Financial overview

-	FY2006	FY2005	Rate of Change(%)	Factors
Overall
Sales	260,732	243,428	7.1	see note 1) below
Operating income	6,789	5,652	20.1	see note 2) below-
Ordinary income	5,517	5,099	8.2
Current net income	4,130	598	590.6
Battery and power supply
Sales	220,582	198,905	10.9	see note 3) below
Operating income	7,594	5,347	42.0	see note 4) below

Factors
1) In the domestic market, while sales of automotive batteries slightly increased, batteries for industrial use and power supply devices sold well. Overseas consolidated subsidiaries increased their profits, as their price revisions upward to cope with increases in materials prices were effective.

2) Due to further price increases of lead and other main materials, the Company's purchasing costs significantly increased. But sales increased and labor and other costs decreased as a result of structural reforms that the Company implemented since closing the financial results of the previous fiscal year on a consolidated basis. It also successfully increased profit by promoting initiatives in the first mid-term business plan. Thanks to all these efforts, the Company's operating income for this fiscal year on a consolidated basis improved. Even so, the Company's income derived from subsidiaries consolidated under the equity method largely declined due to a loss incurred at an equity-method affiliate to respond to product claims, as a result, the Company's ordinary income increased by only 8.2% year-on-year.

3) In the area of automotive batteries, sales increased in the domestic market as a result of price increases of products for new models as well as greater volume supplied. In the area of  batteries for the after-sales market, the situation was continuously severe in general, as sales in summer, which is usually a season with high demand, were slow; and demand in winter, which was relatively warm this year, was low; and price competitions grew even more fierce. Sales of automotive devices were continuously strong.

4) The Company made progress on initiatives to reduce costs, but changes in its product mix and higher prices paid for main materials had a negative impact.

Business Integration
In October 2006, the Company announced that it will merge its three wholly-owned subsidiaries on January 1, 2007. The three subsidiaries are GS Yuasa Power Supply Ltd. that produces and sells industrial batteries, and GS Yuasa Manufacturing Ltd., manufacturing automotive batteries and marketing products to OEMs for new vehicles, and GS Yuasa Industry Ltd., manufacturing and selling electrochemical, mechanical and electricity applications. GS Yuasa Power Supply will be a surviving company and the other two being merged companies. Newly formed GS Yuasa Power Supply Ltd. will be located in Minami ward, Kyoto city. (From an article in the Nikkan Jidosha Shimbun on Oct.28, 2006)

First Medium-term business plan 
(1) Period: April 2006 through March 2009 
(2) Financial targets for FY2008
Sales: 260 billion yen
Operating income: 13 billion yen
Ordinary income: 12 billion yen
(3) Major Challenges 
-To improve profitability of its automotive battery business in Japan
-To expand business in China and other Asian countries
-To launch business operations in the HEV and EV markets. 
-To reinforce the profit structure of its industrial battery and power supply equipment business
-To enhance its service business 
-To expand its large lithium ion battery business 
-To step up battery-related businesses having strong potential for growth

R&D Structure
R&D activities for batteries and power supply equipment are conducted at the following facilities: 
-The Company's R&D Center;
-The automotive battery business division's technical development headquarters and industrial battery and power supply business division's power supply system production headquarters development section of GS Yuasa Power Supply Ltd.
-The large lithium ion engineering section of GS Yuasa Technology Ltd.
-The research group of Ztong Yee Industrial Co., Ltd.
-The development group of Yuasa Battery, Inc.

R&D expenses for FY2006 totaled 4,536 million yen, of which 3,422 million yen was spent for the battery and power supply equipment division. 

R&D achievements in FY2006
-In the area of automotive batteries, the Company developed a new battery named the Sensia, which constantly does self-checks to check the status of the battery and notify drivers of malfunctions by flashing lights and sounding alarms. New products capable of preventing battery trouble in advance are being released for the after-sales market. The Company also developed battery technology to cope with the recent growing need for vehicles capable of reducing loads on engines to improve fuel economy, by controlling power generation (charging voltages) in correlation to the driving and battery charging conditions. The application of this technology will help reduce CO2 emissions by approximately 2% on average and improve fuel efficiency by approximately 2%, compared to those of the Company's conventional products. In the future, the Company will test the technology, aiming to commercialize new products based on it as soon as possible.

-In the area of hybrid electric vehicles (HEVs), the Company improved performance of its paste-type nickel hydride batteries by combining the Company's proprietary technologies to lower inner electrical resistance and control electrodes. The Company developed D-sized cylindrical batteries having an output of over 1800W/kg, which is the highest in the world. Currently, the Company is preparing to mass-produce these batteries. The Company also developed, in addition to the EH6 and EH4 batteries, lithium ion batteries with smaller capacities but with the output capacity and product lives improved to the highest levels in the world. The Company has set up a mock production line and is developing a sound foundation on which it will prepare to mass-produce the products. The Company has also developed new products that capitalize on advantages of lithium ion batteries.  These include the Toughion, a long life battery for a use in high temperatures as a backup battery for electronic control devices.

-Demand for large lithium ion batteries in the automotive and other new markets is anticipated to significantly grow. In addition, so is demand in the markets for conventional, specialty, and industrial batteries. In order to rapidly respond to the growing needs in the markets, the Company developed a new large-capacity lithium ion battery, the KEV50, based on its LIM Series batteries. The LIM Series batteries are designed for general industry and have been mass-produced and sold in the market for a long time. The new LEV50 battery has a more refined design and uses better battery plate materials. The Company is already supplying the LEV50 to Mitsubishi Motors Corporation for use on a test vehicle named the i-MiEV, a next-generation electric vehicle (EV) that Mitsubishi is planning to release in the market by 2010.  

R&D in details
-In Nov. 2006, the Company has developed a new lithium-ion battery named "Toughion". The Company expects that the new batteries will be employed as backup power sources in hybrid vehicles, for which higher power reliability is demanded with automotive electronic control systems becoming increasingly sophisticated. Applying titanium oxide as anode active material, and incorporating a new technology, which significantly reduces side reaction with electrolyte, Toughion achieves high heat-resistance and high energy-density for a long time, which have never been made possible with existing lithium-ion batteries. (From an article in the Nikkan Jidosha Shimbun on Nov.16, 2006)

-In Feb. 2007, the Company announced development of "Prothium," a new nickel hydride battery for the next generation hybrid vehicles. This new battery has achieved the world-highest level of output density for a cylindrical battery, 1,800 watt/kg (cell standards), which will greatly improve fuel efficiency and acceleration performance while reducing cost per output by 20% compared to the current product. The Company introduced a new technique in developing the Prothium to reduce the inner electrical resistance to less than 50% of the current product. The performance of the nickel hydride battery has also been upgraded greatly by application of its unique electrode technology which largely dampens charge/discharge resistances of the active material. Its output density is twice as much as Yuasa's first generation product of cylindrical battery and 1.4 times as much as its second generation product. Its durability in hot environment has also doubled that of the current product. With its large output and superior energy recovery, applications in electric bicycles, electric tools and energy recovery batteries requiring high output are anticipated in addition to hybrid vehicles. (From an article in the Nikkan Jidosha Shimbun on Feb. 3, 2007)

-In Mar. 2007, GS Yuasa Power Supply Ltd., a member company of the Company's group, announced that it has developed new automotive battery technology, which contributes to reducing both CO2 emissions and fuel consumption. The eco friendly battery will be available in the market in the summer of 2007. The battery has a great charging performance, which is some 10 percent higher than existing products. This was made possible by optimizing additive distribution on polar plates. In an effort to improve fuel efficiency, automakers are adopting charging control technology in a majority of their new models today. When tested on a vehicle equipped with this technology in 10-15 mode (Japanese Ministry of Land, Infrastructure and Transport calculations), GS Yuasa's new eco battery demonstrated an average 2 percent point reduction in CO2 emissions and fuel consumption compared with conventional ones. (From an article in the Nikkan Jidosha Shimbun on Mar. 13, 2007)

In FY2006, the Company made a capital investment of 7,328 million yen in total.
Among this, the investment for battery and power supply division was 6,610 million yen.

New Facilities (Selected)

Facilities/Locations	Equipment	Amount (in million yen)	Date of start	Scheduled date of completion	Increased capacity after completion
GS Yuasa Corporation (Kyoto, Japan)	R&D facilities	1,204	Mar. 2007	After March or April, 2008	R&D facility expansion
GS Yuasa Power Supply Ltd. (Kyoto, Japan)	Manufacturing facilities for lead storage batteries for automotive use	1,585	Mar. 2007	After March or April, 2008	Cost reduction
	Manufacturing facilities for power supply devices and lead storage batteries for industrial use	1,083	Mar. 2007	After March or April, 2008	Cost reduction
Ztong Yee Industrial Co., Ltd. (Yungkang Tainan, Taiwan)	Manufacturing facilities for lead storage batteries	570	Dec. 2006	After March or April, 2008	Production capacity increase
GS Battery Vietnam Co., Ltd.(Hanoi, Vietnam)	Manufacturing facilities for lead storage batteries	431	Dec. 2006	After March or April, 2008	Production capacity increase
Jieshi Battery Co., Ltd. (Wuxi, China)	Manufacturing facilities for lead storage batteries	480	Jan. 2007	After March or April, 2008	Production capacity increase
Yuasa Battery, Inc.(Pennsylvania, USA)	Manufacturing facilities for lead storage batteries	569	Dec. 2006	After March or April, 2008	Production capacity increase