Financial overview

( in millions of JPY )

-	FY 2006	FY 2005	R.C.	Factors
Sales	173,159	142,260	7.1%	see note 1) below
Ordinary income	12,157	11,025	12.4%	see note 2) below
Current net income	6,631	5,857	11.9%

( R.C. : Rate of Change )

Factors
1) Despite some negative factors such as sluggish sales at some car OEMs in Japan, overall sales increased by 30.9 billion yen (21.7 percent) from what they were last year, to 173.2 billion yen. Some of the contributing factors to the rise are its favorable business overseas  and the addition of Ambrake Corporation in North America; and PT. TriDharma Wisesa (Indonesia), to its consolidated statements. The Company acquired Ambrake in August 2005 and invested additional capital in PT. TriDharma Wisesa in March 2006. 

2) Ordinary income was 12.2 billion yen, a gain of 1.1 billion yen (10.3 percent) year-on-year. Net income also rose 800 million yen (13.2 percent) from what it was last year, to 6.6 billion yen. Although there were negative factors including soaring prices of crude oil and other materials, and slumping domestic sales, income increased year-on-year as a result of the Company's streamlining initiatives and the addition of two subsidiaries to its consolidated statements. 


Domestic Development
In December 2006, the Company announced it will establish a new casting foundry in Tatebayashi City, Gunma Prefecture for in-house production of disc brake materials. Operations are expected to start in April 2008 and the company will expand production capacity to 2,200 tons per month by 2009. A total investment of approximately 5 billion yen is planned over a three-year period from fiscal 2007 to fiscal 2009. The new foundry is designed to ensure a stable supply and lower cost of cast iron, which is an essential material for disc brakes. (From an article in the Nikkan Jidosha Shimbun on Dec.6, 2006)


Global Development
- In September 2006, the Company announced the establishment of a wholly owned subsidiary for production and sales in Thailand. Akebono Brake (Thailand) Co., Ltd,. which was established on August 11 in Chonburi Province's Amata Nakorn, is the company's first plant in India, and will supply disc brakes to local Japanese automakers. (From an article in the Nikkan Jidosha Shimbun on Sep.29, 2006)

- In December 2007, the Company announces that it will establish companies functioning as regional headquarters in the U.S., Europe and Asia. Under this policy U.S. operations will be reorganized, effective January 1, 2007. Companies to perform functions of regional headquarters in Europe and Asia will be established by the end of fiscal 2007 at the earliest. Dissolution of a joint venture with Delphi in North America has made it possible for the Company to undertake its own comprehensive operations. In Asia four consolidated subsidiaries in Indonesia, China and Thailand have been established. Such development to fortify the regional structure is the basis for this organizational change. The Company aims to achieve objectives in the current midterm business plan until March 2009 by putting in place the global quadrupolar regional structure including Japan. (From an article in the Nikkan Jidosha Shimbun on Dec.28, 2006)


Business Partnership
Business Alliance with the ITOCHU Group
- In December 2006, the Company announced it will strengthen capital and business alliance with ITOCHU Corporation in and outside Japan. ITOCHU will raise its current holding of 0.8% in the Company's shares to 9.5% by the end of December 2006 through market transactions. ITOCHU will also acquire a stake in the Company, its wholly funded controlling company in the U.S. located in Elizabethtown, Kentucky. The Company intends to expand sales of industrial machinery and rolling stock brake products in Japanese and global markets, while studying the possibility of forming a joint venture to conduct aftermarket brake product sales in the North American market in the mid term. (From an article in the Nikkan Jidosha Shimbun on Dec.20, 2006)

- In March 2007, the Company announced its plans to bolster its business in Europe and the U.S.A. Following the strategic alliance agreement the company signed with Itochu Corporation in December 2006, the Akebono group will acquire from the Itochu group a 40 percent ownership in Amak Brake L.L.C. of the U.S.A. At the same time, the Itochu group will purchase a 20 percent stake in the Company's North American headquarters, Akebono Corporation (North America), fostering the two companies partnership in the region. In Europe, the Company will establish Akebono Brake Europe S.A., as its European regional headquarters in Brussels, Belgium on April 1. The new entity will oversee the group's regional operations and conduct sales and marketing activities in Europe. With its close proximity to European headquarters of Japanese automakers and parts suppliers, the new office will allow the group to strengthen ties with the Japanese car industry in Europe. In addition to the formation of the new company, the group will merge its two subsidiaries in France as a measure to streamline its operations; Akebono Brake Europe S.A.S will absorb Akebono Arras S.A.S. as the surviving entity.(From an article in the Nikkan Jidosha Shimbun on Mar. 14, 2007)

Restructuring
- In December 2006, the Company announced that it had liquidated ARC Brake LLC, Kentucky-based brake manufacturing and sales subsidiary, in July 2006 as part of the Company's restructuring measures in the U.S. In the year ended December 2005, ARC Brake sold 7,513 million yen and posted an ordinary profit of 260 million yen with a workforce of 31. (From an article in the Nikkan Jidosha Shimbun on Dec.25, 2006)

R&D Expenditure

( in millions of JPY )

-	FY 2006	FY 2005	FY 2004
R&D	1,271	484	422

R&D Structure
R&D activities are conducted in Japan, the U.S., Europe, as well as in China. The Company leverages the combined strength stemming from each of its facilities to develop next-generation products, aiming to become more competitive in the global market. 

The Company plans to concentrate the evaluations and experiments on brake products manufactured locally in Asia, to Japan. Organizational changes will be made to allocate only application engineers in Thailand, China and Indonesia, while evaluations and experiments which require new and replacement investments in equipment and others will basically be carried out in Japan to improve investment efficiency. The Company plans to raise its operating income margin from the current 8.2% to 10% by the fiscal year ending March 2009 through better investment efficiency, except for investment in production capacity expansion. Evaluations and experiments for the whole Asian market will be transferred to Hanyu, Saitama Prefecture, where its headquarters is located. (From an article in the Nikkan Jidosha Shimbun on Jan.19, 2007)

Japan
(Friction materials)
-Mainly manufactures high performance brake pads and linings for medium-sized and large vehicles. The company develops it products by focusing on the use of friction material compounds that are efficient, durable and safer and that have excellent sound and vibration properties. 
-In addition to the development of high performance friction material, the company also develops materials that not only achieve cost reductions but also are environmentally friendly.
-In developing environmental friendly friction material products, the Company procures samples and evaluates them from the perspective of environmental safety by taking into account the MSDSs (Material Safety Data Sheets), which the Company acquires from the material makers. The Company investigates how the makers respond to environmental safety and legal regulations. Further, the Company established its own guidelines in analyzing materials so that if any materials do not pass certain standards, the Company will not start development activities.
 (Brakes)
- In the area of disc brakes and drum brakes, the Company focuses its development activities on designing weight-saving products. The Company intends to achieve this by using 
 aluminum alloy and other new materials, and optimizing product structure. 
- For the purpose of improving production efficiency and reducing costs, the Company is promoting sharing and standardization of components. 
- As part of its drive to become more environmentally responsible, the Company eliminated the use of lead; shifting 100 percent to nonleaded electrodeposition paint in line with the End-of-life Vehicle directive implemented in Europe. It also replaced components using hexavalent chromium with those employing trivalent chromium. 

North America
(Friction material)
-The Company continues its initiatives on developing superior grade materials providing high performance and excellent properties in terms of sound vibration. These materials, which also take environmental protection into consideration (green materials), are equipped in a wide range of vehicle applications, from passenger cars to pickup trucks.
(Brakes)
-The company develops disc brakes mainly for passenger cars, SUVs, and pickup trucks. The company developed new aluminum composite calipers specifically designed to reduce weigh and  started mass-producing them.
-The company developed a disc brake which features a new, next-generation rear parking mechanism, which will replace its existing products. The new disc brake is currently being developed for various vehicle models.

-The company is developing new products including a newly designed low-cost brake and a caliper with improved heat-capacity performance by collaborating with Japan.

Europe
-This European research center specializes in the development of friction materials covering a wide-range of products, starting from friction materials for the European market, which has particular demands for special features; up to friction materials that are appropriate for vehicles exported to the Japanese market. 
- The Company aims to win new customers by developing "hybrid materials" that combine the features of excellent noise reduction properties, something which is in demand in the Japanese and U.S. markets; and high performance, which is required in Europe. 
- Apart from its own development facility in France, the Company established an R&D subsidiary in Germany, which enables it to develop products that better meet the needs of local customers. It is also working on becoming more cost competitive by using and sharing materials available in Europe; and introducing manufacturing methods employed in Europe. 

Capital Expenditure

( in millions of JPY )

-	FY 2006	FY 2005	FY 2004
Investment	8,900	8,200	3,233

Planned amount of capital investment by region
- Japan: 5,000 million yen
- North America: 2,000 million yen
- Europe: 200 million yen
- Asia: 1,700 million yen

Construction of new facilities: 

Region	Planned investment amount (Million Yen)	Investment projects
Japan	12,900	- Improving facilities for testing and R&D - Preparing production lines to support new contracts - Revamping existing equipment - Streamlining operations - Promoting environmental conservation  - Installing new facilities to manufacture disc brakes, drum brakes, disc brake pads, and drum brake linings  - Constructing a foundry - Expanding its plant that produces sensors - Installing facilities to develop high performance brakes - Constructing a new office building - Improving its IT system
North America	3,600	- Improving facilities for testing and R&D - Preparing production lines to support new contracts - Revamping existing equipment - Streamlining operations - Promoting environmental conservation  - Strengthening aftermarket business - Installing new facilities to manufacture disc brakes and disc brake pads - Constructing a new office building
Europe	1,300	- Improving facilities for testing and R&D - Preparing production lines to support new contracts - Revamping existing equipment - Streamlining operations - Promoting environmental conservation  - Installing new facilities to manufacture disc brake pads - Installing facilities to develop high-performance brakes
Asia	2,200	- Preparing production lines to support new contracts - Streamlining operations - Promoting environmental conservation  - Installing new facilities to manufacture disc brakes, drum brakes, and disc brake pads - Installing new facilities to produce motorcycle brakes - Constructing a new plant in Thailand
Total	20,000