Financial overview

(in millions of JPY)	FY2007	FY2006	Rate of Change(%)	Factors
Overall
Sales	187,302	166,745	12.3	-
Operating income	19,781	16,670	18.7
Ordinary income	19,578	17,378	12.7
Current net income	11,658	10,497	11.1
MT business (Manual transmission business)
Sales	58,026	50,913	14.0	Sales of repair parts at home and abroad increased. Automotive production in China and other Asian countries increased.
Operating income	9,435	7,054	33.8	Income increased as a result of increases in sales in Asia; and the Company’s thorough efforts to cut costs.
AT business (Automatic transmission business)
Sales	110,513	99,659	10.9	Sales grew since the Company received more orders from domestic automakers and transmission manufacturers. In the U.S., sales of torque converters increased as the Company received larger orders for products that the Company started delivering the previous year.
Operating income	9,823	8,366	17.4	Profit increased, thanks to increases in sales, although the Company incurred extra costs for increasing production of new products.

Production System Reorganization
The Company will make a drastic reallocation of production at its domestic plants by the end of 2008. Production of clutches for heavy-duty trucks and buses will be consolidated to the Kawagoe Plant. At the vacated area in the Head Office Plant, the Company will build a new assembly line for automatic transmissions.
>>>See Capital Investment for more details

Overseas Business Operations

<China>
The Company will augment its production capacity of torque converters for automatic transmissions (ATs) in Shanghai, China. Approximately 10 billion yen will be invested to boost its annual production capacity.
>>>See Capital Investment for more details

<U.S.A.>
The Company will step up internal production of torque converter components in the U.S., by introducing new manufacturing facilities and equipment for aluminum die-casting products that are fully outsourced. The Company will soon start full-scale production of major components.
>>>See Capital Investment for more details

<Hungary>
The Company will increase clutch production in Hungary by 30 percent. Its subsidiary, Euro Exedy Clutch Ltd. (EEC), in Tatabanya, aims to respond to requests from Japanese automakers in Europe and further expand aftermarket sales of clutches in the European Union and former Eastern Europe countries. It produced 170,000 sets of clutch covers and discs in FY 2006. As its OEM supply to Japanese automakers in Europe including Magyar Suzuki Corp. is increasing and the company is promoting aftermarket sales of clutches across Europe, it will raise production by 50,000 sets to approx. 220,000 sets in 2007. The Company is improving the infrastructure for aftermarket clutch sales in emerging markets including Russia and Ukraine where used car imports from Japan are rising and growing demand is expected as a result. It is also reinforcing the lineup of high-functional clutches targeted at parallel imported Japanese luxury cars and will increase supply to its U.K. subsidiary, Exedy Clutch Europe Ltd. (ECE), Runcom, Cheshire as well. (From an article in the Nikkan Jidosha Shimbun on Jun.2, 2007)

Business Plan
The Company will raise the sales ratio of automatic transmission business, its mainline, by four percent in total sales from fiscal 2006 to 126 billion yen by the end of March 2011. Sales shares of torque converters manufactured by the Company and wet friction materials made by its wholly-owned subsidiary Dynax Corporation (Chitose city, Hokkaido) will be increased by two percent, respectively. While aiming to achieve an annual production of eight million units of torque converters worldwide, the Company has set a goal to increase its share in the global market of friction materials for automatic transmissions to 38%, by turning out 300 million sheets a year. (From an article in the Nikkan Jidosha Shimbun on Jul.13, 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. 2008)

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. 2008)

Country	Company	Contract	Period
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, 2007
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	5 years from Jan 14, 2008
Malaysia	Exedy (Malaysia) Sdn. Bhd.	Technical support and guidance on manufacturing clutches	From Jun. 27, 2006 until the products are discontinued
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 FY2007

in millions of Yen	FY2007	FY2006	FY2005
Investment	14,892	12,640	12,978
MT Business	2,330	2,352	2,782
AT Business	10,970	9,477	9,314

Main Investment Activities
<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.

Domestic Investment Activities
The Company will make a drastic reallocation of production at its domestic plants by the end of 2008. Production of clutches for heavy-duty trucks and buses, which is currently being conducted separately at two locations by model at its Head Office Plant in Neyagawa city, Osaka and Kawagoe Plant in Kawagoe city, Saitama Prefecture, will be consolidated to the Kawagoe Plant. At the vacated area in the Head Office Plant, the Company will build a new assembly line for automatic transmissions at a cost of upwards of 5 billion yen for the next two years. The Company intends not only to respond to expanding demand for automatic transmissions and continuously variable transmissions, but also to improve production efficiency and reduce transportation costs of clutches for heavy-duty vehicles, whose sales are likely to decline in the aftermath of introduction of the new long-term emissions regulations. (From an article in the Nikkan Jidosha Shimbun on Jan. 7, 2008)

Overseas Investment Activities

<China>
The Company announced that it will augment its production capacity of torque converters for automatic transmissions (ATs) in Shanghai, China. Approximately 10 billion yen will be invested to boost its annual production capacity from current 100 thousand to 1 million in August 2009. The Company, with an increased production capacity of torque converters for ATs, will meet a robust demand for automatic transmission components in China where the market for cars equipped with ATs has been growing rapidly along with an expanded production by OEMs including Japanese car makers. The Company will begin construction of an additional building within the premises of the existing plant in Shanghai and also plan to increase the number of employees there from current 260 to around 500. The Company produces torque converters in three countries; Japan, U.S.A., and China. The production of torque converters in China was launched in May 2007. (From a press release on Sep. 26, 2007)

<U.S.A.>
The Company will step up internal production of torque converter components in the U.S., by expanding the plant building and introducing new manufacturing facilities and equipment for aluminum die-casting products that are fully outsourced. The Company will soon start full-scale production of stators, one of major components of torque converters like pump impellers and turbine runners. In the first year the Company plans to assembly one million torque converters. Investment to acquire land, expand building and introduce new facilities will total about two billion yen. This will cut the distribution cost required when purchasing stators from external suppliers and will also compensate for a deterioration in profitability affected by sluggish sales of the Big Three. (From an article in the Nikkan Jidosha Shimbun on Mar. 3, 2008)