Financial overview

in million JPY	FY2006	FY2005	Rate of Change (%)	Factors
Overall
Sales	501,866	465,922	7.7	(See below.)
Ordinary income	39,825	36,761	8.3	Ordinary income increased due to improved income in Europe and increased profit in Asia, despite a significant increase in overhead costs such as transportation costs which resulted from the accident in March 2006 at the Monclova Plant in Mexico.
Net income	23,540	16,789	40.2	Since the Company recorded an extraordinary profit of 4.266 million JPY and an extraordinary loss of 1,383 million JPY in connection with the above mentioned incident, net income increased.

Total sales increased 7.7% on a year-to-year basis due to the following measures.

(1) Production: The Company started commercial production of seat belts at Jangan-1 High-tech Regional Industry Complex, Hwaseong, Korea at the end of December 2006. It also started commercial production of airbag ground fabric and cushions in Sibiu, Romania. In Mexico, it started production of air bags at its Torreon Plant. It started constructing production facilities to manufacture airbag inflators at its press plant in Arita-cho, Saga Prefecture, in Japan, and in Zhejiang, Changxing Province in China. In India, the Company made progress on reviewing its operational framework and decided to establish a new local subsidiary.

(2) Sales: The Company was actively working to win more orders, focusing on expanding into Asian markets such as China and South Korea and into the European market. It also actively worked to sell curtain airbags, new devices, and other electronic products.

Establishment of new subsidiaries
The Company announced the reconstruction of its Indian operation. In the wake of the dissolution of a joint venture in India at the end of 2006, it will operate by establishing its own local company to produce seatbelts and airbags. An application to develop a wholly-owned subsidiary has recently been approved by the government of India. Takata acquired capital in Abhishek Auto Industries Ltd., a seatbelt manufacturer in India in 2000. Abhishek's sales for the period ended March 2006 were about 1,766 million yen. Takata sold its stakes (30%) back to Abhishek and dissolved the joint venture in December 2006 in an attempt to revamp and reinforce its operation in India. Takata plans to establish a comprehensive business network in the area of automotive safety systems including seatbelts, airbags and steering wheels. (From an article in the Nikkan Jidosha Shimbun on Mar. 30, 2007)

R&D structure
- The Company conducts R&D activities in Japan, the Americas, and Europe.
- The Company started development and evaluation activities at its new development center located in its Echigawa manufacturing plant.

- The Company announced that it will newly establish a research and development center for safety devices such as seat belts and air bags in Berlin. The total investment will be 2.5 billion yen. The construction work has been in progress since August this year, and is expected to be completed in December 2007. The new center will have about 100 staff members and be equipped with various collision experiment facilities. The center will be built by Takata-Petri, Takata's subsidiary in Aschaffenburg, Germany, to integrate its three development centers in Ulm, Berlin, and Aschaffenburg and make it its development base in Europe, in addition to the bases in Detroit, USA and Shiga prefecture, Japan.(From an article in the Nikkan Jidosha Shimbun on Nov.22, 2006)

R&D expenditure
- Total R&D spending reached 21.786 billion yen in fiscal 2006 (ending in March 2007).
- The Company continued to focus its R&D activities on developing new active/passive safety technologies for frontal collisions, lateral collisions, and rollovers, as well as for protecting pedestrian and motorcycle drivers at the time of collisions.

Capital investment
The Company's capital spending in fiscal 2006 totaled 22.263 billion yen.
The Company made capital investments mainly to establish a research and development center in Berlin, Germany; construct production facilities to manufacture airbag inflators in Zhejiang, Changxing Province in China, construct a seat belt plant in Jangan, Hwaseong-si in Korea; construct a seat belt buckle plant in Arita-cho, Saga Prefecture, in Japan: construct airbag production facilities at the Torreon Plant in Mexico; and construct facilities for producing airbags and other products in Sibiu in Romania.

Capital Investment Projects (as of March 31, 2007)

Plant (City)	Equipment to be installed	Estimated amount of investment (in million JPY)	From	To
Takata (Changxing) Safety Systems Co., Ltd. (Changxing, China)	Production equipment for airbags	1,489	Jan., 2006	Jul., 2007
Takata Corporation and Takata Kyushu Corporation(Arita-cho, Saga Prefecture)	Production equipment for seat belt buckles	4,230	Nov. 2006	May 2008
Takata-Petri AG (Berlin, Germany)	R&D of automotive safety devices	2,571	Aug., 2006	Dec., 2007
TK Holdings Inc. (Moncolva, Mexico)	Production equipment for airbag components	2,400	Dec. 2006	Aug. 2008