Financial Overview

( In millions of JPY )

	FY2006	FY2005	R.C. (%)	Factors
Overall
Sales	312,875	278,616	12.3	The sale of New Japan Radio, Inc., which became the Company's consolidated subsidiary from the second half of the previous year, contributed to the Company's improved business results for the entire fiscal year. The increase in orders that the automotive brake segment received also contributed to the increased sales.
Operating income	11,551	10,524	9.8	Operating income increased due to improved revenue of the U.S. subsidiary operating in the automotive brake segment; along with the factors mentioned above.
Ordinary income	17,282	14,033	23.1
Net income	15,107	11,182	35.1
Automotive brake business segment
Sales	61,764	58,130	6.3	Brake products The Company received more orders from domestic vehicle manufacturers and Japanese and South Korean vehicle manufacturers operating overseas than it did during the previous year. This resulted from the fact that  vehicle production volume both in Japan and overseas grew. As a result, sales of the Company's domestic and overseas subsidiaries increased. ABS products Sales at this product sector decreased significantly because the Company is now transferring the ABS business to its joint venture, Continental Teves AG&Co, HG.
Operating income	7,009	5,462	28.3	Brake products Operating income for this product sector decreased due to rises in raw-materials prices and increased expenses involved with transferring manufacturing operations from the Nagoya plant to the Toyota plant, which is the Company's new manufacturing facility. However, the increased sales at the Company's overseas subsidiaries contributed to greater sales of in this sector, which was a result of subsidiaries overseas receiving more orders for new products and the US subsidiaries improving their profits. As a result, overall sales increased.

( R.C. : Rate of Change )

Business plan

Brake division

-This business segment will construct a new manufacturing facility in India in 2008. To establish a three-party joint venture, this segment will start a feasibility study with Saeron Automotive Corporation, a South Korean subsidiary of the Company, and a local enterprise with which the Company has capital and technical partnerships.

-This segment plans to double its production capacity of the China plant by FY2008. Orders from Hyundai, the largest automaker in South Korea, and some Japanese automakers in Chine are on the increase. Thus the Company will reinforce its only manufacturing facility in China to deal with the increasing volume of orders.

-The production volume of the brake business in Thailand will increase 40% by FY2008, compared to the FY2005 production volume. The Company will focus on winning orders and making investments to boost its production capacity, after it increases the volume of products it manufactures in-house, boosting productivity of brake parts.

For the details, see investments.

-Electronics Division

The Company will support a business expansion of New Japan Radio Co., Ltd., an electronics company, which became one of the Company's subsidiaries in December 2005, in an effort to make it the group's core business in the future. The textile company will consolidate the development and production of electronics devices for automotive brakes, high-precision processing tools and capacitors at the subsidiary in order to take advantage of the group synergy. It plans to make an approximately 26% of the group's profit in its electronics wing in fiscal 2008. Specifically, it will concentrate the development and production of in-vehicle devices, especially by soon establishing a structure in the subsidiary to manufacture all components for the group's ABS-related company, Continental Teves Corporation. By doing so, the group will become able to provide complete next-generation brake control systems. New Japan Radio Co., Ltd. will also provide circuit technology for capacitors and high-precision processing tools and produce semiconductors and other products.(From a story in the Nikkan Jidosha Shimbun on Apr. 17, 2006)

R&D Expenditure

( in millions of JPY )

	FY2006	FY2005	FY2004
Overall	12,244	9,607	5,987
Brake Division	3,702	3,511	3,102

Brake Division
-Friction material development: The Company focused R&D activities on materials that contain no environmentally harmful substances (so called green materials).
-Brakes: The Company standardized all aspects of product planning and product designing to shorten the lead-time needed for development and designing of brakes, and to improve efficiencies. It also reduced costs by standardizing raw materials and parts.
- ABS products: The Company's affiliate, Continental Teves AG&Co, HG, is now developing next-generation electrically controlled brake systems designed for the global market.

Other (Materials involving new energy sources)
The Company and Japan Radio Co., Ltd. announced that they will exhibit an electric double layer capacitor with the world's top level power density of 18.2kw per liter at EVS22, the 22nd International Battery, Hybrid and Fuel Cell Electric Vehicle Symposium & Exhibition. This high power capacitor is expected to be installed on electric and hybrid vehicles, and able to recharge and discharge large current in a shorter period of time compared with a secondary cell. In order to improve low power density, which was a weak point of a capacitor, optimal materials and structure were adopted for the electrode to reduce internal resistance by half. Its rated voltage is 3V. (From an article in the Nikkan Jidosha Shimbun on Oct. 20, 2006)

Technology Agreements (Inward) as of Mar, 2007

Partner (Country)	Contract Details	Contract Term
TMD Friction Holding GmbH (Germany)	Know-how on manufacturing technology and material composition for brake linings and disc pads. Also assistance in sales activities. (cross-licensing contract)	10 years from Nov. 1991 (yearly automatic extension after Nov. 2001)
TRW Automotive Inc. (UK)	Know-how on design and manufacturing technology for drum brake assemblies, brake valves and their components for automobiles.  Also assistance in sales activities. (cross-licensing contract)	Nov. 1995 to Oct. 2006 (*1)
Meritor Heavy Vehicle Braking Sysytems (UK) Limited. (UK)	Know-how on design and manufacturing technology for disc brake assemblies, drum brake assemblies and their  components	Nov. 2003 to Nov. 2008

*1: Renewal of the terms of the agreement is under negotiation because the agreement expired.

Technology Agreements (Outward) as of Mar. 2007

Partner (Country)	Contract Details	Contract Term
Rane Brake Linings Limited (India)	Know-how on manufacturing technology, material composition, and technical information on manufacturing facilities for brake linings, disc pads and clutch facings manufacturing.	5 years from Jan. 2005
TMD Friction Holding GmbH (Germany)	Know-how on manufacturing technology and material composition for brake linings and disc pad manufacturing. Also assistance in sales activities.(cross-licensing contract)	10 years from Nov. 1991 (yearly automatic extension after Nov. 2001)
Heng Tong Auto Parts Inc. (Taiwan)	Know-how on manufacturing technology, material composition, and technical information on manufacturing facilities for brake linings and disc pads. Also, guidance on factory construction for licensed products.	5 years from Dec. 2005
Heng Tong Auto Parts Inc. (Taiwan)	Know-how on design and manufacturing technology for disc brakes and their components.	Dec. 2002 to Jun. 2007
TRW Automotive Inc. (UK)	Know-how on design and manufacturing technology for drum brake assemblies, brake valves and their components for commercial vehicles. Also assistance in sales activities. (cross-licensing contract)	Nov.1995 to Oct. 2006 (*1)

*1: Renewal of the terms of the agreement is under negotiation because the agreement expired.

Investment Expenditure

( in millions of JPY )

	FY2006	FY2005	FY2004
Overall	17,077	16,548	12,504
Brake Division	4,546	5,177	5,290

In the terms of the brake business segment, the Company made investments on production equipment for brakes at the Toyota plant and on friction materials at the Tatebayashi plant.

Investments Overseas

-India
The Company will start a production operation in India as early as 2008. It has started a full-scale feasibility study including a possible joint venture with Saeron Automotive Corp., its subsidiary in Korea, and its capital/technical alliance partner in India. While details of the operation and investment will be decided in 2007, the Company plans to hold down initial investment by acquisition and improvement of an existing plant. This will be the Company's fifth overseas production operation after the U.S.A., Korea, Thailand and China (Nisshinbo's sub-subsidiary). The local partner to be the base of this project is Rane Brake Linings Ltd., a leading friction material supplier in New Delhi, India whose 10% of shares has been owned by the Company since 1996 as the biggest shareholder. It is a local listed company and the biggest supplier of friction materials in India with three manufacturing plants, which supplies products as brake pads to Maruti Udyog Ltd., a local automaker; Hyundai Motor Co.; Tata Motors Ltd.; Honda and Toyota.(From an article in the Nikkan Jidosha Shimbun on Nov. 17, 2006)

-China
The Company plans to double the production capacity at its automotive plant in China by fiscal 2008. In response to growing demand from Hyundai Motor-the largest automaker in Korea-as well as from some Japanese carmakers, the Company will strengthen capacity at the only automotive facility in China. Up until now, the Company has been exporting from Japan a majority of friction materials for brakes required from Japanese customers' plants operating overseas, because these products are generally last items to be localized. In preparation for the imminent large volume requirements from Hyundai and a projected increase in demand from Japanese automakers, the Company will reinforce its supply structure in China. (From an article in the Nikkan Jidosha Shimbun on Nov. 27, 2006)

-Thailand
The Company will increase brake production in Thailand by 40% compared with FY2005 by 2008. In addition to increasing in-house manufacturing of brake parts and enhancing productivity, the Company will expand sales operations and further invest in enhancing manufacturing capabilities. Not only the production capacity of brake units, it will also strengthen development and manufacturing of brake pads (friction materials), aiming to increase sales at the Thai plant, Nisshinbo Somboon Automotive Co., Ltd. (NSA.), to 2 billion baht level from 1.4 billion baht recorded in FY2005 (one baht is equivalent to 3.1 yen) over the course of the next three years. NSA was established in 1996 in Rayong Prefecture and initially produced brake linings, gradually expanded the items to include drum brakes and disc brakes. NSA currently produces most of the Company's brake related parts as a major manufacturing site in Asia except for Japan. In its three-year managerial plan starting from FY2006, the Company will make capital investment of 13 billion yen in the auto parts business, which is its second largest operation unit, following textiles. More than half of this auto related investment will be appropriated to overseas operations, and the largest portion will go to NSA, amounting to 2.5 to 3 billion yen to improve its productivity and production.(From an article in the Nikkan Jidosha Shimbun on Apr. 19, 2006 )

Domestic Investments
The Company announced that it will drastically strengthen its chemical business including production and sales of electric double-layer capacitors (high-capacity electric storage devices) and fuel cell separators. The plan calls for the establishment of a new division, Chemical Product Division, on April 1, 2007, as well as capital investments of some one billion yen at the Chiba Plant (Asahi City, Chiba Prefecture) to install mass production facilities for capacitors. The new capacitor line is scheduled to start operations as early as this autumn. The Company will also revamp its manufacturing line of fuel cell separators at the same plant in 2008.(From an article in the Nikkan Jidosha Shimbun on Jan. 11, 2007)