To Our Shareholders
Business Operations

As of March 31, 2007 and 2008

Review of Fiscal Year 2007

Net assets

Net assets

2007

2008

2008

2007/2008

166,745

187,3031,869,476

12.3

10,497

11,658116,36111.1

144,073

158,147

1,578,471

9.8

99,847110,033

1,098,24110.2

215.09239.95

2.39

11.6

1,907.92

2,102.64

20.99

10.2

34.00

50.00

0.50

47.1

Note : Dollar figures are translated, for convenience only, at the rate of ¥100.19 to U.S. $1.00.

In the period under review, while the Japanese automotive
industry posted sluggish sales growth in the major industrializedcountries, there was a sharp increase in demand elsewhere,
especially in the BRICs nations. As a result, global production
volumes grew at a steady pace. Due to growing demand for
fuel-efficient vehicles that comply with carbon dioxide
emissions standards, Japanese automakers increased theirmarket share in the overseas market.
On the other hand, the rising prices of oil and materials
such as steel are placing pressure on the automotive industry’s
profits. In this unforgiving business environment, the EXEDYGroup focused its efforts on the development and expanded
sales of products that contribute to improving fuel efficiency,
in order to meet the changing needs of customers and society
as a whole.
These efforts brought about favorable consolidated results
for the fiscal year, with net sales climbing to ¥187.3 billion (anincrease of 12.3% over the previous fiscal year), operating
income reaching ¥19.7 billion (an increase of 18.7% over theprevious fiscal year), ordinary income growing to ¥19.5 billion(an increase of 12.7% over the previous fiscal year), and net
income rising to ¥11.6 billion (an increase of 11.1% over theprevious fiscal year).

competitiveness of Japanese cars due to the appreciation of
the yen against the dollar, may cause sales growth to slow down.
In contrast, we expect the manual transmission (MT) businessin the Asian market outside Japan to show continued expansion.
As a result of the rising yen against the dollar, likely surges
in steel price, and the depreciation burden of increased capital
investment for AT-related products, we foresee a severe profit
picture in the coming year.
The EXEDY Group will make a concerted effort to obtain
increased orders through continuous improvements in quality, andthe aggressive development of environment-friendly products that
contribute to higher fuel efficiency, vibration reduction, and noise
reduction. The Group also intends to make the utmost efforts tostreamline its operation and ensure profitability.
Consequently, we forecast a net sales of ¥195.0 billion (anincrease of 4.1% over the previous fiscal year), an operating
income of ¥18.5 billion (a decrease of 6.5% from the previous
fiscal year), an ordinary income of ¥18.0 billion (a decrease of
8.1% from the previous fiscal year), and a net income of ¥11.0
billion (a decrease of 5.6% from the previous fiscal year).
July 2008

Outlook for Fiscal Year 2008
Net Sales

Net Income Per Share of Common Stock

2008
2007
2006

187,303
166,745

2008

2006

153,059239.95

2007

2005

2005

2004

2004

186.02

220

230

240

Net Assets Per Share of Common StockNet Income
2008

2006

Haruo Shimizu
President and Chief Executive Officer

215.09200,000

2007

In the automatic transmission (AT) business centered in Japanand the United States, automakers’ continued outsourcing ofparts is expected to contribute to an increase in orders.
However, factors such as the U.S. economic slowdown brought
about by turmoil in financial markets, and the declining price

11,658
10,497
9,354

2008
2007
2006

2005

2005

2004

2004
11,000 12,000

2,102.64
1,907.92
1,714.93

2,000 2,200
Note: Figures for FY 2005 and FY 2004 in the chart above show shareholders'equity per share of common stock.

From left to right: Katsumi Shintou (Managing Director), Etsuji Terada (Executive Managing Director), Haruo Shimizu (President and Chief Executive Officer),
Hisayasu Masaoka (Managing Director), Yoshitsugu Sakamoto (Managing Director), and Masayuki Matsuda (Managing Director)

1

Annual Report 2008

Annual Report 20082

Locations of Plants, Sales Offices
and Affiliated Companies
Throughout the EXEDY Group, we areworking to promote higher standards ofsafety, quality, and communication.

FZCO

FZCO

Net Sales by Location
Japanese yen(millions)

2007

2008

Other 1.4%

U.S. dollars(thousands)

2008

Asia and Oceania

15.2%

Japan ・・・・・・・・・・・・・・・・・・ ¥130,804 ¥140,449 $1,401,826
United States ・・・・・・・・・・・・

30,06534,654

345,878

Asia and Oceania ・・・・・・・・

24,334

31,987319,259

Other・・・・・・・・・・・・・・・・・・・・

2,348

2,907

29,010

United States

16.5%

Eliminations（inter-segment net sales）・・ （20,806）（22,694） （226,497）
Total$1= ¥100.19

3

Annual Report 2008

¥166,745 ¥187,303 $1,869,476
The chart at right shows the percentage ofsales to customers outside the Group.

Japan 66.9%

Annual Report 2008

4

Topics of the Year
Consolidated Five-Year Summary
EXEDY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Years ended March 31
Japanese yen(millions)

U.S. dollars(thousands)

2004

2005

2006

2007

2008

2008

Net sales ··························································· ¥ 122,281¥ 136,307¥ 153,059¥ 166,745¥ 187,303$1,869,478

5,179

6,300

9,354

10,497

11,658116,359

Total assets ······················································· ¥ 110,799¥ 123,289¥ 133,440¥ 144,073¥ 158,147$1,578,471

For the year:

Net income ························································At year-end:

Osaka Auto Messe
2008

Current assets ··················································

55,39963,78366,43370,26582,000818,445

Property, plant and equipment ··························

47,041

49,71957,24065,011

68,220680,906

Current liabilities ···············································

25,074

27,64730,66732,932

37,207

371,364

Long-term debt ·················································

2,594

2,687

2,726

2,727

2,966

29,604

Shareholders’ equity ·········································

69,61476,032————

Shareholders’ equity / Total assets ···················

62.8%

61.7%

Net assets ·························································——Net assets / Total assets ···································—%—%

Retained earnings ············································

55,40660,808—%—%90,25999,847

67.6%

64.3%

69,05075,049—%—%110,033

1,098,244

64.6%

64.6%

84,934

847,729

Super Endurance Race

Civic Race・Took first place in the first race of the year in April 2008

・Took first place in the first race of the year in April 2008
・Took first place in the second race of the year in May 2008

Corporate logos on the sides of transport trucks

Japanese yen

Per share data:

U.S. dollars

Net income ······················································· ¥108.84¥ 127.61¥ 186.02¥ 215.09¥ 239.95$

2.39

Net income – diluted ·········································

106.12

127.59———

Shareholders’ equity ········································

1,432.90

1,525.24

—

—

—

—

Net assets ·························································——

1,714.93

1,907.92

2,102.64

20.99—

Notes: 1. Dollar figures are translated, for convenience only, at the rate of ¥100.19 to U.S. $1.00.
2. In fiscal year 2007, net assets are stated under “Accounting standard for presentation of net assets in the balance sheet (Accounting Standards Board of Japan
Statement No.5 issued on December 9, 2005)” and “Implementation guidance for Accounting standard for presentation of net assets in the balance sheet(Accounting Standards of Japan Guidance No.8 issued on December 9, 2005) as referred to in Note1(r). This standard retroactively applied to the net assets
for fiscal year 2006.

Financial Section
Consolidated Five-Year Summary ······································ 6Consolidated Balance Sheets ············································ 7
Consolidated Statements of Income ··································· 9Consolidated Statements of Changes in Net Assets ········ 10
Consolidated Statements of Cash Flows ·························· 11
Notes to Consolidated Financial Statements ···················· 12
Independent Auditors' Report ··········································· 25
Corporate Data ································································· 26

MAZDA Demio
HONDA FIT

2007-2008 Japan Car of the Year
5

Annual Report 2008

2008 World Car of the Year2008 RJC Car of the Year
Photographs of vehicles on this page are used with the permission of the manufacturers. Their reproduction in other publications is strictly prohibited.

Annual Report 2008 6

Consolidated Balance Sheets
EXEDY CORPORATION AND CONSOLIDATED SUBSIDIARIESAs of March 31, 2007 and 2008

Japanese yen(millions)
ASSETS2007

U.S. dollars(thousands)

2008

2008

Current Assets:
Cash and cash equivalents [Notes 1(p)] ································¥ 15,736¥ 22,422$ 223,795

Time deposits ········································································

236

727

7,256

Trade ··············································································

35,09937,660375,886

Non-consolidated subsidiaries and affiliates ··················

164

183

1,827

Notes and accounts receivable (Notes 3 & 4) –Allowance for doubtful accounts ····································

(395)

(204)

(2,036)Inventories (Notes 2 & 3) ·······················································

14,532

15,937

159,068

Deferred tax assets (Note 13) ···············································

2,566

2,723

27,178

Short-term loans ····································································

737

697

6,957

Other current assets ······························································

1,590

1,855

18,514

Total current assets ························································

70,26582,000818,445

Property, Plant and Equipment (Note 3):
Land ·······················································································

7,588

7,698

76,834

Buildings and structures ························································

34,572

36,590365,206

Machinery and vehicles ·························································

93,154

100,726

1,005,350

Tools and furniture ·································································

30,952

33,688336,241

Construction in progress ························································

7,726

6,805

67,921

173,992

185,507

1,851,552

Less – accumulated depreciation ··········································(108,981)(117,287)(1,170,646)

Total property, plant and equipment ·······························

65,011

68,220680,906

Investments and Other Assets:
1,627

1,477

14,742

non-consolidated subsidiaries and affiliates ······················

682

752

7,506

Long-term loans ····································································

165

151

1,507

Deferred tax assets (Note 13) ···············································

3,435

3,105

30,991Other assets ··········································································

2,888

2,442

24,374

Total investments and other assets ································

8,797

7,927

79,120Investments in securities (Note 10) ·······································
Investments in and loans to¥144,073¥158,147$1,578,471

Japanese yen(millions)

Current Liabilities:
Short-term borrowings including
current portion of long-term debt (Notes 3 & 18) ·····················
Notes and accounts payable –Trade ····················································································
Construction ·········································································
Non-consolidated subsidiaries and affiliates ························
Accrued expenses ·······································································
Accrued income taxes ·································································
Other current liabilities ·································································
Total current liabilities ···························································

2008

2007

LIABILITIES AND NET ASSETS

¥

4,624

U.S. dollars(thousands)

¥

5,713

2008

$

57,022

17,747
1,232
57
5,759
2,932
581
32,932

18,614
1,719
34
6,426
3,878
823
37,207

185,787
17,157339
64,13838,706
8,215
371,364

2,727
1,020
6,345
277
925
11,294

2,966
1,521
5,719
458
243
10,90729,604
15,181
57,0824,571
2,425
108,863

8,284
7,541
75,0498,284
7,541
84,934

82,68375,267
847,729(26)
90,848(36)
100,723(359)
1,005,320

698
1,153
1,851

436
995
1,431

4,352
9,931
14,283

Minority Interests ·············································································

7,148

7,879

78,641

Total net assets ·····································································

99,847110,033

1,098,244¥144,073¥158,147$1,578,471

Long-term Liabilities:
Long-term debt (Notes 3 & 18) ····················································
Deferred tax liabilities (Note 13) ··················································
Employees’ severance and retirement benefits (Note 12) ···········
Retirement benefits for directors and corporate auditors ············
Other long-term liabilities ·····························································
Total long-term liabilities ···························································
Contingent Liabilities (Note 4)
Net Assets [Note 1(r)]Shareholders’ Equity (Note 14):
Common stock
Authorized – 168,000 thousand shares in 2007 and 2008
Issued – 48,594 thousand shares in 2007 and 2008 ···············
Capital surplus ·············································································
Retained earnings ·······································································
Treasury stock
8 thousand shares in 2007 and 10 thousand shares in 2008 ·······
Total shareholders’ equity ························································
Valuation and Translation Adjustments:
Net unrealized holding gains on other securities ·························
Foreign currency translation adjustments [Note 1(c)] ··················
Total valuation and translation adjustments ·························

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

7 Annual Report 2008

Annual Report 2008 8

Consolidated Statements of Income

Consolidated Statements of Changes in Net Assets

EXEDY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2007 and 2008

EXEDY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2007 and 2008

Japanese yen(millions)
2007

U.S. dollars(thousands)

2008¥166,745¥187,303$1,869,478

Cost of Sales ····················································································
Gross profit ··················································································

130,019
36,726144,216
43,087

1,439,425
430,053

Other (Income) Expenses:
Interest and dividend income ·······················································
Interest expense ··········································································
Losses on sale or disposal of property,
plant and equipment ································································
Equity in gains of non-consolidated subsidiaries and affiliates ····
Foreign exchange (gains) losses, net ··········································
Gains on reversal of allowance for doubtful accounts ·················
Gains on reversal of reserve for warranty ····································
Imparement losses on property, plant and equipment (Note 6) ·····
Other, net ·····················································································
Income before income taxes and minority interests ····················
Income Taxes (Note 13)
Current ·························································································
Deferred ·······················································································
Minority Interests in Net Income of Consolidated Subsidiaries ··········Net Income ·······················································································Per Share Data (Note 17):
Net income ··················································································Net income – diluted ····································································Cash dividends ············································································

20,055
16,671

232,618
197,435(211)
274(2,106)
2,735

260
(112)
(479)
—
—
—
(431)
(708)

286
(108)
240
(216)
(560)
98
(279)
(476)

2,855
(1,078)2,395(2,156)(5,589)978(2,785)(4,751)

17,37920,257202,186

6,742
785

4,957
1,295

1,072

630
¥ 10,497

67,292
7,835¥ 11,658

10,700$ 116,359

Japanese yen¥ 215.09—
34.00¥ 239.95—
50.00

Valuation and translation
adjustments

Shareholders' equity

Commonstock

CapitalsurplusRetainedearnings

Net
ForeignTotal
unrealized
currency
shareholders’ holding gains
translation
equityon otheradjustments
securities

Treasurystock

Minority
interests

Balance as of March 31, 2006 ·······························

49,794¥ 8,284¥ 8,768¥ 69,050¥ (2,951) ¥83,151¥ 744

30¥ 6,334

Net income ······················································

—

—

—

10,497—

10,497———Purchase of treasury stock ·····························

—

—

—

—

(1,153)(1,153)———Retire treasury stock ········································(1,200)—(1,227)(2,853)

4,080

—

—

—

—

Cash dividends paid ········································

—

—

—

(1,541)—(1,541)———

Bonuses to directors and corporate auditors ···

—

—

—

(104)

—

(104)

—

—

—

Other, net ·························································

—

—

—

—

—

—

(46)

1,123

814

Balance as of March 31, 2007 ·······························

48,594¥ 8,284¥ 7,541¥ 75,049(26) ¥

90,848¥ 698¥ 1,153¥ 7,148

Net income ······················································

—

—

—

11,658—

11,658———Purchase of treasury stock ·····························

—

—

—

—

(10)

(10)

—

—

—

Cash dividends paid ········································

—

—

—

(1,773)—(1,773)———

Other, net ·························································

—

—

—

—

—

—

(262)

(158)

731

Balance as of March 31, 2008 ·······························

48,594¥ 8,284¥ 7,541¥ 84,934(36) ¥ 100,723

¥ 436

995

¥ 7,879

¥

¥

¥

¥

U.S. dollars(thousands)
Valuation and translation
adjustments
Net
ForeignTotal
unrealized
currency
shareholders’ holding gains
translation
equityon otheradjustments
securities

Shareholders' equity
Commonstock

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

9 Annual Report 2008

23,306
19,781(167)
221

Number ofissuedshares(thousands)

2008

Net Sales ··························································································

Selling, General and Administrative Expenses (Note 5) ··············
Operating income ········································································

Japanese yen(millions)

Retainedearnings

CapitalsurplusTreasurystock

Minority
interests

Balance as of March 31, 2007 ·····················································$82,683$75,267$749,067$6,967$11,508

Net income ············································································——

116,359—

116,359———

Purchase of treasury stock ···················································

—

—

—

(99)

(99)

—

—

—

$(260) $ 906,757$71,344

Cash dividends paid ······························································——(17,697)—(17,697)———

Other, net ···············································································

—

—

—

—

—

(2,615)(1,577)

7,297

Balance as of March 31, 2008 ·····················································$82,683$75,267$847,729$(359) $1,005,320$4,352$ 9,931$78,641

U.S. dollars
$

2.39
—
0.50

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

Annual Report 2008 10

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

EXEDY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2007 and 2008

EXEDY CORPORATION AND CONSOLIDATED SUBSIDIARIESJapanese yen(millions)

Cash Flows from Operating Activities:
Income before income taxes and minority interests ·········································
Adjustments for:
Depreciation and amortization ·········································································
Losses on sale or disposal of property, plant and equipment ··························
Impairment losses on property, plant and equipment ·······································
Decrease in allowance for doubtful accounts ···················································
Decrease in employees' severance and retirement benefits ····························
Interest and dividend income ···········································································
Interest expense ·······························································································
Increase in notes and accounts receivables ·····················································
Decrease (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 ·····················································

U.S. dollars(thousands)

2007

2008

2008

¥17,379¥20,257$202,186

9,432
260
—
(17)
(863)
(167)
221
(2,563)
662
799
(122)
25,021
172(227)(4,412)
20,554

10,863
286
98
(155)
(626)
(211)
274
(2,457)(1,405)550
218
27,692231(263)(5,834)
21,826

108,4242,855
978(1,547)(6,248)(2,106)
2,735(24,523)(14,023)
5,489
2,175
276,395
2,306(2,625)(58,230)
217,846

Cash Flows from Investing Activities:
Increase in time deposits ··················································································
Decrease in time deposits ················································································
Payments for purchase of property, plant and equipment ································
Proceeds from sale of property, plant and equipment ······································
Payments for acquisitions of intangible assets ·················································
Payments for purchase of investment in securities ··········································
Payments for additional portion of consolidated subsidiaries ···························
Payments for acquisitions of consolidated subsidiaries ···································
Additions to loans receivable ············································································
Collection of loans receivable ···········································································
Other, net ··········································································································Net cash used in investing activities ····························································

(184)
13
(15,048)
205
(679)
(11)
—
—
(458)
262
160
(15,741)(216)
214(13,619)
171
(206)
(285)
(228)
(1)
(54)
114
2
(14,108)(2,156)2,136(135,932)
1,707(2,056)(2,845)(2,276)
(10)
(539)
1,138
21
(140,812)

Cash Flows from Financing Activities:
Increase (decrease) in short-term borrowings, net ··········································
Proceeds from long-term loans payable ···························································
Repayments of long-term loans payable ··························································
Payments for acquisitions of treasury stock ·····················································Cash dividends paid ·························································································Cash dividends paid to minority shareholders ··················································
Other, net ··········································································································Net cash used in financing activities ····························································

(526)
179
(655)
(1,155)(1,541)(207)
29(3,876)

1,026
561
(460)
(10)
(1,771)
(349)
71
(932)

10,241
5,599(4,591)(100)(17,676)(3,483)708(9,302)

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 ··············································Cash and Cash Equivalents of Newly Consolidated Subsidiaries ····················Cash and Cash Equivalents at End of Year ·························································

275
1,212
14,512
12¥15,736

(100)
6,686
15,736—¥22,422(999)
66,733
157,062—$223,795

1. Summary of Significant Accounting and Reporting Policies(a) Basis of presenting the consolidated financial statements
The accompanying consolidated financial statements of Exedy
Corporation (“the Company") and its consolidated subsidiaries havebeen prepared in accordance with the provisions set forth in the
Financial Instruments and Exchange law in Japan and its related
accounting regulations, and in conformity with accounting principles
generally accepted in Japan (“Japanese GAAP”), which are different
in certain respects as to application and disclosure requirements fromInternational Financial Reporting Standards.
The accounts of the Company’s overseas subsidiaries are based on theiraccounting records maintained in conformity with generally accepted
accounting principles prevailing in the respective countries of domicile. The
accompanying consolidated financial statements have been restructured
and translated into English from the consolidated financial statementsof the Company prepared in accordance with Japanese GAAP and filedwith the appropriate Local Finance Bureau of the Ministry of Finance as
required by the Financial Instruments and Exchange law in Japan. Certain
supplementary information included in the statutory Japanese language
consolidated financial statements, but not required for fair presentation, is
not presented in the accompanying consolidated financial statements.
The translation of the Japanese yen amounts into U.S. dollars is
included solely for the convenience of readers outside Japan, using
the prevailing exchange rate at March 31, 2008, which was ¥100.19
to U.S. $1.00. The convenience translation should not be construed as
representation that the Japanese yen amounts have been, could havebeen, or could in the future be, converted into U.S. dollars at this or any
other rate of exchange.
(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 or the
existence of certain conditions evidencing control by the Company.
Investments in non-consolidated subsidiaries and affiliates over which
the Company has the ability to exercise significant influence over
operating and financial policies of the investees, are accounted forusing the equity method.
In the elimination of investments in consolidated subsidiaries, the assets
and liabilities of the subsidiaries, including the portion attributable tominority shareholders, are valued using the fair value at the time theCompany acquired control of the respective subsidiaries. Materialintercompany balances, transactions and profits have been eliminatedin 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 to income
for the current period.
The 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
statements of consolidated overseas subsidiaries are translated at the
average rates during the year. Translation adjustments resulting fromtranslating financial statements whose accounts are denominated inforeign currencies are not included in the determination of net income
but are reported as “Foreign currency translation adjustments” in acomponent of net assets and minority interests.

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

(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 fair market
value. Net unrealized holding gains and losses on these securities are

11 Annual Report 2008

reported, net of applicable income taxes, as a separate component of
net assets.
Realized gains and losses on the sale of such securities are computed
using the moving average cost method.
Other securities with no available fair market value are stated at moving
average cost, net of the amount considered uncollectible.
If the fair market value of other securities declines significantly, suchsecurities are stated at fair market value and the difference between thefair market value and the carrying amount is recognized as a loss in the
period of decline. If the net asset value of other securities, except forinterest-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.
(e) Derivatives
All derivatives are stated at fair value.
(f) Inventories
Inventories except for supplies are mainly stated at the lower of cost(first-in, first-out) or market value. Supplies are mainly stated at cost
determined by the last purchase cost method.
(g) Property, plant and equipment
The Company and its domestic consolidated subsidiaries compute thedepreciation of property, plant and equipment by using the decliningbalance method and its overseas consolidated subsidiaries mainly byusing the straight-line method. The depreciation of buildings acquired by
the Company and its domestic consolidated subsidiaries on and after
April 1, 1998 is computed by using the straight-line method.
Estimated useful lives of property, plant and equipment are as follows:
Buildings and structures ············································· 3 – 50 years
Machinery and vehicles ·············································· 2 – 15 years
Tools and furniture ······················································ 2 – 20 years
Maintenance and repairs including minor renewals and betterments arecharged to income as incurred.
(Changes in accounting policies)
Effective from April 1, 2007, the Company and its domestic subsidiaries
changed accounting method for depreciation of property, plant andequipment based on an amendment in corporation tax law. The effectof this change was to decrease operating income and income before
income taxes and minority interests by ¥375 million ($3,743 thousand),
respectively.
Furthermore, those assets acquired before April 1, 2007 were allowed,
after depreciating to 95% of their acquisition costs, to be depreciated to¥1 in five years using the straight line method.
The effect of this change was to decrease operating income by ¥405
million ($4,042 thousand) and income before income taxes and minority
interests by ¥406 million ($4,052 thousand), respectively.
The effect of these changes on segment information is discussed in therelevant sections of this report.
(h) Software
Software is amortized using the straight-line method over the useful life
(3-5 years) of the software.
(i) Leases
The Company and its domestic consolidated subsidiaries accountfor leases which transfer substantially all the risks and rewards ofownership of the leased assets as capital leases. Leases which do nottransfer ownership of the leased assets at the end of the lease term areaccounted for as operating leases, in accordance with Japanese GAAP.
Overseas consolidated subsidiaries of the Company account for leases
that transfer substantially all risks and rewards of ownership of theleased assets as capital leases.

Annual Report 2008 12

(j) Income taxes
The Company and its consolidated subsidiaries recognize the 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.
(k) 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.
(l) Employees' severance and retirement benefits
The Company and its consolidated subsidiaries provide 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 valueof the plan assets at that date.
Actuarial differences are fully amortized in the year following the year inwhich the actuarial differences are recognized. Prior service costs arerecognized in expenses in the year in which they are incurred.
(m) Retirement benefits for directors and corporate auditors
The Company and its domestic consolidated subsidiaries have
unfunded retirement allowance plans for directors and corporate
auditors. The amounts required under the plans have been fully
accrued.
(n) Accounting for consumption taxes
Consumption taxes in Japan 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.
(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 toordinary shareholders, excluding bonuses to directors and corporate
auditors, etc. The computation of net income - diluted per shareassumes the full exercise of outstanding warrants and full conversion of
convertible bonds at the beginning of the year (or at the time of issuance,
if this is after the beginning of the year) with an applicable adjustment for
related net-of-tax interest expense. The computation of net assets per
share is based on the number of common stock shares outstanding at
the year-end, excluding the Company’s treasury stock and based on net
assets attributing to ordinary shareholders excluding minority interests.

Cash dividends per share shown in the statements of income are theamounts applicable to the respective years.
(p) Cash and cash equivalents
Cash and cash equivalents include cash in hand, demand deposits andshort-term investments which have maturities of three months or lesswhen purchased, are easily convertible into cash and have few risks offluctuation of value.
(q) Reclassification
Certain comparative figures have been reclassified to conform to thecurrent year’s presentation.
(r) Changes in accounting policies
Accounting standard for presentation of net assets in thebalance sheet
Effective from the year ended March 31, 2007, the Company and its
domestic consolidated subsidiaries applied “Accounting standard forpresentation of net assets in the balance sheet (Accounting Standards
Board of Japan Statement No.5 issued on December 9, 2005)”, and“Implementation guidance for Accounting standard for presentationof net assets in the balance sheet (Accounting Standards of Japan
Guidance No.8 issued on December 9, 2005)”.
“Net assets” in the consolidated balance sheets for this year ispresented according to the revision of “Regulations Concerning the
Terminology, Form and Presentation Methods of Consolidated Financial
Statements” dated on April 25, 2006. Furthermore, the Company
presented its net assets in the consolidated balance sheets using thenew presentation as of March 31, 2006.
Accounting standard for directors’ and corporate auditors’
bonuses
Effective from the year ended March 31, 2007, the Company and its
domestic subsidiaries applied “Accounting standard for directors’ andcorporate auditors’ bonuses” (Accounting Standards Board of Japan
Statement No.4 issued on November 29, 2005).
As a result of the application of this standard, operating income for theyear ended March 31, 2007 decreased by ¥104 million and income
before income taxes and minority interests for the year ended March
31, 2007 decreased by ¥107 million, respectively.
In addition, the effect of the application of this standard on segment
information is discussed in the relevant sections of this report.
Accounting standard for decrease of treasury stock and legal
reserve
Effective from the year ended March 31, 2007, the Company applied“Accounting standard for decrease of treasury stock and legal
reserve” (Accounting Standards Board of Japan Statement No.1 final
version issued on August 11, 2006) and “Implementation guidance for
Accounting standard for decrease of treasury stock and legal reserve(Accounting Standards of Japan Guidance No.2 final version issued on
August 11, 2006”.
There is no effect of the application of this standard on statements ofincome.

2. Inventories
Inventories as of March 31, 2007 and 2008 were as follows:
Japanese yen(millions)Finished goods ···········································································································
Work-in process ··········································································································
Raw materials ·············································································································
Supplies ······················································································································

U.S. dollars(thousands)

2007

2008

2008

¥ 5,804
2,611
5,283
834
¥14,532¥ 6,509
3,257
5,327
844
¥15,937$ 64,967
32,50853,1698,424$159,068

3. Assets Pledged as Collateral
The following assets were pledged as collateral for ¥699 million of secured short-term loans from banks and ¥263 million of secured longterm loans from government-sponsored agencies as of March 31, 2007, and for ¥1,689 million ($16,858 thousand) of secured short-termloans from banks and ¥113 million ($1,128 thousand) of secured long-term loans from government-sponsored agencies as of March 31,
2008:
Japanese yen(millions)2007
Notes and accounts receivable and inventories ·····························································
Land ································································································································
Buildings and structures, net ··························································································
Machinery and vehicles, net ···························································································

U.S. dollars(thousands)

2008

2008

¥1,142152
220
5¥1,519¥1,191152
233
6¥1,582$11,398
1,517
2,196
50
$15,161

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 at the 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.

4. Contingent Liabilities
Contingent liabilities for guarantees by the Company as of March 31, 2007 and 2008 were as follows:
Japanese yen(millions)

2007
Guarantees of loans from banks of affiliates under the equity method ··························

U.S. dollars(thousands)

2008
¥

¥500

2008
—

$

—

Trade note receivable endorsed was ¥56 million and discounted was ¥19 million for the year ended March 31, 2007. Trade note receivablediscounted was ¥16 million ($160 thousand) for the year ended March 31, 2008.

5. Research and Development Expenses
Research and development expenses are charged to income as incurred. Research and development expenses charged to income for theyears ended March 31, 2007 and 2008 were as follows:
Japanese yen(millions)

2007
Research and development expenses ···········································································

13 Annual Report 2008

¥3,552

U.S. dollars(thousands)

2008¥ 4,546

2008$45,374

Annual Report 2008 14

(b) Dividends

6. 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
amount of some of those assets are not recoverable. Therefore the Company recognized impairment losses on those assets where therecoverable value was less than the net book value. The recoverable value of land was based on valuation of property and equipment taxes.
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, 2008 were as follows:
March 31, 2008
Asset Group
Asset which does not belong
to any business category

Asset Type
Land
Land

Location
Hyogo Pref.
Osaka Pref.

Japanese yen(millions)

Usage
Idle
Idle

················································································

U.S. dollars(thousands)

¥70
28

$699
279

¥98

$978

7. Changes in Net Assets

Shares issued:
Common stock (thousands) ·····················································
Treasury stock:
Common stock (thousands) ······················································(Notes)Number of shares
as of March 31,
2006

Increase

Decrease

Number of shares
as of March 31,
2007

49,794
49,794

—
—

1,200
1,200

48,594
48,594

856
856

352
352

1,200
1,200

8
8

1. The decrease of share issued - common stock 1,200 thousand is due to retire treasury stock on January 22, 2007 as approved by the Board of
Directors' meeting held on December 26, 2006.
2. The increase of treasury stock - common stock 352 thousand is due to purchase of the stocks 350 thousand and the stocks less than standard
unit 2 thousand as approved by the Board of Directors' meeting held on October 26, 2006.
3. The decrease of treasury stock - common stock 1,200 thousand is due to retire treasury stock on January 22, 2007 as approved by the Boardof Directors' meeting held on December 26, 2006.

March 31, 2008
Shares issued:
Common stock (thousands) ·····················································
Treasury stock:
Common stock (thousands) ······················································Cash dividends paid
Japanese yen (millions)

Resolution

Type of shares

Ordinary general meeting of theshareholders on June 27, 2006

Common stock¥ 832

Board of Directors’ meeting on
October 26, 2006

Common stock¥ 709

Cut-off date

Effective date

¥ 17.0March 31, 2006

June 28, 2006

¥ 14.5September 30, 2006

November 28, 2006

March 31, 2008
Cash dividends paid
Japanese yen (millions)
U.S. dollars (thousands)

Resolution

Type of shares

Ordinary general meeting of theshareholders on June 26, 2007

Common stock¥ 947$9,452

Board of Directors’ meeting on
October 30, 2007

Common stock¥ 826$8,245

Number of shares
as of March 31,
2007

Increase

Decrease

Number of shares
as of March 31,
2008

48,594
48,594————

48,594
48,594

8
8

2
2

—
—

10
10

Resolution

Type of shares

Dividends per share(Japanese yen)
(U.S. dollars)

Cut-off date

Effective date¥ 19.5$ 0.19March 31, 2007

June 27, 2007

¥ 17.0$ 0.17

September 30, 2007

November 28, 2007

Ordinary general meeting of theshareholders on June 26, 2008

Common stock

Resources
Cash dividends paidofJapanese yen (millions)
U.S. dollars (thousands) dividends¥ 1,603$16,000

Retainedearnings

Dividends per share
Cut-off date
(Japanese yen)
(U.S. dollars)¥ 33.0$ 0.33

March 31, 2008

Effective dateJune 27, 2008

8. Cash Flows(a) Acquisition of newly consolidated subsidiaries
In the year ended March 31, 2008, the Company acquired the outstanding shares of Kinugawa Cast Iron Co.,Ltd. The assets and liabilities
of Kinugawa Cast Iron Co., Ltd. acquired by the Company and the reconciliation between the acquisition cost and net cash used for theacquisition were as follows:
Japanese yen(millions)
Current assets ·····························································································
Non-current assets ······················································································
Consolidation difference ··············································································
Current liabilities ···························································································
Non-current liabilities ···················································································
Acquisition cost ····························································································Cash and cash equivalents of newly consolidated subsidiary ·····················Net acquisition cost ·····················································································

¥ 216
210
93
(215)
(280)
24
(23)
¥
1

U.S. dollars(thousands)$2,156
2,096
928(2,146)(2,794)
240
(230)
$ 10

(b) Non-cash investing and financing activities
In the year ended March 31, 2007, the Company retired 1,200 thousand treasury stock.
Japanese yen(millions)(Note) The increase of treasury stock - common stock 2 thousand is due to purchase of the stocks less than standard unit 2 thousand.

Decrease of capital surplus ·········································································
Decrease of retained earnings ····································································
Decrease of treasury stock ··········································································

15 Annual Report 2008

Dividends per share(Japanese yen)

(2) Dividends, of which cut-off date was in the year ended March 31, 2008, and effective date of which will be in the year ending March 31, 2009(a) Shares issued / Treasury stock

March 31, 2007

(1) Dividends
March 31, 2007

¥1,227
2,853¥4,080

Annual Report 2008 16

9. Leases

10. Securities(a) Finance leases
Information relating to finance leases, except those leases for which the ownership of the leased assets is considered to be transferred to
the lessee, is described below.

Other securities with book values (fair values) exceeding acquisition costs as of March 31, 2007 and 2008 were as follows:

Pro forma information regarding leased property such as acquisition cost, accumulated depreciation, accumulated losses on impairment andfuture minimum lease payments under finance leases that do not transfer the ownership of the leased property to the lessee for the years
ended March 31, 2007 and 2008 was as follows:
Japanese yen (millions)
March 31, 2007
Machinery and vehicles ················
Tools and furniture ························
Other ·············································

Acquisition
cost

Accumulated
depreciation

¥ 290
158
61
¥ 509

¥ 137
117
58
¥ 312

Accumulated
losses on
impairment
¥
¥

—
—
—
—

Machinery and vehicles ················
Tools and furniture ························
Other ·············································

Acquisition
cost

Accumulated
depreciation

¥ 334
131
—
¥ 465

¥ 216
29
—
¥ 245

Accumulated
losses on
impairment
¥
¥

—
—
—
—

March 31, 2007

Equity securities ·············································································································
Interest-bearing securities ······························································································
Others ·····························································································································

¥ 398
—
—
¥ 398

Difference¥1,560——¥1,560Japanese yen (millions)

¥ 153
41
3
¥ 197

March 31, 2008

Equity securities ·············································
Interest-bearing securities ······························
Others ·····························································

U.S. dollars (thousands)
BalanceAcquisition
cost

Accumulated
depreciation

¥ 118
102
—
¥ 220

$3,334
1,307—$4,641$2,156289—$2,445

Accumulated
losses on
impairment¥1,162——¥1,162$$

Japanese yen(millions)

¥
¥

356
—
—
356

Book
value
¥ 1,184——¥ 1,184

U.S. dollars (thousands)

Difference
¥
¥

828
—
—
828

Acquisition
cost

Book
value

$ 3,553——$ 3,553$11,818——$11,818

2008$1,1781,018—$2,196

Japanese yen (millions)
March 31, 2007

Acquisition
cost

Book
value

¥

¥

Equity securities ·············································································································
Interest-bearing securities ······························································································
Others ·····························································································································

—
—
—
—

¥

¥

¥

Japanese yen (millions)

2008

78
119
¥ 197

63
157
¥ 220

$ 629
1,567
$2,196

Lease payments for the year ····························································································

¥

¥

$ 789

79

The amounts of acquisition costs and future minimum lease payments under finance leases included the interest expense portion.
Depreciation expenses, which are not reflected in the accompanying consolidated statements of income, calculated by the straight-line
method, would be ¥88 million and ¥79 million ($789 thousand) for the years ended March 31, 2007 and 2008, respectively.
The Company had no leased assets on which impairment should be recognized for the years ended March 31, 2007 and 2008.

March 31, 2008

Equity securities ·············································
Interest-bearing securities ······························
Others ·····························································

Acquisition
cost
¥
¥

326
—
—
326

Book
value

Japanese yen(millions)

¥

0
—
0

—
—
—
—

¥

¥
¥

—
—
—
—

¥
¥

227
—
—
227

U.S. dollars (thousands)

Difference
¥
¥

(99)
—
—
(99)

Acquisition
cost

Book
value

$ 3,254——$ 3,254$ 2,266——$ 2,266

Difference$ (988)——$ (988)The book value of securities with no available fair values as of March 31, 2007 and 2008 were as follows:

Other securities with no fair value
Non-listed equity securities ································································································¥

U.S. dollars(thousands)

2008

2007

¥

Difference

Japanese yen(millions)(b) Operating leases
The scheduled maturities of future lease payments under non-cancelable operating leases as of March 31, 2007 and 2008, were as follows:

Due within one year ··········································································································
Due over one year ············································································································$8,265——$8,265

Other securities with book values (fair values) not exceeding acquisition costs as of March 31, 2007 and 2008 were as follows:

—
—
—
—

Due within one year ··········································································································
Due over one year ············································································································

2007

Difference

U.S. dollars(thousands)

2007

88

Acquisition
cost

Balance

The scheduled maturities of future lease payments, on such lease contracts for the years ended March 31, 2007 and 2008 were as follows:

17 Annual Report 2008

Book
value

Balance

Japanese yen (millions)
March 31, 2008

Japanese yen (millions)
Acquisition
cost

67

¥

2008
66

$ 658

U.S. dollars(thousands)

2008

2008

¥

$

¥

3
10
13

30
100
$ 130

Annual Report 2008 18

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

11. Derivatives
The only derivative transactions the Company and its consolidated subsidiaries engages in are forward currency exchange contracts andcurrency swaps for the purpose of hedging against exchange rate risks. The Company and its consolidated subsidiaries do not engage
in derivative transactions for trading or speculative purposes. Hedging accounting through derivative transactions was not applied as thenecessary conditions were not met. Forward currency exchange contracts and currency swaps bear risk due to changes in the exchange
rate. However, as the company trades only with banking facilities, there is very little credit risk. The Company and its consolidated
subsidiaries have established a control system which includes policies and procedures regarding derivative transactions. All derivativetransactions were processed under control and with the necessary approval.

Method of attributing the projected benefits to periods of service ····································
Discount rate ····················································································································
Expected rate of return on plan assets ·············································································
Amortization of prior service costs ···················································································
Amortization of actuarial differences ················································································

2007

2008

Straight-line basis
2.0%
2.0%
1 year
1 yearStraight-line basis
2.0%
2.0%
1 year
1 year

The following table provides information on derivative instruments as of March 31, 2007 and 2008.
Japanese yen (millions)
March 31, 2007

Contract
amountFair
value

Forward exchange contracts:
To sell U.S. dollars ·········································¥¥

Currency swaps:
Payment Rupiahs
Receipt U.S. dollars ···································
¥

624

46
—

621

(6)
—

¥

13. Income Taxes

Gain (loss)¥

Significant components of the Company's and consolidated subsidiaries' deferred tax assets and liabilities as of March 31, 2007 and 2008 were as follows:
Japanese yen(millions)

3

(6)
(3)

¥

Japanese yen (millions)
March 31, 2008

Currency swaps:
Payment Rupiahs
Receipt U.S. dollars ···································

Contract
amount

¥

34
—

Fair
value

¥

(3)
—

U.S. dollars (thousands)
Contract
amount

Loss

(3)
(3)

¥

$

Fair
value

339
—

$

Loss

(30)
—

$

(30)
(30)

12. Employees’ Severance and Retirement Benefits
The Company and its domestic consolidated subsidiaries adopt defined benefit retirement plans: cash balance plans and lump-sum payment
plans, as well as defined contribution pension plans.
The liability for employees' severance and retirement benefits included in the liabilities section of the consolidated balance sheets as ofMarch 31, 2007 and 2008 consisted of the following:
Japanese yen(millions)

U.S. dollars(thousands)

2007

2008

2008

Projected benefit obligation ······························································································
Fair value of pension assets ····························································································¥11,883(5,553)
6,330¥11,742(5,494)
6,248$117,197(54,835)
62,362

Unrecognized actuarial differences ··················································································
Liability for employees’ severance and retirement benefits ·······································

15¥ 6,345(529)¥ 5,719(5,280)$ 57,082

Included in the consolidated statements of income for the years ended March 31, 2007 and 2008 were employees' severance and retirement
benefit expenses comprised of the following:
Japanese yen(millions)

Service costs ····················································································································
Interest costs ····················································································································
Expected return on plan assets ························································································
Amortization of actuarial differences ················································································
Employees’ severance and retirement benefit expenses ··········································
Others ·······························································································································

U.S. dollars(thousands)

2007

2008

2008

¥

¥

$

¥

471
237
(103)
(465)
140
155
295

¥

461
236
(111)
(37)
549
166
715

U.S. dollars(thousands)

2007

2008

2008

Deferred tax assets:
Employees' severance and retirement benefits ························································Net operating losses carried forward ········································································
Accrued bonuses to employees ················································································
Impairment losses on property, plant and equipment ···············································
Unrealized gains (inventories) ··················································································
Losses on devaluation of inventories ········································································
Accrued enterprise tax ······························································································
Accounts payable for defined contribution pension to employees ····························
Unrealized gains (fixed assets) ··················································································
Accrued warranty costs ····························································································
Retirement benefits for directors and corporate auditors ··········································
Other ························································································································
Total deferred tax assets ·······························································································
Valuation allowance ··································································································¥ 2,558
2,174
836
—
218
245
219
523
219
323
—
969
8,284
(551)

¥ 2,309
2,084
949
475
385
305
279
238
196
191
185
905
8,501
(1,101)$23,046
20,800
9,472
4,741
3,843
3,044
2,785
2,375
1,956
1,906
1,847
9,033
84,848(10,989)

Deferred tax assets ········································································································

7,733

7,400

73,859Deferred tax liabilities:
Retained earnings of overseas subsidiaries ·····························································
Property, plant and equipment ··················································································
Reserve for advanced depreciation ··········································································Net unrealized holding gains on other securities ·····················································
Reserve for special depreciation ···············································································
Other ························································································································(1,017)
(688)
(339)
(465)
(86)
(157)

(1,515)
(822)
(334)
(292)
—
(130)

(15,121)(8,204)(3,334)(2,914)—(1,298)Deferred tax liabilities ····································································································(2,752)(3,093)(30,871)

Net deferred tax assets ··································································································¥ 4,981¥ 4,307$42,988

The Company and its consolidated subsidiaries are subject to a number of taxes based on income, which, in the aggregate, indicate astatutory tax rate in Japan of approximately 40.4% for the years ended March 31, 2007 and 2008.
The following table summarizes 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, 2007 and 2008:

2007
Statutory tax rate ············································································································
Adjustments for:Non-deductible expenses ·························································································Per capita inhabitant tax ···························································································Tax credit for research and development expenses ··················································
Different tax rates applied to overseas subsidiaries ··················································
Increase of retained earnings of overseas subsidiaries ············································
Other ························································································································
Effective tax rate ·············································································································

2008

40.4%

40.4%

2.1
0.1
(1.5)
(3.0)
2.0
(4.1)
36.0%

0.4
0.1
(1.6)
(4.0)
2.5
(0.6)
37.2%

4,601
2,356
(1,108)
(369)
5,480
1,657
$ 7,137(Note) "Others" represents the payments to defined contribution pension plans.

19 Annual Report 2008

Annual Report 2008 20

14. Shareholders’ Equity
As described in Note 1, net assets comprise three subsections, which are shareholders' equity, valuation and translation adjustments andminority interests.
The Japanese Corporate Law (“the Law”) became effective on May 1, 2006, replacing the Japanese Commercial Code (“the Code”).
Under the Law, in cases where a dividend distribution of surplus is made, the smaller of an amount equal to 10% of the dividend or theexcess, if any, of 25% of common stock over the total of additional paid-in-capital and legal earnings reserve must be set aside as additional
paid-in-capital or legal earnings reserve. Legal earnings reserve is included in retained earnings in the accompanying consolidated balance
sheets.
Under the Code, companies were required to set aside an amount equal to at least 10% of the aggregate amount of cash dividends andother cash appropriations as legal earnings reserve until the total of legal earnings reserve and additional paid-in capital equaled 25% ofcommon stock.
Under the Code, legal earnings reserve and additional paid-in capital could be used to eliminate or reduce a deficit by a resolution of
the shareholders' meeting or could be capitalized by a resolution of the Board of Directors. Under the Law, both of these appropriations
generally require a resolution of the shareholders' meeting.
Additional paid-in capital and legal earnings reserve may not be distributed as dividends. Under the Code, however, on condition that the
total amount of legal earnings reserve and additional paid-in capital remained equal to or exceeded 25% of common stock, they wereavailable for distribution by resolution of the shareholders’ meeting. Under the Law, all additional paid-in-capital and all legal earnings
reserve may be transferred to other capital surplus and retained earnings, respectively, which are potentially available for dividends.
The maximum amount that the Company can distribute as dividends is calculated based on the non-consolidated financial statements of theCompany in accordance with Japanese laws and regulations.

15. Segment Information
The Company and its consolidated subsidiaries operate in 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 sale of torqueconverters and wet friction clutch plates. The Other segment consists of industrial machine drivetrain operations, that is, the manufacture andsale of powershift transmissions, and other operations including the sale and manufacture of clutches for motorcycle, plants and other facilities.
Business segment information for the years ended 31, 2007 and 2008 was as follows:
Japanese yen(millions)

U.S. dollars(thousands)

2007

2008

2008

Manual automotive drivetrain operations ····································
Automatic automotive drivetrain operations ································
Other operations ·········································································
Eliminations (inter-segment net sales) ········································¥ 50,914
99,66022,271(6,100)¥166,745¥ 58,026
110,513
24,489(5,725)¥187,303$ 579,160
1,103,034
244,426(57,142)$1,869,478

Operating Costs and Expenses: Manual automotive drivetrain operations ····································
Automatic automotive drivetrain operations ································
Other operations ·········································································
Non-allocated operating expenses and eliminations ···················¥ 43,859
91,293
20,171(5,249)¥150,074¥ 48,591
100,690
23,166(4,925)¥167,522$ 484,989
1,004,991
231,221(49,158)$1,672,043

Operating Income:Manual automotive drivetrain operations ····································
Automatic automotive drivetrain operations ································
Other operations ·········································································
Non-allocated operating expenses and eliminations ···················

¥

7,055
8,366
2,100
(850)
¥ 16,671¥ 9,435
9,823
1,323
(800)
¥ 19,781$

94,171
98,044
13,205(7,985)$ 197,435

Assets:Manual automotive drivetrain operations ····································
Automatic automotive drivetrain operations ································
Other operations ·········································································
Corporate and eliminations ·························································¥ 39,901
75,723
15,51012,939¥144,073¥ 44,495
80,837
17,36915,446¥158,147$ 444,106
806,837
173,361
154,167$1,578,471

Manual automotive drivetrain operations ····································
Automatic automotive drivetrain operations ································
Other operations ·········································································
Corporate and eliminations ·························································

¥

2,658
6,172
701
(99)
9,432

¥

3,021
7,131
814
(103)
¥ 10,863$¥ 3,300
12,149816(327)¥ 15,938¥$

Sales:

Depreciation and Amortization:¥
Capital Expenditures:

21 Annual Report 2008

Manual automotive drivetrain operations ····································
Automatic automotive drivetrain operations ································
Other operations ·········································································
Corporate and eliminations ·························································

3,084
9,460
1,756
(57)
¥ 14,243

30,153
71,1758,125(1,029)$ 108,424
30,782
94,421
17,527(570)$ 142,160(Notes) 1. Effective from the year ended March 31, 2007, the Company and its domestic consolidated subsidiaries adopted new accounting standards for directors'
and corporate auditors' bonuses. As compared with the previous method, operating costs and expenses increased by ¥33 million in the Manual automotive
drivetrain operations, ¥60 million in the Automatic automotive drivetrain operations and ¥11 million in the Other operations, and operating income for eachsegment decreased by the same amount.
2. Effective from the year ended March 31, 2008, the Company and its domestic consolidated subsidiaries changed accounting method for depreciation ofproperty, plant and equipment based on an amendment in corporation tax law. As compared with the previous method, operating costs and expenses
increased by ¥88 million ($878 thousand) in the Manual automotive drivetrain operations, ¥238 million ($2,376 thousand) in the Automatic automotive
drivetrain operations and ¥49 million ($489 thousand) in the Other operations, and operating income for each segment decreased by the same amount.
Furthermore, those assets acquired before April 1, 2007 were allowed, after depreciating to 95% of their acquisition costs, to be depreciated to ¥1 in five
years using the straight line method. As compared with the previous method, operating costs and expenses increased by ¥154 million ($1,536 thousand)in the Manual automotive drivetrain operations, ¥172 million ($1,717 thousand) in the Automatic automotive drivetrain operations and ¥79 million ($789
thousand) in the Other operations, and operating income for each segment decreased by the same amount.

Geographic area segment information for the years ended March 31, 2007 and 2008 was as follows:
Japanese yen(millions)

U.S. dollars(thousands)

2007

2008

2008

Japan ··························································································
America ·······················································································
Asia-Oceania ··············································································
Other ···························································································
Eliminations (inter-segment net sales) ········································¥130,804
30,06524,334
2,348(20,806)¥166,745¥140,449
34,654
31,987
2,907(22,694)¥187,303$1,401,827
345,883
319,263
29,015(226,510)$1,869,478

Operating Costs and Expenses: Japan ··························································································
America ·······················································································
Asia-Oceania ··············································································
Other ···························································································
Non-allocated operating expenses and eliminations ···················¥118,645
28,80921,283
2,118(20,781)¥150,075¥126,795
33,49727,317
2,481(22,568)¥167,522$1,265,545
334,335
272,652
24,763(225,252)$1,672,043

Operating Income:Japan ··························································································
America ·······················································································
Asia-Oceania ··············································································
Other ···························································································
Non-allocated operating expenses and eliminations ···················¥ 12,159
1,255
3,051
230
(24)
¥ 16,671¥ 13,654
1,157
4,670
426
(126)
¥ 19,781$ 136,281
11,54846,611
4,253(1,258)$ 197,435

Assets:Japan ··························································································
America ·······················································································
Asia-Oceania ··············································································
Other ···························································································
Corporate and eliminations ·························································¥ 84,295
24,92624,2081,760
8,884¥144,073¥ 87,433
25,66931,5172,022
11,506¥158,147$ 872,672
256,203
314,572
20,182
114,842$1,578,471

Sales:(Notes) 1. The Company's operations are classified into geographical areas as follows: Japan, America, Asia-Oceania (Thailand, Malaysia, China, Indonesia,
Vietnam, Australia and United Arab Emirates) and Other (Europe).
2. Effective from the year ended March 31, 2007, the Company and its domestic consolidated subsidiaries adopted new accounting standards for
directors' and corporate auditors' bonuses. As compared with the previous method, operating costs and expenses increased by ¥104 million in Japan
segment and operating income for each segment decreased by the same amount.
3. Effective from the year ended March 31, 2008, the Company and its domestic consolidated subsidiaries changed accounting method for depreciationof property, plant and equipment based on an amendment in corporation tax law. As compared with the previous method, operating costs andexpenses increased by ¥375 million ($3,743 thousand) in Japan segment and operating income for each segment decreased by the same amount.
Furthermore, those assets acquired before April 1, 2007 were allowed, after depreciating to 95% of their acquisition costs, to be depreciated to ¥1 in
five years using the straight line method. As compared with the previous method, operating costs and expenses increased by ¥405 million ($4,042
thousand) in Japan segment and operating income for each segment decreased by the same amount.

Net sales outside Japan for the years ended March 31, 2007 and 2008 were as follows :Japanese yen(millions)

America ·······················································································
Asia-Oceania ··············································································
Other ···························································································

U.S. dollars(thousands)

2007

2008

2008

¥ 29,998
26,783
7,326¥ 64,107¥ 34,678
32,032
9,004¥ 75,714$ 346,122
319,71389,869$ 755,704

Annual Report 2008 22

16. Related Party Transactions

18. Short-term Borrowings and Long-term Debt

For the years ended March 31, 2007 and 2008, the Company and its consolidated subsidiaries had operational transactions with Aisin AW
Co., Ltd. Aisin AW Co., Ltd. is a subsidiary of Aisin Seiki Co., Ltd. which holds 33.4% of the Company's voting rights.

Short-term borrowings and long-term debt as of March 31, 2007 and 2008 were as follows:
Japanese yen(millions)

A summary of the significant transactions between the Company and its consolidated subsidiaries and such a company for the years ended
March 31, 2007 and 2008 were as follows:
March 31, 2007
Categories

Name

Other related
Aisin AW
company'sCo., Ltd.
subsidiary

Relationship

Address

CapitalJapanese yen(millions)Operation

Votingrights(%)

Directors

Businessrelationship

Trade

AmountJapanese yen(millions)Anjo City
Aichi Pref.

¥ 26,480

Manufacturing
automotive
parts

—

1

Sale ofproducts

Sale ofproducts¥ 8,440

Accounts

Balance
Japanese yen(millions)

Accounts
receivable¥ 2,010

Advanced
received

¥

4

2007

2008

2008

¥ 4,175
449
2,727
96
¥ 7,447¥ 5,194
519
2,966
107
¥ 8,786$51,842
5,180
29,604
1,067$87,693

Name

Other related
Aisin AW
company'sCo., Ltd.
subsidiary

Address

CapitalJapanese yen(millions)
U.S. dollars(thousands)

Anjo City
Aichi Pref.

¥ 26,480$264,298

Trade

AmountJapanese yen(millions)
U.S. dollars(thousands)

Sale ofproducts¥ 9,035$90,179

RelationshipOperation

Votingrights(%)

Directors

Businessrelationship

Manufacturing
automotive
parts

—

1

Sale ofproducts

Accounts

Balance
Japanese yen(millions)
U.S. dollars(thousands)

Accounts
receivable¥ 1,916$19,124

Advanced
received¥$

Weighted
averageinterest rates
3.7%
3.4
4.9
1.1

Year
due

2009-2017

Annual maturities of long-term debt as of March 31, 2008 were as follows:
Years ending March 31

March 31, 2008

Categories

Short-term borrowings ·········································
Current portion of long-term debt ························
Long-term debt ····················································
Other interest bearing debt ·································

U.S. dollars(thousands)

2010 ···································································································································································
2011 ···································································································································································
2012 ···································································································································································
2013 and thereafter ···········································································································································

Japanese yen(millions)
¥ 854
112
30
1,970
¥2,966

U.S. dollars(thousands)$ 8,524
1,118
299
19,663$29,6046
60(Transaction terms and policy determination thereof)
With regard to sale of products, prices and other transaction terms are determined by negotiation in consideration of market situation.
(Note) Consumption taxes are included in the balance, but not in the trade amounts.

17. Per Share Data
Per share data for the years ended March 31, 2007 and 2008 were as follows:
Japanese yen

2007
Net income ·······················································································································Net income – diluted ········································································································Net assets ·························································································································¥ 215.09—
1,907.92

U.S. dollars

2008¥ 239.95—
2,102.64

2008
$

2.39
—
20.99

Diluted net income per share is not disclosed because potentially dilutive securities are not issued.

The information on which per share data was calculated for the years ended March 31, 2007 and 2008 were as follows:
Japanese yen(millions)

U.S. dollars(thousands)

2007

2008

2008

Net income per share of common stock
Net income ················································································································
Amounts not attributed to ordinary shareholders ······················································Net income attributed to ordinary shareholders ························································¥10,497—¥10,497¥11,658—¥11,658$116,359—$116,359

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

48,802

48,58523 Annual Report 2008

Annual Report 2008 24

Independent Auditors’ Report

Corporate Data

EXEDY CORPORATION AND CONSOLIDATED SUBSIDIARIESTo the Shareholders and Board of Directors of
EXEDY Corporation:
We have audited the accompanying consolidated balance sheets of EXEDY Corporation andconsolidated subsidiaries as of March 31, 2008 and the related consolidated statements of income,changes in net assets and cash flows for the year then ended, expressed in Japanese yen. These
consolidated financial statements are the responsibility of the Company’s management. Our
responsibility is to independently express an opinion on these consolidated financial statements basedon our audits. The accompanying consolidated financial statements of EXEDY Corporation and its
consolidated subsidialies as of March 31, 2007 and for the year then ended, were audited by otherauditors who have ceased operations. Those auditors’ report dated June 26, 2007, was an unqualified
opinion on those statements.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonablebasis for our opinion.
In our opinion, the 2008 consolidated financial statements referred to above present fairly, in all material
respects, the consolidated financial position of EXEDY Corporation and its consolidated subsidiaries asof March 31, 2008, and the consolidated results of their operations and their cash flows for the year thenended, in conformity with accounting principles generally accepted in Japan.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year
ended March 31, 2008 are presented solely for convenience. Our audit also included the translation of
yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the basis
described in Note 1 to the consolidated financial statements.

BOARD OF DIRECTORSOUTLINE OF COMPANYDOMESTIC JAPANESE NETWORKAs of June 30, 2008

As of March 31, 2008

Head Office:President and Chief Executive Officer:
Haruo Shimizu
Executive Managing Director:
Etsuji Terada
Managing Directors:
Hisayasu Masaoka
Masayuki Matsuda
Yoshitsugu Sakamoto
Katsumi Shintou
Directors:
Mikio Natsume
Hideki Miura
Masanori Motoura
Shougo Okamura
Hidehito Hisakawa
Koji Akita
Hiromu Yamasaki
Toshiharu Yamamoto
Akira Hirai
Auditors:
Naoaki Sawada
Kanshirou Toyoda
Koji Okada
Takenori Yamasaki

Name:
EXEDY Corporation
Established:
July 1, 1950
Paid-in Capital:¥8,284 million
Number of Employees:
2,159
Number of Authorized Shares:
168,000 thousand shares
Number of Issued Shares:
48,594 thousand shares
Number of Shareholders:
5,279
Average Number of Shares
Held by One Shareholder:
9,205 shares
Listed on First Sections,Tokyo/Osaka Stock Exchange1053-1 Kamiosazu, Chitose-shi,
Hokkaido, 066-8585
Tel: 81-123-24-3247 Fax: 81-123-49-2050

DK Pronac Co., Ltd.:DBS Tokyo, 2-17-2 Iwamoto-cho, Chiyoda-ku,
Tokyo, 101-0032
Tel: 81-3-3862-2771 Fax: 81-3-3864-1547

Kitakanto Sales Office:6-11 Taguchi Kenkyu Danchi, Higashi
Hiroshima-shi, Hiroshima, 739-0038
Tel: 81-82-425-3434/5 Fax: 81-82-425-3436

Exenet Logistics Co., Ltd.:Tokyo Denki Sangyo Co., Ltd. 's Center Bldg.,
6th Floor, 1255-1 Iida-cho, Ota-shi,
Gunma, 373-0851
Tel: 81-276-60-1361 Fax:81-276-60-1362

Shizuoka Sales Office:
TBM Bldg., 2nd Floor, 6-20 Aratajima-cho,Fuji-shi, Shizuoka, 417-0043
Tel: 81-545-54-0861 Fax: 81-545-54-0862

Hamamatsu Sales Office:CITY21Bldg., 6th Floor, 320-4 Sunayama-cho,Naka-ku, Hamamatsu-shi, Shizuoka, 430-0926
Tel: 81-53-413-6011 Fax: 81-53-413-6012

Chubu Sales Office:Tosho Bldg., 2nd Floor, 1-16-5 Mikawaanjo-cho,Anjo-shi, Aichi, 446-0056
Tel: 81-566-71-2750 Fax: 81-566-72-7015

Hiroshima Sales Office:
DBS Hiroshima, 6-6 Sakaemachi, Kaita-cho,
Aki-gun, Hiroshima, 736-0043
Tel: 81-82-821-0021 Fax: 81-82-823-6620
2418 Ota-cho, Iga-shi, Mie, 518-0825
Tel: 81-595-23-8101 Fax: 81-595-24-5521

Kawagoe Plant:
1-103-25 Yoshinodai, Kawagoe-shi,
Saitama, 350-0833
Tel: 81-49-225-0601 Fax: 81-49-225-0600

1-1-33 Kidamotomiya, Neyagawa-shi,
Osaka, 572-0822
Tel: 81-72-825-0473 Fax: 81-72-820-2521

DK Building Service Co., Ltd.:
1-1-33 Kidamotomiya, Neyagawa-shi,
Osaka, 572-0822
Tel: 81-72-824-7633 Fax: 81-72-824-1043

Nippon Retarder System Co., Ltd.:
1-1-33 Kidamotomiya, Neyagawa-shi,
Osaka, 572-0822
Tel: 81-72-820-0911 Fax: 81-72-824-1035

DBS Career Service Co., Ltd.:
1-1-33 Kidamotomiya, Neyagawa-shi,
Osaka, 572-0822
Tel: 81-72-824-7633 Fax: 81-72-824-1043

Pronet Co., Ltd.:
15 Kizuogawa, Kizugawa-shi, Kyoto, 619-0214
Tel: 81-774-73-0631 Fax: 81-774-73-2147

EXEDY Precision Co., Ltd.:
104-1 Joden, Mimasaka-shi, Okayama,701-2625
Tel: 81-868-74-3501 Fax: 81-868-74-3503

Kinugawa Cast Iron Co., Ltd.:112 Azahaishi, Fukuchiyama-shi,
Kyoto, 620-0955
Tel: 81-773-22-1156 Fax: 81-773-23-8477

OVERSEAS NETWORKEXEDY Holdings of Ameria Corporation (EHA)
8601 Haggerty Road South, Belleville, Michigan
48111, U.S.A.
Tel: 1-734-397-3333 Fax: 1-734-397-9567

EXEDY Corporation Asean Regional Office (EAR)
700/316 Moo 6, Bagna-Trad Road, Tumbon Don HuaRoh, Amphur Muang, Chonburi 20000, THAILAND
Tel: 66-38-214-423 Fax: 66-38-214-422

EXEDY Globalparts Corporation (EGP)
8601 Haggerty Road, South Belleville, MI 48111,
U.S.A.
Tel: 1-734-397-3333 Fax: 1-734-397-7300

EXEDY (Thailand) Co., Ltd. (EXT)
700/316 Moo 6, Bangna-Trad Road, Tumbon Don HuaRoh, Amphur Muang, Chonburi 20000, THAILAND
Tel: 66-38-214-423 Fax: 66-38-214-422

EXEDY America Corporation (EAC)
2121 Holston Bend Drive, Mascot, TN 37806, U.S.A.
Tel: 1-865-932-3700 Fax: 1-865-932-2230

EXEDY Friction Material Co., Ltd. (EFM)
700/359 Moo 6, Bangna-Trad Road, Tumbon Don HuaRoh, Amphur Muang, Chonburi 20000, THAILAND
Tel: 66-38-743-923 Fax: 66-38-743-927

EXEDY-DYNAX America Corporation (EDA)
8601 Haggerty Road, South Belleville, MI 48111,
U.S.A.
Tel: 1-734-397-6556 Fax: 1-734-397-6566
EXEDY Chongqing Co., Ltd. (EXC)
158 Taoyuan Road, Nanan District, Chongqing,
CHINA
Tel: 86-23-62924439 Fax: 86-23-62900348
EXEDY (Shanghai) Co., Ltd. (ESC)
1399 Chengqiao Road, Fengxian District, Shanghai 201400,
CHINA
Tel: 86-21-67109075 Fax: 86-21-57434257
EXEDY Guangzhou Co., Ltd. (EGC)
No.406, E-Aria, Longfu Car Accessories Centre,
Hengfu Road, Guangzhou, CHINA
Tel: 86-20-83489371 Fax: 86-20-83489370
Shanghai DYNAX Co., Ltd. (DXC)
No.2 plant 1399 Chengqiao Road, Fengxian District,
Shanghai 201400, CHINA
Tel: 86-21-57437465 Fax: 86-21-57437458
DYNAX Industry (Shanghai) Co., Ltd. (DXS)
No.350 Rongxiang Road, Songjiang Export
Processing Zone, Shanghai 201613, CHINA
Tel: 86-21-57748388 Fax: 86-21-57748389

25 Annual Report 2008

Tokyo Sales Office:Ueno Division:

DYNAX America Corporation (DXA)
568 East Park Drive, Roanoke, VA 24019, U.S.A.
Tel: 1-540-966-6010 Fax: 1-540-966-6011

Osaka, Japan
June 26, 2008

DYNAX Corporation:

1-1-1 Kidamotomiya, Neyagawa-shi,
Osaka, 572-8570
Tel: 81-72-824-6933 Fax: 81-72-821-7913

EXEDY (Malaysia) Sdn. Bhd. (EXM)
PT 16748, Jalan Permata 1/5, Arab-Malaysian
Industrial Park 71800 Nilai, Negeri Sembilan,
MALAYSIA
Tel: 60-6-7992988 Fax: 60-6-7996388
P.T. EXEDY Indonesia (EXI)
Jalan Pegangsaan Dua Km2 No.64, Kelapa Gading,
Jakarta, Utara 14250, INDONESIA
Tel: 62-21-4603353 Fax: 62-21-4603355
P.T. EXEDY Motorcycle Indonesia (EMI)JL. Pulobuaran Raya Kav. III FF 8-9, Jakarta, Timur
13920, INDONESIA
Tel: 62-21-4602581 Fax: 62-21-4602580

EXEDY Middle East FZCO (EME)
P.O.BOX 18199, Warehouse No. ZE5 & ZE6 Jebel Ali
Free Zone, Jebel Ali Dubai, U.A.E.
Tel: 971-4-883-2244 Fax: 971-4-883-2500<Amman Representative Office>Room No.103, 1st Floor, Al Housanie Bldg. #6 Salem
Moh'd Al-Ekdhah Street Sweifieh, Wadi Al-Saier,Amman, JORDAN
Tel: 962-658-13215 Fax: 962-658-13015<Nairobi Representative Office>International House, 1st Floor, Room No.12, Mama
Ngina Street, P.O. Box 41931-00100, Nairobi, KENYA
Tel: 254-20-221-1214 Fax: 254-20-221-5700
EXEDY Australia Pty. Ltd. (EAP)
21 Fiveways Boulevard, Keysborough, Victoria 3173,
AUSTRALIA
Tel: 61-3-9701-5556 Fax: 61-3-9701-5684
EXEDY Clutch Europe Ltd. (ECE)
Unit 2, Rokeby Court, Manor Park, Runcorn, Cheshire
WA7 1RW, U.K.
Tel: 44-1928-571850 Fax: 44-1928-571852
Euro EXEDY Clutch Ltd. (EEC)
2800 Tatabanya, Buzavirag UT4, HUNGARY
Tel: 36-34-311-117 Fax: 36-34-311-122

EXEDY Vietnam Co., Ltd. (EXV)Khai Quang Industrial Zone, Vinh Yen City, Vinh Phuc
Province, Socialist Republic of VIETNAM
Tel: 84-211-721252 Fax: 84-211-721253
Ceekay Daikin Ltd. (CDL)<Aurangabad Plant>
Plot No.L-4, M.I.D.C. Industrial Area, Chikalthana,
Aurangabad, 431 210, M.H. INDIA
Tel: 91-240-2484014 Fax: 91-240-2484403<Greater Noida Plant>
Plot No.9, Udyog Kendra Industrial Area, Greater
Noida, 201 304, U.P. INDIA
Tel: 91-120-2350280~286 Fax: 91-120-2350237

Annual Report 2008 26

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

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

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

 