1-1-1, Kidamotomiya, Neyagawa-shi, Osaka 572-8570, Japan
Phone: 81-72-824-6933 Facsimile: 81-72-821-7913
URL http://www.exedy.co.jp

Mission Statement
The Shape of Our Future-“Creation of Fulfillment”
Each employee, with a good conscience and hope for the future,
will create fulfillment for our society.
Through advanced technology and scrupulous attention to detail,we will create fulfillment for our customers.
With pride and a desire to grow, we will create fulfillment
for the EXEDY family.

Our Guiding Principles
Every one of us
participates with strong self-motivation.
-A company that meets challenges with vitality.
cooperates and strives for performance.
-A company whose efforts are rewarded.
practices what we preach.
-A company that accomplishes its stated goals.

Annual Reportbuilds mutual respect and trust.
-A company with pride.
encourages workers to grow as individuals.
-A company that makes the most of individual talent.

Year Ended March 31, 2004

Business DomainWith advanced technology and a dedication to service,a firm base in manufacturing drivetrain components,
we aim to be a world-leader in our field.

2004

2004.8.1000.BC. Printed in Japan

Profile

Consolidated Financial Highlights

In the nearly 80 years since we began operations and more than 50 years since our foundation, Daikin
Clutch has grown steadily, together with the evolution of power trains. Many of our outstanding products,
developed from our original technology and constant research, have ensured safe, comfortable travel andoperability of vehicles and industrial machinery, thus contributing to all areas of industry. Through ourefforts to manufacture the best products in response to current needs, we aim to deliver satisfaction to ourdirect customers, and ultimately to the general public. With this in mind we are constantly striving toadvance still further our special technology, which has been developed over many years. Efforts to expand
our overseas production facilities are backed by a simple principle: products should be produced where
they are needed by members of the local community.
At EXEDY, we work to undertake business activities that contribute to the local communities, regions
and countries that we serve. As a comprehensive engineering manufacturer of driving systems, we aredetermined to continue our quest to become the world’s best company.

EXEDY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Years ended as of March 31, 2003 and 2004

Japanese yen(Millions)

U.S. dollars(thousands)%
Change2004

2004

2003/2004

・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・ ¥ 113,673
4,448
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・

¥ 122,281$ 1,156,973

5,179

49,001

Total assets ・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・ ¥ 108,907
Shareholders’ equity ・
63,192
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・

¥ 110,799$ 1,048,337

69,614

658,661

2003
For the year :Net sales
Net income

Japanese yen

Net income ・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・ ¥ 95.80
Shareholders’ equity ・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・ 1,386.57
17.00
Cash dividends ・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・

Torque converters, automatic transmissions/parts, etc.

Comprehensive Engineering
Manufacturer of Driving Systems

Manual Automotive Drivetrain Operations
Clutch discs, clutch covers, 2 mass flywheels, etc.

Net Sales
122,2812004

113,673

2003

101,215
113,622
104,6120

20,00040,00060,000 80,000

1.03+ 13.6

1,432.90

108.84

$

13.56

+

15.00

0.14

- 11.83.3

108.84

2004

95.80

2003
30.99

2002

42.71

2001

33.74

2000
0

20

40

60

80

100

120

Shareholders’ Equity Per Share of Common Stock
5,179

2004
4,448
1,482
2,072

2001

1 Annual Report 2004

U.S. dollars(Millions of yen)

2002

0

1,000

2,000

(Yen)

1,432.90

2004
2003

1,386.57

2002

1,320.08
1,214.25

2001

749 1,637

2000

Consolidated Five-Year Summary・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・14
Consolidated Balance Sheets・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・15
Consolidated Statements of Income・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・17
Consolidated Statements of Shareholders’ Equity・
・
・
・
・18
Consolidated Statements of Cash Flows・
・
・
・
・
・
・
・
・
・
・
・
・19
Notes to Consolidated Financial Statements・
・
・
・
・
・
・
・
・
・20
Report of Independent Public Accountants・
・
・
・
・
・
・
・
・
・
・
・
・29
Corporate Data・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・30

+ 10.2(Yen)

100,000 120,000 140,000

Net Income

2003

Profile・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・1
Consolidated Financial Highlights・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・2
To Our Shareholders・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・3
Business Results by Division・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・5
Business Results by Market・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・7
Exedy Plant-tour 2003 ・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・9
Topics of the Year・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・11
Outline of the EXEDY Group・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・13

1.7

Net Income Per Share of Common Stock2000

C o n t e n t s¥+(Millions of yen)

2001

Power shift transmissions, torque converters, hydraulic clutches,machine devices, molding devices, shipping agent, clutches
for motorcycles, etc.

+ 16.4

Notes.1: Dollar figures are translated, for convenience only, at the rate of ¥105.69 to U.S. $1.00.
2: Effective as of April 1, 2002, per share data are stated under “Accounting Standards for the computing net income per shareof common stock (Standards of Enterprise accounting No.2)” and “Implementation Guideline of Standards for the computing
net income per share of common stock (Implementation Guideline of Standards of Enterprise accounting No.4)”.

2002

Other Operations

7.6

At Year-End:Per Share Data:

Automatic Automotive Drivetrain Operations+

1,182.31

2000
3,000

4,000

5,000

6,000

0

200

400

600

800

1,000

1,200

1,400

1,600

Annual Report 2004 2

To Our Shareholders
Business Operations

Financial Position

1. Review of Fiscal 2003

1. Review of Fiscal 2003

The auto parts industry saw favorable bullish trends dueto the upward movement in the American and Asianmarkets. The Japanese market also experienced demand
for re-purchasing large-size vehicles due to the tighter
regulation of exhaust gases. The EXEDY Group focused
mainly on the automatic automotive drivetrain business in
the United States and the manual automotive drivetrain
business in Asia in addition to lowering costs in all
possible segments. As the result, the EXEDY Group hadsales of 122.2 billion yen (an increase of 7.6% over fiscal
2003), operating profits of 11.5 billion yen (an increase of
17.7%), ordinary income of 10.9 billion yen (an increaseof 22.8%), and net income of 5.1 billion yen (an increaseof 16.4%).

Our cash flow from sales activities was 13.6 billion yen, adecrease of 2.6 billion yen over fiscal 2002. The main
breakdown is as follows: net income before income taxes was
9.3 billion yen (compared to 8.5 billion yen for fiscal year 2002)
and depreciation expenses were 7.6 billion yen, which was thesame level as the previous year. The loss of 1 billion yen due tothe accounting for the impairment of fixed assets did not reduce
cash, which resulted in positive cash flow. In terms of working
capital from operations, trade receivables, and inventory
increased 1.9 billion yen and liabilities on purchases increased
800 million yen due to business expansion in North America.
The corporate tax paid was 5.2 billion yen.
Cash flow from investments was 10.7 billion yen, an increase of
2.7 billion yen. Expenses for capital investment were 9.4 billion
yen (compared to 8.2 billion yen for the previous year). Cashflow from financial activities was 2.2 billion yen, a decrease of
2.3 billion yen. The payment of dividends was 800 million yen
and the long/short term loan payments were 1.9 billion yen. In
addition, gain from treasury stock sold was 700 million yen. As
the results indicate, cash and cash equivalents at the end of
the year totaled 16.7 billion yen, an increase of 200 million yen.

Note: Due to the accounting for the impairment of fixed assets, which has
been allowed in Japan since the current period, EXEDY already applied
this accounting method, allocating impairment loss of 1 billion yen as
extraordinary loss in order to build a sound financial structure.

2. Outlook for Fiscal 2004
We expect that the domestic market will be flat in the
coming period, the U.S. market will be favorable, and the
Asian market will continue to expand. The EXEDY Group
continues to develop eco-friendly products that improvefuel economy and suppress noise and vibration in
vehicles with fuel-efficient engines for complete quality
management. Regarding earnings, we are determined tosecure solid profitability by streamlining operations given
the severe financial condition and the expected higher
costs from price increases for steel material.
Consequently, we expect sales of 125 billion yen (an increaseof 2.2%), ordinary income of 11.2 billion yen (an increase of
1.9%), and net income of 6.0 billion yen (an increase of
15.9%) for the next fiscal year.

2. Outlook for Fiscal 2004
Cash flow obtained from sales activities will increase by 3
billion yen compare to this year due to increases in net
income before income taxes and depreciation expenses,
decrease in corporate tax expenses, and variations inworking capital. Cash flow for investment activities will
increase by 5 billion yen over this year due to an increase incapital investment in response to the expanded AT
business. Cash flow from financing activities will be 1 billion
yen due to the payment of dividends and other items. As theresults indicate, cash and cash equivalents at the end of
next year will remain the same at 16.7 billion.
July 2004
Takeshi Nakano

Management goals
EXEDY Group will put our corporate climate reform
activities named NC21 (New Century 21) into practicebased on our corporate principle with “Creation of
Fulfillment” as the key basis.
The backbone is “being competitive as we fulfill
our corporate responsibilities in society including
compliance, corporate principle, and eco-friendly
operation to improve our social standing.”

Top management policies
Accomplish the world’s best quality, cost performance,and manufacturing promptly to transform our corporate
structure as the world's leader.
1) Keep focusing on customer needs and supply
products providing pleasure in a timely manner2) Improve quality, the key factor, as if no comparison
exists3) Accomplish the world’s best cost performance by
establishing a system of global production and supply4) Establish a corporate structure to accomplish eachtarget with complete commitment to activities
5) Establish better communication to create an active
and well-communicated corporate climate

Mid-term strategies
Due to the upward demand of multistage autotransmissions and CVT, more and more of the main parts,
torque converters, which used to be manufactured byauto manufacturers internally, are outsourced anddeveloped/produced by specialized manufacturers, suchas EXEDY. In order to take advantage of this new
business opportunity, we expand the size of our
production across the three bases in Japan, the UnitedStates, and Asia since 2004 with our superb establishedtechnologies. We continue our corporate management
considering environmental issues demanded by society to
improve fuel efficiency and develop lighter, thinner, andmore efficient products in the driving parts field with ourtechnology, which leads to profits from our new products
for our shareholders.

Takeshi Nakano
President and Chief Executive Officer

3 Annual Report 2004

Annual Report 2004 4

Business Results by Division
Segment Information(AT, MT)

Segment Information(Other)Due to the initiation of the new torque converter business, the increase insales for South Korea, and CVT, sales were 66.7 billion yen (61.5 billion yen
in the previous year, an increase of 8.5%) and operating profits were 6.2
billion yen (6.2 billion yen in the previous year, an increase of 0.7%)

AT
MT

The Sales ofAutomotive drivetrain operations(Millions of yen)
66,75345,476112,229

2004
61,53344,0882003

Due to the favorable business results of the auto industry in Asia and thedemand for the repurchase of large-size vehicles to meet the new exhaustgas regulations in Japan, net sales were 45.4 billion yen (44 billion yen in theprevious year, an increase of 3.1%) and operating profits were 5.5 billion
yen (4.9 billion yen in the previous year, an increase of 11.3%)

41,43651,652

2002
0

20,00040,00060,000 80,000

Due to the increase on sales of forklifts and motorcycles, sales were 15.1
billion yen (11.4 billion yen in the previous year, an increase of 32.2%)
and operating profits were 500 million yen (-700 million yen in theprevious year).

105,62193,088100,000 120,000

The Sales of
Other operations(Millions of yen)

15,1882004
2003

11,486

2002

11,295
0

3,000

6,000

9,000

Integrated production of torque converters required for driving convenience, in AT segment, future automobiles are in perspective
through continuous development of new products and technology, such as development of highly efficient, small size, long, flat
torque converter based on fluid mechanics and the world’s smallest, lightest FRU (forward/rear switch unit) essential for the CVT. In
addition, its business field is expanding into the whole automatic transmission including development and production of AT parts.

We supply products for construction machinery and industrial vehicles that keep Japanese industry on the move. Because thisfield involves custom manufacturing of a wide variety of products in small lots, great flexibility is required. EXEDY develops,
manufactures, and assembles power shift transmissions that stand out for their quality. In addition, EXEDY is expanding thebusiness of clutches for motorcycles in the Southeast Asian market based on our clutch technology developed for automobiles.

AT

Other

Automatic automotive drivetrain operations

Super-elliptical type
torque converter

Unity torque converter

Lock-up damper

Forward reverse unit
for CVTClutch Pack

Friction Plates

Transmission for a rough-terrain crane

15,000Industrial drivetrain operations, Motorcycle
drivetrain operations and other operations

Forklift transmission

RetarderOne-way clutch

Multiplate wet clutch

Other

In MT business, EXEDY develops, manufactures, and assembles components for manual transmissions, such as
clutch discs and clutch covers. Our advanced engineering has led to a number of innovations, including sports
clutches and WAD (wide-angle dampers), hydrodamp systems that provide the superior anti-noise,anti-vibration performance needed in today’s compact, lightweight cars.

MT

12,0008.7%
Segment Information
The EXEDY Group segments by business type used to be

Manual automotive drivetrain operations

MTautomotive drivetrain operations, industrial drivetrain operations,37.2%

and other operations; however, the ratio of industrial drivetrain
business of the EXEDY Group has been lowered and therefore
included in the segment of other operations. On the other hand,the automotive drivetrain segment has been classified into MT(manual automotive drivetrain operations) and AT (automatic

WAD (wide angle damper)

5 Annual Report 2004

Large sized unity disc

Silent disc

Large sized pull-type clutch

Hydrodamp system

Multi-plate clutchAT

automotive drivetrain operations), in order to provide useful

54.1%

information to our shareholders and investors.
The graph above shows the percentage ofsales to customers outside the Group.

Annual Report 2004 6

Business Results by Market
Other (Europe)

Asia and Oceania

1.4%

7.0%

Net Sales of Location
Japanese yen(millions)

United States

2003

2004

Japan・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・ ¥ 94,469¥ 98,435

19.5%

Japan

72.1%

The graph above shows the percentage ofsales to customers outside the Group.

■ Production● Sales/Warehousing● Licensee

U.S. dollars(thousands)

United States
Due to the initiation of the new torque converters business, net sales were 24.4 billion yen(an increase of 11.0% over the previous year) and operating profits were 1.4 billion yen (anincrease of 44.1%)

2004$

931,353

United States・
・
・
・
・
・
・
・
・
・
・
・
・
・
・

22,071

24,493

231,741

Asia and Oceania・
・
・
・
・
・
・
・
・
・
・

7,312

9,887

93,550

Other (Europe)・
・
・
・
・
・
・
・
・
・
・
・
・

1,238

1,812

17,140Eliminations・
・
・
・
・
・
・
・
・
・
・
・
・
・
・ (11,417)(12,346)(116,811)

Total・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・ ¥ 113,673¥ 122,281$ 1,156,973

EXEDY Holdings of America Corporation

U.S.A.

1 Daikin Clutch Corporation

2 EXEDY America Corporation

1
3
2

Other ( Europe )Net sales were 1.8 billion yen (an increase of 46.3% over the previous
year due to the fiscal year period change of the U.K. affiliate, since
the previous year results were for a nine-month period), andoperating profits were 200 million yen (an increase of 215.3%).

U.S.A.

DYNAX Industry(SHANGHAI) Corporation

Hyundai Motor
Kia Motors

Shanghai DYNAXCorporation

4

BONEM

7

5

England

U.S.A.

Hungary

Tamp Auto Parts

8

EXEDY Middle East Fzco 6

3 DYNAX America Corporation

11 12

10

4

EXEDY Clutch Europe Limited

5 Euro EXEDY Clutch Limited

9

Japan
13

Asia and Oceania

Net sales were 98.4 billion yen (an increase of 4.2% over the previous year) and operating profits were 8.8 billion
yen due to the total rationalization (an increase of 16.7%)

Due to stable growth of automobile production in Asian countries, an additional sales office establishedin the U. A. E and expanded motorcycle related business, net sales resulted in 9.8 billion yen (an increase of 35.2% overthe previous year) and operating profits 1 billion yen (an increase of 4.6%).

Head Office

DK Pronac Co., Ltd.

DYNAX Corporation

1-1-1, Kidamotomiya, Neyagawa-shi,
Osaka 572-8570, Japan
Phone: 81-72-824-6933
Facsimile: 81-72-821-7913

6-11, Taguchi kenkyu danchi,
Higashihiroshima-shi,
Hiroshima 739-0038, Japan
Phone: 81-82-425-3434
Facsimile: 81-82-425-3436

1053-1, Kamiosatsu, Chitose-shi,
Hokkaido 066-8585, Japan
Phone: 81-123-24-3247
Facsimile: 81-123-49-2050

U.A.E.

China

India

Indonesia

6 EXEDY Middle East Fzco

7 EXEDY Chongqing Co., Ltd.

8 Ceekay Daikin Limited

9 P.T. Daikin Clutch Indonesia

Malaysia

ThailandThailandAustralia● DYNAX Corporation● DH Corporation● Hiroshima Sales Office● DK Pronac Co., Ltd.
● Tokyo Sales Office● Kawagoe Plant● Business Location● Affiliated Companies

10 EXEDY (MALAYSIA) SDN. BHD.

7 Annual Report 2004

11 Siam DK Technology Co., Ltd

12 EXEDY Friction Material Co., Ltd.

● Head office● Nippon Retarder System Co., Ltd.
● Exenet Logistics Co., Ltd.
● DK Building Service Co., Ltd.

● Shizuoka Sales Office● Chubu Sales Office● Ueno Division

13 EXEDY Australia PTY. Limited

Annual Report 2004 8

EXEDY World-Tour 2004

EXEDY World-Tour 2004

EXEDY Chongqing Co., Ltd.
EXEDY America Corporation

EXEDY America Corporation
Facility expansion of EXEDY America Corporation (EAC), an
EXEDY Group torque converter manufacturer located in
Tennessee, U.S.A. was completed in July 2003, and its
newly set two-line production started. The expansion was
due to a large order received from Ford Motors, and thetorque converter production
capability was increased to
1.5 million from 0.9 million
per year before theexpansion construction.
EAC was establishedas the first EXEDY Groupoverseas torque converter
production base in October
1994. The initial company
Torque convertername was Daikin Drivetrain
Components Corporation (DDC); however, it was changed
to EAC in April 2004 due to the strategy for the EXEDY
brand creation. The facility area expanded to 31,000 m2,
approximately 1.5 times larger than the initial facility area of
22,000 m2, and the number of employees increased by 80
to 340.
EAC received a production order of 260 mm large-size
torque converters equipped on three models, including theFreestar, Taurus, and Sable from Ford Motors. At present,
approximately 150 employees are engaged in this productionin three shifts manufacturing 45,000 per month. In the United

EXEDY Chongqing Co., Ltd.

States, auto manufacturers have outsourced more and more
auto parts, and the torque converters had originally been
manufactured by Ford Motors internally.
Half of the expanded facility is for a wider range ofbusiness in the future. EAC intends to take advantage of theoutsourcing trend based on the latest experience of capital
investment and production line setup, stepping forward toreceive new orders for the remaining space to be used for
production. Its final goal for the expanded production area isover 2 million converters annually.

Ford Sable

Ford Taurus

Ford Freestar

EXEDY Chongqing Co., Ltd.(EXC), our Group company
located in Chongqing, China manufactures clutch discs andclutch covers for passenger cars and driving components,
such as F/W dampers, for CVT vehicles. Its sales activities
cover 14 auto and engine manufacturers, including a location
deep in the mountains 1,300 km away from thecoastal Shanghai area and northern tosouthern components of mainland
China, in addition to sales foraftermarket in different
parts of the country.
EXC wasestablished in December
Clutch Disc
1995 with the company
name of Chongqing
Sanling Daikin Mfg. Co.,
Clutch CoverLtd. (CSD), started mass
production in 1997, andexperienced stable business expansion with the slogan,“First class quality, first class corporation and first class life.”
For the last two years since FY 2002, CSD experienced rapid
growth, and net sales, profits, and production/sales volume
all doubled. Since January 2004, its name has been changed
from CSD to EXC as a part of the EXEDY Brand image
creation strategy.
As the auto industry in China has become the fourthlargest in the world above France following the United States,

Japan, and Germany in FY 2003, the market share of EXC isthe fourth largest as a clutch manufacturer for OEM in China,
taking advantage of being an EXD Group company, and will
start capital investment to double production capability fromFY 2004, aiming to be a leading company within 10 years.
By the second half of FY 2005, monthly production isplanned to be 100,000 sets in a double-shift operation.
EXC product lineup is specialized in the range of small
passenger/commercial vehicle to compact
passenger/commercial vehicle components, having an
advantage over competitors for models of Japanese madeautomobiles. Therefore its OEM business is mainly forJapanese vehicles; however, EXC aims to obtain a larger
market share by developing new products focusing on U.S.
and European models of automobiles as well.

AUTO CHINA 2004, the first exhibition as EXC

9 Annual Report 2004

Annual Report 2004 10

Topics of the Year

Topics for the Year

Consecutive Awards in 2002 and 2003
for GM Supplier of the Year

Company Name Changes of Overseas
Affiliated Companies

EXEDY was honored as the General Motors Supplier of theYear, an award presented to superior suppliers selected byGeneral Motors (GM), for the two consecutive years 2002
and 2003.
EXEDY is a three-time winner of this award since 2000.
Award winners are selected from suppliers all over theworld by GM executives from purchasing, engineering,
manufacturing, and logistics who base their decisions on
supplier performance in technology, quality, price, anddelivery. The award has been presented since 1992. This
year, General Motors honored 77 suppliers out ofapproximately 3,500 companies for their excellence
throughout 2003.
The award was given during ceremonies in April 2004
at the Hilton Prague Hotel in the Czech Republic. EXEDY
president Takeshi Nakano and others attended, anda trophy was awarded by Jim Bovenzi, executive
director of GM. EXEDY continues to supply better
products, aiming to be a four-time award winner.

As a part of the EXEDY brand image creation since 2002,
five of EXEDY’s overseas affiliated group company names
have been changed.

President Nakano of EXEDY (left) and Rick Wagoner, president andchief executive officer of GM

Five company names have been changed as follows:
1. Chongqing Sanling Daikin Clutch Mfg. Co., Ltd. (China)[New Company Name] EXEDY Chongqing Co., Ltd.
2. Daikin Clutch Australia Pty. Ltd. (Australia)[New Company Name] EXEDY Australia Pty Ltd.
3. Daikin Clutch Europe Limited (UK)[New Company Name] EXEDY Clutch Europe Ltd.
The above three names were changed on January 1, 2004
4. EXEDY America Corporation (U.S.A)[New Company Name] EXEDY Holdings of America
Corporation
5. Daikin Drivetrain Components Corporation (U.S.A)[New Company Name] EXEDY America Corporation
The above two names were changed on April 1, 2004
Our company name was changed from Daikin Mfg. Co.,Ltd to EXEDY Corporation in 1995; however, the name,
Daikin, remained with some affiliates due to the worldwide
strength of the Daikin Clutch brand image. For the coming
future, we will form EXEDY as our sole brand and focus on
creating a global standard brand.

Ceremony for the new company name, EXEDY Chongqing Co.,Ltd.

2003 Major Global Vehicles
Using EXEDY Products

Strategy of EXEDY Brand Creation
In order to establish the brand name of EXEDY in the global
market, EXEDY participated in domestic and overseas autoparts trade fairs. For FY 2003, EXEDY displayed products at
six locations in five countries (U.S.A. (2), France, China,
Malaysia, and the U.A.E.) and four domestic locations(Yokohama, Chiba, Osaka, and Fukuoka) to promote the
EXEDY brand name and products. These activities were partof our strategy of brand creation since 2002, pressing our
immediate aim to spread EXEDY as a global standard brand.
In addition, the package design of clutches for theaftermarket was changed for the current period after
eight years. The purpose was to make the brandname well known and prevent the imitation of
EXEDY products in the market by using a registeredpackage design as an EXEDY trademark.

VOLKSWAGEN TOUAREG
DYNAX AT Parts

PEUGEOT 406
EXEDY Torque Converter

SEMA SHOW 2003(USA Las Vegas)
November 2003

SUBARU LEGACY
EXEDY Manual Clutch, Torque Converter
and DYNAX AT Parts(2003-2004 Car of the Year Japan)

MAZDA RX-8
EXEDY Manual Clutch(2004 RJC Car of the Year)

New package for manual clutches

11 Annual Report 2004

Annual Report 2004 12

Consolidated Five-Year Summary
Status of the Corporate GroupThe EXEDY Group consists of EXEDY Corporation,
23 affiliates, and 2 related companies for the
production and sales of manual automotive drivetrain(MT) and automatic automotive drivetrain (AT) as our
main business, as well as a wide range of service
activities related to the core business.
The EXEDY Group domestic business structure
consists of production and sales of products andparts by EXEDY Corporation and DYNAX Corporationand subcontract production, service activity, andother businesses by other Group companies.

Overseas, each Group company manufacturesand markets MT, AT, and other products for local
users; EXEDY Corporation and DYNAX Corporation
exports to international customers and provides
technical support and supplies products and parts toGroup companies.
The business outline of EXEDY Corporation, theaffiliates, and related companies are classified asfollows:

Outline of the EXEDY Group

EXEDY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Years ended as of March 31

Japanese yen(millions)

2000

2001

2002

2003

2004

2004

Net sales ............................................................ ¥ 104,612¥ 113,622¥ 101,215¥ 113,673¥ 122,281$ 1,156,973

1,637

2,072

1,482

4,448

5,179

49,001

Total assets ........................................................ ¥ 102,009

For the year:

Net income .........................................................

At year-end:¥ 105,952¥ 106,576¥ 108,907¥ 110,799$ 1,048,337

Current assets ....................................................

49,16551,41950,81754,21355,399524,160

Property, plant and equipment .........................

44,27847,00548,514

48,10847,041445,084

Current liabilities ................................................

24,597

33,10628,32524,73325,074

237,243

Long-term debt ..................................................

14,099

6,382

5,914

8,354

2,594

24,542

Shareholders’ equity ..........................................

57,35858,90860,081

63,192

69,614

658,661

Shareholders’ equity / Total assets (%) .............

56.23

55.60

56.37

58.02

62.83

62.83

Retained earnings .............................................

43,654

45,111

47,21951,13655,406524,232

Japanese yen

Per share of Common stock:

Automatic Automotive Drivetrain Operations●EXEDY Corporation●DYNAX Corporation●EXEDY America Corporation●DYNAX America Corporation●Shanghai DYNAX Corporation●DYNAX Industry (Shanghai) Corporation●EXEDY Australia PTY.Limited●Siam DK Technology Co.,Ltd●DYNAX North America Sales Corporation●EXEDY Holdings of America Corporation

1 other company(11 companies total)

U.S. dollars(thousands)

U.S. dollars

Net income ......................................................... ¥33.74

Net income-diluted ............................................

33.51

42.23

30.84

93.32

106.12

1.00

Shareholders’ equity ..........................................

1,182.31

1,214.25

1,320.08

1,386.57

1,432.90

13.56

¥

42.71

¥

30.99

¥

95.80

¥

108.84$1.03

Notes: 1. Dollar figures are translated, for convenience only, at the rate of ¥105.69 to U.S.$1.00.
2. Effective as of April 1, 2002, per share data are stated under “Accounting Standards for the computing net income per share of common
stock (Standards of Enterprise accounting No.2)” and “Implementation Guideline of Standards for the computing net income per share ofcommon stock (Implementation Guideline of Standards of Enterprise accounting No.4)”.

Manual Automotive Drivetrain Operations●EXEDY Corporation●DYNAX Corporation●DK Pronac Co.,Ltd.
●EXEDY America Corporation●Daikin Clutch Corporation●EXEDY Clutch Europe Limited●EXEDY Australia PTY.Limited●Siam DK Technology Co.,Ltd●EXEDY (Malaysia) SDN.BHD.

●Euro EXEDY Clutch Limited●EXEDY Friction Material Co.,Ltd●EXEDY Chongqing Co.,Ltd●EXEDY Middle East Fzco
●EXEDY Holdings of America Corporation
P.T. Daikin Clutch Indonesia
Ceekey Daikin Limited

2 other company(18 companies total)

Other Operations●EXEDY Corporation●EXEDY America Corporation●DYNAX Corporation●DYNAXAmerica Corporation●Exenet Logistics Co.,Ltd●Daikin Clutch Corporation●Siam DK Technology Co.,Ltd●EXEDY Friction Material Co.,Ltd●Shanghai DYNAX Corporation●EXEDY Holdings of America Corporation

5 other companies(15 companies total)

Financial Section
Consolidated Five-Year Summary・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・14
Consolidated Balance Sheets・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・15
Consolidated Statements of Income・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・17
Consolidated Statements of Shareholders’ Equity・
・
・
・
・18
Consolidated Statements of Cash Flows・
・
・
・
・
・
・
・
・
・
・
・
・19
Notes to Consolidated Financial Statements・
・
・
・
・
・
・
・
・
・20
Report of Independent Public Accountants・
・
・
・
・
・
・
・
・
・
・
・
・29
Corporate Data・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・
・30

●= Consolidated Subsidiaries
None= Equity-method applied companies

13 Annual Report 2004

Annual Report 2004 14

Consolidated Balance Sheets
EXEDY CORPORATION AND CONSOLIDATED SUBSIDIARIESAs of March 31, 2003 and 2004

U.S. dollars(thousands)

Japanese yen(millions)
ASSETS

2003

2004

2004

Current Assets:
Cash and cash equivalents [ Note 1( p) ] ......................................
Time deposits .................................................................................

16,752$ 158,499

66

59

561

24,78825,317

239,545

Non-consolidated subsidiaries and affiliates ....................
Allowance for doubtful accounts .......................................

368

364

3,445

(66)

(218)

(2,064)Marketable securities (Note 3) .....................................................
Inventories (Note 2) ........................................................................

100

—

—

9,748

10,33997,822

Deferred tax assets (Note 4) .........................................................

1,344

1,593

15,072

Notes and accounts receivableTrade .......................................................................................

¥ 16,530¥

Other current assets ......................................................................

1,335

1,193

11,280Total current assets ..............................................................

54,21355,399524,160

Property, Plant and Equipment (Note 5&11):
Land ..................................................................................................

8,182

7,036

66,573

Buildings and structures ...............................................................

28,312

28,077

265,653

Machinery and vehicles .................................................................

74,962

76,068719,725

Tools and furniture ........................................................................

21,52723,781225,010

Construction in progress ..............................................................

3,089

2,647

25,049136,071

137,609

1,302,010(87,963)(90,568)(856,926)

48,10847,041445,084

1,482

2,884

27,289non-consolidated subsidiaries and affiliates ..........................
Long-term loans .............................................................................

403

471

4,454

246

214

2,027

Deferred tax assets (Note 4) .........................................................

2,495

2,366

22,385

Other assets ....................................................................................
Total investments and other assets .....................................

1,960

2,424

22,938

6,586

8,359

79,093¥ 108,907¥ 110,799$1,048,337

Less-accumulated depreciation ..................................................
Total property, plant and equipment ....................................

Investments and Other Assets:
Investment in securities (Note 3) .................................................
Investments in and loans to

U.S. dollars(thousands)

Japanese yen(millions)
LIABILITIES AND SHAREHOLDERS’ EQUITY

2004

2004

5,026

$ 47,550

12,420
985
26
4,229
3,024
10
364
24,73313,014
702
91
4,227
1,647
—
367
25,074

123,134
6,645
863
39,991
15,582—
3,478
237,243

Long-term Liabilities :Long-term debt (Note 5) ...............................................................
Deferred tax liabilities (Note 4) ....................................................
Employees’ severance and retirement benefits (Note 6) ........
Retirement benefits for directors and corporate auditors ......
Other long-term liabilities .............................................................
Total Long-term liabilities ...................................................

8,354
235
7,485
384
448
16,906

2,594
368
7,928
450
683
12,02324,542
3,479
75,0104,255
6,468
113,754

Minority Interests ................................................................................

4,076

4,088

38,6797,223
6,481
51,136
277
(372)

7,227
7,712
55,406
1,113(1,843)

68,37572,971
524,232
10,530(17,437)(1,553)63,192¥ 108,907(1)
69,614¥110,799(10)
658,661$1,048,337

Current Liabilities :Short-term borrowings including
current portion of long-term debt (Note 5) ............................
Notes and accounts payable Trade .....................................................................................
Construction ........................................................................
Non-consolidated subsidiaries and affiliates .................
Accrued expenses ........................................................................
Accrued income taxes (Note 4) ...................................................
Deferred tax liabilities (Note 4) ....................................................
Other current liabilities ..................................................................
Total current liabilities .........................................................

2003¥ 3,675¥

Contingent Liabilities (Note 9)
Shareholders’ Equity (Note 7) :Common stock
Authorised-168,000 thousand shares in 2003 and 2004
Outstanding-48,514 thousand shares in 2003 and48,520 thousand shares in 2004 .............................................
Capital surplus ...............................................................................
Retained earnings ..........................................................................
Net unrealized holding gains on securities ................................
Foreign currency translation adjustments [Note 1(c)] ............
Treasury stock
3,003 thousand shares in 2003 and 2 thousand
shares in 2004 ............................................................................
Total shareholders’ equity .................................................

The accompanying notes to consolidated financial statements are an integral part of these statements.

15 Annual Report 2004

Annual Report 2004 16

Consolidated Statements of Income

Consolidated Statements of Shareholders’ Equity

EXEDY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Years ended as of March 31, 2003 and 2004

EXEDY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Years ended as of March 31, 2003 and 2004

U.S. dollars(thousands)

Japanese yen(millions)
2003

2004

2004

Net Sales ...............................................................................................

¥ 113,673¥ 122,281$1,156,973

Cost of Sales .......................................................................................
Gross profit ......................................................................................

85,53028,14392,23430,047

872,681284,292

Selling, General and Administrative Expenses ...........................
Operating income ............................................................................

18,351
9,792

18,527
11,520175,294108,998

(86)
238

(55)
194

(523)
1,840

252
186

310
(2)

2,935
(16)

(1,411)

—

—

1,362
569

607
—

5,742
—

67
293
—
(226)
1,244

(48)
404
1,079
(279)
2,210

(457)
3,825
10,214(2,647)
20,913

Other (Income) Expenses:
Interest and dividend income ........................................................
Interest expense ..............................................................................
Losses on sales or dispositions of property,
plant and equipment ...................................................................
Losses (Gains) on sales of investment in securities ....................
Gain on the extinguishment of retirement benefit obligation
relating to entrusted government’s portion .............................
Amortization of the net transition obligationfor employees’ severance and retirement benefits .................
Losses on devaluation of investment in securities ......................
Equity in losses (gains) of non-consolidated subsidiaries
and affiliates .................................................................................
Foreign exchange loss, net ............................................................
Impairment losses on property, plant and equipment (Note 11) ....
Other, net ..........................................................................................

Income before income taxes and minority interests ...................

8,548

9,310

88,085

Income Taxes (Note 4)
Current ..............................................................................................
Deferred ............................................................................................

4,342
(785)

3,878
(554)

36,692(5,238)

Minority Interests in Net Income of Consolidated Subsidiaries.....

543

807

7,630

5,179

$ 49,001

Net Income ...........................................................................................

¥

4,448

¥

Japanese Yen
Per Share of Common Stock (Note 10) :Net income .......................................................................................
Net income-diluted .........................................................................
Cash dividends ................................................................................

¥

95.80
93.32
17.00

¥

U.S.dollars
108.84106.1215.00

The accompanying notes to consolidated financial statements are an integral part of these statements.

17 Annual Report 2004

$

1.03
1.00
0.14

Japanese yen(millions)

Number ofoutstanding
shares(thousands)

Commonstock

Capitalsurplus

Balance as of 31 March, 2002 .........................
Net income ....................................................
Net unrealized holding gains on securities ....
Adjustments from translation of foreign
currency financial statements ................
Treasury stock ...............................................
Cash dividends paid ....................................
Bonuses to directors and corporate auditors ....

48,514——¥ 7,223——¥ 6,481 ¥ 47,219
4,448
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

—
—
(455)
(76)

Balance as of 31 March, 2003 ........................
Net income ....................................................
Net unrealized holding gains on securities ....
Adjustments from translation of foreign
currency financial statements .................
Exercise of warrants .....................................
Sale of treasury stock ...................................
Purchase of treasury stock .........................
Cash dividends paid .....................................
Bonuses to directors and corporate auditors ....

48,514
—
—

7,223
—
—

6,481
—
—

—
6
—
—
—
—

—
4
—
—
—
—

—
4
1,227
—
—
—

Balance as of 31 March, 2004 ........................

48,520¥ 7,227

Net
Foreign
Retained
unrealized
currency
earnings holding gains translation
on securities adjustments

Treasury
stock

620
—
—

¥ (1,551)
—
—

—
—
—
—

(992)
—
—
—

—
(2)
—
—

51,136
5,179
—

277
—
836

(372)
—
—

(1,553)
—
—

—
—
—
—
(820)
(89)

—
—
—
—
—
—

(1,471)
—
—
—
—
—

—
—
1,555
(3)
—
—

¥ 7,712 ¥ 55,406¥ 1,113¥ (1,843)

¥

89
—
188

¥

¥

(1)

U.S. dollars(thousands)

Number ofoutstanding
shares(thousands)

Commonstock

Capitalsurplus

Balance as of 31 March, 2003 .........................
Net income ....................................................
Net unrealized holding gains on securities ....
Adjustments from translation of foreign
currency financial statements ................
Exercise of warrants ....................................
Sale of treasury stock ...................................
Purchase of treasury stock .........................
Cash dividends paid ....................................
Bonuses to directors and corporate auditors ...

48,514——$ 68,337——$ 61,327
—
—

—
6
—
—
—
—

—
38
—
—
—
—

—
38
11,606———

Balance as of 31 March, 2004 ........................

48,520$ 68,375$ 72,971

Retainedearnings

Net
Foreignunrealized
currency
holding gains translation
on securities adjustments$483,830 $ 2,625
49,001
—
—
7,905
—
—
—
—
(7,762)
(837)

—
—
—
—
—
—

Treasurystock$ (3,519)——$ (14,702)——(13,918)
—
—
—
—
—

—
—
14,715(23)——$524,232 $10,530 $(17,437)

$

(10)

The accompanying notes to consolidated financial statements are an integral part of these statements.

Annual Report 2004 18

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

EXEDY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Years ended as of March 31, 2003 and 2004

EXEDY CORPORATION AND CONSOLIDATED SUBSIDIARIES

U.S. dollars(thousands)

Japanese yen(millions)

2003
Cash Flows from Operating Activities:
Income before income taxes and minority interests ....................................
Adjustments for :Depreciation and amortization .................................................................
Losses on sales or dispositions of property, plant and equipment ................
Losses (gains) on sales of investment in securities .....................................
Losses on devaluation of investment in securities ......................................
Losses on devaluation of golf membership ................................................
Impairment losses on property, plant and equipment ..................................
Increase (decrease) in allowance for doubtful accounts ..............................
Increase in employees’ severance and retirement benefits ..........................
Interest and dividend income ...................................................................
Interest expense ..................................................................................
Decrease (increase) in notes and accounts receivables ...............................
Increase in inventories ............................................................................
Increase in notes and accounts payables ..................................................
Other, net ..............................................................................................
Sub-total ......................................................................................
Interest and dividend income received ......................................................
Interest paid ...........................................................................................
Income taxes paid ...................................................................................
Net cash provided by operating activities ........................................

¥

8,548
7,531
252
186
569
19

2004
¥

9,310

2004
$

88,085

7,630
310
(2)

72,189
2,935
(16)

—

—

(178)
445
(86)
238
716
(1,021)
1,323
725
19,26790(248)(2,828)16,281

5
1,079
204
442
(55)
194
(956)
(988)
808
1,026
19,00757(192)(5,259)13,61348
10,214
1,934
4,185
(523)
1,840
(9,044)(9,347)
7,643
9,692
179,834543(1,815)(49,763)
128,799

Cash Flows from Investing Activities:
Payments for purchase of property, plant and equipment ............................
Proceeds from sales of property, plant and equipment ...............................
Payments for purchase of investment in securities ......................................
Proceeds from sales of investment in securities .........................................
Payments for additional portion of consolidated subsidiaries .......................
Additions to loans receivable ..................................................................
Collection of loans receivable ...................................................................
Other, net ............................................................................................
Net cash used in investing activities ...............................................

(8,215)
139
(107)
440
(331)
(10)
288
(278)
(8,074)(9,492)
72
(9)
103
(697)
(42)
62
(776)
(10,779)(89,807)
682
(82)
974
(6,595)(394)
589(7,350)(101,983)

Cash Flows from Financing Activities:
Decrease in short-term borrowings, net ....................................................
Proceeds from long-term loans payable ....................................................
Repayments of long-term loans payable ...................................................
Issuance of bonds .................................................................................
Redemption of bonds ..............................................................................
Cash dividends paid ...............................................................................
Cash dividends paid to minority shareholders ............................................

(4,766)
3,837(4,075)2,069(1,000)
(455)
(241)

(214)

(2,021)———(1,763)(16,682)————(7,762)(1,430)6,745
53(21,097)

Other, net ..............................................................................................
Net cash used in financing activities ................................................

10(4,621)

(820)
(151)
713
5
(2,230)Effect of Exchange Rate Changes on Cash and Cash Equivalents .................
Net Increase in Cash and Cash Equivalents ..................................................
Cash and Cash Equivalents at Beginning of Year ..........................................
Adjustments of New Consolidated Subsidiaries
on Cash and Cash Equivalents ..................................................................
Cash and Cash Equivalents at End of Year ...................................................

(396)
3,190
13,048(382)
222
16,530(3,615)2,103
156,396292¥ 16,530——¥ 16,752$ 158,499

Proceeds from sale of treasury stock ........................................................

—

Additional Cash Flow information:
Non-cash investing and financing activities:
In the year ending March 31, 2004, convertible bonds were converted and the Company resold treasury stock instead of issuing new stock.
Japanese yen
U.S. dollars(millions)(thousands)
Decrease of treasury stock ...........................................................................
Increase of capital surplus ............................................................................
Decrease of convertible bonds ....................................................................

The accompanying notes to consolidated financial statements are an integral part of these statements.

19 Annual Report 2004

¥ 1,265804¥ 2,069$ 11,966
7,609$ 19,575

1. Summary of Significant Accounting and Reporting Policies(a) Basis of presenting consolidated financial statements
EXEDY Corporation (the “Company”) and its consolidated domestic
subsidiaries maintain their accounts and records in accordance withthe provisions set forth in the Japanese Commercial Code and the
Securities and Exchange Law, and in conformity with accounting
principles and practices generally accepted in Japan (“Japanese
GAAP”). The accounts of overseas consolidated subsidiaries are
based on their accounting records maintained in conformity withgenerally accepted accounting principles and practices prevailing in
the respective countries of domicile. Certain accounting principles andpractices generally accepted in Japan are different in certain respects
from the application and disclosure requirements of International
Accounting Standards or standards in other countries.
The accompanying financial statements are not intended to present
the consolidated financial position, results of operations and cash
flows in accordance with accounting principles and practices
generally accepted in countries and jurisdictions other than Japan.

statements of consolidated overseas subsidiaries are translated ataverage rates except for transactions with the Company, which aretranslated at the rates used by the Company. The Company and its
domestic subsidiaries report foreign currency translation
adjustments in the shareholders’ equity and minority interests.

The accompanying financial statements have been restructured andtranslated into English (with some expanded descriptions and theinclusion of statements of shareholders’ equity) from theconsolidated financial statements of the Company prepared inaccordance with Japanese GAAP and filed with the Director of
Kanto Finance Bureau in Japan as required by the Securities andExchange Law. Some supplementary information included in thestatutory Japanese language consolidated financial statements, but
not required for fair presentation, is not presented in theaccompanying financial statements.

Other securities with no available fair market value are stated atmoving average cost, net of the amount considered not collectible.

The translation of the Japanese yen amounts into U.S. dollars areincluded solely for the convenience of the reader, using the prevailingexchange rate as at March 31, 2004 which was ¥105.69 to U.S. $1.00.
The convenience translations should not be construed as
representations that the Japanese yen amounts have been, could
have been, or could in the future be, converted into U.S. dollars at thisor any other rate of exchange.

(e) Derivatives
All derivatives are stated at fair value.

(b) Principles of consolidation
The accompanying consolidated financial statements include theaccounts of the Company and significant companies over which theCompany has power of control through majority voting rights orexistence of certain conditions evidencing control by the Company.

( g) Property, plant and equipment
Depreciation of property, plant and equipment is mainly computed
using the declining-balance method over their estimated useful lives
as follows:

Investments in non-consolidated subsidiaries and affiliates overwhich the Company has the ability to exercise significant influence
over operating and financial policies of the investees, are accounted
for on the equity method.
In the elimination of investments in consolidated subsidiaries, theassets and liabilities of the subsidiaries, including the portion
attributable to minority shareholders, are evaluated using the fairvalue at the time the Company acquired control of the respective
subsidiaries. Material intercompany balances, transactions andprofits have been eliminated in consolidation.
(c) Translation of foreign currencies
Monetary assets and liabilities denominated in foreign currency aretranslated into Japanese yen at current rates at each balance sheet
date and the resulting translation gains or losses are charged toincome currently.
Balance sheets of consolidated overseas subsidiaries are translated
into Japanese yen at the year-end rate except for shareholders’equity accounts, which are translated at the historical rates. Income(d ) Securities
Securities consist principally of marketable and nonmarketable
equity securities and interest-bearing securities.
Other securities with available fair market value are stated at fairmarket value. Net unrealized holding gains and losses on thesesecurities are reported, net of applicable income taxes, as aseparate component of shareholders’ equity.
Realized gains and losses on sales of such securities are computed
using moving average cost.

If the fair market value of other securities declines significantly, suchsecurities are stated at fair market value and the difference between
fair market value and the carrying amount is recognized as loss inthe period of decline. If the net asset value of other securities,
except for interest-bearing securities, with no available fair market
value declines significantly, such securities should be written down
to the net asset value by charging to income.

( f ) Inventories
Inventories except for supplies are mainly stated at the lower ofcost (first-in, first-out) or market. Supplies are stated at cost
determined by the last purchase cost method.

Buildings and structures ................................................... 3-60 years
Machinery and vehicles .................................................... 2-15 years
Tools and furniture ............................................................. 2-20 years
Buildings acquired by the Company and its domestic consolidated
subsidiaries on and after April 1, 1998 are depreciated on thestraight-line method.
Maintenance and repairs including minor renewals and betterment
are charged to income as incurred.
Software is amortized using the straight-line method over the useful
lives (3-5 years).
The Company adopted accounting standards for Impairment of
Fixed Assets (“Opinion concerning establishment of AccountingStandards for Impairment of Fixed Assets” issued by the BusinessAccounting Deliberation Council on August 9, 2002) and“Implementation Guideline of Standards for Impairment of fixed
assets (Implementation Guideline of Standards of Enterpriseaccounting No.6 issued on October 31, 2003)”. As a result of
adoption of new accounting standards, in the year ending March
31, 2004, income before income taxes and minority interests
Annual Report 2004 20

decreased by ¥1,079 million ($10,214 thousand) compared withwhat would have been recorded under the previous accounting
standards. On the balance sheet, impairment losses are subtracted
from the book cost of each asset type.

( l ) Retirement benefits for directors and corporate auditors
The Company and domestic subsidiaries have unfunded retirement
allowances plans for directors and corporate auditors. The amounts
required under the plans have been fully accrued.

( h) Leases
Leases that transfer substantially all the risks and rewards ofownership of the assets are accounted for as capital leases, exceptthat leases do not transfer ownership of the assets at the end of thelease term are accounted for as operating leases, in accordance withaccounting principles and practices generally accepted in Japan.

( m ) Accounting for consumption taxes
Consumption taxes are imposed at the flat rate of 5% on all
domestic consumption of goods and services ( with certain
exemptions ).
The consumption taxes withheld upon sale and consumption taxes
paid by the Companies on their purchases of goods and services are
not included in the amounts of respective revenue and cost or expense
items in the accompanying consolidated statements of income.

( i ) Income taxes
The Company and its consolidated subsidiaries recognize tax
effects of temporary differences between the carrying amounts ofassets and liabilities for tax and financial reporting purposes. The
asset and liability approach is used to recognize deferred tax assets
and liabilities for the expected future tax consequences of
temporary differences between the carrying amounts of assets andliabilities for financial reporting purposes and the amounts used forincome tax purposes.
( j ) Allowance for doubtful accounts
The company and its consolidated subsidiaries provide for doubtful
accounts principally at an amount computed based on the historicalbad debt ratio during a certain reference period plus the estimateduncollectible amount based on the analysis of individual accounts.
( k ) Employees’ severance and retirement benefits
The Company and its domestic subsidiaries have unfunded
retirement plans and contributory and non-contributory fundedpension plans for employees, which are defined benefit plans.
The Company and most of its consolidated subsidiaries provided
for employees’ severance and retirement benefits at the end of the
fiscal year based on the estimated amounts of projected benefit
obligation and the fair value of the plan assets at that date.
The net transition obligation is recognized in expenses in equalamounts primarily over 5 years commencing with the year ended
March 31, 2001.
The actuarial gains and losses are recognized over the years lessthan the estimated average remaining service lives of the employees,
which is 15 years for the current year, from the next fiscal year.

3. Securities
Other securities with book values (fair values) exceeding acquisition costs as of March 31, 2003 and 2004 were as follows:
Japanese yen (millions)
March 31,2003
Equity securities ......................................................................................................................
Interest-bearing securities ......................................................................................................
Others .....................................................................................................................................

Acquisition
cost

Difference

¥ 854
100
—
¥ 954

¥ 529
1
—
¥ 530

¥ 325
99
—
¥ 424

U.S. dollars (thousands)

Japanese yen (millions)
Acquisition
cost

Book
value

Book
value

Difference

Acquisition
cost

Book
value

Difference¥ 2,791—5¥ 2,796¥ 1,864—1¥ 1,865$ 8,771—41$ 8,812$ 26,410—45$ 26,455$ 17,639—
4$ 17,643( n ) Research and development expenses
Research and development expenses are charged to income as
incurred. Research and development expenses charged to income
amounted to ¥3,993 million and ¥4,206 million ($39,795 thousand )for the years ended March 31, 2003 and 2004, respectively.

March 31,2004
Equity securities .................................................
Interest-bearing securities .................................
Others ...............................................................

( o ) Per share data
The computation of net income per share is based on the weighted
average number of shares outstanding during each year, excluding
the Company’s treasury stock and based on net income attributing
to ordinary shareholders, excluding bonuses to directors andcorporate auditors etc.,.
The computation of net income-diluted per share assumes fullconversion of convertible bonds at the beginning of the year (or at
the time of issuance, if it is after beginning of the year) with anapplicable adjustment for related net-of tax interest expense. The
computation of Shareholders’ equity per share is based on thenumber of common stock shares outstanding at year end,
excluding the Company’s treasury stock.
Cash dividends per share shown in the statements of income are
the amounts applicable to the respective years.

Other securities with book values (fair values) not exceeding acquisition costs as of March 31, 2003 and 2004 were as follows:( p ) Cash and cash equivalents
Cash and cash equivalents include cash on hand and deposits
which have maturities of three months or less when purchased.

¥ 927
—
4
¥ 931

Japanese yen (millions)
March 31,2003
Equity securities ......................................................................................................................
Interest-bearing securities ......................................................................................................
Others .....................................................................................................................................

Acquisition
cost
¥ 629
—
7
¥ 636

Book
value

Difference

¥

¥

¥

¥

¥

28
—
—
28

Acquisition
cost

(8)
—
—
¥ (8)

$
$

337
—
—
337

$
$

Japanese yen(millions)Difference$ (76)——$ (76)

261
—
—
261

U.S. dollars(thousands)

2003

2004

2004

¥

¥

$

Other securities with no fair value
Non-listed equity securities
Carrying amount .................................................................................................................

61

61

573

Maturities of other securities with maturities as of March 31, 2003 and 2004 were as follows:

Inventories as of March 31, 2003 and 2004 were as follows:
Japanese yen(millions)Finished goods ...................................................................................................................
Work-in process .................................................................................................................
Raw materials ......................................................................................................................
Supplies ................................................................................................................................

Book
value

Book value of securities with no available fair values as of March 31, 2003 and 2004 were as follows:( q ) Reclassification
Certain comparative figures have been reclassified to confirm withthe current year’s presentation.

2. Inventories¥ (68)—(1)¥ (69)

U.S. dollars (thousands)

Acquisition
cost
36
—
—
36

Difference

¥ 561
—
6
¥ 567

Japanese yen (millions)
March 31,2004
Equity securities .................................................
Interest-bearing securities .................................
Others ...............................................................

Book
value

2003
¥ 4,494
1,954
3,046
254
¥ 9,7482004¥ 5,140
1,912
2,762
525
¥ 10,339

Japanese yen(millions)

U.S. dollars(thousands)
2004$ 48,632
18,091
26,1304,969$ 97,822

Corporate bondWithin one year ........................................................................................................................
After one year through five years ................................................................................................
After five years through ten years ...............................................................................................
Over ten years ........................................................................................................................
Other
Within one year ........................................................................................................................
After one year through five years ................................................................................................
After five years through ten years ...............................................................................................
Over ten years ........................................................................................................................

2003

2004

¥

¥

100
—
—
—
—
2
4
—

U.S. dollars(thousands)
2004
—
—
—
—
—
5
—
—

$

—
—
—
—
—
45
—
—

Other securities sold in the year ended March 31, 2003 and 2004 were as follows:
Japanese yen(millions)

Sales value ................................................................................................................................
Gains ..........................................................................................................................................
Losses ........................................................................................................................................

21 Annual Report 2004

U.S. dollars(thousands)

2003

2004

2004

¥ 440
7
193

¥ 103
2
—

$ 974
16
—
Annual Report 2004 22

As of March 31, 2004, the following assets were pledged as collateral for the secured short-term loan from banks of ¥52 million ($490
thousand) and government sponsored agencies:

4. Income Taxes
Significant components of the Company’s deferred tax assets and liabilities as of March 31, 2003 and 2004 were as follows:
Japanese yen(millions)

U.S. dollars(thousands)

2003

2004

2004

Deferred tax assets:
Net operating loss carryforwards ................................................................................................
Employees’ severance and retirement benefits ..........................................................................
Accrued bonuses to employees ..................................................................................................
Losses on devaluation of investment in securities ......................................................................
Accrued enterprise tax.................................................................................................................
Losses on devaluation of inventories ..........................................................................................
Unrealized income(fixed assets) ..................................................................................................
Retirement benefits for directors and corporate auditors ...........................................................
Unrealized income(inventories) ...................................................................................................
Other ..........................................................................................................................................
Total deferred tax assets ..................................................................................................................
Valuation allowance ....................................................................................................................

¥ 3,852
2,723
626
224
349
93
133
155
175
699
9,029
(3,508)¥ 3,333
3,030
741
230
227
195
188
182
171
837
9,134
(3,684)$ 31,538
28,668
7,011
2,172
2,147
1,847
1,777
1,722
1,614
7,928
86,424(34,861)

Deferred tax assets ........................................................................................................................

¥ 5,521¥ 5,450$ 51,563

Deferred tax liabilities:
Property, plant and equipment ...................................................................................................
Net unrealized holding gains on securities ...........................................................................
Reserve for advanced depreciation .............................................................................................
Reserve for special depreciation ..................................................................................................
Other ..........................................................................................................................................
Total deferred tax liabilities ..............................................................................................................
Valuation allowance .....................................................................................................................
Deferred tax liabilities ....................................................................................................................

¥ (738)
(186)
(492)
(266)
(245)
(1,927)—¥ (1,927)

¥

(968)
(750)
(349)
(255)
(563)
(2,884)
1,026¥ (1,859)$ 9,155
7,097
3,306
2,411
5,323
27,292(9,707)$ 17,585

Net deferred tax assets .................................................................................................................

¥ 3,594¥ 3,591$ 33,978Japanese yen(millions)Land ..............................................................................................................................................................................
Buildings and structures, net ....................................................................................................................................
Machinery and vehicles, net .....................................................................................................................................

¥The Company is subject to a number of taxes based on income, which, in the aggregate, indicate a statutory rate in Japan of approximately
41.7% for the years ended March 31, 2003 and 2004.
The following table summarized the significant differences between the statutory tax rate and the Company’s effective tax rate for financial
statement purposes for the years ended March 31, 2003 and 2004:
2003
Statutory tax rate............................................................................................................................................................
Adjustments for:Non-deductible expenses ........................................................................................................................................
Non-taxable incomes ...............................................................................................................................................
Per capita inhabitant tax ...........................................................................................................................................
Effect of operating loss carryforwards of overseas subsidiaries ..............................................................................
Loss before income taxes of overseas subsidiaries .................................................................................................
Other .........................................................................................................................................................................
Effective tax rate ...........................................................................................................................................................

2004

—%

41.7 %

—
—
—
—
—
—
—%

0.9
(1.9)
0.2
(6.7)
0.5
1.0
35.7 %

5. Short-term Borrowings and Long-term Debt
Japanese yen(millions)23 Annual Report 2004

U.S. dollars(thousands)

2003

2004

2004

¥ 6,991¥ 5,063$ 47,902

862
2,069
9,922
(1,568)¥ 8,354

712
—
5,775
(3,181)¥ 2,594

6,741—
54,643(30,101)$ 24,542

$
$

1,441
3,096
166
4,703

Annual maturities of long-term debt as of March 31,2004 were as follows:
Japanese yen(millions)Year ending March 31
2006 ...............................................................................................................................................................................
2007 ...............................................................................................................................................................................
2008 ...............................................................................................................................................................................
2009 ...............................................................................................................................................................................

¥¥

U.S. dollars(thousands)

334
167
1,966
127
2,594

$

3,163
1,576
18,605
1,198$ 24,542

6. Employees’ Severance and Retirement Benefits
The Company and its domestic subsidiaries have defined benefit retirement plans covering substantially all employees.
The liabilities for employees’ severance and retirement benefits included in the liabilities section of the consolidated balance sheets as ofMarch 31, 2003 and 2004 consisted of the following:
Japanese yen(millions)

U.S. dollars(thousands)

Projected benefit obligations ......................................................................................................
Fair value of pension assets .......................................................................................................

2003¥14,651(2,302)
12,3492004¥17,620(3,424)
14,196

2004$166,711(32,390)
134,321

Unrecognized net transition obligation .....................................................................................
Unrecognized actuarial differences ...........................................................................................
Liability for employees’ severance and retirement benefits ................................................

(1,214)(3,650)¥ 7,485(607)(5,661)¥ 7,928(5,742)(53,569)$ 75,010

The company and its domestic consolidated subsidiaries applied the transitional treatment specified in paragraph 47-2 of Accounting
Committee Report No. 13, “Practical Guidelines of Accounting for Retirement Benefits (Interim Report),” issued by the Japanese Instituteof Certified Public Accountants, and recognized an extinguishment of retirement benefit obligation with relating to such entrusted
government’s portion as of the date of the approval. The equivalent amount of pension fund to be refunded to government is amounting to¥8,242 million at March 31, 2003.
Included in the consolidated statements of income for the years ended March 31, 2003 and 2004 were employees’ severance andretirement benefit expenses comprised of the following:
Japanese yen(millions)Short-term borrowings are notes payable to banks due to in 30-180 days. The interest rates on these loans as of March 31, 2004 ranged
from 0.53 percent to 5.84 percent.
Long-term debt as of March 31, 2003 and 2004 were summarized below:

Less:Current portion .....................................................................................................................

152
327
18
497

As is customary in Japan, short-term and long-term bank loans are made under general agreements which provide that additional security
and guarantees for present and future indebtedness will be given upon request of the bank under certain circumstances, and that any
collateral so furnished will be applicable to all indebtedness to that bank.To date, the Company and its consolidated subsidiaries have notreceived such requests from their banks.

Reconciliation was not required to be presented for 2003 due to the difference being less than 5%.

0.57% to 6.48% loans from banks and others,
due in installments through 2009 - Unsecured ..................................................................
1.60% loans from government sponsored agencies,
due in installments through 2009 - Secured .......................................................................
0.125% unsecured convertible bonds due 2006 ....................................................................

¥

U.S. dollars(thousands)

Service cost ...................................................................................................................................
Interest cost ...................................................................................................................................
Expected return on plan assets ..................................................................................................
Amortization of net transition obligation....................................................................................
Amortization of prior service cost ..............................................................................................
Amortization of actuarial differences .........................................................................................
Employees’ severance and retirement benefit expenses.....................................................
Gain on the extinguishment of retirement benefit obligation relating to entrusted government’s portion ...

2003¥ 1,003
831
(466)
1,362
(68)
390
3,052
(1,411)¥ 1,641

2004
¥ 816
337
(69)
607
—
414
2,105
—
¥ 2,105

U.S. dollars(thousands)
$

2004
7,718
3,194
(653)
5,742
—
3,915
19,916—
19,916

Assumptions used in calculation of the above information were as follows:

2003
Method of attributing the projected benefits to period services ......................................................................... straight-line basis
Discount rate ................................................................................................................................................................
2.9%
Expected rate of return on plan assets ...................................................................................................................
4.0%
Amortization of net transition obligation .................................................................................................................
5yearsAmortization of prior service cost ............................................................................................................................
15years
Amortization of actuarial differences .......................................................................................................................
15years

2004
straight-line basis
2.0%
3.0%
5years—15years

Annual Report 2004 24

7. Shareholders’ Equity

9. Contingent Liabilities

The Company is subject to the Japanese Commercial Code (the “Code”), to which certain amendments became effective on October 1, 2001.

Contingent liabilities for guarantees by the Company as of March 31, 2003 and 2004 were as follows :The Code provides that all appropriations of retained earnings, except interim cash dividends, must be approved at an ordinary general meetingof shareholders. In accordance with customary practice in Japan, appropriations of retained earnings are not accrued in the financial statements
for the year to which they relate but are recorded in the subsequent accounting year after shareholders’ approval has been obtained.
The Code provides that an amount equal to at least 10% of cash dividends and directors’ bonuses, etc., to be paid should be appropriated as a legal reserve.
Before September 30, 2001, no further appropriation is required when the legal reserve equals 25% or more of common stock. Pursuant to the amendments
to the Code, no further appropriation is required when the sum of capital surplus and legal reserve equals 25% or more of common stock. If the amount ofaccumulated capital surplus and legal reserve exceeds the required amount, the excess amount is allowed to be appropriated by a resolution at an ordinary
general meeting of shareholders. Legal reserve might be used to reduce a deficit or it might be transferred to common stock by appropriate legal procedures.
The following appropriations of retained earnings of the Company were proposed and approved at the general meeting of shareholders heldon June 24, 2004:

Balance at March 31,2004 ..........................................................................................................................................
Appropriations-Cash dividends paid ( ¥9 per share outstanding at March 31, 2004) ............................................
Bonuses to directors and corporate auditors .........................................................................................
Balance after appropriations .......................................................................................................................................

Japanese yen(millions)¥ 55,406
437
65¥ 54,904

U.S. dollars(thousands)$ 524,232
4,132
615$ 519,485

8. Leases
Information relating to finance leases, except those leases for which the ownership of the leased assets is considered to betransferred to the lessee as of March 31, 2003 and 2004 and for the fiscal years then ended were as follows:
Pro forma information regarding the leased property such as acquisition cost, accumulated depreciation, accumulated losses on impairment and future minimum lease
payments under finance leases that do not transfer the ownership of the leased property to the lessee for the year ended March 31, 2003 and 2004 were as follows:
Japanese yen (millions)
March 31,2003
Machinery and vehicles .......................................................................................................
Tools and furniture ...............................................................................................................
Other .......................................................................................................................................

Acquisition
cost
¥ 860
396
261
¥1,517

Japanese yen (millions)
Acquisition Accumulated Losses on
Balance
March 31,2004
cost
Depreciation Impairment.......................
Machinery and vehicles
¥ 900
¥ 401
¥ —
¥ 499
Tools and furniture ...............................
355
215
—
140
Other .....................................................
246
148
—
98
¥1,501
¥ 764
¥ —
¥ 737

Accumulated
Depreciation
¥ 355
179
116
¥ 650

Balance
505
217
145
¥ 867

U.S. dollars (thousands)
Acquisition Accumulated Losses on
Balance
cost
Depreciation Impairment$ 8,512$ 3,797$ —$ 4,715
3,361
2,032
—
1,329
2,333
1,397
—
936
$14,206$ 7,226$ —$ 6,980

The scheduled maturities of future lease payments, on such lease contracts as of March 31, 2003 and 2004, were as follows:
Japanese yen
U.S. dollars(millions)(thousands)
Due within one year .....................................................................................................................
Due over one year ........................................................................................................................

2003
¥ 236
631
¥ 867

2004
¥ 250
487
¥ 737

2004
$ 2,368
4,612$ 6,980

Lease payments for the year ......................................................................................................

¥ 220

¥ 257

$ 2,431

The amounts of acquisition costs and future minimum lease payments under finance leases included the imputed interest expense portion.
Depreciation expenses, which are not reflected in the accompanying consolidated statements of income, computed by the straight-line
method, would be ¥ 220 million and ¥ 257 million($2,431 thousand) for the years ended March 31, 2003 and 2004, respectively.

Japanese yen(millions)
Guarantees of loan from bank of an affiliate under equity method ..............................................

Due within one year ......................................................................................................................
Due over one year .........................................................................................................................

25

Annual Report 2004

2003
¥
—
—
¥
—

2004
¥
6
8
¥ 14

2004
$
59
76
$ 135

2004

2004

¥ 500

$ 4,731

Per share data as of March 31, 2003 and 2004 were as follows:
Japanese yen(millions)
2003
95.80
93.32
1,386.57

Net income ..................................................................................................................................
Net income-diluted .....................................................................................................................
Shareholders’ equity ...................................................................................................................

¥¥

U.S. dollars(thousands)

2004
108.84106.12
1,432.90

$

2004
1.03
1.00
13.56

The basic of computing per share data as of March 31, 2003 and 2004 were as follows:
Japanese yen(millions)

U.S. dollars(thousands)

2003

2004

2004

Net income per share of common stock
Net income ...................................................................................................................................
Amounts not attributing to ordinary shareholders ....................................................................
(Bonuses to directors and corporate auditors) ..........................................................................
Net income attributing to ordinary shareholders ..........................................................................

¥ 4,448
88(88)¥ 4,360¥ 5,179
92(92)¥ 5,087$ 49,001
868(868)$ 48,133

The weighted average number of shares (thousands) .................................................................

45,512

46,73946,739Net income-diluted per share of common stock
Effect of dilutive securities
On net income (net-of-tax interest expense) ...........................................................................
On the weighted average number of shares (thousands) ........................................................

¥

1
1,232

¥

$

1
1,208

7
1,208

11. Impairment of Fixed Assets
Accounting for impairment of fixed assets shall be applied only when the investment may not be recoverable in the business. The company
evaluated the profitability in each business category, which is Manual automotive drivetrain operations, Automatic automotive drivetrain
operations,Industrial drivetrain operations and Other (Plants and other facilities), and the result indicates each business can recover theinvestment through the future. However, the company has some assets which do not belong to any business category and the carrying amountof these assets may not be recoverable. Therefore the Company recognized impairment losses on those assets where the recoverable value wasless than the net book value. The recoverable value of land was based on valuation of property and equipment taxes and the recoverable value ofother assets were based on fair value to sell. Impairment losses were recognized for the excess of the net book value over the recoverable value.
Impairment losses on fixed assets for the year ended March 31, 2004 were as follows:
Asset Group
Asset which does
not belong to any
business category

Asset Type

Location

Usage

Land
Buildings and Structures
Tools and Furniture
Land

Hyogo Pref.
Osaka Pref.
Osaka Pref.
Osaka Pref.

Idle
Idle
Idle
Idle

Japanese yen(millions)...........................................................
...........................................................
...........................................................
...........................................................

U.S. dollars(thousands)
¥

4,478
158
0
5,578
¥ 10,214

¥ 473
17
0
589
¥ 1,079

12. Derivatives
The only derivative transactions the Company carries are forward currency exchange contracts and the purpose is to hedge against theexchange rate risk. The Company does not carry derivative transactions for trading or speculative purposes. Hedging accounting throughderivative transactions was not applied as necessary conditions were not met.
Transaction of forward currency exchange contract has risk due to changes in exchange rate. Since the company trades only with banking
facilities, there can be no credit risk.
The Company has established a control system which includes policies and procedures regarding derivative transactions. All derivativetransactions were processed under control and with necessary approval.
The following table provides amount information about derivative instruments as of March 31, 2003 and 2004.

March 31,2003

The scheduled maturities of future lease payments under non-cancelable operating leases as of March 31, 2003 and 2004, were as follows:
Japanese yen
U.S. dollars(millions)(thousands)

2003
¥ 500

10. Per Share Data

The Company had no leased assets on which impairment shall be recognized for the year ended March 31, 2004.
Information regarding operating leases was as follows:

U.S. dollars(thousands)

Contract
AmountJapanese yen (millions)
Fair
Value

Gain
(loss)¥¥¥

Forward exchange contracts:
To sell U.S. dollars .......................................................................................................................
To sell Euro...................................................................................................................................

¥
Japanese yen (millions)

March 31,2004
Forward exchange contracts:
To sell U.S. dollars..................................................
To sell Euro .............................................................

Contract
Amount
¥ 482
93
¥ 575

—
—
—

¥

—
—
—

¥

—
—
—

U.S. dollars (thousands)

Fair
Value

Gain
(loss)

¥ 474
90
¥ 564

¥
¥

7
4
11

Contract
Amount$4,558884$5,442

Fair
Value

Gain
(loss)$4,489851$5,340

$

69
33
$ 102

Annual Report 2004 26

Geographic area information for the years ended as of March 31, 2003 and 2004 were as follows :13. Segment Information
The Company and its consolidated subsidiaries operate three business segments, Manual automotive drivetrain operations,
Automatic automotive drivetrain operations and Other. The Manual automotive drivetrain segment manufactures and sells clutch
discs, clutch covers, flywheels and other manual transmissions. The Automatic automotive drivetrain segment is engaged in the
manufacture and sales of torque converters and wet friction clutch plates. The Other segment consists of industrial machine
drivetrain operations which manufacture and sell powershift transmissions, and other operations including sales and manufactureof clutches for motorcycle, plants and other facilities.
Effective for the fiscal year ending March 31, 2004, the Company and its subsidiaries changed the segment category as shown
below because the Automatic automotive drivetrain segment is expanding its business significantly and new categorization shallprovide investors with more beneficial information. The segment information for 2003 has been restated to conform to the 2004
presentation.
Former segment
Automotive drivetrain operations
Industrial drivetrain operations
Other operations

New segment
Manual automotive drivetrain operations
Automatic automotive drivetrain operations

Business segment information for the years ended as of March 31, 2003 and 2004 were as follows :2003
Sales :
Manual automotive drivetrain operations ........................................................................ ¥ 44,088
61,533
Automatic automotive drivetrain operations ...................................................................
11,486
Other operations .................................................................................................................
(3,434)
Eliminations(inter-segment net sales) ..............................................................................
¥ 113,673
Operating Costs and Expenses :Manual automotive drivetrain operations ........................................................................ ¥ 39,096
55,277
Automatic automotive drivetrain operations ...................................................................
12,261Other operations .................................................................................................................
(2,753)
Non-allocated operating expenses and eliminations ....................................................
¥ 103,881
Operating Income (Loss) :Manual automotive drivetrain operations ........................................................................ ¥ 4,992
6,255
Automatic automotive drivetrain operations ...................................................................
(775)
Other operations .................................................................................................................
(680)
Non-allocated operating expenses and eliminations ....................................................
¥ 9,792
Assets :Manual automotive drivetrain operations ........................................................................ ¥ 34,855
53,440Automatic automotive drivetrain operations ...................................................................
Other operations .................................................................................................................
9,098
Corporate and eliminations ...............................................................................................
11,514¥ 108,907
Depreciation and Amortization :Manual automotive drivetrain operations ........................................................................ ¥ 2,393
Automatic automotive drivetrain operations ...................................................................
4,107
Other operations .................................................................................................................
1,031
Corporate and eliminations ...............................................................................................
—¥ 7,531
Impairment Losses on Fixed Assets:
Manual automotive drivetrain operations ........................................................................ ¥—Automatic automotive drivetrain operations ...................................................................
—
Other operations .................................................................................................................
—
Corporate and eliminations ...............................................................................................
—¥—
Capital Expenditures :Manual automotive drivetrain operations ........................................................................ ¥ 2,486
Automatic automotive drivetrain operations ...................................................................
5,875
Other operations .................................................................................................................
661
Corporate and eliminations ...............................................................................................
—¥ 9,02227 Annual Report 2004

U.S. dollars(thousands)

2004

2004

¥ 45,476
66,753
15,188(5,136)¥ 122,281$ 430,279
631,595
143,700(48,601)$1,156,973¥ 39,920
60,455
14,600(4,214)¥ 110,761$ 377,713
572,001
138,142(39,880)$1,047,976

¥

5,556
6,299
587
(922)
¥ 11,520$¥ 34,950
51,53012,920
11,399¥ 110,799$ 330,688
487,557
122,245
107,847$1,048,337

¥

2,430
4,325
958
(83)
7,630

$

—
—
—
1,079
1,079

$

2,907
5,802
996
(212)
9,493

$

¥
¥

¥
¥

¥

Sales:
Japan .....................................................................................................................................
America .................................................................................................................................
Asia-Oceania .......................................................................................................................
Other ......................................................................................................................................
Eliminations(inter-segment net sales) ...............................................................................
Operating Costs and Expenses :Japan .....................................................................................................................................
America .................................................................................................................................
Asia-Oceania .......................................................................................................................
Other ......................................................................................................................................
Non-allocated operating expenses and eliminations ....................................................
Operating Income (Loss) :Japan .....................................................................................................................................
America .................................................................................................................................
Asia-Oceania .......................................................................................................................
Other ......................................................................................................................................
Non-allocated operating expenses and eliminations ....................................................

Other operations

Japanese yen(millions)Japanese yen(millions)

52,56659,595
5,558(8,721)$ 108,998

$

$
$

$

2003

2004

2004

¥

94,46922,071
7,312
1,238(11,417)¥ 113,673¥ 98,435
24,493
9,887
1,812(12,346)¥ 122,281$ 931,353
231,741
93,55017,140(116,811)$1,156,973¥

86,85821,077
6,276
1,162(11,492)¥ 103,881¥ 89,556
23,0608,803
1,574(12,232)¥ 110,761$ 847,349
218,190
83,291
14,889(115,743)$1,047,976

¥

¥

8,878
1,432
1,084
238
(112)
¥ 11,520$¥ 71,923
17,565
11,202968
9,141¥ 110,799$ 680,514
166,196
105,989
9,159
86,479$1,048,337¥
Assets :Japan .....................................................................................................................................
America .................................................................................................................................
Asia-Oceania .......................................................................................................................
Other ......................................................................................................................................
Corporate and eliminations ................................................................................................

U.S. dollars(thousands)

7,611
994
1,036
76
75
9,792

¥

72,752
18,302
8,525
1,098
8,230
¥ 108,907

84,005
13,552
10,2592,251(1,069)$ 108,998

Notes : The Company’s operations are classified into geographical areas as follows: Japan, America, Asia-Oceania(Thailand, Malaysia, China, Australia and United Arab Emirates) and Other (Europe).

Net sales outside Japan for the years ended as of March 31, 2003 and 2004 were as follows :Japanese yen(millions)
America ............................................................................................................
Asia-Oceania ...................................................................................................
Other ................................................................................................................

U.S. dollars(thousands)

2003

2004

2004

¥ 21,328
12,913
4,006¥ 38,247¥ 24,035
14,7385,290¥ 44,063$ 227,410
139,449
50,050$ 416,909

22,99440,921
9,068(794)
72,189———10,214
10,21427,50754,8959,428(2,011)89,819Annual Report 2004 28

Report of Independent Public Accountants

Corporate Data

EXEDY CORPORATION AND CONSOLIDATED SUBSIDIARIESBOARD OF DIRECTORSOUTLINE OF COMPANY

As of June 30, 2004

As of March 31, 2004

President and Chief Executive Officer:

Name:

Takeshi Nakano

Executive Managing Directors:

To the Board of Directors and Shareholders of
EXEDY Corporation
We have audited the accompanying consolidated balance sheet of EXEDY Corporation and its
subsidiaries as of March 31, 2003 and 2004, and the related consolidated statements of income,shareholders’ equity, and cash flows for the year then ended, all expressed in Japanese Yen. These
consolidated financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audits in accordance with auditing standards, generally accepted in Japan. Thesestandards require that we plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall consolidated financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the consolidated financial position of EXEDY Corporation and its subsidiaries as of March 31,
2003 and 2004, and the consolidated results of their operations and their cash flows for the year thenended in conformity with accounting principles generally accepted in Japan.
As described in Note 13, effective for the year ended March 31, 2004, EXEDY Corporation and its
subsidiaries changed the segment category.
The amounts expressed in U.S. dollars, which are provided solely for the convenience of the reader,have been translated on the basis set forth in Note 1(a) to the accompanying consolidated financial
statements.

Osaka, Japan
June 24, 2004

ChuoAoyama PricewaterhouseCoopers

Established:
Paid-in Capital:

Managing Directors:￥7,227 million

Directors:
Mikio Natsume
Hajime Koshimaru
Kenji Takehara
Kouji Kajitani
Yoshitsugu Sakamoto
Masayuki Matsuda
Katsumi Shintou
Hideki Miura
Osamu Fujiwara

Auditors:
Katsuumi Ohse
Kanshirou Toyoda
Yusho Dejima
Koji Okada

July 1, 1950

Number of Employees:
1,657

Number of Authorized Shares:
168,000 thousand shares

Number of Issued Shares:
48,520 thousand shares

Number of Shareholders:
3,327

Average number of shares
held by one Shareholder:Shizuoka Sales Office:1-1-1, Kidamotomiya,
Neyagawa-shi,
Osaka 572-8570, Japan
Phone :81-72-824-6933
Facsimile:81-72-821-7913

Tokyo Sales Office:
DBS Tokyo,2-17-2, Iwamoto-cho,
Chiyoda-ku,
Tokyo 101-0032, Japan

Chubu Sales Office:Tosho Bldg., 2nd Floor
28-1, Futatsuike, Nihongi-cho,Anjo-shi,
Aichi 446-0054, JapanTBM Bldg., 3rd Floor
6-20, Aratajima-cho, Fuji-shi,
Shizuoka 417-0043, Japan

Hiroshima Sales Office:
DBS Hiroshima,
6-6, Sakaemachi, Kaita-cho,
Aki-gun, Hiroshima,736-0043, Japan

Ueno Division:
2418 Ota-cho, Ueno-shi,Mie 518-0825, Japan

Kawagoe Plant:
1-103-25, Yoshinodai,
Kawagoe-shi,
Saitama 350-0833, Japan

14,584

Listed on First Sections,Tokyo/Osaka Stock Exchange

EXEDY Overseas Network
EXEDY Holdings of America Corporation

DYNAX North America Sales Corporation

P.T. Daikin Clutch Indonesia

8601 Haggerty Road, South Belleville,
MI 48111, U.S.A.
Phone: 1-734-397-3333
Facsimile: 1-734-397-9567

150 West Jefferson, Suite 2500 Detroit,
MI 48226, U.S.A.
Phone: 1-734-459-9610
Facsimile: 1-734-459-9510

JI, Pegangsaan Dua Km2 No.64 Kelapa
Gading Jakarta Utara 14250, INDONESIA
Phone: 62-21-4603353
Facsimile: 62-21-4603355

Daikin Clutch Corporation

DYNAX Industry (SHANGHAI) Corporation

Ceekay Daikin Limited

8601 Haggerty Road, South Belleville,
MI 48111, U.S.A.
Phone: 1-734-397-3333
Facsimile: 1-734-397-7300

No.Ⅲ-24 Area Song Kai, Export Processing,
Songjiang, Shanghai 201612, CHINA
Phone: 86-21-5774-8391
Facsimile: 86-21-5774-8300

EXEDY America Corporation

N.K.M.International House, 4th Floor,
178 Babubhai M.Chinai Marg, Mumbai
400 020, INDIA
Phone: 91-22-2020849
Facsimile: 91-22-2043939

Siam DK Technology Co., Ltd.

2121 Holston Bend Drive, Mascot,
TN 37806, U.S.A.
Phone: 1-865-932-3700
Facsimile: 1-865-932-2230

700/316 Moo 6, Bangna-Trad Road,
Tumbon Don Hua Roh, Amphur Muang Chonburi
20000, THAILAND
Phone: 66-38-214-423〜5
Facsimile: 66-38-214-422

EXEDY Australia PTY. Limited

EXEDY Friction Material Co., Ltd.

EXEDY Clutch Europe Limited

700/359 Moo 6, Banga-Trad Road,
Tumbon Don Hua Roh, Amphur Muang
Chonnburi 20000, THAILAND
Phone: 66-38-743-923
Facsimile: 66-38-743-927

Unit 2, Rokeby Court, Manor Park, Runcorn,
Cheshire WA7 1RW, UK
Phone: 44-1928-571850
Facsimile: 44-1928-571852

EXEDY (MALAYSIA) SDN.BHD.

2800 Tatabanya, Buzavirag ut4, HUNGARY
Phone: 36-34-311-117
Facsimile: 36-34-311-122

DYNAX America Corporation
568 East Park Drive, Roanoke,
VA 24019, U.S.A.
Phone: 1-540-966-6010
Facsimile: 1-540-966-6011

Statement on Accounting Principles and Auditing Standards

EXEDY Chongqing Co., Ltd.

This statement is to remind users that accounting principles and auditing standards and their application in practice mayvary among nations and therefore could affect, possibly materially, the reported financial position and results ofoperations. The accompanying financial statements are prepared based on accounting principles generally accepted inJapan, and the auditing standards and their application in practice are those generally accepted in Japan. Accordingly,
the accompanying consolidated financial statements and the auditors’ report presented above are for users familiar withJapanese accounting principles, auditing standards and their application in practice.

158 Taoyuan Road, Nanan District,
Chongqing, CHINA
Phone: 86-23-62904573
Facsimile: 86-23-62900348

29 Annual Report 2004

Head Office:

EXEDY Corporation

Haruo Shimizu
Tsunao Shimizu
Tsuyoshi Hirata
Etsuji Terada
Hisayasu Masaoka

DIRECTORY

Shanghai DYNAX Corporation#1 Dongxing Road, Songjiang,
Shanghai 201600, CHINA
Phone: 86-21-6774-0300
Facsimile: 86-21-5774-2381

PT16748, Jalan Permata 1/5,
Arab-Malaysian Industrial Park,
71800 Nilai, Negeri Sembilan, MARAYSIA
Phone: 60-6-7992988
Facsimile: 60-6-7996388

21 Fiveways Boulevard, Keysborough,Victoria 3173, AUSTRALIA
Phone: 61-3-9701-5556
Facsimile: 61-3-9701-5684

Euro EXEDY Clutch Limited

EXEDY Middle East Fzco
P.O. BOX 18199, Jebel Ali Free Zone,
Jebel Ali Dubai, U.A.E.
Phone: 971-4-883-2244
Facsimile: 971-4-883-2500
Annual Report 2004 30