Financial overview

In million JPY	FY2006	FY2005	Rate of Change (%)	Factors
Overall
Sales	105,860	95,739	10.6	- Commercial production of auto parts started at Taiho Seiki and Taiho Gifu - Made Nippon Gasket Co., Ltd. its subsidiary in October 2006
Operating income	4,154	3,131	32.6	- Materials price hikes, increase in depreciation expenses, and the costs to launch new products were offset by a production increase and group-wide streamlining activities on management
Ordinary income	4,286	3,215	33.3	- Interest expense increased, while foreign exchange translation was favorable
Net income	2,599	1,781	45.9	-
Automotive Component Business
Sales	79,965	68,438	16.8	-
Operating income	5,804	4,708	23.3	-

Incorporation
The Company announced at the end of June, 2007 that it will dissolve TF Global Gaskets LLC (TFGC), that produces automotive engine gaskets. TFGC is a 50:50 joint venture of the Company's wholly owned US subsidiary, Taiho Corp. of America (TCA), and Federal-Mogul Corp. (FM), a US-based supplier. TCA will establish its own subsidiary by purchasing the TFGC facility from FM to continue supplying products. The new TCA company, Taiho Manufacturing of Tennessee, will start operating on April 1. FM will transfer its production equipment at TFGC to its own plant. (From an article in the Nikkan Jidosha Shimbun on Feb.03, 2007)

Business Plan
The Company will reinforce its high value-added product business such as turbochargers and suspension parts. In addition to ensuring a smooth startup in supplying suspension parts for new models produced by Toyota, its major customer, the Company will work to expand its product range and customer base in the area of turbochargers, as well. Developing these products as leading items in its proprietary parts business, along with developing its mainstay products such as plain bearings and die-cast parts, the Company hops to achieve sales of more than 19 billion yen in FY2008, up 16 percent over the volume of present sales. Through fostering its value-added assembly parts business, the Company intends to establish a solid revenue base. The Company is a bearing supplier affiliated with Toyota, having a competitive edge in plain bearings such as crank shafts and transmission parts. The Company will actively expand the volume of its OEM parts, including suspension parts, turbocharger parts and EGR bulbs. (From an article in the Nikkan Jidosha Shimbun on May.28, 2007)

The Company plans to enhance its gasket business through reinforcing its partnership with Nippon Gasket Co., Ltd., its subsidiary. It plans to focus on increasing sales by consolidating its engine parts technology with the sealing material technology of Nippon Gasket so as to develop technologies for ultra-low viscosity oil, low oil pressure and new materials to be incorporated in new gaskets for next-generation engines. It aims to achieve over 12 billion yen in sales as early as FY 2008, which would be an increase of 14.4 percent over FY 2006 sales. The Company made Nippon Gasket its subsidiary in 2005 through a buyout. The company consolidated functions involving development and production of gaskets into Nippon Gasket. Its future business development plans are to accelerate the consolidation of both companies' resources. The Company's tribology (friction and lubrication) expertise and Nippon Gasket's sealing material expertise will be used to develop technologies on low-viscosity oil, low oil pressure, ultra-light aluminum material, and high-pressure fuel injection, which are expected to meet the needs of the next-generation engines. (From an article in the Nikkan Jidosha Shimbun on Jun.11, 2007)

R&D expenses in FY2006
The Company spent 1,543 million yen for overall R&D activities, out of which the Company spent 1,440million yen in its automotive equipment business.

R&D activities in FY2006
Automotive parts business
(1) The Company's R&D activities related to sliding bearings were successful in producing engine bearings, which are compatible with high performance engines; special bearings, which are used in compressors; and also various other bearings. In the area of engine bearings, the Company launched both copper and aluminum bearings with overlays that are both completely lead-free. These bearings received a technology award from Japan Society of Tribology, and the Japan Society of Mechanical Engineers Award from the Japan Society of Mechanical Engineers.
-The company successfully developed overlay materials using lead-free, solid lubricants to meet recent needs for enhanced engine performance. This has been used for major vehicle models in and outside Japan.
- The Company was successful in conducting sales activities that increased its global presence, as its won new supply agreements from overseas makers with which it had never transacted business before.
- The Company developed and launched completely lead-free copper bearing materials.

(2) Metal head gaskets for engines: The Company reinforced its R&D capabilities by entering into a business partnership with Nippon Gasket Co., Ltd.

(3) Die-cast products: The Company developed and commercialized sleeves for oil control valves and started to supply them to makers in both Japan and abroad. Also, the Company developed and commercialized cam housings and is currently conducting R&D activities to expand their application to more sophisticated parts such as differential carriers.

(4) High value-added products: The Company developed and commercialized coils and core assemblies for solenoid valves, parts for continuous variable valve timing systems, and EGR valves for small-diesel and large-diesel engines. In particular with coils and core assemblies for solenoid valves, the Company expanded its customer base by increasing the number of both domestic- and foreign-based customers.
-The Company   successfully developed electronic control EGR valves that offer precise control and a large volume of flow. These were designed in compliance with new long-term exhaust emission regulations for commercial vehicles that started from October 2005.

(5) Solder materials: The Company developed and commercialized in-vehicle use (ECU-use) lead-free cream solder.

(6) Environmental friendly products: The Company commercialized lead-free balance weights.
- The Company was successful in developing lead-free, clip-type balance weights being used in overseas markets. The Company also developed and commercialized stick-on balance weights.
- The Company also is working on development of high-intensity resin products as well as on development and commercialization of various catalyzers to satisfy environmental measures.

Capital Investment in FY2006
Total investment : 9,240million yen
Capital investment in the automotive parts business : 8,674million yen.

Automotive parts business
- In this business segment, capital investment focused on developing new products, expanding manufacturing facilities and strengthening production capacity.
- Taiho Gifu, its subsidiary, invested in plant equipment and bearing manufacturing facilities in conjunction with the Company establishing its second plant.
- At Taiho Kogyo Corporation of Yantai, the Company expanded the facilities producing bearings.

The Company announced that Taiho Kogyo Corporation of Yantai (TCY), the Company's subsidiary in Shandong Province, China,  will establish a new plant in order to meet growing demand for automotive components in the country. In addition to boosting the level its local production capacity in China, TCY will start producing high performance bearings at the new facility, which will begin operating in October 2007. The Group plans to invest 1.2 billion yen in this project. (From an article in the Nikkan Jidosha Shimbun on Nov.2, 2006)

New facilities (Automotive parts business only)

Plant	Facilities to be built	Planned investment (million JPY)	Planned construction starting date	Planned completed date	Objective
Taiho Kogyo Co., Ltd.
Main plant (Aichi Pref., Japan)	Production facilities for die casting products, etc.	1,984	Apr, 2007	Mar, 2008	Increasing production capacity
Hosoya plant (Aichi Pref., Japan)	Production facilities for bearing products, etc.	868	Apr, 2007	Mar, 2008	Rationalization and expansion projects to increase production capacity
Shinohara plant (Aichi Pref., Japan)	Production facilities for assembly components, bearings, etc.	745	Apr, 2007	Mar, 2008	New products, maintenance and renewal
Kyushu plant (Kagoshima Pref., Japan	Production facilities for bearings, etc.	211	Apr, 2007	Mar, 2008	Expansion, increasing production capacity and rationalization
Koukai plant (Aichi Pref., Japan)	Production facilities for bearings, etc.	415	Apr, 2007	Mar, 2008	Rationalization
Subsidiary
Taiho Seiki Main Plant (Aichi Pref., Japan)	Building (for production), expansion of related facilities and production facilities of suspension parts of automobiles, etc.	500	Apr, 2007	Mar, 2008	Basic investment, expansion and increasing production capacity
Taiho Gifu Co., Ltd. Main Plant (Gifu Pref., Japan)	Buildings and production facilities for bearings, etc.	1,282	Apr, 2007	Mar, 2008	Expansion, increasing production capacity, maintenance and renewal
Nippon Gasket Co., Ltd. Shiga Plant (Shiga Pref., Japan)	Production facilities for gaskets	654	Apr, 2007	Mar, 2008	New products, expansion and increasing production capacity
Taiho Corporation of America Main Plant (Ohio, USA)	Buildings and production facilities for bearings, etc	465	Apr, 2007	Mar, 2008	Expansion, increasing production capacity, maintenance and renewal
PT. Taiho Nusantara (PTN) Main plant (Karawang, Indonesia)	Buildings and production facilities for bearings, etc	121	Apr, 2007	Mar, 2008	Expansion, increasing production capacity, maintenance and renewal
Taiho Corporation of Europe (TCE) Main plant (Ujhartyan, Hungary)	Buildings and production facilities for bearings, etc	292	Apr, 2007	Mar, 2008	Expansion, increasing production capacity, maintenance and renewal
Taiho Corporation of Korea Main plant (Daegu, Korea)	Buildings and production facilities for bearings, etc	75	Apr, 2007	Mar, 2008	Expansion and increasing production capacity
Taiho Kogyo Corporation of Yantai Main plant (Shandong, China)	Buildings (factory)	667	Apr, 2007	Mar, 2008	Basic investment
	Production facilities for bearings, etc.	501			Expansion, increasing production capacity, maintenance and renewal