TDK Tdk Corp

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 20-F

o		REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

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

For the fiscal year ended March 31, 2008

OR

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

OR

o		SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-08346

TDK KABUSHIKI KAISHA

(Exact name of Registrant as specified in its charter)

TDK CORPORATION

(Translation of Registrant’s name into English)

Japan

(Jurisdiction of incorporation or organization)

13-1, Nihonbashi 1-chome, Chuo-ku, Tokyo 103-8272 Japan

(Address of Registrant’s principal executive offices)

Takakazu Momozuka, +81-3-5201-7116, tmomo@mb1.tdk.co.jp, +81-3-5201-7118,

13-1, Nihonbashi 1-chome, Chuo-ku, Tokyo 103-8272 Japan

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

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

Title of each class		Name of each exchange on which registered
American Depositary Shares		New York Stock Exchange
Common Stock		New York Stock Exchange

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

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

     Indicate the number of outstanding shares of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

     Common Stock

     128,955,736 shares (excluding treasury stock)

     Indicate by check mark whether if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes    þ           No    o

     If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes    o           No    þ

     Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes    þ           No    o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer    þ           Accelerated filer    o           Non-accelerated filer    o

     Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP    þ           International Financial Reporting Standards as issued by the International Accounting Standards Board    o           Other    o

     If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17    o           Item 18    o

     If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes    o           No    þ

 

 

TABLE OF CONTENTS

		PAGE
Explanatory Note			1
Forward-Looking Statements			1
PART I
Item 1. Identity of Directors, Senior Management and Advisors			2
Item 2. Offer Statistics and Expected Timetable			2
Item 3. Key Information			3
Item 4. Information on the Company			10
Item 4A. Unresolved Staff Comments			17
Item 5. Operating and Financial Review and Prospects			18
Item 6. Directors, Senior Management and Employees			52
Item 7. Major Shareholders and Related Party Transactions			72
Item 8. Financial Information			73
Item 9. The Offer and Listing			74
Item 10. Additional Information			76
Item 11. Quantitative and Qualitative Disclosures about Market Risk			95
Item 12. Description of Securities Other than Equity Securities			96
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies			97
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds			97
Item 15. Controls and Procedures			97
Item 15T. Controls and Procedures			98
Item 16A. Audit Committee Financial Expert			98
Item 16B. Code of Ethics			99
Item 16C. Principal Accountant Fees and Services			99
Item 16D. Exemptions from the Listing Standards for Audit Committees			101
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers			102
PART III
Item 17. Financial Statements			103
Item 18. Financial Statements			157
Item 19. Exhibits			157
SIGNATURES
EX-1.1 ARTICLES OF INCORPORATION (English translation)
EX-1.2 REGULATIONS OF THE BOARD OF DIRECTORS (English translation)
EX-1.3 REGULATIONS OF THE BOARD OF COMPANY AUDITORS (English translation)
EX-2.1 SHARE HANDLING REGULATIONS (English translation)
EX-8.1 LIST OF SIGNIFICANT SUBSIDIARIES
EX-11.1 TDK CODE OF ETHICS (English translation)
EX-12.1 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 OF CEO OF THE COMPANY
EX-12.2 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 OF CFO OF THE COMPANY
EX-13.1 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 OF CEO OF THE COMPANY
EX-13.2 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 OF CFO OF THE COMPANY

Explanatory Note

               All of the information contained in this annual report is as of March 31, 2008 unless otherwise specified. Fiscal 2008, fiscal 2007, fiscal 2006, fiscal 2005 and fiscal 2004 of this annual report indicate TDK Corporation’s fiscal period of the fiscal years ended March 31, 2008, 2007, 2006, 2005 and 2004, respectively.

               The figures in this annual report are expressed in yen and, solely for the convenience of the reader, are translated into United States dollars at the rate of ¥100 = U.S.$1, the approximate exchange rate prevailing on the Tokyo Foreign Exchange Market as of March 31, 2008. (See Note 2 of the Notes to Consolidated Financial Statements.) On June 30, 2008 the noon buying rate for yen cable transfers in New York City as reported by the Federal Reserve Bank of New York was ¥106.17 = $1. This translation should not be construed as a representation that the amounts shown could be converted into U.S. dollars at such rate.

Forward-Looking Statements

               This document contains forward-looking statements, including projections, plans, policies, management strategies, targets, schedules, understandings and evaluations, about TDK Corporation (“TDK”) and its group companies (TDK and its group companies are referred to also as “TDK” where the context so requires). These forward-looking statements are based on the current forecasts, estimates, assumptions, plans, beliefs and evaluations of TDK in light of information currently available to it, and contain known and unknown risks, uncertainties and other factors. TDK therefore wishes to caution readers that, being subject to risks, uncertainties and other factors, TDK’s actual results, performance, achievements or financial position could be materially different from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements, and TDK undertakes no obligation to publicly update or revise any forward-looking statements after the issue of this document except as required by law.

               The electronics markets in which TDK operates are highly susceptible to rapid changes. Risks, uncertainties and other factors that can have significant effects on TDK include, but are not limited to, shifts in technology, fluctuations in demand, prices, interest and foreign exchange rates, and changes in economic environments, conditions of competition, laws and regulations.

PART I

Item 1 .		Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2 .		Offer Statistics and Expected Timetable

Not applicable.

Item 3 .		Key Information

A.

Selected financial data

               The following selected consolidated financial data has been derived from the consolidated financial statements of TDK as of each of the dates and for each of the periods indicated below. This information should be read in conjunction with TDK’s audited consolidated balance sheets of March 31, 2008 and 2007, the related consolidated statements of income, stockholders’ equity and cash flows for each of the years in the three-year period ended March 31, 2008 and the notes thereto that appear elsewhere in this annual report.

               You should read the selected consolidated financial data set forth below in conjunction with Item 5 “Operating and Financial Review and Prospects” appearing elsewhere in this annual report.

Income Statement Data

																						Thousands of
																						U.S. dollars,
																						except per
		Millions of yen, except per share amounts																				share
		For the year ended March 31																				amounts (1)
		2008				2007				2006				2005				2004				2008
Net sales		¥	866,285			¥	862,025			¥	795,180			¥	657,853			¥	655,792			$	8,662,850
Cost of sales			635,529				622,819				585,780				484,323				476,407				6,355,290
Gross profit			230,756				239,206				209,400				173,530				179,385				2,307,560
Selling, general and administrative expenses			158,921				159,106				142,052				119,886				122,875				1,589,210
Transfer to the government of the substitutional portion of Employees’ Pension Fund:
Subsidy from the government			—				—				—				(33,533	)			—				—
Loss on settlement			—				—				—				27,347				—				—
Gain on sale of business to Imation Corp.			(15,340	)			—				—				—				—				(153,400	)
Restructuring cost			—				510				6,825				—				—				—
Operating income			87,175				79,590				60,523				59,830				56,510				871,750
Income from continuing operations before income taxes			91,505				88,665				66,103				60,728				55,847				915,050
Income from continuing operations			71,461				70,125				44,411				36,965				43,355				714,610
Loss from discontinued operations			—				—				310				3,665				1,254				—
Net income			71,461				70,125				44,101				33,300				42,101				714,610
Per Common Share:
Income from continuing operations per share:
Basic		¥	551.72			¥	529.88			¥	335.84			¥	279.41			¥	327.27			$	5.52
Diluted			551.19				529.29				335.54				279.25				327.15				5.51
Loss from discontinued operations per share:
Basic		¥	—			¥	—			¥	(2.34	)		¥	(27.70	)		¥	(9.47	)		$	—
Diluted			—				—				(2.34	)			(27.69	)			(9.46	)			—

																						Thousands of
																						U.S. dollars,
																						except per
		Millions of yen, except per share amounts																				share
		For the year ended March 31																				amounts (1)
		2008				2007				2006				2005				2004				2008
Net income per share:
Basic		¥	551.72			¥	529.88			¥	333.50			¥	251.71			¥	317.80			$	5.52
Diluted			551.19				529.29				333.20				251.56				317.69				5.51
Cash dividends		¥	120.00			¥	100.00			¥	80.00			¥	60.00			¥	50.00
U.S. Dollar equivalents (1)		$	1.20			$	0.85			$	0.68			$	0.56			$	0.47

Balance Sheet Data

		Millions of yen, except per share amounts																				Thousands of
		and exchange rate for yen																				U.S. dollars (2)
		2008				2007				2006				2005				2004				2008
Net working capital (3)		¥	300,859			¥	449,830			¥	397,131			¥	379,746			¥	360,555			$	3,008,590
Total assets			935,533				989,304				923,503				808,001				770,319				9,355,330
Short-term indebtedness			9,192				3,527				6,427				103				416				91,920
Long-term indebtedness			152				532				405				81				27				1,520
Retirement and severance benefits			33,990				32,290				26,790				28,839				73,521				339,900
Capital Stock			32,641				32,641				32,641				32,641				32,641				326,410
Stockholders’ equity			716,577				762,712				702,419				639,067				576,219				7,165,770
Number of shares outstanding (in thousands)			128,956				132,434				132,267				132,245				132,409

Exchange Rate Information

Yen exchange rates per U.S. dollar (4)		Average				Term end				High				Low
Year ended March 31:
2004			112.75				104.18				120.55				104.18
2005			107.28				107.22				114.30				102.26
2006			113.67				117.48				120.93				104.64
2007			116.55				117.56				121.81				110.07
2008			113.61				99.85				124.09				96.88
2009 (through June 30, 2008)			105.39				106.17				108.29				100.87
Month of 2008:
January 2008											109.70				105.42
February 2008											108.15				104.19
March 2008											103.99				96.88
April 2008											104.56				100.87
May 2008											105.52				103.01
June 2008											108.29				104.41

B.

Capitalization and indebtedness

               Not applicable.

C.

Reasons for the offer and use of proceeds

               Not applicable.

D.

Risk factors

Our business is exposed to fluctuations in economic conditions that may adversely affect our business results and financial condition.

               The electronics industry, our field of operations, is highly susceptible to economic trends in the U.S., Europe, China and Japan, which are the main markets for end products. Markets in these countries are constantly exposed to various risks such as international issues and economic fluctuations. In addition, the digital consumer products field is significantly affected by the extremely fast pace of technological innovation and competition in the development of new products as well as changes in economic conditions. Changes in the economic environments from our expectations could significantly affect our business results and financial condition.

Fluctuations in currency exchange rates could adversely affect our business results and financial condition.

               We import and export products between different regions of the world as we conduct our business activities in countries around the globe. Sudden changes in foreign currency exchange rates affect company transactions between regions and costs and prices of our products and services at overseas bases, which consequently have effects on our business results such as sales and income. Such fluctuations also give rise to conversion differences with respect to our investments in overseas assets and liabilities, which are converted into Japanese yen in our consolidated financial statements. Therefore, significant fluctuations in foreign currency exchange rates could have a significant adverse effect on our business results and financial condition.

We are susceptible to risks involved with selling our products in markets outside of Japan.

               Overseas sales account for approximately 80% of total sales on a consolidated basis. Therefore, we may be exposed to international political risks, such as war, terrorism and other events; economic risks, such as fluctuations in foreign currency exchange rates and trade imbalance; and social risks, including disease and labor problems stemming from differences in cultures and customs. Such risks may give rise to changes of a far greater magnitude than we anticipate. We may also face unexpected barriers in building relationships with trading partners due to differences in commercial and business customs. These risks could lower productivity in manufacturing processes, undermine the competitiveness of products and hinder sales activities. These outcomes could in turn have a significant adverse effect on our business results and financial condition.

A slow-down of the Chinese economy, adverse changes in political and economic policies of the Chinese government, or other factors in China may reduce our growth and profitability.

               We have many production bases in China for mainstay products, such as HDD heads. We have also established a system for supplying both local companies and customers that have been setting up operations in China.

                However, in the event that political factors (such as changes in laws and regulations), economic factors (such as the continuity of high growth, problems with electric power supply and other infrastructure) and social factors cause unexpected events in China, there could be a material adverse effect on our growth and profitability.

We may not be able to compete effectively with respect to prices, which would have a material adverse effect on our profitability.

               We supply products in a broad range of fields in an electronics industry defined by intense competition. These fields include information technology and communications devices such as digital home appliances, personal computers and mobiles phones. Price is one of the main competitive factors differentiating us from other companies in an industry in which leading Japanese companies and Asian companies in South Korea and Taiwan have fueled intense price-based competition.

                However, pressure continues to mount from customers for price discounts. In the event that a fall in prices far exceeds our expectations or becomes protracted, there could be a material adverse effect on our profitability.

Rapid changes in technology could adversely affect our business and hurt our competitive position.

               We believe that our ability to increase sales by developing appealing and innovative products has an important role in our growth. However, it is extremely difficult to predict future demand in the rapidly changing electronics industry and develop new technologies to meet that demand. We may fail to develop and supply in a timely manner attractive, new products with innovative technologies for this industry and our markets. In the event that our technology innovations lag behind others and existing technology becomes obsolete due to the technological change at an unexpectedly rapid pace, actual earnings could differ significantly from our forecasts. Such events also may negatively affect our ability to compete in existing markets, resulting in a significant adverse effect on our business results and growth prospects.

Claims of product liability and other issues associated with the quality of our products could adversely affect our business results and brand name.

               We manufacture various products at overseas manufacturing bases that we are developing globally in accordance with ISO (International Organization for Standardization) quality management standards (ISO 9001) and the strict standards required by customers in the electronics industry.

               We cannot be fully certain, however, that all of our products are defect-free and immune from recalls at some later date. A product recall or a product liability claim against us or against consumer products of our brand name caused by product defects could result in recall costs or damage claims, lower sales and have a negative impact on our reputation and brand, and may have a material adverse effect on TDK’s business performance. A situation resulting from poor product quality due to a major product defect could have a materially adverse effect on our business results.

Our proprietary technology is difficult to protect and unauthorized use of our proprietary technology by third parties may reduce the value of our products and brand and impair our ability to compete effectively.

               Our growth depends to a great extent on our ability to obtain patents, licenses and other intellectual property rights covering our products, product designs and manufacturing processes.

               However, there are cases where our intellectual property rights cannot be fully protected in a particular region for reasons unique to that region. Furthermore, we may suffer damages resulting from the manufacture by a third party of similar products to our own with the unauthorized use of our intellectual property rights. Limitations of our ability to enforce our intellectual property rights in such regions could reduce the value of our products and brand and impair our ability to compete effectively.

Our business may suffer if we are sued for infringing upon the intellectual property rights of third parties.

               There may be cases where it is alleged that our products infringe on the intellectual property rights of third parties that may sue for damages as a result of such alleged infringement. If our defenses against such claims are not accepted in such disputes, we may have to pay damages and royalties and suffer losses such as the loss of markets. Whether or not our defenses against such claims are accepted, we may incur expenses related to participating in legal processes or settlement negotiations in defense of such claims.

               The failure to defend against such third party infringement claims could have a materially adverse effect on our business development and business results and financial condition.

Our success depends on attracting and retaining highly-skilled employees, and we would suffer material adverse effects if we are unable to do so.

               To prevail against fierce competition in the electronics industry, we believe that it is necessary to recruit and retain staff possessing advanced technical skills, and superior management ability, such as with respect to the ability to formulate strategy and organizational management.

               However, intense competition to recruit such skilled employees is not limited to the industries where we are active. Moreover, in Japan, the change of employment environment progresses rapidly because of the falling birthrate and the aging population, and the decline of the workforce population. These and other factors mean there is no guarantee that we will continue to be able to recruit and retain skilled employees. The inability to recruit and train personnel as planned could have a materially adverse effect on our operations, business results and growth prospects.

We are dependent on certain raw materials and other products, and our business will suffer if we are unable to procure such materials.

               Our manufacturing system is premised on deliveries of raw materials, components, equipment and other supplies in adequate quality and quantity in a timely manner from many external suppliers. In new product development, we may rely on certain irreplaceable suppliers for materials.

               Because of this, there may be cases where supplies of raw materials and other products to us are interrupted by an accident or some other event at a supplier, supply is suspended due to quality or other issues, or there is a shortage of or instability in supply due to a rapid increase in demand for finished products that use certain materials and products. If any of these situations becomes protracted, we may have difficulty finding substitutes in a timely manner from other suppliers, which could have a significant, adverse effect on our production and prevent us from fulfilling our responsibilities to supply products to our customers. Furthermore, such changes in the supply-demand equation may increase the price we pay for the raw materials. In the event of these or other similar occurrences, there could be a material adverse effect on our business results and financial condition.

Increased government regulation of our industry or changes in those regulations, whether in Japan or overseas, may limit our ability to compete effectively.

               We are subject to various regulations in Japan and other countries where we conduct business. These include approval for conducting business and making investments, laws and regulations governing the safety of electric and electronic products, laws and regulations relating to national security between nations, and export/import laws and regulations. We are also subject to commercial, antitrust, patent, product liability, environmental, consumer and business taxation laws and regulations.

               In the event that these laws and regulations become more stringent in the future, our business development could be affected adversely and we may incur additional operating costs. Furthermore, in the event that we are unable to respond appropriately to these laws and regulations, we may be forced to partially withdraw from certain businesses or take other actions.

               Government laws and regulations in their various forms may limit our ability to compete effectively.

Fluctuations in interest rates may have an adverse effect on our profitability.

               We have financial assets and liabilities which are subject to interest rates changes. Interest rate changes could have a material effect on interest income, interest expense or the value of financial assets, and could have a material adverse effect on our results and financial position.

We are developing business to business transactions on a global scale, whereby we supply electronic components to a variety of customers, and are thus susceptible to adverse changes with respect to the business of such customers.

               We are developing on a global scale business to business transactions, whereby we supply electronic components to a variety of electronics manufacturers, personal computer makers and other customers.

               However, supplies to these customers are significantly affected by various factors that are beyond our control such as changes in each customer’s business results and management strategies. A drop-off in purchasing demand due to poor business results at major customers, changes in customers’ purchasing plans and policies, the unexpected termination of contracts and other occurrences could result in our profit margins being reduced due to discounting pressure from customers or our being left holding large amounts of inventory.

               In recent years, mergers and acquisitions have been actively conducted in Japan and overseas. In the event that our customers go through reorganization or acquisition effected by enterprises of different business types with huge funds or by competitive enterprises, this situation could have a material adverse effect on our sales.

               Customers’ business results, changes in management strategy or other factors could thus have a material adverse effect on our business results and financial condition.

Our operations depend on facilities throughout the world and are subject to forces of nature that could disrupt our ability to serve our customers.

               We have many production sites and research and development facilities in Japan and overseas. These facilities and plants have taken measures to prevent damage caused by natural disasters. However, these facilities and plants could still suffer significant damage due to a force majeure event such as a large earthquake, typhoon, flood, or unknown epidemics including a new type of influenza virus that far exceeds any level expected. In the event of interruption to manufacturing, disruption of transportation routes, damage to or disconnection of information and communications infrastructure, our ability to supply our customers could be affected for a long period of time. This situation could have a material adverse effect on our business results and financial condition.

If we are unable to comply with the various environmental laws and regulations to which we are subject, we may have to withdraw from certain business activities, which would have an adverse effect on our brand and business operations.

               We are subject to various environmental laws and regulations with respect to industrial waste and emissions into the atmosphere and water from our production processes in Japan and overseas and with respect to specified hazardous chemical substances used in the products. In the event that environmental protection regulations become more stringent in the future, we expect our cost of compliance with such regulations to increase as well.

               While we both comply with such environmental regulations and actively promote environmental protection activities, there may be situations in which we will have difficulty responding appropriately to such demands and laws and regulations. In which case, we may be forced to withdraw from certain business activities, which could have a material adverse effect on our business results and financial condition.

Mergers and acquisitions may have an adverse effect on our profitability.

               The electronics industry is defined by intense competition and in order to remain competitive we have conducted mergers and acquisitions with the goal of pursuing competitiveness and profitability. However, we may not achieve the synergistic effects we expect or we may not achieve the profitability expected as a result of a merger or acquisition due to reasons such as insufficient penetration of management policies and strategies. Our inability to achieve the desired results after a merger or acquisition may significantly adversely effect on our business results, growth prospects and business development.

Japan’s Unit Share System could affect access to Japanese markets by holders of American Depositary Shares (“ADSs”), which could adversely affect the price of our shares.

               Pursuant to our Articles of Incorporation, 100 of our shares constitute one unit. A holder who owns ADRs evidencing less than 100 ADSs will indirectly own less than a whole unit of shares of Common Stock. Although, under the unit share system holders of less than a unit have the right to require us to purchase their shares, holders of ADRs evidencing ADSs that represent other than integral multiples of whole units are unable to exchange their ADRs for the underlying shares of Common Stock representing less than a unit and, therefore, are unable to exercise the rights to require us to purchase such underlying shares at this time. As a result, access to the Japanese markets by holders of ADRs through this mechanism will not be available for dispositions of shares of Common Stock in lots less than a unit. The unit share system does not affect the transferability of ADSs, which may be transferred in lots of any size.

Holders of American Depositary Shares have limited rights, which could adversely affect the price of our shares.

               The rights of shareholders under Japanese law to take actions, including voting their shares, receiving dividends and distributions, bringing derivative actions, examining our accounting books and records and exercising appraisal rights are available only to shareholders of record. Citibank, N.A., through its custodian agent, is the record holder of the shares underlying the ADSs, and therefore only it can exercise the rights of shareholders in connection with the deposited shares. The depositary has agreed to endeavor to vote the shares underlying ADSs in accordance with the instructions of ADS holders and to pay the dividends and distributions collected from us. However, ADS holders will not be able to bring a derivative action, examine our accounting books and records or exercise appraisal rights through the depositary.

               We are incorporated in Japan and a substantial portion of our assets are located outside of the United States (U.S.). As a result, it may be more difficult for investors to enforce against us judgments obtained in U.S. courts predicated upon the civil liability provisions of the Federal securities laws of the United States, including the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, or judgments obtained in other courts outside of Japan. In addition, there is doubt as to the enforceability in Japanese courts, in original actions or in actions for enforcements of judgments of U.S. courts, of civil liabilities based solely upon violation of these Federal securities laws of the United States.

Item 4 .		Information on the Company

A.

History and development of the Company

History

               TDK Corporation (TDK Kabushiki Kaisha) is a corporation formed under the Companies Act (formerly the Commercial Code) of Japan (the “Companies Act”). TDK’s principal place of business is at 13-1, Nihonbashi 1-chome, Chuo-ku, Tokyo 103-8272 Japan and its telephone number is +81-3-5201-7102. The agent in the U.S. for purposes of this Item 4 is TDK U.S.A. Corporation, 901 Franklin Avenue, P.O. Box 9302, Garden City, New York, NY 11530.

               TDK is a world leading manufacturer of recording media, ferrite products and recording device products, and a major producer of inductor, ceramic capacitor, magnet, HDD head and other components. TDK is a Tokyo-head quartered company founded on December 7, 1935 to commercialize ferrite.

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

               In the years ended March 31, 2008, 2007 and 2006, TDK’s capital expenditures were ¥84.3 billion ($843 million), ¥70.4 billion ($704 million) and ¥73.9 billion ($739 million), respectively. For further information of TDK’s capital expenditures, see “Capital Expenditures” included in Item 5.B. “Liquidity and capital resources”.

               TDK is planning capital expenditures of ¥70.0 billion ($700 million) in fiscal 2009, primarily for the expansion of production facilities and upgrading of facilities. Regarding TDK’s capital expenditure plans, TDK’s policy is to invest actively in targeted strategic fields to drive growth. TDK anticipates that the funds needed for the capital expenditures will be generated internally from its operations.

B.

Business overview

Sales by product category

               TDK’s businesses are broadly classified into two business segments: the electronic materials and components segment and the recording media segment.

               The following is a breakdown of consolidated net sales of TDK and its subsidiaries by business segment for fiscal 2008, 2007 and 2006:

		Years ended March 31
		2008				2007				2006				2008
		(millions of yen)												(millions of
		(%)												U.S. dollars)
Electronic Materials and Components:
Electronic materials		¥	200,101			¥	199,243			¥	180,766			$	2,001.0
			(23.1	)			(23.1	)			(22.7	)
Electronic devices			209,089				198,199				154,680				2,090.9
			(24.1	)			(23.0	)			(19.5	)
Recording devices			334,734				304,822				315,928				3,347.4
			(38.6	)			(35.4	)			(39.7	)
Other electronic components			74,191				56,557				36,376				741.9
			(8.6	)			(6.5	)			(4.6	)
Sub total			818,115				758,821				687,750
			(94.4	)			(88.0	)			(86.5	)			8,181.2
Recording Media:			48,170				103,204				107,430				481.7
			(5.6	)			(12.0	)			(13.5	)
Total		¥	866,285			¥	862,025			¥	795,180			$	8,662.9
			(100.0	)			(100.0	)			(100.0	)

Electronic Materials and Components segment. TDK’s electronic materials and components segment is made up of four product sectors: (i) electronic materials, (ii) electronic devices, (iii) recording devices, and (iv) other electronic components. Overall business results of each sector in fiscal 2008 compared to fiscal 2007 are as follows.

(i) Electronic materials. This sector is broken down into two product categories: capacitors, and ferrite cores and magnets.

               Capacitors: Sales of capacitors increased slightly year over year, reflecting higher sales of multilayer ceramic chip capacitors, the main product in the capacitors category, to the auto market and other sectors, which outweighed lower sales for use in personal computers and mobile phones.

               Ferrite cores and magnets: Sales of ferrite cores and magnets rose year over year, as higher magnet sales countered lower ferrite core sales.

(ii) Electronic devices. This sector has three product categories: inductive devices, high-frequency components, and other products.

               Inductive devices: Sales of inductive devices increased year over year, mainly as a result of higher sales of power line coils and signal line coils used in flat-screen TVs and of common-mode filters for the auto market.

               High-frequency components: Sales of high-frequency components increased year over year, the result mainly of higher sales for PC applications.

               Other products: Sales of other products were down year over year, with sensor and actuator sales falling mainly due to price declines and power supplies recording a slight drop due in part to the termination of some products.

(iii) Recording devices. This sector has two product categories: HDD heads and other.

               HDD heads: Sales of HDD heads increased year over year as HDD head sales volume increased on the back of higher unit production of HDDs, which was driven by growth in demand for HDDs for use in personal computers. Another factors was the increasing storage capacity of HDDs.

               Other: Sales of other increased year over year, with lower “other heads” sales offset by the inclusion from this fiscal term of the sales of a Thai-based manufacturer of suspension assemblies for HDDs, which was consolidated in November 2007.

(iv) Other electronic components. This sector includes all other products of the electronic materials and components segment other than those in the three sectors above. These products include anechoic chambers, mechatronics (production equipment) and energy devices (rechargeable batteries).

               Sales of this sector increased year over year as a result of higher sales of anechoic chambers and energy devices, and strong sales of new products.

Recording Media. This segment has three product categories: audiotapes and videotapes, optical media, and other products. On August 1, 2007, TDK transferred substantially all of the assets relating to TDK branded world wide recording media business and use of the TDK brand name for current and future recording media products to U.S. company Imation Corp (“Imation”). TDK retained its research and development, manufacturing and OEM business related to above three product categories.

               Sales of audiotapes and videotapes declined year over year, reflecting the effect of the sales business transfer and falling demand amid an ongoing switch to digital data storage.

               Sales of optical media declined year over year, due to lower sales of CD-Rs and DVDs following as a result of the sale of the TDK brand recording media sales business to Imation. On the other hand, sales of Blu-ray Discs increased.

               Sales of other products decreased year over year despite higher sales of LTO-standard* (Linear Tape-Open) tape-based data storage media for computers due to rising demand. The main reason for the overall fall in sales was lower sales of accessories and other products following the sale of the TDK brand recording media sales business.

     Marketing and Distribution

Marketing channels in Japan

                TDK markets electronic materials and components in Japan through its sales division, which had approximately 337 sales representatives at March 31, 2008.

Operations outside Japan

               TDK had 73 direct and indirect foreign subsidiaries as of March 31, 2008:

	•		35 manufacturing various product lines and distributing their products in their country of operation and other countries;
	•		16 sales subsidiaries which exclusively handle products manufactured by TDK;
	•		1 holding company for the administration of TDK’s U.S. operations;
	•		1 holding company for the administration of TDK’s European operations;
	•		1 company for research and development in Ireland;
	•		2 companies for research and development in the U.S.;
	•		1 company for engineering service for magnetic heads in Singapore;
	•		1 local management company for the administration of TDK’s Chinese operations;
	•		1 company for engineering service for magnetic heads in China;
	•		1 company for engineering service for magnetic heads in South Korea;
	•		1 holding company for the administration of Lambda’s U.S. operations;
	•		1 company for administration in Canada;
	•		1 holding company for the administration of Lambda’s European operations;
	•		1 company for research and development in Taiwan;
	•		1 holding company for the administration of Magnecomp’s U.S. operations;
	•		1 holding company for the administration of Magnecomp’s Asian operations;
	•		1 company for property investment in Thailand;
	•		3 dormant companies; and
	•		3 companies in the course of liquidation.

                Principal manufacturing or assembly operations were conducted by subsidiaries in the following countries as of March 31, 2008:

	China(including Hong Kong)	—	HDD heads, inductors, ferrite cores, capacitors, transformer, power supplies, and ferrite magnets
	United States	—	HDD heads, capacitors, ferrite magnets, and power supplies
	Taiwan	—	Capacitors, ferrite cores, and power supplies
	Philippines	—	HDD heads
	Thailand	—	Audiotapes, rare-earth metal magnets, power supplies, and suspension assemblies for HDD heads
	Malaysia	—	Power supplies, Capacitors and high-frequency components
	South Korea	—	Capacitors and inductors
	Hungary	—	Capacitors and ferrite cores

                A manufacturing subsidiary in Luxembourg ceased operation in April 2006.

                Outside of Japan, TDK relies on a combination of its sales force, distribution agents, retailers and directed sales efforts to market its products. TDK has sales subsidiaries in Germany, the United Kingdom, the United States, Singapore, Brazil, China, China (Hong Kong), Philippines, France, Italy and Sweden.

                TDK’s production sites are spread in many different regions in the world, which enables TDK to more easily adapt to fluctuating exchange rates and potential trade barriers. Production outside Japan as a percentage of sales outside Japan was 85.1% in fiscal 2008, 77.7% in fiscal 2007 and 79 % in fiscal 2006.

                Consolidated net sales of TDK and subsidiaries by geographical area for fiscal 2008, 2007 and 2006 were as follows:

		Years ended March 31
		2008								2007								2006								2008
																										(millions of
										(millions of yen) (%)																U.S. dollars)
Japan		¥	172,292				(19.9	)		¥	187,056				(21.7	)		¥	168,554				(21.2	)		$	1,722.9
North America			63,126				(7.3	)			75,862				(8.8	)			65,931				(8.3	)			631.3
Europe			52,801				(6.1	)			82,721				(9.6	)			74,846				(9.4	)			528.0
Asia and others			578,066				(66.7	)			516,386				(59.9	)			485,849				(61.1	)			5,780.7
Total		¥	866,285				(100.0	)		¥	862,025				(100.0	)		¥	795,180				(100.0	)		$	8,662.9

Patents and Licenses

                TDK has a variety of patents in Japan and other countries, and also has licenses from other companies. It believes that expiration of any one of its patents or licenses or related group of patents or licenses would not materially adversely affect its business activities. TDK does not believe that acquisition of new proprietary patents or other companies’ patents would have a material effect on operating results in the future.

Competition

                In electronic materials and components, rapid technological innovation makes technological improvement a particularly significant competitive factor in the industry. It has become difficult to make difference in product performance characteristics, due to the shift of technologies from analog to digital in electronics market in recent yeas. Also, customers expand their development, manufacture and sales into all over the world. Because of this, competitive factors are not only product performance characteristics which customers seek, but also higher quality reliability, reasonable price, appropriate delivery timing. In addition, it has become important to comply with the environmental regulations and laws (ex. The EU’s Restriction of Hazardous Substances (RoHS) Directive) and promote the creation of more products with an even higher level of environmental performance.

                Also, TDK does not compete only with Japanese companies, but also with foreign companies (especially Asian Companies). So, the foreign exchange will make an impact on the competition factor of products price.

Raw Materials and Sources of Supply

                TDK purchases a wide variety of raw materials, machines, tools and parts for use in the manufacture of its products. The principal raw materials purchased include magnetic powder of iron oxide, used for various electronic parts and recording media, neodymium-iron-alloy, composed rare-earth magnet products. For products manufactured in Japan, TDK purchases such raw materials from approximately 1,800 different sources, primarily in Japan. However, TDK purchases base tape from mainly three suppliers in Japan, although alternative sources of supply exist. Recently TDK increased its purchases from overseas and also increased local procurement of raw materials. No single source accounted for more than 10 percent of total purchases for fiscal 2008.

                TDK monitors the availability of raw materials on a regular basis to ensure that it will not encounter any shortages. TDK has not experienced any significant difficulty in obtaining raw materials and believes that it will be able to continue to obtain comparable raw materials in sufficient quantities to meet its manufacturing needs in the future. TDK also believes that the effect of price volatility with respect to raw materials that it uses in manufacturing its products can be managed.

C.

Organizational structure

                As of March 31, 2008, TDK had 73 overseas subsidiaries and 18 Japanese subsidiaries. See Exhibit 8.1 “List of Significant Subsidiaries” for further information.

D.

Property, plants and equipment

                TDK’s manufacturing operations are conducted primarily at 36 plants in Japan and 28 plants overseas.

                The following table sets forth information, as of March 31, 2008, with respect to TDK’s manufacturing facilities, the sites of which approximately 73% (in terms of floor space) are owned by TDK.

		Number of		Floor space
		principal		(thousands of
Location		factories		square feet)				Principal products manufactured
Japan
Akita		16			2,047			Capacitors, ferrite cores, inductors and high-frequency components
Nagano		4			1,150			HDD heads and optical disks
Chiba		1			724			Rare-earth metal magnets, ferrite cores and power supplies
Yamanashi		3			603			HDD heads and data storage tapes
Oita		1			470			Videotapes
Shizuoka		2			465			Ferrite magnets
Yamagata		3			345			Inductors
Iwate		1			298			Capacitors
Ibaraki		3			209			Display and power supplies
Niigata		1			54			Power supplies
Kanagawa		1			25			Ferrite magnets
Overseas
China		7			4,684			HDD heads, inductors, ferrite cores, capacitors, transformer, power supplies and ferrite magnets
United States of America		7			746			HDD heads, capacitors, ferrite magnets and power supplies
Thailand		3			626			Audiotapes, rare-earth metal magnets, power supplies and suspension assemblies for HDD heads
Philippines		1			441			HDD heads
Taiwan		1			380			Capacitors, ferrite cores and power supplies
Malaysia		2			364			Power supplies, Capacitors and high-frequency components
China (Hong Kong)		3			271			Ferrite cores
South Korea		1			164			Capacitors and inductors
Hungary		1			160			Capacitors and ferrite cores
United Kingdom		1			42			Power supplies
Israel		1			28			Power supplies
Total		64			14,296

                TDK considers all of its principal manufacturing facilities and other significant properties to be in good condition and adequate to meet the needs of its operations. TDK owns each of its significant properties.

                In addition, TDK utilizes additional floor space at the above plants and elsewhere for laboratories, office buildings, and employee housing and welfare facilities, with an aggregate floor space of 7,725 thousand square feet, of which approximately 48% is owned by TDK and the balance is leased to TDK.

Item 4A .		Unresolved Staff Comments

               None.

Item 5 .		Operating and Financial Review and Prospects

      Overview

          TDK was established in 1935 as the world’s first company to commercialize a magnetic material called ferrite. In the ensuing years, TDK developed and commercialized a host of other materials and products. The drive to develop new products is based on TDK’s founding spirit of “Contribute to culture and industry through creativity.”

          TDK’s operations are affected by economic conditions in various regions of the world including Japan, the U.S., Europe and Asia. Looking at economic conditions worldwide during the past fiscal year, the U.S. economy saw consumer spending and capital expenditures slow in the second half as a result of soaring energy and material prices and other factors. This happened at the same time as housing investment continued to plummet, due to a credit crunch triggered by the subprime loan problem. European economies, meanwhile, remained firm, underpinned by strong capital expenditures and increasing consumer spending. In Asia, economic conditions were strong due to continued expansion, particularly in Chinese exports. The Japanese economy, while seeing housing investment drop in the wake of amendments to the Building Standard Code of Japan, was resilient during the past fiscal year, thanks to increasing capital expenditures and exports.

          In the electronics market, which has a major bearing on the TDK Group’s performance, fiscal 2008 saw higher production of flat-screen TVs, home game consoles, notebook PCs, HDDs, digital still cameras and mobile phones, thanks in part to increasing demand in emerging growth markets. This growth, together with an increase in the number of electronic components required for use in finished products driven by their increasing sophistication and features, led to higher demand for electronic components, a key market for TDK. The increasing use of electronics in automobiles also lifted demand for electronic components.

          In this operating environment, TDK responded to this increasing demand for electronic components by boosting output of multilayer ceramic chip capacitors and other products. In November 2007, it also acquired the minority interest of DENSEI-LAMBDA K.K. making it a wholly owned subsidiary with the goal of expanding the power supplies business. In a move designed to make TDK’s HDD head operations more competitive, in September 2007, TDK acquired assets of an HDD head-related business from Alps Electric Co., Ltd., including manufacturing and other equipment and intellectual property rights such as patents and unpatented technologies. TDK also acquired Magnecomp Precision Technology Public Company Limited (“MPT”), a Thai-based manufacturer of suspension assemblies for HDDs, which became a consolidated subsidiary of TDK in November 2007.

          Moreover, on August 1, 2007, TDK transferred substantially all of the assets relating to TDK branded world wide recording media business and use of the TDK brand name for current and future recording media products to U.S. company Imation Corp. (“Imation”) for $250 million. In consideration, TDK received Imation common stock constituting approximately 16.6 percent of that company’s total outstanding shares and cash of approximately $29 million. Subsequently, on December 5, 2007, TDK purchased additional shares in Imation. As a result of this share purchase, TDK’s ownership in Imation increased to 20.1 percent, accordingly, TDK accounts for this company as an equity-method affiliate.

          TDK had consolidated net sales of ¥866,285 million ($8,662,850 thousand) in fiscal 2008, an increase of 0.5 percent from ¥862,025 million in fiscal 2007.

          Operating income increased 9.5 percent from ¥79,590 million in fiscal 2007 to ¥87,175 million ($871,750 thousand) in fiscal 2008.

          Income from continuing operations before income taxes increased 3.2 percent from ¥88,665 million in fiscal 2007 to ¥91,505 million ($915,050 thousand) in fiscal 2008.

          Net income rose 1.9 percent from ¥70,125 million in fiscal 2007 to ¥71,461 million ($714,610 thousand) in fiscal 2008.

               Basic net income per common share was ¥551.72 in fiscal 2008, an increase from ¥529.88 in fiscal 2007.

               TDK’s businesses are broadly classified into two business segments: the electronic materials and components segment and the recording media segment.

               The Electronic Materials and Components Segment is made up of four product sectors: (1) electronic materials, (2) electronic devices, (3) recording devices, and (4) other electronic components. This segment’s net sales climbed 7.8 percent to ¥818,115 million ($8,181,150 thousand) in fiscal 2008, from ¥758,821 million in fiscal 2007, while segment operating income declined 7.1 percent to ¥75,972 million ($759,720 thousand) in fiscal 2008, from ¥81,775 million in fiscal 2007.

               The Recording Media Segment has three product categories: audiotapes and videotapes, optical media and other products. This segment’s net sales declined 53.3 percent from ¥103,204 million in fiscal 2007 to ¥48,170 million ($481,700 thousand) in fiscal 2008. Operating income of the recording media segment in fiscal 2008 was ¥11,203 million ($112,030 thousand), up ¥13,388 million from fiscal 2007.

A.		Operating Results

Results of Operations

		Years ended March 31
		2008				2007				2006				2008
		(millions of yen)												(thousands
		(%)												of dollars)
Net sales		¥	866,285			¥	862,025			¥	795,180			$	8,662,850
			(100.0	)			(100.0	)			(100.0	)
Cost of sales			635,529				622,819				585,780				6,355,290
			(73.4	)			(72.3	)			(73.7	)
Gross profit			230,756				239,206				209,400				2,307,560
			(26.6	)			(27.7	)			(26.3	)
Selling, general and administrative expenses			158,921				159,106				142,052				1,589,210
			(18.3	)			(18.4	)			(17.9	)
Gain on sale of business to Imation Corp.			(15,340	)			—				—				(153,400	)
			(-1.8	)			—				—
Restructuring cost			—				510				6,825				—
			—				(0.1	)			(0.8	)
Operating income			87,175				79,590				60,523				871,750
			(10.1	)			(9.2	)			(7.6	)
Other income (other deductions)			4,330				9,075				5,580				43,300
			(0.5	)			(1.1	)			(0.7	)
Income taxes and minority interests, net of tax			20,044				18,540				21,692				200,440
			(2.4	)			(2.2	)			(2.7	)
Loss from discontinued operations			—				—				310				—
			—				—				(0.1	)
Net income		¥	71,461			¥	70,125			¥	44,101			$	714,610
			(8.2	)			(8.1	)			(5.5	)

Sales by Region

		Years ended March 31
		2008				2007				2006				2008
		(millions of yen)												(thousands
		(%)												of dollars)
Japan		¥	152,113			¥	171,352			¥	173,658			$	1,521,130
			(17.6	)			(19.9	)			(21.8	)
North and South America			96,287				103,124				90,192				962,870
			(11.1	)			(11.9	)			(11.4	)
Europe			59,128				83,545				75,895				591,280
			(6.8	)			(9.7	)			(9.5	)
Asia (excluding Japan) and Oceania			553,911				499,505				451,710				5,539,110
			(63.9	)			(58.0	)			(56.8	)
Middle East and Africa			4,846				4,499				3,725				48,460
			(0.6	)			(0.5	)			(0.5	)
Net sales		¥	866,285			¥	862,025			¥	795,180			$	8,662,850
			(100.0	)			(100.0	)			(100.0	)

     This summary of sales by region is based on the location of the customer.

      Segment Information

          The following industry and geographic segment information is presented to conform to requirements of the Financial Instruments and Exchange Law of Japan. Segment information has not been derived from the audited consolidated financial statements in Item 17.

Industry Segment Information

		Years ended March 31
		2008				2007				2006				2008
		(millions of yen)												(thousands
														of dollars)
ELECTRONIC MATERIALS AND COMPONENTS
Net sales
External sales		¥	818,115			¥	758,821			¥	687,750			$	8,181,150
Intersegment			—				—				—				—
Total revenue			818,115				758,821				687,750				8,181,150
			(100.0	%)			(100.0	%)			(100.0	%)			(100.0	%)
Operating expenses			742,143				677,046				613,417				7,421,430
			(90.7	%)			(89.2	%)			(89.2	%)			(90.7	%)
Operating income		¥	75,972			¥	81,775			¥	74,333			$	759,720
			(9.3	%)			(10.8	%)			(10.8	%)			(9.3	%)
Identifiable assets			790,005				735,204				672,596				7,900,050
Depreciation and amortization			68,910				62,605				53,599				689,100
Capital expenditures			81,957				68,394				71,070				819,570
RECORDING MEDIA
Net sales
External sales		¥	48,170			¥	103,204			¥	107,430			$	481,700
Intersegment			—				—				—				—
Total revenue			48,170				103,204				107,430				481,700
			(100.0	%)			(100.0	%)			(100.0	%)			(100.0	%)
Operating expenses			36,967				105,389				121,240				369,670
			(76.7	%)			(102.1	%)			(112.9	%)			(76.7	%)
Operating income (loss)		¥	11,203			¥	(2,185	)		¥	(13,810	)		$	112,030
			(23.3	%)			(-2.1	%)			(-12.9	%)			(23.3	%)
Identifiable assets			65,264				75,442				79,109				652,640
Depreciation and amortization			2,387				2,732				4,941				23,870
Capital expenditures			2,355				2,046				2,841				23,550
ELIMINATIONS AND CORPORATE
Corporate assets		¥	80,264			¥	178,658			¥	171,798			$	802,640
TOTAL
Net sales
External sales		¥	866,285			¥	862,025			¥	795,180			$	8,662,850
Intersegment			—				—				—				—
Total revenue			866,285				862,025				795,180				8,662,850
			(100.0	%)			(100.0	%)			(100.0	%)			(100.0	%)
Operating expenses			779,110				782,435				734,657				7,791,100
			(89.9	%)			(90.8	%)			(92.4	%)			(89.9	%)
Operating income		¥	87,175			¥	79,590			¥	60,523			$	871,750
			(10.1	%)			(9.2	%)			(7.6	%)			(10.1	%)
Identifiable and corporate assets			935,533				989,304				923,503				9,355,330
Depreciation and amortization			71,297				65,337				58,540				712,970
Capital expenditures			84,312				70,440				73,911				843,120

Geographic Segment Information

		Years ended March 31
		2008				2007				2006				2008
					(millions of yen)									(thousands
														of dollars)
JAPAN
Net sales (1)		¥	390,364			¥	397,147			¥	360,210			$	3,903,640
Operating income			35,257				31,277				49,437				352,570
Identifiable assets			414,009				363,203				347,942				4,140,090
NORTH AND SOUTH AMERICA
Net sales (1)			103,248				111,689				105,979				1,032,480
Operating income			7,905				7,869				9,995				79,050
Identifiable assets			82,128				99,585				100,611				821,280
EUROPE
Net sales (1)			54,418				84,329				76,240				544,180
Operating income (loss)			(4,056	)			(3	)			(9,996	)			(40,560	)
Identifiable assets			37,917				50,941				45,729				379,170
ASIA AND OTHERS
Net sales (1)			636,242				572,979				531,824				6,362,420
Operating income			44,397				41,515				12,607				443,970
Identifiable assets			396,348				387,002				348,008				3,963,480
ELIMINATIONS AND CORPORATE
Net sales (1)			317,987				304,119				279,073				3,179,870
Operating income (loss)			3,672				(1,068	)			(1,520	)			36,720
Identifiable assets			5,131				88,573				81,213				51,310
TOTAL
Net sales		¥	866,285			¥	862,025			¥	795,180			$	8,662,850
Operating income			87,175				79,590				60,523				871,750
Identifiable and corporate assets			935,533				989,304				923,503				9,355,330
OVERSEAS SALES (2)
Americas		¥	96,287			¥	103,124			¥	90,192			$	962,870
Europe			59,128				83,545				75,895				591,280
Asia and others			558,757				504,004				455,435				5,587,570
Overseas sales total		¥	714,172			¥	690,673			¥	621,522			$	7,141,720
Percentage of consolidated sales			82.4	%			80.1	%			78.2	%			82.4	%

Fiscal 2008 Compared to Fiscal 2007

Sales

               Consolidated net sales increased 0.5 percent from ¥862.0 billion to ¥866.3 billion ($8,662.9 million) for the fiscal year ended March 31, 2008.

               Electronic Materials and Components Segment is made up of four product sectors: (1) electronic materials, (2) electronic devices, (3) recording devices, and (4) other electronic components.

               Electronic Materials: Sales in the electronic materials sector rose 0.4 percent from ¥199.2 billion to ¥200.1 billion ($2,001.0 million). Sales of capacitors increased slightly year over year, reflecting higher sales of multilayer ceramic chip capacitors, the main product in the capacitors category to the auto market and other sectors, which outweighed lower sales for use in PCs and mobile phones. Sales of ferrite cores and magnets rose year over year, as higher magnet sales countered lower ferrite core sales.

               Electronic Devices: Sales in the electronic devices sector climbed 5.5 percent from ¥198.2 billion to ¥209.1 billion ($2,090.9 million). Sales of inductive devices increased year over year, mainly as a result of higher sales of power line coils and signal line coils used in flat-screen TVs and of common-mode filters for the auto market. Sales of high-frequency components increased year over year, the result mainly of higher sales for PC applications. Sales of other products were down year over year, with sensor and actuator sales falling mainly due to price declines and power supplies recording a slight drop due in part to the termination of some products.

               Recording Devices: In the recording devices sector, sales rose 9.8 percent from ¥304.8 billion to ¥334.7 billion ($3,347.3 million). Sales of HDD heads increased year over year, as HDD head sales volume increased on the back of higher unit production of HDDs, which was driven by growth in demand for HDDs for use in PCs. Another factor was the increasing storage capacity of HDDs. Sales of other increased year over year, with lower “other heads” sales offset by the inclusion from this fiscal term of the sales of a Thai-based manufacturer of suspension assemblies for HDDs, which was consolidated in November 2007.

               Other Electronic Components: Sales in the other electronic components sector increased 31.2 percent from ¥56.6 billion to ¥74.2 billion ($741.9 million) compared to the prior fiscal year. This was the result of higher anechoic chamber and energy device sales, and strong sales of new products.

               Operating income of the electronic materials and components segment in fiscal 2008 was ¥76.0 billion ($759.7 million), a decrease of ¥5.8 billion as compared to fiscal 2007. The decrease is mainly due to the decline in gross profit ratio as a result of reduction of sale price in certain products.

               In the recording media segment, sales decreased 53.3 percent from ¥103.2 billion to ¥48.2 billion ($481.7 million). Sales dropped sharply year over year due to the sale of the TDK brand recording media sales business in August 2007. Sales of audiotapes and videotapes declined year over year, reflecting the effect of the sale of the TDK brand recording media sales business and falling demand due to an ongoing switch to digital data storage. Sales of optical media declined year over year, the result of lower sales of CD-Rs and DVDs as a result of the sale of the TDK brand recording media sales business. On the other hand, sales of Blu-ray Discs increased. Sales of other products decreased year over year despite higher sales of LTO-standard* (Linear Tape-Open) tape-based data storage media for computers on the back of rising demand. The main reason for the overall fall in sales was lower sales of accessories and other products following the sale of the TDK brand recording media sales business.

               Operating income of the recording media segment in fiscal 2008 was ¥11.2 billion ($112.0 million), ¥13.4 billion increase from the ¥2.2 billion operating loss in fiscal 2007. The aforementioned business sale resulted in TDK recognizing a gain on sale of ¥15.3 billion, which is included in operating income.

               *Linear Tape-Open, LTO, the LTO Logo, Ultrium and the Ultrium Logo are trademarks of HP, IBM and Quantum in the U.S. and other countries.

               By region, sales in Japan declined 11.2 percent from ¥171.4 billion to ¥152.1 billion ($1,521.1 million). Overseas sales increased 3.4 percent from ¥690.7 billion to ¥714.2 billion ($7,141.7 million). Overseas sales accounted for 82.4 percent of consolidated net sales.

Net Sales Geographic Segments

               Japan: In Japan, sales in the other electronic components sector increased, while sales in the electronic materials, electronic devices and recording devices sectors and recording media segment declined. While operating income of the electronic materials and components segment decreased by ¥8.5 billion due to the decline in the electronic materials sector, operating income of the recording media segment increased significantly, resulting in the increase in operating income in this region by ¥9.5 billion to ¥39.2 billion.

               Asia (excluding Japan) and Oceania: In Asia (excluding Japan) and Oceania, sales increased in the electronic materials, electronic devices, recording devices and other electronic components sectors, but sales declined in the recording media segment. Operating income of the electronic materials and components segment increased by ¥3.1 billion due to the increase in the other electronic components sector. Operating income in this region increased by ¥3.0 billion to ¥44.4 billion.

               North and South America: In the Americas, sales decreased in the electronic materials sector and recording media segment. The appreciation of the yen versus the U.S. dollar also led to decreased sales because TDK products became more expensive to U.S. consumers as a result of these exchange rate movements. Operating income of the electronic materials and components segment was relatively unchanged while there was a decline in operating income of the recording media segment. Operating income in this region decreased slightly by ¥0.9 billion to ¥7.6 billion.

               Europe: In Europe, sales decreased in the electronic materials sector and recording media segment. Operating income of the electronic materials and components segment down turned by ¥0.4 billion to operating loss of ¥0.3 billion, and operating loss of the recording media segment increased by ¥3.6 billion to ¥3.7 billion. Operating loss in this region increased by ¥4.0 billion to ¥4.0 billion.

Effect of foreign exchange movements

               In fiscal 2008, overseas sales accounted for 82.4 percent of consolidated net sales, an increase of 2.3 percent compared to the prior fiscal year. As a result, fluctuations in foreign exchange rates had a significant effect on TDK’s consolidated sales and income. During fiscal 2008, the yen’s value rose 2.2 percent against the U.S. dollar and declined 7.7 percent against the Euro, based on average exchange rates in markets. Overall, exchange rate movements had the effect of decreasing net sales by approximately ¥8.1 billion and operating income by approximately ¥5.9 billion in fiscal 2008.

               By geographic area based on the location of TDK entities, foreign exchange fluctuations decreased sales in Japan by approximately ¥3.7 billion, in Asia and Others by approximately ¥10.8 billion, in North and South America by approximately ¥2.5 billion and increased sales in Europe by approximately ¥3.9 billion. The effect of foreign exchange fluctuations on consolidated net sales after the elimination of intersegment transactions between and among TDK and consolidated subsidiaries was approximately ¥8.1 billion.

               TDK conducts a large share of business activities outside Japan. Such activities include manufacturing and sales, as well as research, design and procurement. In-region production ratio for the sales amount in fiscal 2008 represented 99.1 percent compared with 100.6 percent in the 2007 fiscal year of sales in Asia (excluding Japan) and Oceania, 25.2 percent compared with 23.8 percent in the 2007 fiscal year in the Americas, and 28.4 percent compared with 17.2 percent in the 2007 fiscal year in Europe. Overseas production accounted for 70.1 percent of total sales in fiscal 2008, compared with 62.2 percent one year earlier, and for 85.1 percent of overseas sales, compared with 77.7 percent one year earlier. The rise in the percentage of overseas production in fiscal 2008 is mainly due to higher production in Asia in the electronic materials and components segment.

               TDK and certain overseas consolidated subsidiaries hedge exposure to foreign exchange movements by entering into forward foreign exchange contracts and currency option contracts for some foreign currency-denominated obligations. Foreign exchange risk arising from operating activities is hedged by using forward foreign exchange contracts and currency option contracts. In principle, TDK’s policy is to hedge up to 50 percent of expected foreign currency-denominated accounts receivable for each month for the next six months to follow. Due to the global nature of operations, management realizes that currency movements continue to have the potential to exert a material influence on consolidated performance.

Cost and expenses

               The cost of sales increased 2.0 percent to ¥635.5 billion in fiscal 2008 from ¥622.8 billion in fiscal 2007 due primarily to higher sales. Cost of sales increased from 72.3 percent to 73.4 percent of net sales, respectively. In spite of strong pressures by customers to reduce sales prices of TDK products in each segment, TDK’s cost of sales ratio improved because of increased productivity in the manufacture of electronic materials and components, structural reforms undertaken by TDK that reduced its cost and reductions in the prices of materials used by TDK. As a result, gross profit was 26.6 percent in fiscal 2008, compared to gross profit of 27.7 percent in fiscal 2007.

               Selling, general and administrative expenses decreased by ¥0.2 billion from ¥159.1 billion in fiscal 2007 to ¥158.9 billion in fiscal 2008. This represented a decrease from 18.4 percent to 18.3 percent of net sales, respectively. The change was mainly a result of transfer of TDK brand product sales business for recording media of ¥9.3 billion, increase in research and development expenses of ¥7.3 billion, increase in maintenance and repairs expenses of ¥1.3 billion, and resulting from acquisition of MPT of ¥1.6 billion. Exchange rate effects from a stronger yen of ¥0.5 billion also attributed to the increase of ¥0.2 billion. Research and development expenses included in selling, general and administrative expenses increased by ¥7.3 billion from ¥50.1 billion in fiscal 2007 to ¥57.4 billion in fiscal 2008, and increased from 5.8 percent to 6.6 percent of net sales, respectively. The increase was mainly due to investment for increasing storage capacity of HDD heads.

               Also the income of ¥15.3 billion relating to sale of substantially all of the assets relating to TDK branded world wide recording media business and use of the TDK brand name for current and future recording media products to Imation for $250 million is included.

Other income and deductions

               Other income (deductions) decreased ¥4.7 billion from the previous fiscal year. Although reflecting a ¥1.3 billion increase in interest primarily from bank deposits due to an increase in interest rates outside of Japan, foreign exchange loss of ¥3.7 billion was recognized in fiscal 2008 as compared to foreign exchange gain of ¥1.0 billion in fiscal 2007.

Income taxes and minority interests

               The ratio of income taxes to income from continuing operations before income taxes (the effective tax rate) increased from 19.2 percent in fiscal 2007 to 21.8 percent in fiscal 2008 mainly due to increase in additional valuation allowance provided relating to net operating losses during the year and the decrease in research and development tax credit.

Net income

               TDK earned net income of ¥71.5 billion, resulting in basic net income per common share of ¥551.72, compared with ¥529.88 in the previous fiscal year. Return on Equity, which is net income divided by average total stockholders’ equity, increased from 9.6 percent to 9.7 percent. This was mainly due to a ¥1.3 billion increase in net income.

               Cash dividends per share paid during fiscal year 2008 were ¥120. This dividend was the sum of the June 2007 year-end dividend of ¥60 and the December 2007 interim dividend of ¥60. (Shareholders of record on March 31, 2008 received a cash dividend of ¥70 per share at the end of June 2008.)

Fiscal 2007 Compared to Fiscal 2006

Sales

               Consolidated net sales increased 8.4 percent from ¥795.2 billion to ¥862.0 billion for the fiscal year ended March 31, 2007.

               Looking at economic conditions worldwide during the past fiscal year, the U.S. economy recorded healthy growth underpinned by consumer spending and capital expenditures, despite a drop-off in housing investment. Meanwhile, European economies grew on balanced domestic and external demand. In Asia, China maintained a high growth rate and the economies of India and South Korea experienced moderate growth. The Japanese economy also experienced moderate growth, mainly due to capital expenditures fueled by strong corporate earnings.

               In the electronics market, which has a large bearing on the TDK’s performance, fiscal 2007 was notable for buoyant demand for mobile phones, notebook PCs and flat-screen TVs. This demand, together with an increase in the number of electronic components in finished products as a result of the increasing sophistication and number of features of these products, led to even higher demand for electronic components.

               Amid this operating environment, TDK took steps in fiscal 2007 to respond to the increasing demand for its components. In addition to increasing production capacity of its multilayer ceramic chip capacitors and other components, TDK entered into an equity-based business alliance with Tabuchi Electric Co., Ltd. (by way of strategic investment of TDK purchasing 14 percent of Tabuchi’s outstanding shares) to strengthen the power supplies business.

               As a result, the electronic materials and components segment posted net sales of ¥758.8 billion, up 10.3 percent from ¥687.8 billion in the previous fiscal year.

               Electronic Materials and Components Segment is made up of four product sectors: (1) electronic materials, (2) electronic devices, (3) recording devices, and (4) other electronic components.

               Electronic Materials: Sales in the electronic materials sector rose 10.2 percent from ¥180.8 billion to ¥199.2 billion. Sales of capacitors increased year over year, the result mainly of higher sales of multilayer ceramic chip capacitors, the main product in the capacitors category. Sales for use in PCs and flat-screen TVs were particularly strong. Sales of ferrite cores and magnets rose compared to the prior fiscal year. Sales of ferrite cores declined marginally as TDK terminated some products. On the other hand, sales of magnets rose. Ferrite magnet sales rose mainly on a weaker yen, while rare-earth magnets saw sales rise as production of HDDs increased.

               Electronic Devices: Sales in the electronic devices sector climbed 28.1 percent from ¥154.7 billion to ¥198.2 billion. This large year over year increase reflected the inclusion of the Lambda Power Business in this sector from the second half of the previous fiscal year. In other words, this was the first full year the Lambda Power Business results have been reflected in the sector’s results, after only half a year’s sales were booked in the previous fiscal year. Even excluding these sales, existing businesses in the sector posted year over year sales growth. Sales of inductive devices increased compared to the prior fiscal year, mainly as a result of increased sales of power line coils used in mobile phones and HDDs. Sales of high-frequency components declined compared to the prior fiscal year, the result mainly of lower sales volumes and decreased sales prices. Sales of other products increased compared to the prior fiscal year mainly due to increased sales of power supplies, which offset a slight decline in sales of sensors and actuators as sales prices fell.

               Recording Devices: In the recording devices sector, sales declined 3.5 percent from ¥315.9 billion to ¥304.8 billion. Sales of HDD heads decreased year over year. TDK’s HDD head sales volume increased due to higher unit production of HDDs for use in PCs as well as new applications in other consumer electronics. In terms of HDD head volume, therefore, TDK absorbed a negative effect caused by the fact that, in fiscal 2007, TDK lost one of its largest customers for HDD heads, Maxtor Peripherals (S) Pte. Ltd., which had been acquired by a HDD manufacturer. However, discounting pressure on HDD heads stemming from competition for market share among HDD manufacturers led to the overall decrease in sales. Sales of other heads declined year over year.

               Other Electronic Components: Sales in the other electronic components sector increased 55.5 percent from ¥36.4 billion to ¥56.6 billion compared to the prior fiscal year. This was the result of increased sales of organic EL displays, mechatronics and other new products.

               Operating income of the electronic materials and components segment in fiscal 2007 was ¥81.8 billion, an increase of ¥7.5 billion as compared to fiscal 2006. In spite of strong pressure by customers to reduce sales prices of TDK products in each segment, TDK’s sales cost ratio improved because of increased productivity in the manufacture of electronic materials and components, cost improvement, structural reforms undertaken by TDK that reduced its costs and reductions in the prices of materials used by TDK.

               In the recording media segment, sales decreased 3.9 percent from ¥107.4 billion to ¥103.2 billion. Sales of audiotapes and videotapes declined compared to the prior fiscal year and while TDK maintained a high market share, demand decreased for these products as a whole. Sales of optical media increased compared to the prior fiscal year and sales volumes of these products outweighed a continued fall in unit prices of CD-Rs and DVDs. Sales of other products, recording media products other than audiotapes, videotapes and optical media products increased year over year. Sales of LTO-standard* (Linear Tape-Open) tape-based data storage media for computers increased due to strong demand.

               Operating loss of the recording media segment in fiscal 2007 was ¥2.2 billion, a loss that was ¥11.6 billion less than the ¥13.8 billion operating loss in fiscal 2006. Operating loss improved significantly due to the effect of restructuring including restructuring costs which decreased by ¥6.3 billion.

               *Linear Tape-Open, LTO, the LTO Logo, Ultrium and the Ultrium Logo are trademarks of HP, IBM and Quantum in the U.S. and other countries.

               By region, sales in Japan declined 1.3 percent from ¥173.7 billion to ¥171.4 billion. Overseas sales increased 11.1 percent from ¥621.5 billion to ¥690.7 billion. Overseas sales accounted for 80.1 percent of consolidated net sales.

Net Sales Geographic Segments

               Japan: In Japan, sales in the electronic materials, electronic devices and other electronic components sectors increased, while sales in the recording devices sector and recording media segment declined. Operating income of the electronic materials and components segment decreased by ¥20.5 billion due to the absence in fiscal 2007 of the recognition of operating income as was recognized in fiscal 2006 from the payment made by its subsidiary in Asia to TDK in the amount of ¥24.0 billion (relating to the assessment of additional tax in fiscal 2005 on prices charged and paid by TDK in connection with sales and purchases of products involving the subsidiary). This effect was mitigated by improved operation capacity. Although operating loss of the recording media segment improved slightly, operating income in this region decreased by ¥19.0 billion to ¥29.8 billion.

               Asia (excluding Japan) and Oceania: In Asia (excluding Japan) and Oceania, sales increased in the electronic materials, electronic devices, other electronic components sectors and recording media segment, but sales declined in the recording devices sector. Operating income of the electronic materials and components segment increased by ¥28.9 billion. This was because significant operating loss of the other electronic components sector reversed to operating income due to profit increase without the recognition of operating loss in the previous year from the payment made by its subsidiary in Asia to TDK in the amount of ¥24.0 billion relating to the assessment of additional tax in fiscal 2005 on prices charged and paid by TDK in connection with sales and purchases of products involving the subsidiary, in addition to increase in operating income by increasing sales of each sector above, and operating income of the recording media segment also increased slightly. Operating income in this region increased by ¥28.9 billion to ¥41.4 billion.

               North and South America: In the Americas, sales increased in the electronic materials, electronic devices and other electronic components sectors. The lower yen versus the U.S. dollar also led to increased sales. Operating income of the electronic materials and components segment decreased by ¥0.7 billion due to a decrease in operating income mainly in the recording devices sector, and slight decline in operating income of the recording media segment. Operating income in this region decreased by ¥0.9 billion to ¥8.4 billion.

               Europe: In Europe, sales increased in the electronic materials and electronic devices sectors. Although operating income of the electronic materials and components segment decreased slightly, operating loss of the recording media segment improved significantly due to reduction to operating loss of ¥0.1 billion, ¥10.2 billion up from fiscal 2006, by the effect of restructuring including restructuring costs which decreased by ¥6.3 billion. Operating loss in this region upturned by ¥10.0 billion to ¥0.0 billion (¥12 million).

Effect of foreign exchange movements

               In fiscal 2007, overseas sales accounted for 80.1 percent of consolidated net sales, an increase of 1.9 percent compared to the prior fiscal year. As a result, fluctuations in foreign exchange rates had a significant effect on TDK’s consolidated sales and income. During fiscal 2007, the yen’s value declined 3.2 percent against the U.S. dollar and 8.8 percent against the Euro, based on TDK’s average internal exchange rates. Overall, exchange rate movements had the effect of increasing net sales by approximately ¥24.7 billion and operating income by approximately ¥6.1 billion in fiscal 2007.

               By geographic area based on the location of TDK entities, foreign exchange fluctuations increased sales in Japan by approximately ¥6.5 billion, in Asia and Others by approximately ¥19.7 billion, in the North and South America by approximately ¥4.0 billion and in Europe by approximately ¥7.6 billion. The effect of foreign exchange fluctuations on consolidated net sales after the elimination of intersegment transactions between and among TDK and consolidated subsidiaries was approximately ¥24.7 billion.

               TDK conducts a large share of business activities outside Japan. Such activities include manufacturing and sales, as well as research, design and procurement. In-region production ratio for the sales amount in fiscal 2007 represented 100.6 percent compared with 102.2 percent in the 2006 fiscal year of sales in Asia (excluding Japan) and Oceania, 23.8 percent compared with 22.0 percent in the 2006 fiscal year in the Americas, and 17.2 percent compared with 19.1 percent in the 2006 fiscal year in Europe. Overseas production accounted for 62.2 percent of total sales in fiscal 2007, compared with 61.7 percent one year earlier, and for 77.7 percent of overseas sales, compared with 79.0 percent one year earlier. The rise in the percentage of overseas production in fiscal 2007 is mainly due to higher production in Asia in the electronic materials and components segment.

               TDK and certain overseas consolidated subsidiaries hedge exposure to foreign exchange movements by entering into forward foreign exchange contracts and swaps for some foreign currency-denominated obligations. Foreign exchange risk arising from operating activities is hedged by using forward foreign exchange contracts. In principle, TDK’s policy is to hedge up to 50 percent of expected foreign currency-denominated accounts receivable for each month for the next six months to follow. Due to the global nature of operations, management realizes that currency movements continue to have the potential to exert a material influence on consolidated performance.

Cost and expenses

               The cost of sales increased 6.3 percent to ¥622.8 billion in fiscal 2007 from ¥585.8 billion in fiscal 2006 due primarily to higher sales. Cost of sales decreased from 73.7 percent to 72.3 percent of net sales, respectively. In spite of strong pressures by customers to reduce sales prices of TDK products in each segment, TDK’s sales cost ratio improved because of increased productivity in the manufacture of electronic materials and components, structural reforms undertaken by TDK that reduced its cost and reductions in the prices of materials used by TDK. As a result, gross profit was 27.7 percent in fiscal 2007, compared to gross profit of 26.3 percent in fiscal 2006.

               Selling, general and administrative expenses increased by ¥17.1 billion from ¥142.1 billion in fiscal 2006 to ¥159.1 billion in fiscal 2007. This represented an increase from 17.9 percent to 18.4 percent of net sales, respectively. The increase was mainly a result of the inclusion of operating results of Lambda Power Business for the whole fiscal year in fiscal 2007, while in fiscal 2006 this business was included only for the second half period, resulting in an increase of ¥7.4 billion in such expenses. Exchange rate effects from a weaker yen of ¥4.5 billion also attributed the increase of ¥17.1 billion. Research and development expenses included in selling, general and administrative expenses increased by ¥4.6 billion from ¥45.5 billion in fiscal 2006 to ¥50.1 billion in fiscal 2007, and increased from 5.7 percent to 5.8 percent of net sales, respectively. The increase was mainly due to the increase in the production of HDD heads. Also the inclusion of Lambda Power Business resulted in an increase of ¥0.8 billion in research and development expenses.

               In addition, TDK decided to restructure certain of its recording media business in March 2006, including the withdrawal from the manufacturing of recordable CD and DVDs, and recorded a restructuring cost of ¥0.5 billion and ¥6.8 billion for the years ended March 31, 2007 and 2006, respectively.

Other income and deductions

               Other income (deductions) improved ¥3.5 billion from the previous fiscal year, reflecting a ¥3.4 billion increase in interest primarily from bank deposits and dividend income from equity investments from companies that are not consolidated in TDK’s financial statements due to an increase in interest rates outside of Japan.

Income taxes and minority interests

               The ratio of income taxes to income from continuing operations before income taxes (the effective tax rate) decreased from 31.9 percent in fiscal 2006 to 19.2 percent in fiscal 2007. The decrease reflects the higher amounts of income earned in overseas subsidiaries in regions with lower tax rates than TDK’s effective tax rate for all other jurisdictions in which it pays income taxes, decrease in additional valuation allowance provided relating to net operating losses during the year, and one-time reversals of income tax payables as a result of the agreement with the Tax Bureau related to prices in connection with sales and purchases of products involving its overseas subsidiaries.

Net income

               TDK earned net income of ¥70.1 billion, resulting in net income per diluted share of ¥529.29, compared with ¥333.20 in the previous fiscal year. Return on Equity, which is net income divided by average total stockholders’ equity, increased from 6.6 percent to 9.6 percent. This was mainly due to a ¥26.0 billion increase in net income.

               Cash dividends per share paid during fiscal year 2007 were ¥100. This dividend was the sum of the June 2006 year-end dividend of ¥50 and the December 2006 interim dividend of ¥50. (Shareholders of record on March 31, 2007 received a cash dividend of ¥60 per share at the end of June 2007.)

               In fiscal 2006, consolidated net income included loss from discontinued operations of ¥310 million related to TDK Semiconductor Corporation (“TSC”). See discussion at Discontinued Operations.

Discontinued Operations

               On March 31, 2005, TDK entered into an agreement to sell all outstanding stock of its wholly owned subsidiary, TSC for $14,028 thousand to Golden Gates Capital (“Buyer”). The sale of TSC is part of TDK’s continuing shift away from non-core products and technologies. The sale agreement also includes earn-out payments, to be made by the Buyer to TDK, of up to $32,500 thousand. The payments are contingent upon certain milestones being met related to future revenue targets extending through April 2007. No earn-out payments were earned through the measurement period ended April 30, 2007. The transaction was completed on April 8, 2005. TDK has accounted for the sale of TSC as a discontinued operation pursuant to FASB Statement No. 144, “Accounting for the impairment or Disposal of Long-Lived Assets”, as TSC meets the definition of a “component of an entity”. The results of operations for this subsidiary have been reported as discontinued operations for all periods presented. Accordingly, certain financial statement information and related footnote disclosures related to prior periods have been reclassified.

               Selected financial information for the year ended March 31, 2006 for the discontinued operations, is summarized as follows:

		Yen (Millions)
		2006
Net sales		¥	45
Loss from operations before income taxes (including loss on disposal of ¥224 million in 2006)			310
Income tax expense			—
Loss from discontinued operations		¥	310