Financial overview

( in millions of JPY )

(in millions of JPY)	FY2006	FY2005	Rate of Change(%)	Factors
Overall
Sales	166,745	153,058	8.9	-
Operating income	16,670	14,902	11.9
Ordinary income	17,378	15,735	10.4
Current net income	10,497	9,353	12.2
MT business (Manual transmission business)
Sales	50,913	49,311	3.2	- Revenue at the MT business increased year-on-year. As sales leveled off in Japan, they continued to to rise in other Asian countries.
Operating income	7,054	6,024	17.1	- Operating income at the MT business went up year-on-year, thanks to greater sales in Asia. The Company's group-wide cost cutting efforts also contributed to the rise.
AT business (Automatic transmission business)
Sales	99,659	89,907	10.8	- Sales at the AT business remained strong all year round, thanks to greater sales to domestic automakers and the launch of new products in the U.S.A.
Operating income	8,366	7,981	4.8	- Despite soaring prices of raw materials such as aluminum and copper, operating income at the AT business rose year-on-year, thanks to greater sales.

Overseas Business
The Company plans to enhance its profit structure in North America. Along with production capacity increase of torque converters for automatic transmissions, it will accelerate shift to in-house production of components outsourced so far. The company aims to raise the current in-house manufacturing ratio of 46% to over 50%, as much as those at domestic plants. In FY2007, it will invest a total of two billion yen into Exedy America Corp. (EAC), producing torque converters in Mascot, Tennessee, and Dynax America Corp., producing friction materials in Roanoke, Virginia, to increase production capacity and in-house manufacturing. In the U.S., Exedy has supplied directly or indirectly to almost all the automakers with Ford and Nissan as its major customers. In addition, its business is rapidly growing as large shipment of products for the new six-speed automatic transmissions of GM and Ford started last year. While the company originally expected 8.5 billion yen sales of EAC for the fiscal year ending March 2007, it now expects them to reach 11 billion yen. In the U.S., however, prices of materials such as iron and aluminum hover at high levels and the company has not enjoyed the benefit of increased sales figures in profits. It has therefore decided review of balance between in-house manufacturing and outsourcing inevitable to improve profitability.(From an article in the Nikkan Jidosha Shimbun on Feb. 23, 2007)

R&D for Mar. 2007

( in millions of Yen )

-	FY2006	FY2005	FY2004
R&D Expenditure (in millions of Yen)	3,552	3,714	3,945
Number of R&D staff (% of the total number of staff)	255 (4%)	271 (5%)	276 (5%)

MT business: 877 million JPY
-In the area of the MT business, the Company focuses its development activities on developing high-performance dampers and dual mass flywheels. These products are designed to effectively absorb engine vibration on cars, which are powered by environmentally friendly, fuel-saving, lean-combustion engines and direct-injection engines.
-The company is further developing transmission systems that facilitate driving through the use of an automatic start/gear change. This system, which is especially suited to commercial-use vehicles, also improves fuel consumption too. Together with the migration to this new transmission systems, the company is also developing new products such as ECUs for automatic clutches, actuator units and clutch systems which precisely follow commands transmitted by ECUs.

AT business: 1,449 million JPY
-For the purpose of developing high performance torque converters, the Company carries out studies on inner oil flow by using cutting-edge computer systems. The focus of the development activities is on designing torque converters with excellent transmission efficiency and a high level of flexibility in terms of installing them in tight spaces. The Company developed advanced torque converters based on this research, already winning some contracts to supply these products.
-The Company also focuses on developing new products for hybrid vehicles. Some of the products it is working on are a vibration damper system to absorb oscillation when switching the hybrid power source from engine to motor (and the other way around); and a torque limiter that prevents excessive load on the engine.

Licensing of technology from other companies (as of Mar. 2007)

Country	Company	Contract	Period
Germany	J M Foito	Manufacturing technology of wet type fly wheel with two pieces	From Jan. 1, 1992 for 15 to 20 years
Germany	LuK GmbH & Co	Patent for wet type fly wheel with two pieces	From Jan. 17, 1995 until the patent expiry date
Japan	Valeo Unisia Transmission	Patent for flexible fly wheel	From Jan. 31, 2000 until the patent expiry date

Licensing of technology to other companies (as of Mar. 2007)

Country	Company	Contract	Period
Korea	Hyundai Motor Company	Technical support and guidance on automatic transmission system	From Dec. 28, 1989 to Apr. 24, 2008
Korea	Kia Motor Corporation	Technical support and guidance on automatic transmission system	From Dec. 17, 1992 to Apr. 21, 2009
Korea	Seojin Clutch Corporation	Patent for clutches	From Nov. 13, 1997 until the patent expiry date
India	Ceekay Daikin Limited	Technical support and guidance on manufacturing clutches	From Dec. 7, 2004 for 10 years
U.S.A.	Exedy America Corporation	Technical support and guidance on manufacturing torque converters and clutches	10 years from Dec. 1, 2004
U.S.A.	Dynax America Corporation	Technical support and guidance on manufacturing automatic transmission components	From Jan 1, 1997 until the related products are discontinued
Australia	Exedy Australia Pty. Ltd.	Technical support and guidance on manufacturing clutches	5 years from Dec. 1, 2002
Hungary	Euro Exedy Clutch Ltd.	Technical support and guidance on manufacturing clutches	From Oct. 1, 2001 for the lifetime of the company
Thailand	Exedy (Thailand) Co., Ltd.	Technical support and guidance on manufacturing clutches	5 years from March 27, 2005
Thailand	Exedy Friction Material Co., Ltd.	Technical support and guidance on manufacturing friction materials for clutches	10 years from Jan 14, 1998
Malaysia	Exedy (Malaysia) Sdn. Bhd.	Technical support and guidance on manufacturing clutches	5 years from Jan. 22, 2006
China	Exedy Chongqing Co., Ltd.	Technical support and guidance on manufacturing clutches	From Dec. 9, 1995 through June 17, 2025
China	Exedy (Shanghai) Co., Ltd.	Technical support and guidance on on manufacturing friction materials for clutches; and torque converters	10 years from Jay 1, 2006
Indonesia	P.T. Exedy Indonesia	Technical support and guidance on manufacturing clutches	5 years from Oct. 19, 2005
Taiwan	TAMP AUTO PARTS IND. CO., LTD	Technical support and guidance on manufacturing clutches	From Jun. 9, 2004 for 5 years
Columbia	Bonem	Technical support and guidance on manufacturing clutches	From Jul. 1, 1994 for 5 years

Investment for Mar. 2006

( in millions of Yen )

in millions of Yen	FY2006	FY2005	FY2004
Investment	12,640	12,978	10,360
MT Business	2,352	2,782	2,821
AT Business	9,477	9,314	6,427

MT business:
- Investment was focused on enhancing efficiency and revamping equipment at the headquarters and Asian subsidiaries.
AT business:
- Investment was focused on increasing production at its headquarters' plants and U.S. subsidiary.

- The Company will build a new plant for producing torque converters in Shanghai, China. It will construct a new 40,000 square-meter-building by the end of 2006 with an investment of 600 million yen on the site of Exedy Friction Material Corporation in Shanghai which started producing friction materials (facings) in June 2005. While the details of the plan has not been decided yet, the construction will start by the end of 2006. The new plant will start production at the beginning of 2008 to supply 10,000 parts monthly to Japanese makers in China. With the construction of the new plant, Shanghai DYNAX Corporation, which is owned by the Company's subsidiary DYNAX Corporation-a manufacturer of automatic transmission parts such as friction materials-and has been operated on the land on a short-term leasing, will be closed and its production line for transmission paper facings (wet type friction elements) will be transferred to the new plant. Another affiliate owned by DYNAX, DYNAX Industry (Shanghai) Corporation, will continue its operation. As a result, the Company's production facilities in China will be reorganized into three plants; two in Shanghai and one in Chongqing. (From a story in the Nikkan Jidosha Shimbun on Jun 21, 2006)

- The Company will move its Hungarian facilities to a new location and build a new plant with the aim of doubling its production capacity in 2007. The company has acquired a site for construction of a new plant in the industrial district 1.5 kilometers away from the existing plant in order to renew the building and equipment. A majority of total investment amounting to about 3 million yen will be funded by capital increase in the Hungarian subsidiary. The new facilities are designed not only to respond to an increase in demand from local European automakers including Magyar Suzuki Corporation, but also to undertake production of clutches for the aftermarket in Russia and Ukraine. The subsidiary, Europe EXEDY Clutch Ltd. (EEC) is positioned as the company's core production base in Europe covering East European and Russian regions as well. The new plant with a floor space pf 2,500 square meters will be built at a land of about 15,000 square meters. Construction is scheduled to start as early as the beginning of next year. (From a story in the Nikkan Jidosha Shimbun on Jul. 18, 2006)

- The Company will invest 15 billion yen in and outside Japan for the fiscal year ending March 2008. In consideration of urgent need for production increase of torque converters for automatic transmissions (AT) and Continuously Variable Transmissions (CVT), the company will enhance manufacturing capacity in Japan and the U.S. It will also raise output of clutch parts in emerging markets including China. Capital investment of a 15 billion yen level for two consecutive years is the record highest. Investment has exceeded depreciation for five consecutive periods since fiscal 2003. Planned investment for the next term will be about 9 billion yen in Japan and 6 billion yen for overseas. The company will further expand facilities of its Ueno Division in Iga city, Mie prefecture for the production of torque converters that has been reinforced to cope with the expanded auto production throughout the world. Invested amount will be 6 billion yen for installing new production lines of torque converters and renovation of transformation installation. Also, production lines of clutch discs will be newly installed at two plants of its subsidiary Dynax Corporation (Chitose city, Hokkaido) producing clutch parts. For overseas market, the company will invest 2 billion yen in expanding production capacity at Exedy America Corporation (EAC, Mascot, Tennessee), which has started supply to GM and Ford, while establishing a new manufacturing line of torque converters at Exedy Shanghai Corporation (ESC) of China, as well as expanding production of friction materials with an investment of about one billion yen. (From an article in the Nikkan Jidosha Shimbun on Jan. 31, 2007)