Financial Overview

( in millions of JPY )

-	FY2006	FY2005	Rate of change(%)	Factors
Overall
Sales	681,547	265,888	156.3	This significant increase is to due the Company making UK-based Pilkington its wholly owned subsidiary
Operating income	23,822	8,429	182.6
Ordinary income	8,001	10,425	(23.3)	-
Current net income	12,095	7,764	55.8	-
Glass & building materials
Sales	268,229	N.A	N.A	See below
Operating income	13,039	N.A	N.A

Financial performance of the UK-based Pilkington plc, which was made NSK's wholly owned subsidiary in June 2006, is included in the Company's  consolidated income statement from the second quarter of fiscal year 2006 that ended in March 2007. Due to this, building products and automotive products, which were formerly combined under "glass and building materials" are presented separately starting from the current fiscal year.

Automotive products

Overall
-Sales for new cars leveled off. Strong sales in general were partially offset by stagnant performance in North America.
-Aftermarket sales remained at the same level that those of last year, while those in Europe were very brisk.
-Sales breakdown by geographic region is as follows: about 50% in Europe, about 20% in Japan,  about 20% in North America and the remaining10% is in other areas. 

Europe
-Although the vehicle market grew by about 1.2%, the Company fortunately maintained a rate of sales growth exceeding the market average, thanks to brisk orders received for new vehicle models. 
-Sales in the aftermarket in Europe showed strong growth, which is attributable to the Company's continuous efforts to strengthen its competitive edge.

Japan
-Vehicle production in Japan recorded high growth, approximately 7% over that of the last fiscal year. Thanks to increased sales of glass for new cars, the Company was highly profitable.

North America
-Sales for new cars were stagnant, affected by the slump evidenced in U.S. automakers. 
-Aftermarket sales were  negatively affected mainly by strong competition from other suppliers and higher fuel costs.

Other
-In South America, where the need for automobiles grew by about 8% year-on-year, the Company recorded solid performance, thanks to increased sales and continuous efforts to improve efficiency.
-China continued to see rapid market growth. Under this situation, the Company improved its profitability by enhancing cost and production efficiencies.

Reorganization
The board of the Company has approved the top level organisational structure of the newly enlarged Group, following its acquisition of Pilkington plc., DESIGNED to create a truly global leader in the glass manufacturing industry. The first phase in the strategy to achieve that goal is the establishment of an integrated Flat Glass Business. This new global Flat Glass Business will be set up, effective April 1, 2007, which will includes all the activities in the Company's Group involving the development, manufacture and sale of Architectural/Building Products glass and of Transportation/Automotive glass and glazing systems throughout the world. The Chief Executive Officer of the Global Flat Glass Business will be Stuart Chambers.The Flat Glass Business will consist of a global Building Products Business Line, which will also be led by Stuart Chambers and a global Automotive Business Line, to be led by Pat Zito. (From a press release by the company on Jan. 15, 2007)

R&D Structure
The Company conducts R&D operations at its technical research laboratory, product development division, flat glass management office and development division, all located within its own group of companies. In building its glass business and automotive glass business, the R&D structure has been integrated with that of Pilkington plc to achieve a higher level of efficiency.

Capital Investment

( in million JPY )

-	FY2006	FY2005	FY2004	FY2003
Overall	13,660	7,623	7,945	7,714
Glass and Building Material Division	N.A.	2,590	2,825	2,465
Automotive Glass Division	3,519	N.A.	N.A.	N.A.

R&D Operations (Automotive products)
The Company's transport equipment materials company and other related subsidiaries are in charge of developing automotive glass and antennas. 
The transport equipment materials business is shifting from development to commercial production of automotive glass.
Pilkington plc, the Company's wholly owned subsidiary, developed an automatic inspection device that can inspect all kinds of products.  The Company installed it on major production lines worldwide to ensure it supplies products that maintain consistent levels of quality in the global market. 

Contract to introduce automotive glass related technology  (as of Mar. 2007)

Partner	Contract	Period of the contract
Saint Gobain Glass (France)	Licensing of rights to use a patent for automotive laminated glass that has sound-insulating features.	Dec. 2003 - Nov. 2027

Investment