Johnson Electric Group Business Report FY ended Mar. 2007

Business Highlights

Financial overview
(in million dollars) FY2006 FY2005

Rate of change (%)

Sales 2,086.6 1,526.3 36.7 -The significant increase in sales was primarily due to the inclusion of a full year of sales contributions from Saia-Burgess Electronics and Parlex Corporation which were acquired in November 2005, compared to only five months in the previous year. Excluding the effect of adding those acquisitions and other recently consolidated businesses, including Ri Yong, Group sales grew by an underlying rate of approximately 5%.
Operating profit 164.1 121.5 35.1 -
Profit before taxation 135.9 116.3 16.9 -
Profit after taxation 113.0 94.4 19.7 -
Automotive Products Group (APG)
Sales 1,051 777 35.2 -The APG generated sales of US$1,051 million, an increase of 35.2% over the prior year following the combining of the Company's original automotive motors business units with the automotive actuator, stepper motor, and other auto related products of Saia-Burgess.

Financial Overview by Business Unit (BU)
Body Climate
-The Body Climate business unit achieved sales of US$99 million, an increase of 16% from last year. In spite of North America SUV sales slowing down and adversely affecting seat motors, sales for the BU in North America showed a moderate increase, mainly due to strong sales growth in the power lift gate application. Through continued growth in window lift motor sales in Europe, and to new Asian customers, the Company will spread its global reach in this product application. For power seat motors as well, the BU will supplement its current sales to the North America market by expanding its geographic reach and increasing its European and Asian customer base.

Body Instruments
-The Body Instruments business unit achieved sales of US$159 million. Body Instruments was able to grow revenues by 5%, this in the face of a tough pricing environment, by maintaining market share in steadily growing core markets, notably doorlock, washer pump and climate control . The coming year will see continued focus on cost reduction activities, product innovation and the capture of synergies with other business units.

Powertrain Cooling
-The Powertrain Cooling business unit achieved sales of US$351 million, an increase of 19% over last year, driven mainly by the first full year consolidation of Shanghai Ri Yong's sales of US$50 million. Excluding this impact the underlying growth of this unit was 2%, with increased volume from new products launched last year, mainly in the USA, and the
addition of electronic speed control units on cooling fan modules. Significant restructuring activity has been conducted in this business in recent years including the transition of some motor production to its China manufacturing site.

Powertrain Management
-The Powertrain Management business unit achieved fuel system and engine management product sales of U$71 million. The 12% growth in the Powertrain Management sector was achieved in a relatively strong market environment in which fuel efficiency and lower emissions are becoming increasingly important. Ongoing design innovation to improve product performance is the principal focus going forward.

Chassis Braking
-The Chassis Braking application recorded sales of US$38 million, a decrease of 22% from last year. Weaker sports utility vehicle sales in North America resulted in lower sales than expected in transfer case actuators and ABS motors. Concentration in the next few years will be on developing the Asian market and on satisfying the growing demand for transmission based products. In Europe, the Company's electric parking brake capabilities have created a foothold for Chassis Braking there.

Actuation Systems
-This business unit consists of the former Saia-Burgess Automotive Division businesses. This segment achieved sales of US$333 million, accounting for 16% of total Group revenue. Last year, sales for the five month period following the acquisition of Saia-Burgess amounted to US$134 million. The business unit continues to benefit from an increasing demand for comfort and safety in vehicles and from its technology leadership in this field which, in future, will be enhanced further by integration with the Company's competencies in permanent DC motors. This combination will open up significant new development opportunities in the market of automotive actuation systems.

-As part of the ongoing process to optimise the global manufacturing footprint of the enlarged business, the Company incurred total restructuring charges and provisions, including those relating to the shutdown of plants in Dalian, PRC and Cranston, USA, of slightly in excess of US$12 million, which compared to US$17 million in the prior year.


R&D Structure
-Engineering Centers: Hong Kong and China
-Motor and application testing is conducted in Hong Kong, China and some regional facilities (Italy, Japan, and the USA).
-In addition, the Company maintains testing labs in Hong Kong and China to perform motor and materials analysis.

Investment Activities

(in million USD) FY2006 FY2005 FY2004
Capital expenditures 77 66 67