Financial overview

(in millions of JPY)

	FY2007	FY2006	Rate of Change (%)	Factor
Overall
Sales	98,457	95,546	3.0	-
Operating income	3,052	2,992	2.0	-The continued effect of soaring materials prices and a rise in depreciation costs related to capital investments, were offset by sales increases, mainly in Asia, and cost reduction initiatives.
Ordinary income	2,193	2,917	(24.8)	-Income was down because the Company made its subsidiary in Indonesia (established in April 2006) an equity-method affiliate, and in doing so suffered through negative currency translations.
Net income	(317)	1,383	-	-Net income was down as the Company recorded extraordinary losses resulting from appraisal loss on investment securities in Ucal Fuel Systems Ltd., an equity-method affiliate.
Automotive Components Division
Sales	68,742	66,041	4.1	-In the automotive products segment, the Company suffered a decrease in sales of products for mini vehicles, while sales of those for compact cars were brisk. Outside Japan, sales in Asia and North America were strong. -Sales of motorcycle products were down in Japan, however this was offset by steady growth in demand in China and ASEAN markets.
Operating income	2,840	2,782	2.1	-

Acquisition
<China>
-The Company announced that it will acquire the entire stake its Chinese joint venture partner currently holds in Mikuni Hongguang Machinery Electronics Co., Ltd., one of its Chinese subsidiaries/a joint venture company run by the Chinese Government. Mikuni Hongguang Machinery Electronics manufactures carburetors and secondary air valves for motorcycles. The Company, in a bid to improve its global management efficiency by integrating and supplementing the resources of Mikuni Hongguang Machinery Electronics with those of other Chinese subsidiaries in response to a fast-growing motorcycle market in China, decided to wholly own Mikuni Hongguang Machinery Electronics. The Company will purchase Mikuni Hongguang Machinery Electronics shares owned by its JV partner China JIaling Industrial Co.,Ltd. (Group), consequently making Mikuni Hongguang Machinery Electronics its 100% subsidiary. Currently, the Company has a 73.67% stake, China JIaling Industrial Co., Ltd. (Group) with a 26.33% stake. (From a press release on June 28, 2007)


Strengthening production capacity outside Japan
-The Company announced that it will accelerate its investments in Indonesia. In April 2006, the Company established its Indonesian subsidiary PT. Mikuni Indonesia in EJIP Industrial Park, West Java, for the manufacturing and sales of components for automobiles/motorcycles. The Company plans to provide additional funds to the subsidiary on or before March 31, 2008 and strengthen its capital structure. It also plans to construct a new manufacturing facility, with a land area of 30,000 !, in order to expand its local production capacity of carburetors. The new plant is slated to start operations in February 2009 with a targeted annual production of 2.2 million carburetors. Approximately 1.4 billion yen will be invested in the project. (From a press release on Feb. 12, 2008)

>>> For details, refer to the section on Investments.

R&D Expenditure

(in millions of JPY)

	FY2007	FY2006	FY2005
R&D	4,433	1,446	1,384
Automotive products	1,207	1,220	1,073

Automotive products
-The Company is promoting R&D of control technology, actuator technology, sensing technology and material technology for computerized control fuel injection systems and engine components.
-The Company is also promoting development of urgently needed technologies such as: 1) technologies to reduce harmful effects on the environment; and 2) technologies dealing with the use of alternative fuels

Major R&D achievements for FY2006
-Development of air intake module for four-wheel vehicles
-Development of computerized control fuel injection systems and components for ATVs
-Development of electronic control variable valve lift systems
-Development of new CVTs
-Development of new vacuum pumps and new oil pumps
-Development of engine cooling water control valves
-Development of flow control valves and hydrogen sensors for fuel cell vehicles
-Development of new pressure sensors and new position sensors

R&D