow in operating activities minus excess expenditure in cash flow in investing activities) resulted in a surplus of 1,238 million yen. Cash flow for financing activities amounted to 2,724 million yen, with the expenditure increased by 1,650 million yen in comparison with the previous year. This increase is due mainly to the increase in payments from share buy-backs together with the increase in cash dividends paid out by the parent company.

Financial positionOur group’s total assets at the end of the current year amounted to 166,840 million yen (up 7.0% from the previous year). Current assets amounted to 77,780 million yen (up 9.2% from the previous year). This is due mainly to the increase in securities by 6,710 million yen from the previous year, due to the increase in bond assets that are to mature within one year. Tangible fixed assets (after deducting the accumulated depreciation cost) amounted to 45,261million yen (up 6.1% from the previous year). Capital investments have increased greatly for two consecutive years with the total amount for the current year reaching 10,973 million yen. The amount can be broadly categorized as follows:

• 7,160 million yen, mainly for the expansion of production facilities for aluminum electrolytic capacitors and tantalum electrolytic capacitors for electronics, the enhancement of capabilities and expansion of production facilities for electrode foils which are the main material for aluminum electrolytic capacitors;

• 2,153 million yen, mainly for the enhancement of capabilities and expansion of integrated circuit production facilities.

• 1,497 million yen for film capacitor production facilities, mainly for hybrid cars.

Our own resources covered the entire funding necessary to make these investments. And the depreciation cost amounted to 8,930 million yen (up 1.4% from the previous year). Investments and other assets amounted to 43,799 million yen (up 4.3% from the previous year). This is mainly because the investments in securities increased to 36,645 million yen, an increase of 818 million yen from the end of the previous year, owing to the purchase of industrial bonds, bank bonds, etc. On the other hand, with regard to liabilities, current liabilities amounted to 30,138 million yen (up 8.5% from the previous year). This was mainly because the bills payable for facilities in terms of capital investment increased by 656 million yen to 2,728 million yen. Long-term liabilities amounted to 7,979 million yen (up 33.2% from the previous year). This was mainly because the deferred tax liabilities amounted to 2,932 million yen, an increase of 2,063 million yen from the end of the previous year. As for shareholders’ equity our common stock and additional paid-in capital were 14,287 million yen and 17,066 million yen, respectively. The retained earnings increased by 2,792 million yen from the end of the previous year to 95,690 million yen. The outstanding balance of unrealized holdings on securities, which corresponds to the difference (after deducting the tax effect) between the current price and book value of financial products such as listed stocks (calculated by the market-value accounting system), increased by 3,188 million yen from the end of the previous year to 6,395 million yen. The foreign currency translation adjustment, resulting from the conversion of the financial statements of foreign subsidiaries into yen, was plus 208 million yen for the current year, up 2,038 million yen from the minus 1,830 million yen of the previous year. The outstanding balance of treasury stock at the end of the current year increased by 1,430 million yen to 5,033 million yen, due to the reacquisition of stocks. As a result of the above performance, our shareholders’ equity amounted to 128,613 million yen (up 5.4% from the previous year), and the shareholder’s equity ratio stood at 77.1% (down 1.2 points from the previous year).

19A n n u a l R e p o r t 2 0 0 6

2006

( )

( )

( )

2005 2006Current assets :

Cash and cash equivalents・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Trade receivable :

Notes・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Accounts・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Less: allowance for doubtful accounts・・・・・・・・・・・・・・・・・・・・・

Short-term investments (Note 4)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Inventories (Note 5)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Deferred tax assets (Note 14)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Other current assets・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total current assets・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Property, plant and equipment :

Land・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Buildings and structures・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Machinery and equipment・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Construction in progress・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Less: accumulated depreciation・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Net property, plant and equipment・・・・・・・・・・・・・・・・・・・・・・・・

Investments and other assets :

Investments in securities (Note 4)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Investments in and advances to unconsolidated

subsidiaries and affiliates・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Deferred tax assets (Note 14)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Other・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Less: allowance for doubtful accounts・・・・・・・・・・・・・・・・・・・・・・・・・・

Total investments and other assets・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total assets・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

ASSETS

¥

¥

( )

( )

( )

$

$

112,820

49,082

196,585

1,245

244,422

124,048

155,000

15,107

10,728

662,125

33,989

256,942

1,128,712

21,544

1,441,187

1,055,886

385,301

311,951

27,447

2,822

33,012

2,378

372,854

1,420,280

The accompanying notes are an integral part of these statements.

13,253

5,766

23,093

146

28,713

14,572

18,208

1,775

1,259

77,780

3,993

30,183

132,590

2,530

169,296

124,035

45,261

36,645

3,224

331

3,878

279

43,799

166,840

( )

( )

( )

¥

¥

14,070

5,906

22,687

145

28,448

7,862

17,267

1,618

1,976

71,241

3,962

28,685

129,358

808

162,813

120,168

42,645

35,827

2,936

351

3,172

293

41,993

155,879

March 31,

Millions of Yen

March 31,

Thousands of U.S. Dollars(Note 3)

NICHICON CORPORATION AND CONSOLIDATED SUBSIDIARIESMarch 31, 2006 and 2005

Consolidated balance sheets

20 A n n u a l R e p o r t 2 0 0 6

2006

( )

2005 2006Current liabilities :

Trade payable :

Notes・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Accounts・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Notes for construction・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Accrued income taxes (Note 14)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Accrued expenses・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Deferred tax liabilities (Note 14)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Other current liabilities・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total current liabilities・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Long-term liabilities :

Accrued severance indemnities (Note 8)・・・・・・・・・・・・・・・・・・・・・・・

Deferred tax liabilities (Note 14)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Other long-term liabilities・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total long-term liabilities・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Minority interest・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Shareholders’ equity (Note 10):

Common stock,

Authorized :

−137,000,000 shares at March 31, 2006 and 2005

Issued:

−81,144,372 shares at March 31, 2006 and 2005

Additional paid-in capital・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Retained earnings・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Unrealized holding gains on securities (Note 11)・・・・・・・

Adjustments on foreign currency statement

translation・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Less: treasury stock

−3,676,706 shares at March 31, 2006・・・・・・・・・・・・・・・・・・・・・・・・

−2,716,982 shares at March 31, 2005・・・・・・・・・・・・・・・・・・・・・・・・

Total shareholders’ equity・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total liabilities and shareholders’ equity・・・・・・・・・・・・・・・・・・

LIABILITIES AND SHAREHOLDERS’EQUITY

¥

¥

2,623

13,647

16,270

2,728

2,381

5,265

28

3,466

30,138

4,522

2,932

525

7,979

110

14,287

17,066

95,690

6,395

208

5,033

—

128,613

166,840

¥

¥

4,243

10,916

15,159

2,072

1,798

4,893

32

3,810

27,764

4,622

869

500

5,991

100

14,287

17,065

92,898

3,207

1,830

—

3,603

122,024

155,879

( )

( )

( )

$

$

22,333

116,172

138,505

23,223

20,269

44,817

236

29,510

256,560

38,492

24,962

4,472

67,926

933

121,619

145,276

814,587

54,442

1,786

42,849

—

1,094,861

1,420,280

March 31,

Millions of Yen

March 31,

Thousands of U.S. Dollars(Note 3)

21A n n u a l R e p o r t 2 0 0 6

Yen U.S. Dollars (Note 3)

2006

( )

( )

( )

( )

( )

( )

2005 2006

Net sales (Note 16)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Operating costs and expenses (Note 16) :

Cost of sales (Note 13)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Selling, general and administrative expenses

(Notes 12,13,15)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total operating costs and expenses・・・・・・・・・・・・・・・・・・・・・

Operating income (Note 16)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Other income (expenses) :

Interest and dividend income on investments・・・・・・・・・・・・・

Interest expenses・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Foreign exchange gain (loss), net・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Equity in net gains of affiliated company・・・・・・・・・・・・・・・・・・・・・・

Gain (loss) on valuation of short-term investments

and investments in securities, net・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Net loss on sales or disposal of property, plant and

equipment・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Loss on disposal of inventory・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Other, net・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total other income (expenses), net・・・・・・・・・・・・・・・・・・・・・・・・

Income before income taxes and minority interest・・・

Income taxes (Note 14) :

Current・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Deferred・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total income taxes・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Minority interest・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Net income・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Amount per share:

Net income (Note 17):

Basic・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Diluted・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Cash dividends・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Weighted average number of shares (thousands)

Basic・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Diluted・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

¥

¥

¥

106,871

88,236

12,588

100,824

6,047

455

6

1,061

49

38

568

294

17

642

6,689

2,778

209

2,569

39

4,081

51.61

51.61

17.00

78,358

78,366

( )

( )

( )

( )

( )

¥

¥

¥

104,096

86,277

11,505

97,782

6,314

330

5

138

35

2

169

—

15

40

6,354

1,991

236

2,227

56

4,071

51.46

—

15.00

78,430

—

( )

( )

( )

( )

( )

( )

$

$

$

909,777

751,141

107,158

858,299

51,478

3,872

49

9,031

420

324

4,838

2,500

144

5,468

56,946

23,649

1,777

21,872

333

34,741

0.44

0.44

0.14

The accompanying notes are an integral part of these statements.

For the year ended March 31,

Millions of Yen

For the year ended March 31,

Thousands of U.S. Dollars(Note3)

NICHICON CORPORATION AND CONSOLIDATED SUBSIDIARIESFor the years ended March 31, 2006 and 2005

Consolidated statements of income

22 A n n u a l R e p o r t 2 0 0 6

The accompanying notes are an integral part of these statements.

Balance at March 31, 2004・・・

Net income・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Adjustment due to increase in

consolidated subsidiaries・・・

Cash dividends paid・・・・・・・・・・・・・

Bonuses to directors・・・・・・・・・・・・

Increase due to valuation of

securities・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Adjustments on foreign currency

statement translation・・・・・・・・・・・

Increase in treasury stock・・・

Balance at March 31, 2005・・・

Increase due to gain from

distribution of treasury stock・・・

Net income・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Cash dividends paid・・・・・・・・・・・・・

Bonuses to directors・・・・・・・・・・・・

Increase due to valuation of

securities・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Adjustments on foreign currency

statement translation・・・・・・・・・・・

Increase in treasury stock・・・

Balance at March 31, 2006・・・

¥

¥

¥

14,287

—

—

—

—

—

—

—

14,287

—

—

—

—

—

—

—

14,287

81,144,372

—

—

—

—

—

—

—

81,144,372

—

—

—

—

—

—

—

81,144,372

¥

¥

¥

17,065

—

—

—

—

—

—

—

17,065

1

—

—

—

—

—

—

17,066

( )

( )

( )

( )

¥

¥

¥

89,450

4,071

424

1,018

29

—

—

—

92,898

—

4,081

1,254

35

—

—

—

95,690

¥

¥

¥

2,763

—

—

—

—

444

—

—

3,207

—

—

—

—

3,188

—

—

6,395

( )

( )

¥

¥

¥

2,084

—

—

—

—

—

254

—

1,830

—

—

—

—

—

2,038

—

208

( )

( )

( )

( )

( )

¥

¥

¥

3,598

—

—

—

—

—

—

5

3,603

—

—

—

—

—

—

1,430

5,033

Balance at March 31, 2005・・・

Increase due to gain from

distribution of treasury stock・・・

Net income・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Cash dividends paid・・・・・・・・・・・・・

Bonuses to directors・・・・・・・・・・・・

Increase due to valuation of

securities・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Adjustments on foreign currency

statement translation・・・・・・・・・・・

Increase in treasury stock・・・

Balance at March 31, 2006・・・

$

$

121,619

—

—

—

—

—

—

—

121,619

81,144,372

—

—

—

—

—

—

—

81,144,372

$

$

145,272

4

—

—

—

—

—

—

145,276

( )

( )

$

$

790,823

—

34,741

10,682

295

—

—

—

814,587

$

$

27,300

—

—

—

—

27,142

—

—

54,442

( )$

$

15,579

—

—

—

—

—

17,365

—

1,786

( )

( )

( )

$

$

30,676

—

—

—

—

—

—

12,173

42,849

Millions of Yen

Number ofshares of

common stockCommon

stockAdditional

paid-in capitalRetainedearnings

Unrealizedholding gainson securities

Adjustments onforeign currency

statement translationTreasury

stock

Thousands of U.S. Dollars (Note 3)

Number ofshares of

common stockCommon

stockAdditional

paid-in capitalRetainedearnings

Unrealizedholding gainson securities

Adjustments onforeign currency

statement translationTreasury

stock

NICHICON CORPORATION AND CONSOLIDATED SUBSIDIARIESFor the years ended March 31, 2006 and 2005

Consolidated statements of shareholders’equity

23A n n u a l R e p o r t 2 0 0 6

2006

( )( )

( )( )

( )

( )( )

( )

( )

( )

( )( )

( )( )

( )

( )

2005 2006

Operating activities : Income before income taxes and minority interest・・・・

Adjustments for :

Depreciation and amortization・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Net loss on sales or disposal of property, plant and equipment・・・

Reversal of accrued severance indemnities・・・・・・・・・・・・

Interest and dividend income・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Interest expenses・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ (Increase) decrease in notes and accounts receivable・・・

Increase in inventories・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Decrease in notes and accounts payable・・・・・・・・・・・・・・・・

Increase in accrued expenses and other current liabilities・・・・

Other, net・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Sub total・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Interest and dividend income received・・・・・・・・・・・・・・・・・・・・・

Interest expenses paid・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Income taxes paid・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Net cash provided by operating activities・・・・・・・・・・・・・・・・・・・・

Investing activities : Payments for purchase of short-term investments

and investments in securities・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Proceeds from sales of short-term investments

and investments in securities・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Payments for purchase of property, plant and equipment・・・

Decrease in time deposits・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Short-term loans to an affiliate・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Decrease in short-term loans to an affiliate・・・・・・・・・・・・・・・・・・

Long-term loans to an affiliate・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Decrease in long-term loans to an affiliate・・・・・・・・・・・・・・・・・・・ (Increase) decrease in other investments・・・・・・・・・・・・・・・・・・・・・・

Net cash used in investing activities・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Financing activities : Payments for purchase of treasury stock・・・・・・・・・・・・・・・・・・・・・

Cash dividends paid・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Other, net・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Net cash used in financing activities・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Effect of exchange rate changes on cash and cash equivalents・・・Net decrease in cash and cash equivalents・・・・・・・・・・・・・・・・Cash and cash equivalents at beginning of the year・・・・Cash and cash equivalents of newly consolidated subsidiaries・・・Cash and cash equivalents at end of the year・・・・・・・・・・・・

¥

¥

6,689

8,930568101455

6792240368257501

15,577453

62,202

13,822

11,796

9,3729,933

— —525713215254

12,584

1,4351,289

02,724

669817

14,070 —

13,253

( )( )

( )( )( )

( )( )

( )

( )

( )

( )

( )

( )( )( )( )

( )

¥

¥

6,354

8,808169122330

5848930592388145

13,047321

6786

12,576

14,894

11,5728,273

12540 —700—

72512,098

51,068

11,074

187409

14,208271

14,070

( )( )

( )( )

( )

( )( )

( )

( )

( )

( )( )

( )( )

( )

( )

$

$

56,946

76,0224,838

8573,872

496,7442,0393,1362,1864,274

132,6073,852

4918,746

117,664

100,419

79,78484,555

— —

4,4686,0661,8302,170

107,128

12,21810,977

1023,185

5,6946,955

119,775 —

112,820

The accompanying notes are an integral part of these statements.

For the year ended March 31,

Millions of Yen

For the year ended March 31,

Thousands of U.S. Dollars(Note 3)

NICHICON CORPORATION AND CONSOLIDATED SUBSIDIARIESFor the years ended March 31, 2006 and 2005

Consolidated statements of cash flows

24 A n n u a l R e p o r t 2 0 0 6

NICHICON CORPORATION (the “Company”) and its domestic consolidated subsidiaries maintain their accounts and records in accordance with the provisions set forth in the Japanese Commercial Code (the “Commercial Code”) and Japanese Securities and Exchange Law, and in conformity with accounting principles and practices generally accepted in Japan, which are different in certain respects as to application and disclosure requirements of International Financial Reporting Standards. The accounts of overseas subsidiaries consolidated with the Company are based on the financial statements prepared in conformity with generally accepted accounting principles (“GAAP”)

and practices prevailing in the countries where the subsidiaries were incorporated. No adjustments have been reflected in the accompanying consolidated financial statements to present the accounts of the subsidiaries in compliance with Japanese GAAP. The financial statements have not been materially affected by the differences between the GAAP prevailing in these countries and Japanese GAAP. Certain account balances, as disclosed in the basic consolidated financial statements in Japan, have been summarized or reclassified to the extent deemed necessary to enable presentation in a form which is more familiar to readers outside Japan.

Effective from the year ended March 31, 2005, NICHICON ELECTRONICS (TIANJIN) CO., LTD., which was newly set up during the fiscal year ended March 31, 2005, and TORISHIMA ELECTRIC WORKS LTD., the materiality of whose impact on the consolidated financial statements increased, have been included in consolidation. Effective from the year ended March 31, 2006, NICHICON (OHNO) CORPORATION, which was split from the Company during the fiscal year ended March 31, 2006, has been included in consolidation. In addition, as NICHICON (DENDO) CORPORATION had been liquidated, it was excluded from the consolidation during the fiscal year ended March 31, 2005. In addition, as NICHICON (EUROPE) LTD. had been liquidated, it was excluded from the consolidation during the fiscal year ended March 31, 2006.

For the purpose of preparing the accompanying consolidated financial statements, all significant inter-company transactions, account balances and unrealized profits among the Companies have been eliminated. The amounts of certain subsidiaries have been included in consolidation on the basis of fiscal periods ended within the three months prior to March 31. The Company had no major unconsolidated subsidiaries and had 10 and 11 affiliates as of March 31, 2006 and 2005 respectively. The equity method is applied to the investments in one affiliate, SAMWHA ELECTRIC CO., LTD. since the total net income (the amount corresponding to equity) and retained earnings (the amount corresponding to equity) of the affiliates other than SAMWHA ELECTRIC CO., LTD. are not material to the consolidated result of total net income and total retained earnings, respectively.

1. Basis of Presenting the Consolidated Financial Statements

(1) Principles of ConsolidationThe Company had 20 subsidiaries as of March 31, 2006 and 20 subsidiaries as of March 31, 2005. The accompanying consolidated financial statements include the accounts of the Company and 20 of its subsidiaries (together, the “Companies”), which are listed below:

2. Summary of Significant Accounting Policies

NICHICON (KUSATSU) CORPORATIONNICHICON (KAMEOKA) CORPORATIONNICHICON (OHNO) CORPORATIONNICHICON TANTALUM CORPORATIONNICHICON (ASAHI) CORPORATIONNICHICON (IWATE) CORPORATION NICHICON (WAKASA) CORPORATIONNICHICON (FUKUI) CORPORATIONNICHICON (SHIGA) CORPORATIONTORISHIMA ELECTRIC WORKS LTD.NICHICON (AMERICA) CORP.NICHICON (HONG KONG) LTD.NICHICON (SINGAPORE) PTE. LTD.NICHICON (MALAYSIA) SDN. BHD.NICHICON (TAIWAN) CO., LTD.NICHICON (AUSTRIA) GmbHNICHICON (THAILAND) CO., LTD.NICHICON ELECTRONICS (WUXI) CO., LTD.NICHICON ELECTRONICS TRADING (SHANGHAI) CO., LTD.NICHICON ELECTRONICS (TIANJIN) CO.,LTD.

JapanJapanJapanJapanJapanJapanJapanJapanJapanJapanU.S.A.

China (Hong Kong)SingaporeMalaysiaTaiwanAustria

ThailandChinaChinaChina

100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%

94.1%100.0%100.0%100.0%100.0%100.0%100.0%

49.0%100.0%100.0%100.0%

March 31March 31March 31March 31March 31March 31March 31March 31March 31March 31March 31March 31March 31March 31March 31March 31March 31

December 31December 31December 31

Equity ownershippercentage at

March 31, 2006Country and jurisdiction

of incorporationName Fiscal year-end

NICHICON CORPORATION AND CONSOLIDATED SUBSIDIARIES

Notes to the consolidated financial statements

25A n n u a l R e p o r t 2 0 0 6

The investments in the remaining affiliates are carried at cost. TORISHIMA ELECTRIC WORKS LTD. changed the date of its fiscal year end from the last day of February to March 31 effective from the fiscal year ended March 31, 2006. Accordingly, the financial statements of this subsidiary for the 13-month period ended March 31, 2006, were included in the consolidation.

(2) Translation of Foreign Currency Financial StatementsThe accounts of the overseas consolidated subsidiaries are translated into Japanese yen by the methods prescribed under statements issued by the Business Accounting Deliberation Council of Japan. Under this method, all assets and liabilities are translated at current rates, while shareholders’ equity is translated at historical rates, and revenue and expense items are translated at the average rates during the year. The resulting translation adjustments are shown as “Adjustments on foreign currency statement translation” in the accompanying consolidated balance sheet.

(3) Valuation of SecuritiesEffective from the year ended March 31, 2001, the Company and its domestic consolidated subsidiaries adopted the accounting standard for financial instruments issued by the Business Accounting Deliberation Council of Japan on January 22, 1999. Following the standard, securities held by the Company and its domestic consolidated subsidiaries are classified as “held-to-maturity debt securities” or “Other securities”, which represent securities other than trading or “held-to-maturity debt securities”, based on the intent of holding each security for valuation. “Held-to-maturity debt securities” are stated at amortized cost. Marketable “Other securities” are stated at market value. Adjustments to market value as gains, on a one by one basis, are recorded as an increase in shareholders’ equity, net of tax, while adjustments to market value as losses, on a one by one basis, are charged to income for the year. The costs of their sales are determined by the moving average method. “Other securities” which are not marketable are principally stated at cost, cost being determined by the moving average method.

(4) InventoriesFinished goods and work in process are principally valued at cost determined by the average method. Other inventories are principally valued at cost determined by the moving-average method.

(5) Property, Plant and EquipmentDepreciation for the Company and its domestic consolidated subsidiaries is computed by the declining-balance method except for depreciation of buildings acquired on or after April 1, 1998, at rates based on the estimated useful lives of the assets. Depreciation of buildings acquired on or after April 1, 1998 for the Company and its domestic consolidated subsidiaries is computed by the straight-line method at rates based on the above. The estimated useful lives of assets are as follows:

Buildings and Structures ・・・・・・・・・・・・・ from 7 to 50 years Machinery and equipment ・・・・・・・・・・ from 4 to 11 years

Depreciation for the overseas consolidated subsidiaries is principally computed by the straight-line method at rates based on the estimated useful lives of the assets. Normal repairs and maintenance including minor renewals and improvements are charged to income as incurred. Gains or losses on the disposal of property, plant and equipment are recognized in the period of disposal.

(6) Capitalized Computer Software CostsCapitalized computer software costs comprise costs of software used in the Companies’ business. Amortization of capitalized computer software costs, which are included in “Other” in investments and other assets, is computed using the straight-line method over 5 years, the estimated useful life of the assets.

(7) Foreign Currency TranslationEffective from the year ended March 31, 2001, the Company and its domestic consolidated subsidiaries have adopted the accounting standard for foreign currency transactions revised by the Business Accounting Deliberation Council of Japan on October 22, 1999, which required that all monetary assets and liabilities denominated in foreign currencies, whether short-term or long-term, should be, in principle, translated into Japanese yen at the relevant exchange rates prevailing at the respective balance sheet dates.

(8) Allowance for Doubtful AccountsThe Company and its consolidated subsidiaries provide for doubtful accounts principally at an amount computed based on the historical bad debt ratio during a certain reference period plus the estimated uncollected amount based on the analysis of individual accounts.

(9) Hedge AccountingThe Company enters into forward foreign exchange contracts on export transactions to hedge its exposure to fluctuation in foreign exchange rates. At the respective balance sheets dates, the forward foreign exchange contracts satisfying certain conditions are matched with receivables denominated in foreign currencies, which are translated into Japanese yen at the contracted rate of exchange. Gains and losses arising from changes in the fair value of the forward foreign exchange contracts other than those described above are deferred on the balance sheet to the period in which the gains and losses on receivables hedged are recognized to match gains and losses on the forward foreign exchange contracts.

(10) LeasesWhere the financing leases do not transfer ownership of the leased property to the lessee during the terms of the leases, the leased property is not capitalized and the related lease expenses are charged to income in the periods in which they are incurred, as per the statements issued by the Business Accounting Deliberation Council.

(11) Accrued Severance Indemnities and Pension PlanUnder the terms of the Company’s retirement plan, employees of the Company with more than 3 years of service are generally entitled to receive lump-sum payments at the time of retirement. The amount of the retirement benefit is, in general, determined based on the length of service, the cause of retirement, and the remuneration at the time of retirement. The contributory pension plan which is held by the Company is a corporate pension fund. The Company and its domestic consolidated subsidiaries have a tax-qualified pension plan. The amount of severance indemnities to be paid by the Company and its domestic subsidiaries is reduced by the benefits payable under these pension plans. Certain overseas consolidated subsidiaries have defined contribution pension plans. On April 1, 2000, the Company and its domestic subsidiaries adopted the accounting standard for retirement benefits issued by the Business Accounting Deliberation Council of Japan on June 16, 1998. Following the standard, the amount of accrued severance indemnities for employees was provided based on the amount of projected benefit obligations minus pension plan assets at fair value at the end of the fiscal year.

{

26 A n n u a l R e p o r t 2 0 0 6

The directors and statutory auditors of the Company are covered by a retirement benefit plan under which retiring directors and statutory auditors are entitled to receive lump-sum retirement benefits. The amount of such benefits is determined based on the Company’s internal rules. The accrued severance indemnities for directors and statutory auditors represent the estimated amount to be paid if all directors and statutory auditors retired at the balance sheet dates.

(12) Research and Development ExpensesResearch and development expenses are charged to income as incurred.

(13) Appropriation of Retained EarningsUnder the Commercial Code and the Articles of Incorporation of the Company, proposals by the Board of Directors for the appropriation of retained earnings (principally the payment of annual cash dividends) should be approved by a shareholders’ meeting, which must be held within three months of the end of each fiscal year. The appropriation of retained earnings reflected in the accompanying consolidated financial statements for each fiscal year represents the appropriations which were approved by the shareholders’ meeting and disposed of during that year, but which related to the immediately preceding fiscal year. The payment of bonuses to directors is made out of retained earnings instead of being charged to income of the year and constitutes a part of the appropriations referred to above.

(14) Net Income and Dividend per ShareBasic net income per share is based upon the weighted average number of shares of common stock outstanding during each year.

The Company has adopted the Financial Accounting Standard on “Accounting for Earnings per Share”.

The figure for diluted net income per share is not disclosed for the fiscal year ended March 31, 2005 since there were no potentially dilutive common shares that had a dilutive effect. Cash dividends per share represent interim cash dividends paid and annual dividends declared as applicable to the respective years.

(15) Cash and Cash EquivalentsCash and cash equivalents are composed of cash in hand, bank deposits that are able to be withdrawn on demand and highly liquid time deposits with an insignificant risk of changes in value and which have maturities of three months or less when purchased.

(16) Accounting standard for impairment of fixed assetsOn August 9, 2002, the Business Accounting Council in Japan issued “Accounting Standard for Impairment of Fixed Assets”. The

standard requires that fixed assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss shall be recognized in the income statement by reducing the carrying amount of impaired assets or a group of assets to the recoverable amount to be measured as the higher of net selling price or value in use. Effective from the year ended March 31, 2006, the Company has adopted the above accounting standard. The adoption of the standard had no effect on the Company’s income for the year ended March 31, 2006.

2006 2005 2006

Short-term investments:Government and corporate bonds・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Investments in securities:Equity securities・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Government and corporate bonds・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Other・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

¥¥

¥

¥

14,57214,572

16,83019,593

22236,645

¥¥

¥

¥

7,8627,862

9,25326,431

14335,827

$$

$

$

124,048124,048

143,269166,795

1,887311,951

Short-term investments and investments in securities held by the Companies as of March 31, 2006 and 2005 is summarized as follows:

The Company prepares its consolidated financial statements in Japanese yen. The U.S. dollar amounts included in the accompanying consolidated financial statements and notes thereto represent the arithmetical results of translating yen into dollars at the rate of ¥117.47 to U.S.$1, the effective rate of exchange at March 31, 2006.

The inclusion of such dollar amounts is solely for the convenience of the reader and is not intended to imply that yen amounts have been or could be readily converted, realized or settled in dollars at the rate of ¥117.47 to U.S.$1 or at any other rate.

3. United States Dollar Amounts

4. Short-term Investments and Investments in Securities

March 31, March 31,Millions of Yen Thousands of U.S. Dollars

27A n n u a l R e p o r t 2 0 0 6

Debt securities whose market values exceed their book values on the accompanying consolidated Balance sheet

Government bonds・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Corporate bonds・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Debt securities whose market values do not exceed their book values on the accompanying consolidated Balance sheet

Government bonds・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Corporate bonds・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total

¥

¥

1,8046,5088,312

7,67118,18225,85334,165

Book value and market value information in respect of marketable “Held-to-maturity debt securities” as of March 31, 2006 is summarized as follows:

¥

¥

1,8056,5128,317

7,62917,92225,55133,868

( )( )( )( )

( ) ( )

¥

¥

145

42260302297

$

$

15,36255,40070,762

65,299154,782220,081290,843

$

$

15,36755,43370,800

64,937152,571217,508288,308

( )( )( )( )

$

$

53338

3622,2112,5732,535

Securities whose book values on the accompanying consolidated Balance sheet exceed their acquisition costs

Equity securities・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Government and corporate bonds・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Securities whose book values on the accompanying consolidated Balance sheet do not exceed their acquisition costsEquity securities・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total

¥

¥

4,051100

4,151

1,2165,367

Book value and acquisition cost information in respect of marketable “Other securities” as of March 31, 2006 is summarized as follows:

¥

¥

14,704222

14,926

1,18216,108

¥

¥

10,653122

10,775

3410,741

$

$

34,481851

35,332

10,35545,687

$

$

125,1781,887

127,065

10,062137,127

$

$

90,6971,036

91,733

29391,440

Millions of Yen

Other securities :Equity securities・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

The book values of the securities which are not marketable as of March 31, 2006 are mainly summarized as follows:

¥ 925

Thousands of U.S. Dollars

$ 7,877

2006 2007-2010 2011-2015

Government bonds・・・・・・・・・・・・・・・・Corporate bonds・・・・・・・・・・・・・・・・・・・・・

¥

¥

5,3619,211

14,572

¥

¥

4,11515,60019,715

¥

¥

—100100

2006 2007-2010 2011-2015

$

$

45,63478,414

124,048

$

$

35,027132,804167,831

$

$

—851851

The aggregate annual maturities of debt securities included in “Other securities” and “Held-to-maturity debt securities” outstanding as of March 31, 2006 were as follows:

Maturities inMillions of yen

Maturities inThousands of U.S. Dollars

Millions of YenBook value

perBalance sheet

Marketvalue Difference

Thousands of U.S. DollarsBook value

perBalance sheet

Marketvalue Difference

Millions of Yen

Acquisitioncost

Book valueper

Balance sheet Difference

Thousands of U.S. Dollars

Acquisitioncost

Book valueper

Balance sheet Difference

28 A n n u a l R e p o r t 2 0 0 6

Millions of Yen

¥

Debt securities whose market values exceed their book values on the accompanying consolidated Balance sheetGovernment bonds・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Corporate bonds・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

9,19023,66732,857

¥ 9,21823,76332,981

¥ 2896

124

¥

Debt securities whose market values do not exceed their book values on the accompanying consolidated Balance sheetGovernment bonds・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Corporate bonds・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total

3021,1341,436

34,293 ¥

3021,1191,421

34,402

( )( )( )

¥

01515

109

Book value and market value information in respect of marketable “Held-to-maturity debt securities” as of March 31, 2005 is as follows:

Book value perBalance sheet Market value Difference

Millions of Yen

¥

Securities whose book values on the accompanying consolidated Balance sheet exceed their acquisition costsEquity securities・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Government and corporate bonds・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

2,845100

2,945

¥ 8,309143

8,452

¥ 5,46443

5,507

¥

Securities whose book values on the accompanying consolidated Balance sheet do not exceed their acquisition costsEquity securities・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Total—

2,945 ¥—

8,452 ¥ —

5,507

Book value and acquisition cost information in respect of marketable “Other securities” as of March 31, 2005 is summarized as follows:

Acquisition costBook value perBalance sheet Difference

Government bonds・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Corporate bonds・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Millions of yenMaturities in

¥

¥

1,1006,7627,862

2005¥

¥

8,39217,93926,331

2006-2009¥

¥

—100100

2010-2014

The aggregate annual maturities of debt securities included in “Other securities” and “Held-to-maturity debt securities” outstanding as of March 31, 2005 were as follows:

Millions of Yen

Other securities :Equity securities・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

The book values of the securities which are not marketable as of March 31, 2005 are mainly summarized as follows:

¥ 911

Thousands of U.S. Dollars

$ 8,514

Millions of Yen

Corporate bonds・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ ¥ 34

“Held-to-maturity debt securities” sold during the year ended March 31, 2005 were as follows:

Reason for sale :Domestic subsidiary in the process of liquidation is obliged to sell their own holding “held-to-maturity debt securities”.

¥ 34 ¥ 0

Proceedsfrom sales

Costof sales

Losson sales

Proceedsfrom sales

Costof sales

Losson sales

Thousands of U.S. Dollars

$ 318 $ 318 $ 0

29A n n u a l R e p o r t 2 0 0 6

2006 2005 2006

Finished goods・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Work in process・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Raw materials and supplies・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

¥

¥

8,8154,5044,889

18,208

¥

¥

8,9264,5033,838

17,267

$

$

75,04238,33841,620

155,000

Inventories as of March 31, 2006 and 2005 consisted of the followings:

2006 2005 2006

Forward foreign exchange contracts:Foreign currency sales (US$)

Contract amounts・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Fair Value・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Unrealized loss・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

¥

¥

4,0674,051

16

¥

¥

14,84214,702

140

$

$

34,62534,483

142

Forward foreign exchange contracts outstanding as of March 31, 2006 and 2005 were as follows:

5. Inventories

The Company enters into forward foreign exchange contracts on export transactions to hedge its exposure to fluctuations in foreign exchange rates. These hedging instruments are measured for effectiveness based on the movement amounts of positions hedged

during the hedging terms. The Company’s management believes that there is no credit risk since these are executed with creditworthy financial institutions.

6. Derivatives and Hedging Activities

( )

March 31,Millions of Yen

March 31,Thousands of U.S. Dollars

2006 2006

¥

¥

Notional acquisition costs:Machinery and equipment・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Other・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Less: accumulated depreciation・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

7871

1496683

( )

2005

¥

¥

4247893158

( )

$

$

664607

1,271565706

(1) Payment of fees for financing leases where ownership of the leased assets is not transferred to the lease and which are not required to be capitalized, for the years ended March 31, 2006 and 2005, were ¥34 million ($294 thousand) and ¥27 million, respectively. Additional information such as the notional acquisition costs and

accumulated depreciation as of March 31, 2006 and 2005, requested by the Business Accounting Deliberation Council of Japan to be disclosed as not included in the accompanying consolidated balance sheets is as follows:

7. Lease Commitments

March 31,Millions of Yen

March 31,Thousand of U.S. Dollars

March 31, March 31,Millions of Yen Thousand of U.S. Dollars

30 A n n u a l R e p o r t 2 0 0 6

March 31,Millions of Yen

March 31,Thousands of U.S. Dollars

2006 2006

¥

¥

Due within one year・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Due after one year・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

394483

2005

¥

¥

243458

$

$

328378706

The aggregate future lease payments under finance leases as of March 31, 2006 and 2005 were as follows:

The amount of notional acquisition costs and future lease payments under finance leases included the interest expenses portion. Notional depreciation expenses for the years ended March 31, 2006 and 2005 which are not reflected in the accompanying consolidated statements of income were ¥34 million ($294 thousand) and ¥27 million, respectively.

Notional acquisition costs means the costs characterized as the total lease payment including interest due to the immateriality of the leased property. Notional depreciation expense is calculated by the straight-line method over the terms of the lease based on notional acquisition costs, assuming that there is no scrap value.

March 31,Millions of Yen

March 31,Thousands of U.S. Dollars

2006 2006

¥

¥

Due within one year・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Due after one year・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

358

2005

¥

¥

4—4

$

$

224567

(2) The aggregate future lease payments under ordinary operating leases as of March 31, 2006 and 2005 were as follows:

( )

( )

March 31,Millions of Yen

March 31,Thousands of U.S. Dollars

2006 2006

¥

¥

Projected benefit obligations・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Fair value of plan assets・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Accrued severance indemnities for employees・・・・・・・・・・・・・・・

15,05010,8204,230

( )

( )

2005

¥

¥

14,73910,3794,360

( )

( )

$

$

128,11792,11036,007

The following shows the reconciliation of projected benefit obligations to net liabilities for employees’ retirement benefits recognized on the accompanying consolidated balance sheets as of March 31, 2006 and 2005:

( )

March 31,Millions of Yen

March 31,Thousands of U.S. Dollars

2006 2006

¥

¥

Service cost・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Interest cost・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Expected return on plan assets・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Amortization of actuarial differences・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Extra retirement allowance paid temporarily・・・・・・・・・・・・・・・・・・・・・Net periodic benefit costs・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

662295151589

873

( )( )

¥

¥

570278

150 49198847

2005

( )

$

$

5,6372,5101,291

49679

7,431

The accrued severance indemnities for directors and statutory auditors amounting to ¥292 million ($2,485 thousand) and ¥262 million as of March 31, 2006 and 2005 respectively were excluded from the above schedule. Components of net periodic benefit cost for the years ended March 31, 2006 and 2005 are summarized as follows:

8. Accrued Severance Indemnities

The benefit obligations were determined using the discount rates of 2.1% for the years ended March 31, 2006 and 2005, and the expected rate of return on plan assets was 1.5% for the years ended March 31, 2006 and 2005. The benefit obligations are attributed to periods based on years of service. Unrecognized past service cost and actuarial

differences arising in the years are charged or credited to income for the years when they arise. The projected benefit obligations of certain subsidiaries are calculated using a simplified method, which is permitted for small size companies in conformity with the accounting standard for retirement benefits.

As of March 31, 2006, there was no contingent liability.

9. Contingent Liabilities

31A n n u a l R e p o r t 2 0 0 6

2006 2005 2006

Freight charges・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Advertising・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Employees’salary and bonuses・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Research and development expenses・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Others・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

¥

¥

2,594153

3,4771,3065,058

12,588

¥

¥

2,592161

3,287768

4,69711,505

$

$

22,0811,304

29,59711,11543,061

107,158

Selling, general and administrative expenses in the accompanying consolidated statements of income for the years ended March 31, 2006 and 2005 consisted of the following:

The Commercial Code in Japan requires the entirety of the issue price of new shares to be designated as stated capital. By resolution of the board of directors, the Company capitalizes at least 50 % of the issue price of new shares and credits proceeds in excess of the amounts designated at stated capital to the capital reserve. The revision of the Commercial Code on October 1, 2001 abolished the face value of shares. The revised Commercial Code provides that an amount equal to 10% of cash dividends and directors’ and statutory auditors’ bonus and other appropriations of retained earnings paid out with respect to each financial period be appropriated as earned reserve, which is included in retained earnings, until such reserve equals 25% of the stated capital. Legal reserves may be transferred to stated capital by resolution of the board of directors or maybe used to reduce a deficit with the approval of a shareholders’ meeting. In addition, these reserves may be available for dividends to the extent that these reserves do not fall bellow 25% of the stated capital. Under the revised Commercial Code, the Company is allowed to repurchase its own shares by resolution of the shareholders’ meeting and the board of directors. On June 29, 2004 the articles of association were revised by a resolution of the shareholders’ meeting, to allow the Company to repurchase its own shares. The Company adopted a system through which directors, auditors, operating officers, executive officers, and executives of main affiliates of the Company are able to purchase ordinary shares. The stock options are as follows:

【Resolution of the shareholders meeting on June 28, 2001】The system enabled 4 directors and 22 employees of the Company (19 employees for forfeiture as of May 31, 2006) to purchase a total of 52

thousand ordinary shares (38 thousand for forfeiture as of May 31, 2006), and this option is exercisable from July 1, 2003 to June 30, 2006.

【Resolution of the shareholders meeting on June 27, 2002】The system enabled directors, auditors, executive officers, and executives of main affiliates of the Company to purchase a total of 180 thousand ordinary shares (137 thousand for forfeiture as of May 31, 2006), and this option is exercisable from July 1, 2004 to June 30, 2007.

【Resolution of the shareholders meeting on June 27, 2003】The system enabled directors, auditors, executive officers, and executives of main affiliates of the Company to purchase a total of 280 thousand ordinary shares (237 thousand for forfeiture as of May 31, 2006), and this option is exercisable from July 1, 2005 to June 30, 2008.

【Resolution of the shareholders meeting on June 29, 2004】The system enabled directors, auditors, executive officers, and executives of main affiliates of the Company to purchase a total of 510 thousand ordinary shares (464 thousand for forfeiture as of May 31, 2006), and this option is exercisable from July 1, 2006 to June 30, 2009.

【Resolution of the shareholders meeting on June 29, 2005】The system enabled directors, auditors, executive officers, and executives of main affiliates of the Company to purchase a total of 600 thousand ordinary shares (557 thousand for forfeiture as of May 31, 2006), and this option is exercisable from July 1, 2007 to June 30, 2010.

【Resolution of the shareholders meeting on June 29, 2006】The system enabled directors, executive officers, and executives of main affiliates of the Company to purchase a total of 600 thousand ordinary shares, and this option is exercisable from July 1, 2008 to June 30, 2011.

10. Shareholders’ Equity

12. Selling, General and Administrative Expenses

( )( )

March 31,Millions of Yen

March 31,Thousands of U.S. Dollars

2006 2006

For the year ended March 31,Millions of Yen

For the year ended March 31,Thousands of U.S. Dollars

¥

¥

Market value in excess of costs・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Deferred tax liabilities・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Others・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Unrealized holding gains on securities, net of tax・・・・・・・・・・

10,7754,353

276,395

( )( )

2005

¥

¥

5,5072,225

753,207

( )( )

$

$

91,73337,060

23154,442

Unrealized holding gains on securities, net of tax in shareholders’ equity as of March 31, 2006 and 2005 are analyzed as follows:

11. Unrealized Holding Gains on Securities

32 A n n u a l R e p o r t 2 0 0 6

Research and development expenditures included in Cost of sales, Selling, general and administrative expenses, and Other expenses were ¥2,853 million ($ 24,283 thousand) and ¥2,023 million for the years ended March 31, 2006 and 2005, respectively.

The Company and its domestic consolidated subsidiaries are subject to a number of different taxes based on income, which in the aggregate indicate a normal cumulative statutory tax rate of approximately 40.4% for the years ended March 31, 2006 and 2005. Foreign consolidated subsidiaries are subject to income taxes in the countries in which they operate.

The significant components of deferred tax assets and liabilities as of March 31, 2006 and 2005 are summarized as follows:

13. Research and Development

14. Income Taxes

( )

2006 2005 2006

Deferred tax assets due to : Accrued severance indemnities・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ Unrealized gain on inventories・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ Allowance for Salaries Expense・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ Accrued enterprise taxes・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ Operating loss carry-forwards for tax purpose・・・・・・・・・・・ Expenses on environmental protection measures・・・ Other・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ Deferred tax liabilities due to : Unrealized holding gains on “Other securities”・・・・・・・・・ Other・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Net deferred tax assets・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

¥

¥

1,644304473190—

485578

3,674

4,353175

4,528854 ( )

13,9922,5884,0311,615

—4,1274,924

31,277

37,0601,486

38,5467,269

¥

¥

1,60524246811229

485573

3,514

2,225221

2,4461,068

$

$

March 31,Millions of Yen

March 31,Thousands of U.S. Dollars

( )

( )( )

2006 2005 2006

Current assets :Deferred tax assets・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Investments and other assets :Deferred tax assets・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Current liabilities :Deferred tax liabilities・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Long-term liabilities :Deferred tax liabilities・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

¥

¥

1,775

331

28

2,932854

( )

( )

¥

¥

1,618

351

32

8691,068

( )

( )( )

$

$

15,107

2,822

236

24,9627,269

Net deferred tax assets were included in the accompanying consolidated balance sheets as follows:

March 31,Millions of Yen

March 31,Thousands ofU.S. Dollars

33A n n u a l R e p o r t 2 0 0 6

Significant differences between the normal cumulative statutory tax rate and the effective tax rate in the consolidated statements of income for the year ended March 31, 2005 were as follows:

( )

2005

Normal cumulative statutory tax rate・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ Non-taxable entertainment expenses・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ Dividends from the overseas consolidated subsidiaries・・・・ Per capital inhabitant tax・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ Tax loss of subsidiaries・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ Other・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Effective tax rate in the consolidated statements of income・・・・

%

%

40.40.40.90.5

11.14.0

35.1

There were no significant differences between the normal cumulative statutory tax rate and the effective tax rate in the consolidated statements of income for the year ended March 31, 2006.

Segment information of the Company and its consolidated subsidiaries for the years ended March 31, 2006 and 2005 is presented below:

(1) Industry segmentThe Companies’main operations are manufacturing and distributing capacitors and related products. The Companies’operations by business segment for the years ended March 31, 2006 and 2005 are not disclosed since the ratio of business other than the main

operations described above to the total in respect of sales, operating income and assets is not material, being less than the 10% stipulated in the Japanese Disclosure Rule on Consolidated Financial Statements.

(2) Geographic segment

Sales : Outside customers・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ Intersegment・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Total sales・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ Operating costs and expenses・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Operating income (loss)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Assets・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Year ended March 31, 2006

Sales : Outside customers・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ Intersegment・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Total sales・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ Operating costs and expenses・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Operating income・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Assets・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Year ended March 31, 2005

¥

¥

¥

54,11441,54495,65889,2936,365

101,689

( )

¥

¥

¥

10,088—

10,08810,455　367

8,720

( )

¥

¥

¥

37,8553,156

41,01141,221

210

25,393

¥

¥

¥

4,8145

4,8194,800

19

2,294

( )( )( )

¥

¥

¥

—44,70544,70544,945

240

28,744

¥

¥

¥

106,871—

106,871100,824

6,047

166,840

¥

¥

¥

56,27739,52795,80490,2135,591

100,729

¥

¥

¥

11,0244

11,02811,015

13

7,924

¥

¥

¥

31,5931,932

33,52533,162

363

20,415

¥

¥

¥

5,20211

5,2134,990

223

2,022

( )( )( )

¥

¥

¥

—41,47441,47441,598

124

24,789

¥

¥

¥

104,096—

104,09697,7826,314

155,879

Effective from the year ended March 31, 2005, the Company recorded ¥116 million of the value added portion and shareholders’ equity portion of corporate enterprise tax in “Selling general and administrative expenses” in accordance with the statement on

“Practical Treatment Regarding Presentation of Tax Assessment based on Business Size in corporate enterprise tax on the Statement of income” (February 13, 2004, Accounting Standard Board of Japan Practical Measures Report No.12).

15. Tax Assessment Based on Business Size

16. Segment Information

Millions of Yen

JapanUnited Statesof America Asia Other

Eliminationand

corporate Consolidated

Millions of Yen

JapanUnited Statesof America Asia Other

Eliminationand

corporate Consolidated

The foreign operations of the Companies for the years ended March 31, 2006 and 2005 were summarized as follows:

34 A n n u a l R e p o r t 2 0 0 6

Sales : Outside customers・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ Intersegment・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Total sales・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ Operating costs and expenses・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Operating income (loss)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Assets・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

Year ended March 31, 2006

$

$

$

460,661353,660814,321760,13454,187

865,668

( )

$

$

$

85,877—

85,87789,0013,124

74,230

( )

$

$

$

322,25526,861

349,116350,907

1,791

216,164

$

$

$

40,98437

41,02140,862

159

19,524

( )( )( )

$

$

$

—380,558380,558382,605

2,047

244,694

$

$

$

909,777—

909,777858,29951,478

1,420,280

Unallocated corporate assets included in “Elimination and corporate” were ¥54,441 million ($463,446 thousand) and ¥46,641 million as of March 31, 2006 and 2005, respectively.

Thousands of U.S. Dollars

JapanUnited Statesof America Asia Other

Eliminationand

corporate Consolidated

Millions of Yen

¥Sales to foreign customers・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Consolidated sales・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Ratio of sales to foreign customers to consolidated sales・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

10,100—

9.4%

¥ 47,999—

44.9%

¥ 5,418—

5.1%

63,517106,871

59.4%

¥

United Statesof America Asia Other TotalYear ended March 31, 2006

Millions of Yen

¥Sales to foreign customers・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Consolidated sales・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Ratio of sales to foreign customers to consolidated sales・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

11,036—

10.6%

¥ 39,413—

37.9%

¥ 5,647—

5.4%

¥ 56,096104,096

53.9%

United Statesof America Asia Other TotalYear ended March 31, 2005

Thousands of U.S. Dollars

$Sales to foreign customers・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Consolidated sales・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Ratio of sales to foreign customers to consolidated sales・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

85,978—

9.4%

$ 408,609—

44.9%

$ 46,119—

5.1%

$ 540,706909,777

59.4%

United Statesof America Asia Other TotalYear ended March 31, 2006

Sales to foreign customers for the years ended March 31, 2006 and 2005 consisted of the following:

(3) Sales to foreign customers

35A n n u a l R e p o r t 2 0 0 6

Yen U.S. Dollars

2006 2005 2006

Net income per share -Basic・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ -Diluted・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

¥ 51.6151.61

¥ 51.46—

$ 0.440.44

The amounts of net income per share for the year ended March 31, 2006 and 2005 were as follows:

Millions of Yen Thousands of U.S .Dollars

2006 2005 2006

Net income applicable to shareholders of common stock・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ ¥ 4,044 ¥ 4,036 $ 34,429

Weighted average number of shares of common stock・・・

The amounts and numbers used for the basic net income per share computation for the years ended March 31, 2006 and 2005 were as follows:

Thousands of shares

2006 2005

Warrant for stock option・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・Treasury stock for stock option・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

1,15838

88974

The following figures are potential shares of common stock that were excluded from the net income per share computation because they had no dilutive effect.

The figure of diluted net income per share for the fiscal year ended March 31, 2005 is not applicable since there were no potentially dilutive common shares that had a dilutive effect.

17. Amount Per Share

At the 71st shareholders’meeting of the Company held on June 29, 2006, the payment of cash dividends (¥9.5 or $0.08 per share) and directors’ bonuses, which amounted to ¥736 million ($6,265 thousand) and ¥33 million ($281 thousand), respectively was approved.

18. Subsequent Event

Thousands of shares

2006

78,358

2005

78,430

36 A n n u a l R e p o r t 2 0 0 6

We have audited the accompanying consolidated balance sheets of NICHICON CORPORATION and its subsidiaries as of March 31, 2005 and 2006, and the related consolidated statements of income, shareholders’ equity, and cash flows for the years then ended, all expressed in Japanese Yen. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of NICHICON CORPORATION and its subsidiaries as of March 31, 2005 and 2006, and the consolidated results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in Japan.　　

The amounts expressed in U.S. dollars, which are provided solely for the convenience of the reader, have been translated on the basis set forth in Note 3 to the accompanying consolidated financial statements.

To the Board of Directors and Shareholders ofNICHICON CORPORATION

ChuoAoyama PricewaterhouseCoopers

Osaka, JapanJune 29, 2006

Report of independent auditors

37A n n u a l R e p o r t 2 0 0 6

NICHICON TANTALUM CORPORATION690-2, Miozato, Adogawa-cho, Takashima-shi, Shiga Pref.,520-1215 JapanTEL.81-740-32-1250 FAX.81-740-32-1504Capital Stock : 316 million yenProduct line : Solid tantalum electrolytic capacitorsISO 9001, ISO/TS16949 & ISO14001 certified

NICHICON (KAMEOKA) CORPORATION15-1, 2-chome, Kitakose-cho, Kameoka-shi, Kyoto Pref.,621-0811 JapanTEL.81-771-22-5541 FAX.81-771-29-2010Capital Stock : 80 million yenProduct line : Hybrid ICs, Circuit modules, Positive thermistors “Posi-R”ISO 9001 & ISO14001 certified

NICHICON (OHNO) CORPORATION1-11-2 Shimoyoro, Ohno-shi, Fukui Pref., 912-0095 JapanTEL.81-779-66-0333 FAX.81-779-66-0312Capital stock : 80 million yenProduct line : Aluminum electrolytic capacitors (Miniature-sized type)ISO 9001, ISO/TS16949 & ISO14001 certified

NICHICON (KUSATSU) CORPORATION3-1, Yagura 2-chome, Kusatsu-shi, Shiga Pref., 525-0053 JapanTEL.81-77-563-1181 FAX.81-77-563-1208Capital stock : 80 million yenProduct line : Capacitors for electric apparatus and power utilities,

Capacitor-applied system and equipmentISO 9001 & ISO14001 certified

NICHICON (ASAHI) CORPORATION120 Matoba, Hirasawa, Shiwa-cho, Shiwa-gun, Iwate Pref., 028-3308 JapanTEL.81-19-676-4511 FAX.81-19-676-6710Capital Stock : 100 million yenProduct line : Aluminum electrolytic capacitors(Miniature-sized type)ISO 9001, ISO/TS16949 & ISO14001 certified

NICHICON (IWATE) CORPORATION8-17-1, Kubo, Iwate-cho Iwate-gun, Iwate Pref., 028-4305 JapanTEL.81-195-62-5311 FAX.81-195-62-3400Capital Stock : 100 million yenProduct line : Aluminum electrolytic capacitors (Chip type)ISO 9001, ISO/TS16949 & ISO14001 certified

NICHICON (WAKASA) CORPORATION35-1-1 Tada, Obama-shi, Fukui Pref., 917-0026 JapanTEL.81-770-56-2111 FAX.81-770-56-2116Capital Stock : 84 million yenProduct line : Switching power suppliesISO 9001 & ISO14001 certified

Domestic : Overseas :

NICHICON (THAILAND) CO., LTD.Empire Tower 15th Floor, Unit 1506, Tower 3, 195 South Sathorn Road,Yannawa, Bangkok 10120, ThailandTEL.66-2-670-0150 FAX.66-2-670-0153Capital Stock : 20 million BAHTBusiness line : Sales of various kinds of capacitors

NICHICON (AMERICA) CORP.927 East State Parkway, Schaumburg, Illinois 60173, U.S.A.TEL.1-847-843-7500 FAX.1-847-843-2798Capital Stock : 3 million US$Business line : Sales of various kinds of capacitors

NICHICON (HONGKONG) LTD.Unit 308, Harbour Centre Tower 1, 1 Hok Cheung Street,Hunghom, Kowloon, Hong KongTEL.852-2363 4331 FAX.852-2764 1867Capital Stock : 5 million HK$Business line : Sales of various kinds of capacitors

NICHICON (SINGAPORE) PTE. LTD.238A Thomson Road, #12-01/02, Novena Square, Singapore 307684TEL.65-64815641 FAX.65-64816485Capital Stock : 8 million SP$Business line : Sales of various kinds of capacitors

NICHICON ELECTRONICS TRADING (SHANGHAI) CO., LTD.Room 1406-1408, Orient International Plaza (Part C) 85 Lou Shan Guan Road,Shanghai, 200336 ChinaTEL.86-21-6278-7658 FAX.86-21-6278-7657Capital Stock : 0.5 million US$Business line : Sales of various kinds of capacitors

NICHICON ELECTRONICS (TIANJIN) CO., LTD.No.4 Xinghua Road, Xiqing Economic Development Zone,Tianjin, 300381 ChinaTEL.86-22-8396-8930 FAX.86-22-8396-8931Capital Stock : 20 million US$Business line : Production and sales of solid tantalum electrolytic capacitorsISO 9001 & ISO14001 certified

NICHICON ELECTRONICS (WUXI) CO., LTD.Block 51-B, Wuxi National High & New Technology IndustrialDevelopment Zone, Wuxi, Jiangsu, 214028 ChinaTEL.86-510-85218222 FAX.86-510-85221170Capital Stock : 20 million US$Business line : Production of aluminum electrolytic capacitors and switching

power supplies, Sales of various kings of capacitors ISO 9001 & ISO14001 certified

NICHICON (TAIWAN) CO., LTD.16F-12, No.6, Sec.4, Hsin-Yi Rd., Taipei, TaiwanTEL.886-2-2708-0200 FAX.886-2-2708-0959Capital Stock : 30 million NT$Business line : Sales of various kinds of capacitors

NICHICON (AUSTRIA) GmbHAm Concorde Business Park C2 Top, Nr.14 2320 Schwechat, AustriaTEL.43-1-706-7932 FAX.43-1-706-7933Capital Stock : 1 million EURBusiness line : Sales of various kinds of capacitors

NICHICON (FUKUI) CORPORATIONNichicon Technology Center, 4 Tsuchifugo, Ohno-shi, Fukui Pref.,912-0805 JapanTEL.81-779-65-8800 FAX.81-779-65-8801Capital Stock : 100 million yenProduct line : Solid tantalum electrolytic capacitors and Couductivepolymer aluminum solid electrolytic capacitorsISO 9001 & ISO14001 certified

NICHICON (SHIGA) CORPORATION3-1, Yagura 2-chome, Kusatsu-shi, Shiga Pref., 525-0053 JapanTEL.81-77-563-1181 FAX.81-77-563-1208Capital Stock : 50 million yenProduct line : Solid tantalum electrolytic capacitorsISO 9001 & ISO14001 certified

TORISHIMA ELECTRIC WORKS LTD.3-1, Yagura 2-chome, Kusatsu-shi, Shiga Pref., 525-0053 JapanTEL.81-077-562-0891 FAX.81-077-562-0809Capital Stock : 30 million yenProduct and Business line : Various kinds of power transformers and reactorsISO 9001 certified

Consolidated subsidiaries

NICHICON (MALAYSIA) SDN. BHD.No.4 Jalan P/10, Kawasan Perusahaan Bangi,43650 Bandar Baru Bangi, Selangor Darul Ehsan, MalaysiaTEL.60-3-89250678 FAX.60-3-89250858Capital Stock : 63 million M$Business line : Production of aluminum electrolytic capacitors

(Chip, Miniature-sized and large can type), Sales of various kings of capacitorsISO 9001, ISO/TS16949 & ISO14001 certified

38 A n n u a l R e p o r t 2 0 0 6

2,000

1,500

1,000

500

Authorized number of sharesIssued number of sharesNumber of shareholdersListings

137,000,000 shares 81,144,372 shares10,676First section, Tokyo Stock ExchangeFirst section, Osaka Securities ExchangeFirst section, Nagoya Stock Exchange

6,192

4,269

3,560

3,370

3,090

2,641

2,615

2,512

2,200

1,915

8.0

5.5

4.6

4.4

4.0

3.4

3.4

3.2

2.8

2.5

Japan Trustee Services Bank, Ltd. (Trust account)

The Master Trust Bank of Japan, Ltd. (Investment trust account)

Nippon Life Insurance Company

The Bank of Kyoto, Ltd.

Mizuho Corporate Bank, Ltd.

The Bank of New York JASDEC Treaty Account

CBNY-Third Avenue International Val Fund

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

Sumitomo Mitsui Banking Corporation

Nobuko Hirai

Investor information

(Yen)

2001 2002 2003 2004 2005 2006

Corporate data

Major shareholdersCommon stock price range Number of shares held

(thousand)

Percentage of shares held

(%)

As of 31 March, 2006

Ippei Takeda

Hidetaka KurumizawaTadayoshi Nishizawa

Keiji Nishihata

Kouzo Yamasaki

Tatou IwasaSachihiko Araki

Yasuhiko Kumata

President & C.E.O.

Managing Director

Standing Auditor

Auditor

Board of Directors FactoriesAs of 29 June, 2006

As of 3 July, 2006

5-5, 2-Chome, Hamamatsu-cho, Minato-ku, Tokyo, 105-0013 JapanTEL.81-3-5473-5611 FAX.81-3-5473-5651

Offices

4085 Toyoshina, Azumino-shi, Nagano Pref., 399-8205 JapanTEL.81-263-72-2830 FAX.81-263-72-7140Product line : Aluminum electrolytic capacitors (Large can type),

Electric double layer capacitorsISO 9001, ISO/TS16949 & ISO14001 certified

1284-2, Kitahotaka Hotaka, Azumino-shi, Nagano Pref., 399-8302 JapanTEL.81-263-82-2510 FAX.81-263-82-7536Product line : Electrode foil for aluminum electrolytic capacitorsISO 9001 & ISO14001 certified

8224-1, Yashiro, Ohmachi-shi, Nagano Pref., 398-0003 JapanTEL.81-261-21-3200 FAX.81-261-21-3206Product line : Electrode foils for aluminum electrolytic capacitorsISO 9001 & ISO14001certified

Nichicon Technology Center, 4 Tsuchifugo, Ohno-shi, Fukui Pref., 912-0805 JapanTEL.81-779-65-8000 FAX.81-779-65-8911Product line : Electrode foils for aluminum electrolytic capacitors ISO 9001 & ISO14001certified

5-5, 2-Chome, Hamamatsu-cho, Minato-ku, Tokyo, 105-0013 JapanTEL.81-3-3432-6561 FAX.81-3-3437-5769Product line : Development & design for switching power suppliesISO 9001 certified

NAGANOFACTORY

HOTAKAFACTORY

OHMACHI FACTORY

TOMITAFACTORY

POWERSUPPLYDIVISION

As of 29 June, 2006

August 1, 1950

14,286 million yen (As of March 31, 2006)

5,846 (Consolidated) (As of March 31, 2006)

Date ofEstablishment

Capital Stock

Number ofEmployees

Head Office Karasumadori Oike-agaru, Nakagyo-ku, Kyoto, 604-0845 JapanTEL.81-75-231-8461 FAX.81-75-256-4158

TOKYO SALESOFFICE

18F Nishiki-Park Bldg. 4-3, Nishiki 2-chome, Naka-ku, Nagoya, 460-0003 JapanTEL.81-52-223-5581 FAX.81-52-220-1839

NAGOYA SALESOFFICE

Karasumadori Oike-agaru, Nakagyo-ku, Kyoto, 604-0845 JapanTEL.81-75-241-5370 FAX.81-75-231-8467

WEST JAPANSALES OFFICE

Sapporo, Touhoku, Kitakantou, Nagano,Okayama, Fukuoka

Sales Branches

39A n n u a l R e p o r t 2 0 0 6

Karasumadori Oike-agaru, Nakagyo-ku, Kyoto, 604-0845 JapanTEL. 81-75-231-8461 FAX. 81-75-256-4158

URL http://www.nichicon.co.jp/ http://www.nichicon.com

Printed on 100% recycled paper.This catalog is printed withenvironmentally friendly soy ink.