Financial overview

(in millions of JPY)

	FY2007	FY2006	Rate of Change(%)
Overall
Sales	161,302	144,329	11.8
Operating income	16,482	11,695	40.9
Ordinary profit	14,841	10,898	36.2
Net income	8,580	4,964	72.8

Business performance by region
<Japan>
-In Japan, sales increased by 2.9% year-on-year to 49,385 million yen and operating income increased by 1.2% year-on-year to 4,371 million yen. This was attributed to brisk sales to Honda Motor, the Company's major customer, and also due to other factors.

<North America>
-In North America, sales increased by 9.0% year-on-year to 36,542 million yen thanks to strong sales of new automotive parts, such as suspension aluminum arm assemblies and rear differential assemblies. Operating income also increased to 854 million yen (the Company recorded an operating loss of 243 million yen last fiscal year) due to increased sales and stable production performance after launch completion of new products (these were accompanied by massive investment). 

<Europe>
-In Europe, sales increased by 15.2% year-on-year to 11,480 million yen thanks to increasing sales of automotive products to the Company's main customers, as well as favorable currency translation because of the weak yen. Operating income decreased by 3.0% year-on-year to 709 million yen.

<Asia>
-In Asia, sales increased by 13.4% year-on-year to 38,642 million yen and operating income increased by 52.4% year-on-year to 5,937 million yen. This was attributed to growing sales of motorcycle parts to the Company's major customers in Indonesia and India, and the contribution of favorable currency translation because of the weak yen. 

<South America>
-In South America, sales increased by 34.6% year-on-year to 25,250 million yen and operating income increased by 60.7% year-on-year to 3,721 million yen, thanks to brisk sales of motorcycle parts to the company's major customers and significant appreciation of the Brazilian real, compared to the previous fiscal year.


Recent developments in Japan
Constructing Musashi Global Center
-The Company will construct "Musashi Global Center" on the site of its headquarters in August 2008. It will serve as an integrated technical development base, aiming at enhancing technological development capability and conducting basic research in materials and other fields.

>>>See R&D for more details


The 10th mid-term plan (from April 2008 to March 2011)
Consolidated business target (FY2010 ended March 2011)
(1)Sales: 200 billion yen
(2)Operating profit: 20 billion yen
(3)ROE 15 %
(4)15 %

R&D Expenditure

(in millions of JPY)

	FY2007	FY2006	FY2005
R&D Expenditure	1,324	1,104	973

Research and Development Structure

Division	Development Div. No.1 and No.2	Development Div. No.3	Development Div. of Kyushu Musashi Seimitsu Co., Ltd.	Production technology Dept., Technology Div., Kyushu Musashi Seimitsu Co., Ltd.
Business in charge	-Development of new products (and their applications) of ball joints, cam shafts, gears etc.  Patent control. Management of product drawing.	-R&D for a new production technology and production processes for products such as ball joints, cam shafts, and gears.	-R&D for new products such as gears for motorcycles and general -purpose gears.	-Development of new products such as gears for motorcycles and general -purpose gears. R&D related to production technology and process design.
Number of engineers	47	9	14	35
R&D cost	478 million JPY	215 million JPY	166 million JPY	464million JPY

Product Development
<Development of suspension system components>
-The Company continuously worked to develop and mass-produce ball joints which simultaneously achieve both low-torque and a high level of durability. It also tackles the development of environment-responsive technologies, such as core technology to commercialize a small, light-weight ball joint, and new manufacturing technologies that enable production with lower energy consumption. 

<Development of engine system components>
-The Company focused on development of cam shafts. It improved testing facilities to evaluate its proprietary technologies and conducted performance evaluations.

<Development of drivetrain system components>
-The Company enhanced the design of its original 3D bevel gears, which have already been commercialized, to improve design quality and shorten production lead time. 

-As for differential gears, the Company enhanced the design of its original 3D (three-dimension) bevel gears, which have already been commercialized, from design and production technology standpoints. Making an advantage in the bevel gears its core technology, the Company has developed and made proposals for a CAE shape-optimized, original differential gear assembly utilizing gear forming methods based on a new forging process.   

-The Company enhanced design and evaluation technologies for planetary gears, and worked to improve existing products and verify the application of new technologies. In the technology development area, focusing on plastic processing, the Company worked to develop a processing method which combines planning and development of facilities.

<Development of advanced technologies>
-The Company also promoted development of advanced technologies which do not belong to existing product categories. Focusing on the plastic processing area, it conducted joint-development activities with universities and facility makers, mainly on new plan developments utilizing the servo press, surface reforming technology and conjugation technology.


Contracts for technical assistance

Name of the partner company (Country)	Product items	Contents of contract	Term
Musashi Auto Parts Michigan Inc. (USA)	see note below	see note below	1994.02.01-1999.01.31 (Automatically renewed annually after the term)
Musashi Auto Parts Co., Ltd. (Thailand)	see note below	see note below	1987.12.28-1992.12.27 (Automatically renewed annually after the term)
Musashi Auto Parts UK Ltd. (UK)	see note below	see note below	1995.01.01-1999.12.31 (Automatically renewed annually after the term)
P. T. Musashi Auto Parts Indonesia (Indonesia)	see note below	see note below	1996.05.08-2001.05.07 (Automatically renewed annually after the term)
Musashi Auto Parts Canada Inc.(Canada)	see note below	see note below	1998.01.01-2002.12.31 (Automatically renewed annually after the term)
Musashi South Carolina Inc. (USA)	see note below	see note below	2001.01.01-2005.12.31 (Automatically renewed annually after the term)
Musashi Hungary Mfg. Ltd. (Hungary)	see note below	see note below	2001.01.01-2005.12.31 (Automatically renewed annually after the term)
Musashi do Brasil Ltda. (Brazil)	see note below	see note below	5 years from 2003.11.17-2008.11.16
Musasi Auto Parts India private Ltd. (India)	see note below	see note below	2003.04.01-2004.03.31 (Automatically renewed annually after the term)
Musashi da Amazonia Ltda. (Brazil)	see note below	see note below	5 years from 2004.11.01-2009.10.31

Product items in the contract	:	Special parts customized and then produced at the time they are needed for vehicles, motorcycles, and general-purpose products
Contents of contract	:	1. Technical assistance for production, assembly, and marketing of customized parts 2. Providing industrial ownership rights

Capital investment

(in millions of JPY)

	FY2007	FY2006	FY2005
Capital Expenditure	13,303	16,991	23,071
facility for ball joints	1,204	2,096	1,191
facility for cam shafts	2,711	2,622	1,913
facility for gears and other parts	7,492	9,131	16,966

Production facilities for ball joints
-655 million yen to install new facilities at the 1st Akemi Plant
-292 million yen to install new facilities at Musashi Auto Parts Canada Co., Ltd.
-211 million yen to install new facilities at Musashi Hungary Mfg. Ltd.

Production facility for cam shafts:
-888 million yen to install new facilities at the Horai plant
-930 million yen to install new facilities at Musashi Auto Parts Co., Ltd.

Production facility for gears and other parts:
-966 million yen at the Ueda Plant to install new facilities and increase production volume to cope with new orders 
-508 million yen for Kyushu Musashi Seimitsu to increase production volume to cope with new orders
-519 million yen for Musashi Auto Parts Co., Ltd. to install new facilities
-471 million yen for P. T. Musashi Auto Parts Indonesia to install new facilities and increase production volume to cope with new orders
-2,103 million yen to install new facilities to cope with new orders for new parts at Musashi do Brasil Ltda.
-889 million yen to install new facilities to cope with new orders for new parts at Musashi da Amazonia Ltda


Capital investment plan for FY2008

Region	Planned investment as of March 2008 (million yen)	Main contents and objective of production facility
Japan	6,100	Renewal of exiting production, facility, response to a new vehicle model and reinforcement of testing facilities.
Asia	5,100	To strengthen and renew its ability to respond to new models and enhance production capacity for two-wheeler components
South America	3,600	To strengthen its ability to respond to new vehicle models being produced and enhance production capacity for motorcycle components
North America	2,400	To handle production increase of components (new supply award)
Europe	800	To handle production of components for a new supply award it won.