09

TheTsubakiGroupisstrivingtobuildastrongmanagementfoundationthatislesssusceptibletothe

influenceofeconomicfluctuationsbyrigorouslybolsteringitsproductcapabilitiesandadvancingthe

globalizationofitsoperations.

TheTsubakiGroup’sPerformanceandStrategies

09.1Q 2Q 3Q 4Q 10.1Q 2Q 3Q 4Q

01 02 03 04 05 06 07 08 09 10 11(plan) 12 13(plan) FY

Billions of yen

Billions of yen Billions of yen

Results on a Recovery Trend

Aiming to Return to a Course of Growth

Net sales (left) Operating income (right)

Net sales (left) Operating income margin (right)

800

600

400

200

0

40

30

20

10

0

200

150

100

50

0

40

30

20

10

0

00

–15

15

30

45

6

12

18

–6

%

Consolidated Results: Long-Term Trends　　

Consolidated Results: Short-Term Trends　　

10

TheTsubakiGroup’sPerformanceandStrategies

Emergencyresponsemeasuresrelatedtotheglobaleconomicslumphavecometoanend.Aimingtoachievesustainablegrowth,theTsubakiGroupwillthoroughlystrengthenitsmanagementfoundationandadvancetoanewstage.

Strengtheningourmanagementfoundationtosupportsustainedgrowth

InterviewwiththePresident

Infiscal2010,endedMarch31,2010,werecordedsignificantdeclinesinsalesandprofitwhencomparedtofiscal2009.However,operatingincomewas¥4.7billiononaconsolidatedbasis,greatlyexceedingourinitialexpectationsof¥0.8billion.TheglobaleconomyshowedmassivedeteriorationaftertheLehmanshock.Regardless,wewereabletoturnaprofitduetoourearlyimplementationoffixedcost-cuttingmeasuresandothersuchemergencyresponsemeasures. Theturbulenceintheglobaleconomyhasbeguntocalm,andaccordinglyinMay2010,theTsubakiGroupestablishedandsubsequentlyannouncedanewthree-yearmedium-termmanagementplansettoendwithfiscal2013.However,thenumericaltargetssetforfiscal2013inthisplanaremerelypassingpoints.Whetherwearetoaccelerateourgrowthfromfiscal2014onward,orfocusonmakingthatgrowthmoresustainable,itisimportantthatweusethethreeyearsuntilfiscal2013tobuildasolidmanagementfoundationthatisresilienttochangesintheeconomy.Thisisthemaingoalofthenextmedium-termmanagementplan. Asamanufacturingcompany,theTsubakiGroupstrivestoplacecustomersfirstandtoprovidethebestsolutionstocustomersaroundtheworld.Weaimtocontributetosocietyasawholethroughman-ufacturinginitiatives,suchasbolsteringdevelopmentofenvironmentallyfriendlyproductsthathelpourcustomerstoreducetheirenvironmentalburdensandincreasetheireconomicefficiency. Iaskforthecontinuedsupportofourshareholdersandinvestors.

IsamuOsaPresidentandRepresentativeDirector

11

WhataresomekeypointsinregardtotheTsubakiGroup’sconsolidatedperformanceinfiscal2010?

Throughourearlyresponsetothedeclineindemandfollowingthedeteriorationoftheglobalecon-

omy,particularlyinregardtoourthoroughmeasurestoreducefixedcosts,wewereabletoachieve

operatingincomethatexceededourinitialexpectations.

Infiscal2010,net sales fell20.3%or¥28.7billionyearonyear.This substantialdecrease innet salespulledoperating

incomedowntoalevel¥13.1billionlowerthanthatoffiscal2009.However,theTsubakiGroupmanagedtocutfixedcosts,

suchaspersonnelcosts,byapproximately¥8.3billion.Additionally,weworkedtoreducevariablecoststhroughsuch

initiativesaspromotingin-Groupmanufacturing.Asaresultoftheseefforts,operatingincomestoodat¥4.7billion.This

representedasignificantyear-on-yeardecreaseof47.9%,andgreatlyexceededourinitialexpectationsof¥0.8billion.

Howwasperformanceonaquarterlybasis?

Netsalesshowedatrendtowardrecovery,particularlyinAutomotivePartsoperations.Further,the

effectsofcost-cuttingmeasuresweregreat,andasaresultprofitmarginsshowedimprovementthat

wasmoreimpressivethanthatseeninnetsales.

Consolidatednetsalesonaquarterlybasiswereasfollows:netsalesinthefirstquarteroffiscal2010fellto¥23.9billion,

however,fromthesecondquarteronwardwesawstrongrecovery,andinthefourthquarternetsaleswere¥33.6billion,

recoveringtothesamelevelasthethirdquarteroffiscal2009(¥33.1billion).Thespeedofrecovery,though,differed

greatlybetweendifferentareasofoperation.ThegreatestdrivingforcebehindtherecoverywastheTsubakiGroup’s

AutomotivePartsoperations.TheseoperationsareseeingparticularlyimpressiverecoveryinsalesinJapan,NorthAmer-

ica,andAsia.Conversely,areasrelatedtocapital investment,suchasChainoperations,PowerTransmissionUnitsand

Componentsoperations,andMaterialsHandlingSystemsoperations,sawrelativelysluggishrecoveryinsales.Thecur-

tailingofcapitalinvestmentbottomedoutandbegantorecoveratamoderatepaceinthesecondhalfoffiscal2010.

However,takingintoaccountthebusinesstrendsthatwehaveseenthusfar,weexpectthattherewillbea3–6month

timelagbeforetheeffectsoftherecoveryspreadtosuchareasasChainoperationsandPowerTransmissionUnitsand

Componentsoperations.

Theoperatingincomemargin,however,improvedto8.2%inthefourthquarteroffiscal2010.Whilenetsaleswereatthe

samelevelinthethirdquarteroffiscal2009,theoperatingincomemarginatthattimewasonly4.8%.Thisrepresentsthe

improvementofourbreak-evenpointthroughtheeffectsofthecost-cuttingmeasuresthatIhavementionedpreviously.

Q

Q

4Q2Q 3Q10.1Q

%

Net sales (left) Operating income margin (right)

33.6

26.523.9

28.68.2

6.3

1.9

–1.3

Billions of yen

Quarterly Results

36

24

12

0

–12

12

8

4

0

–4

Chain operationsPower transmission units and components operations Automotive parts operationsMaterials handling systems operations

¥112.7 billion

FY2010Net Sales

Materials Handling Systems Segment

18%

Power TransmissionProducts Segment

82%

Composition of Sales by Segment

12

TheTsubakiGroup’sPerformanceandStrategies

Thenewlyannouncedmedium-termmanagementplan(forfiscal2011to2013)targetsnetsalesof¥150.0

billionandanoperatingincomemarginof9.0%,onaconsolidatedbasis.Thesetargetsseemlowcom-

paredtofiscal2008,inwhichtheTsubakiGroupachieveditshighestrecordresults(netsalesof¥167.2

billionandoperatingincomemarginof11.8%).Whatisthereasoningbehindthis?

TheMedium-TermManagementPlan2012wasestablishedbasedonamedium-termperspective

andthereforeplacesstrengtheningourmanagementfoundationtoensuresustainablegrowthas

itstoppriority.Inordertoconstructasolidmanagementfoundationthatisresilienttochangesin

theeconomicenvironment,wewillstepupinvestmentsinareasthatarecrucialtothisgoal.

Thismedium-termmanagementplandoesnotmerelyfocusonthecomingthree-yearperiod,butinsteadtakesamore

medium-termperspective.Accordingly,itsmainpriorityisstrengtheningtheTsubakiGroup’smanagementfoundation

inordertoimprovetheGroup’sgrowthpotential,aswellasthesustainabilityofthisgrowth.Previously,wehaverevised

medium-termmanagementplansyearly.Bysettingthismedium-termmanagementplanforthreeyears,weintendto

steadilyimplementinvestmentthatiscrucialtowardstrengtheningourmanagementfoundation.

Further,infiscal2008,whenweachievedourrecordperformance,theexchangeratewas¥114totheUS$and¥161to

theeuro.Thismedium-termmanagementplan,however,isbasedontheyenremainingstrong,withanexchangerateof

¥85totheUS$and¥115totheeuro.Thedifferenceintheexchangeratesisanotherreasonthatthesegoalsweresetlow.

Q

ExpansiongrowthStrengtheningmanage-

mentfoundationforsustainedgrowth

Furtherstrengtheningofrevenue/profitstructure

Medium-TermManagementPlan2012

FY2011 FY2013

Netsales ¥127.0billionllionlion ¥150.0billion

Operatingincome ¥6.4billion ¥13.5billion

Operatingincomemargin 5.0% 9.0%

Withoutbeing limitedbyexisting ideas,

wewillreevaluateproductstrategiesand

regional strategies f rom a medium–to

long–termviewpointandworktoreform

ourrevenue/profitstructure.

BasicManagementPolicies

1. Honethe“globalbest”managementstrategy2. Strengthenfoundationasamanufacturer3. Becomeasolutionsprovider

OutlineoftheMedium-TermManagementPlan2012

ThreeYearsofStrengtheningManagementFoundationinResponsetoDramaticallyChangingOperatingEnvironment

~2008 2013~20152010~2012

ConsolidatedResultsPlan

Emergencycountermeasuresforrapidchangeineconomic

environment

2009100thanniversary

offounding

2016

13

IntheMedium-termManagementPlan2012,whatspecificstrategieswillyouimplement,andwhatare

thebasicmanagementpoliciesbehindthese?

Basedonthreebasicmanagementpolicies—honethe“globalbest”managementstrategy,strength-

enfoundationasamanufacturer,andbecomeasolutionsprovider—wewillworktofurtherdifferen-

tiateourselves,asitisthisdifferentiationthatisthesourceoftheTsubakiGroup’scompetitiveedge.

Basicmanagementpolicy1:Honethe“globalbest”managementstrategy

TheTsubakiGroup’sconsolidatednetsalesrangedfrom¥64.6billionto¥120.7billioninthe1980sandfrom¥101.6billion

to¥140.3billioninthe1990s.Since2000,netsaleshaverangedfrom¥112.7billionto¥167.2billion.Inthismanner,the

levelofTsubakiGroup’sconsolidatednetsaleshasgraduallyincreased.Oneofthefactorsbehindthissteadygrowthis

ourimplementationofthe“globalbest”managementstrategy.Wehaveprogressivelyadvancedtheglobalizationofour

operationsbasedontheconceptofcomprehensiveoptimization—optimallocationforproduction,optimallocationfor

procurement,andoptimallocationformarketing.Regardlessoftheresults,however,therestillremainedanumberof

problemswiththe“globalbest”managementstrategy.

OneexampleofthiswouldbetheoperationofU.S.Tsubaki,Inc.(referredtoasUSThereinafter),oursubsidiaryinthe

UnitedStates.USTengagesinproductionandsalesofchains,powertransmissionproducts,automotiveparts,andma-

terialshandlingsystems.Atthissubsidiary,optimizationforspecificregionalcharacteristicswasprioritized.This,however,

restrictedourabilitytoperformcomprehensiveoptimizationonaglobalscalewhiletakingintoaccountthecharacter-

isticsofalloperations.Reflectingonthis,inJuly2010wereorganizedoperationsatUST,dividingitintoheadquarters,

whichhandlesmanagementonly,andtwooperatingcompanies.Eachoperatingunitwasthenplacedunderthedirect

controlofachiefbusinessofficer(CBO).Thisallowedforthetimelydevelopmentandpromptimplementationofglobal

strategiespertainingtoproduction,procurement,andsales.

Anotherproblemthatoccurredinrelationtothe“globalbest”managementplanwastheslowexpansionofChain

operationsintotheEuropeanmarket.WhileChainoperationsboasta24%shareoftheglobalmarketforindustrial-use

steelchains,intheEuropeanmarket,thatsharewasstalledatlessthan10%.Aimingforthequickresolutionofthisprob-

lem,inApril2010theGrouppurchasedKabelSchleppGmbH(referredtoasKShereinafter),andmadeitasubsidiary.(For

furtherinformation,pleaseseethecolumnbelow.)KS,basedinGermany,possessesadiversecustomerbase,aswellas

globalmanufacturingfacilities. Inadditiontoexpandingourshareofthecableveyormarket,takingadvantageofKS’

EuropeancustomerbasewillallowustobolstersalesofawiderangeofTsubakiproducts,includingnotonlyindustrial-

usesteelchainsbutalsosuchproductsaspowertransmissionunitsandcomponents.Furthermore,thiscontributesto

ourabilitytoperformcomprehensiveoptimizationofproductionandprocurementonaglobalscale.

Q

AcquisitionofKabelSchleppGmbH(April2010)

KabelSchlepp (KS) is an equipment component manu-

facturer that was established in 1954. The company’s

headquartersisinWenden,Germany.Withapioneering

presence in support and guidance systems for cables

andhoses,whichareknownascableveyors inTsubaki-

moto’s product lineup, KS has a strong customer base

that includes more than 7,000 companies in Germany,

France,andItalyalone.Inparticular,KShasbuiltastrong

directsalessystemthatservestopmanufacturersofma-

chinetoolsandautomobiles.

Tsubakimotohashadatechnicalcooperationagree-

ment with KS for many years, and in April 2010 we ac-

quired KS for €20 million, making KS a subsidiary. As a

result,wewillbeabletocombinetheagent-basedsales

channelthatisastrengthoftheTsubakiGroupwiththe

directsalesnetworkthatisastrengthofKS.Weexpectto

expandourglobal shareof themarkets forchainsand

power transmissionproducts.Moreover,byconsolidat-

ingbases,wewillworktofurther increaseefficiencyin

productdevelopmentandproduction.

KSheadquartersbuildingandcableveyorproductionsite

14

TheTsubakiGroup’sPerformanceandStrategies

Basicmanagementpolicy2:Strengthenfoundationasamanufacturer

TheTsubakiGrouppossessesproductlinesthathavealargeshareoftheglobalmarketineachoftheareasitoperatesin.

Further,ithassteadilyexpandedthescopeofthesebusinessactivities.Thereasonitwasabletoaccomplishthesefeats

liesinitsproductandmanufacturingtechnologies,whichhavebeenthedrivingforcebehindthedifferentiationofthe

TsubakiGroup.Duringtheperiodofthenewmedium-termmanagementplan,wewillreturnonceagaintotheseroots.

Ibelievethatworkingtofurtherimprovethequalityofallofourproductswillformthefoundationonwhichwewill

achievesustainablegrowth.

Dantotsuactivitiesareanexampleofoureffortsgearedtowardthisgoal.Theseactivitiesarenotbasedonthecon-

ventionalapproachofreducingqualitydefectsorincreasingproductivity.Theyareproductioninnovationactivitiesthat

arerigorouslyfocusedonqualityandcosts,sothatweachieve“zeroqualitydefects”anddonothavetostopaproduc-

tionlineonceperday.InAutomotivePartsoperations,wheretheseproductioninnovationactivitieswereintroducedat

anearlystage,notonlywasthereanimprovementinproductquality,profitabilityalsogreatlyincreasedduetothesub-

stantialriseinproductivity.Asaresult,thesegmentachievedhigherincomeregardlessofthedecreaseinsales.Going

forward,theTsubakiGroupwillimplementthesedantotsuactivitiesatallGroupmanufacturingcompanies.Moreover,

wewillworktobolsterourhumanresourcesdevelopmentonaglobalbasisthroughsuchinitiativesaspostingengineers

overseasandsendingyoungengineersonoverseasassignments.

Throughsuchefforts,weareexpandingourshareinhigh-endmarketsinEuropeandtheUnitedStates.Atthesame

time,wewillworktocapturedemandinthepromisingmarketsinemergingcountries,suchastheBRICs,andexpandour

globalmarketshare.Tothisend,inadditiontothesalesofficeinBrazilestablishedduring2009,wefoundedasalescom-

panyforpowertransmissionproducts(generalindustrialmachineryandparts)inIndiainJune2010.However,inorderto

advanceinemergingmarkets,itisnotenoughtosimplyincreasethenumberofsalesoffices.Ibelievethatitisimportant

thatweworktoprovidenewproductstailoredtoeachmarket’sneeds.Toenhanceourabilitytointroducesuchproducts,

wewillthoroughlycutcostbyrevisingourcomponentlineupandreevaluatingourmanufacturingprocesses.

10.2H10.1H09.2H

Index (second half of �scal 2009 = 100)

Productivity in Automotive Parts Operations (Saitama Plant) (Production Amount per Hour)

100

120126

0

100

120

140

AutoEngineeringLabOpensattheSaitamaPlant

(June2009)

AttheSaitamaPlant,weopenedtheAutoEngineering

Lab,whichstartedfullscaleoperationsinJune2009.This

labwillbeourbaseforR&Dinnext-generationautomo-

tive technologiesandparts, suchas timingchaindrive

systems,inwhichwehaveaglobalmarketshareofmore

than30%.

Atthelab,wecollectdatafromperformancetestsof

productsusingactualenginesandvehicles.Inaddition,

customers can directly view testing conditions and re-

sults.Moreover,wewillresearchstructuresandmaterials

neededtocreateenvironmentallyfriendlyproductsand

to reduce costs. We will also develop new production

andprocessingtechnologiesfortheefficientmasspro-

ductionofnewproducts.Intheseways,wewillworkto

achieve further gains in the quality, technologies, and

productioncapacityoftheGroup’sautomotivepartsop-

erationsandtodifferentiatethoseoperations.

ThebuildinghousingtheAutoEngineeringLabreflectsconsiderationfortheenvironment,suchasrooftopgreening.

15

Basicmanagementpolicy3:Becomeasolutionsprovider

Therearetwoimplicationstoourbasicmanagementpolicyofbecomingasolutionsprovider.

Thefirstistogoonestepbeyondsimplyproducingproductsattherequestofcustomers.Thisentailsproposingsolu-

tionstocustomerproblemsandworkingtogetherwithcustomerstodevelopproducts.Whilewehavealwaysbeen

stronginthisarea,wewillworktofurtherincreasethisstrength.Infiscal2009,theAutomotivePartssegment,which

primarilysellsproductsdirectlytocustomers,openedtheAutoEngineeringLabattheflagshipSaitamaPlant.Thisnew

laballowscustomerstoseefirst-handthedetailsandresultsoftechnologicaltestsconductedonactualenginesand

vehicles.Additionally, inregardtoChainandPowerTransmissionUnitsandComponentsoperations,whichprimarily

dealindirectlythroughretailers,wearestrengtheningthesystemthroughwhichsalesdivisionscananalyzeandunder-

standtheneedsofproducts’end-users,andcommunicatethesetomanufacturingdivisionsinatimelymanner.

Thesecondistoexpandintonewareasofoperation.LookingatthelineupofTsubakiproducts,thePowerTransmis-

sionProductssegment(chains,powertransmissionunitsandcomponents,andautomotiveparts)deals inpartsand

units,andtheMaterialsHandlingSystemssegmentdealsinsystems.However,ourdevelopmentintheareaofmodules,

whicharepositionedbetweenthetwo,hasbeenslow.Forthepastseveralyears,wehavebeenadvancingthedevelop-

mentofmoduleproducts.Inparticular,wehavebeenhighlysuccessfulinourdevelopmentofsuchnewproductsasthe

ZipChainLifter*1,anultra-high-speedelevator,andtheDireflexModularUnit*2.Infiscal2011,wewilldevelopaModule

BusinessUnitintheMaterialsHandlingSystemssegment,andworktoexpandoperationsintheareaofmodules,which

wehavepreviouslybeenunabletofullyenterinto.*1 ZipChainLifter:Alifterthatusestwochainsthatinterlockinazip-likefashiontoformasinglestrongunitthatcanbepushedorpulled.*2 DireflexModularUnit:Acompactmonofunctionalconveyorunitthatiscapableofpayingout,rotationwhilestopped,androtationwhiletraveling.

Centeredonthesethreebasicmanagementpolicies,wewillstrivetobuildastrongmanagementfoundation

thatsupportssustainedgrowth.Throughmanufacturinginitiatives,theTsubakiGroupwillendeavortoprovide

thebestsolutionstocustomersaroundtheworld.

TakingontheChallengeoftheModuleBusiness

Parts Units SystemsModules

OperationalFieldsaftertheEstablishmentoftheModuleBusiness

MaterialsHandlingSystemsFieldModuleBusinessUnitPowerTransmissionField

EnhancingourLineupofModularConveyorsthrough

SalesTie-upwithFlexLink,ofSweden(July2010)

To enhance the lineup of products in our Module

Business,weconcludedasalestie-upagreementwith

Sweden’sFlexLink,whichhasa50%shareoftheglob-

al market for aluminum-frame modular conveyors.

FromJuly1,westartedsalesofFlexLink’saluminum-

frame3-Dconveyors.Throughcombinationsofmore

than 10,000 units and components, these conveyor

systems can flexibly accommodate diverse convey-

ance styles matched to applications, such as linear,

round,inclined,andverticalmovement.Thesystems

are suitable for comparatively small volume, light

weight conveyance operations. The Company will

worktoincreasesalesoftheseproducts.Thesesales

initiatives will include offering these products in

combinationwithourhigh-speedZipChainLifterfor

use in suchareasasautomotiveparts,photovoltaic

panels,andmed-

icalequipment.

FlexLinkSystem,3-Dconveyor

Tsubaki’sComprehensiveStrengths

Eco & Eco Benefits that are Provided

to Customers by Eco-Products

ByusingenvironmentallyfriendlyTsubakieco-products,cus-

tomerscanrealizereducedenvironmentalburden,improved

worksites,increasedefficiency,andenhancedquality.Inad-

dition,customerscancreateenvironmentallyfriendlyprod-

uctsby incorporatingTsubakieco-products intotheirown

products, thereby creating environmentally friendly prod-

uctsthatcanexpandtheirbusinessopportunities.

<BenefitsfromtheUseofEco-Products>

(1)Reducingcustomerprocurementcostsasaresultofsim-

plerproducts

(2)Reducingrunningcosts,suchasthroughlongwear life

andmaintenance-freeoperation

(3)Promotingresourcerecyclingandreducingincineration

coststhroughreuseandrecycling

Tsubaki Group Activities Targeting

Eco & Eco Functionality

Increasing environmentally friendly products is a major

themeintheTsubakiGroup’seffortstoestablishafounda-

tion for environmental management. In this way, we are

workingtowardsuchobjectivesasachievingsmallersizes

by enhancing functionality and reducing waste through

longwearlife.

<PointsofEco-ProductDevelopment>

(1)Pursuitofeco-design,reducedenvironmentalburdenof

procuredproducts

(2)Rationalizationofeco-responsivenessthroughtheintro-

ductionoflife-cycleassessment(LCA)

(3)Buildanenvironmentallyfriendlyimagewith

eco-productsasafoundation

16

Tsubaki’sEco&Eco(EcologyandEconomy)TheTsubakiGroup’sPerformanceandStrategies

ForTsubaki,Eco&Eco(EcologyandEconomy)meansworkingforbothareducedenvironmentalburdenandenhancedeco-nomicefficiency,suchascostsavingforcustomers,throughtheprovisionofenvironmentallyfriendlyproductstocustomers.Throughitsproducts,theTsubakiGroupwillworktogetherwithitscustomerstodriveprogressinenvironmentalfriendlinessandtoenhancecustomers’economicefficiency.

TheTsubakiGroup’sEco&EcoApproach

Customers TsubakiGroup

Ecology—increasing

benefits

Economy—increasing

benefits

Development of Eco-Products

ProductsthatMeetTsubaki’sEco-Evaluation

Standards

FocusingonEco&Ecofunctionality

Provision

Asanequipmentmanufacturer,theTsubakiGroupworkstodevelopenvironmentallyfriendlyproductsthathelpitscustomerstoreducetheenvironmentalburdenoftheiroperationsandtoimprovetheireconomicefficiency.Tothatend,wehaveinstitutedapolicythatallofthenewproductsthatwedevelopmustbeenvironmentallyfriendly.

Tsubaki’senvironmentallyfriendlyeco-productshelpcustomerstoachievetheirownenvironmentalobjectives.

17

Inaccordancewiththekeyphrase,“Allnewproductdevelopmentiseco-productdevelopment,”theentireTsubakiGroupisworkingtogetherinthedevelopmentofeco-products.

MovingForward,allNewProductswillbeEco-Products.

EnvironmentalFriendlinessFactors

TheTsubakiGroupclassifiestheenvironmentalfriendlinessfactorsthatareunderitscontrolintosevencategories.Thesefactorsareusedinthe

formationofaframeworkforproductdevelopmentanddesign.

EnvironmentalFriendlinessFactors ProductSpecificationDefinitions Benefits

Resourceconservation,reductionofwastegenerated

Reductionofamountofresourcesconsumed,recycling,increasedwearlife,etc.,leadingtoresourceconservation

Smallsizeandlightweight,lube-free,longwearlife,reducedwaste,recycling,noresidue

Energysaving,reducedCO2emissions

Reducedenergyusage,leadingtoreductionsinCO2Lowfriction,highefficiency,smallsizeandlightweight

Cleanworkplacesandusageenvironments

Leadingtoimprovementsincustomerworkplaceenviron-ments,usageenvironments,etc.

Lube-free,minimaldust,preventionofspills

Considerationforthesurroundingenvironment

Considerationfortheareaaroundcustomerworksitesandforthegenerallivingenvironmentinthesurroundingarea

Pollutionprevention,lownoise,lowvibration,lowodor

EaseofdisposalSupportingenvironmentalfriendlinessthroughrecyclability,wastesortability,etc.

Useofsametypesofmaterials,easeofdisassembly

Reuse Reuseofcertainproductcomponentsafterproductcollection Reuseofproducts

Considerationforharmfulsubstances

Eliminationofharmfulchemicalsubstances,includingreductionsinlinewithcustomerrequests

Reductioninharmfulchemicalsubstances,useofediblegrease

Eco-ProductDecisionProcess

Toincreasethereliabilityofproductenvironmentalfriendliness,theTsubakiGrouphassetstandardsthatmustbefulfilledforaproductto

beconsideredaneco-product.

RepresentativeEco-Products

RSRollerChainG7-EX

*1IncomparisonwiththeCompany’sconventionalRSRollerChain(RS80-1)andLCAInventoryanalysis(perunit)*2IncomparisonwiththeCompany’sconventionalRSRollerChain(RS100-1andRS80-1)andLCAInventoryanalysis(perunit)

EnvironmentalFriendlinessFactors

•Doublethewearlife(throughlongerwearlife)

49%reductioninCO2emissions*1

•33%increaseindriveperformance(throughreducedsize)

37%reductioninCO2emissions*2

•Reductioninmaintenancetimeandeffort

•Reductioninchainswitch-ingcosts

•Reductioninspaceandcostthroughsmallerequipment

•Reductionincoststhroughsmallerchains

Ecology,Economy

Wedetermineeco-evaluationstandardsforvariousproductsin

accordancewiththeTsubakiGroupstandardsmanual.

EvaluationManual/Eco-EvaluationStandards

Tosatisfyeco-evaluationstandards,weimplementenvironmentallyfriendly

productdesign.

ProductDesign

Weconducteco-evaluationsofproductsinaccordancewithour

evaluationmanualandeco-evaluationstandards.

Eco-Evaluations

Onlywhenaproductclearstheevaluationprocessisitconsidered

tobeaneco-product.

Determination/Display

Fiscal2011SegmentStrategies

18

TheTsubakiGroup’sPerformanceandStrategies

Ourhighestprioritywillbetoincreaseourshareinhigh-endmarkets,centeredondifferentiatedproductsinareaswhere we can leverage the strengths of our products,such as abrasion resistance, strength, and energy effi-ciency. Specifically,inNorthAmericawewillworktoexpandsalesof theRSRollerChainG7-EX. Incomparisonwithconventional products, this new roller chain providestwicethewearlifeand33%betterdriveperformance.InEurope,weintroducedtheRS-WINNER,anewEuropean-specification rollerchain.Wewillalso takesteps toex-pandourshareofthechainmarket,suchasleveragingthecustomerbaseoftherecentlyacquiredKS.InJapan,meanwhile,wewillmakethemostofourproposalcapa-bilities and promote the usage of Tsubaki products in

growthfields,suchasareasrelatedtophotovoltaicpan-elsandlithiumbatteries. In emerging markets, our strategy calls for focusingonindustriesthatarerecordingrelativelystablegrowth,even in a challenging global economic environment,suchasminingandsteel.Inaddition,wewillstrivetoac-celerate growth in sales of conveyor chains in China,whichisrecordingrelativelystrongeconomicexpansion. In thisway,wearesteadily implementingourmar-ketingstrategy.Moreover,inadditiontoJapanandtheUnited States, we are working to optimize our supplybasesinsuchmarketsasTaiwan,SouthKorea,andGer-many, and strategic partner in Brazil and Italy. We willalsoimplementdantotsuactivitiestofurtherstrengthenourproductiontechnologies.

Thechainindustryisundergoingreorganizationonaglobalscale.Inthissetting,theTsubakiGroupwillworkto

furtherincreaseitsshareinhigh-endofthemarkets,wherewecanleverageourtechnicalstrengths,andwewill

accelerateourbusinessdevelopmentactivitiesingrowthfields,suchasphotovoltaicpanels.

Steadyprogressinbusinessdevelopmentbasedonaglobalperspective

ChainOperations

Billions of yen %

Net sales (left)* From fiscal 2011, sprocket operations are included in this segment.

Operating income margin (right)

38ｘ47

8.2

2.20.2

35.2

44.6

52.4

10 (Results) 11 (Plan) 13 (Plan) FY0

20

40

60

0

4

8

12

Results of Operations*

StrategicproductfortheEuropeanmarket:RS-WINNER Salespromotiontoolsavailableinsixlanguages,includingRussian

ChainOperations

19

Indevelopedcountries,wewillfollowthekeyconceptof“differentiationinenvironmentaltechnologies”aswecon-tinueworkingtoexpandourshareinhigh-endmarkets,wherewecanfullyleveragethestrengthsofourproducts.These advantages include small size, light weight, highefficiency,lowfrictionloss,longwearlife,andlownoiseoperation. However, thescaleof theautomotive industry is re-cordingrapidgrowthinChinaandotheremergingmar-kets.Inthissetting,tofurtherexpandtheglobalshareoftheTsubakiGroupweneedtoimplementaggressiveini-tiativestargetingtheseemergingmarkets.Ourkeywordsin these markets will be“costs and speed.” Especially in

regardtocosts,weneedtorapidlydeveloptimingchaindrivesystemsthatcanbeprovidedatsubstantiallylowerprices.Tothatend,wewillmakefulluseoftheAutoEngi-neeringLabthatweopenedattheSaitamaPlanttopro-pelfurtherinnovationinproductionanddevelopment.Atthesametime,wewillaccelerateourimplementationofdantotsuactivities,whicharealreadygeneratingsubstan-tial results at the Saitama Plant. Moreover, we will takestepstofurtherstrengthenourglobalproductionsystem,whichnowhasbasesinsixregions—Japan,NorthAmeri-ca,Europe,Thailand,China,andSouthKorea.Forexample,wearebuildinganewplantinSouthKoreathatissched-uledtobecompletedinJune2011.

ExpandingglobalsharewithacquisitionofnewengineprojectsIndevelopedcountries,wewilluseouradvancedtechnicalproposalcapabilitiestoachievecontinuedprogresswith

ourdifferentiationstrategy. Inaddition,throughwide-ranginginnovationandimprovements intheareasof“costs

andspeed,”wewillmoveforwardaggressivelyinemergingmarketsandstrivetoexpandourglobalmarketsharefor

timingchaindrivesystems.

38ｘ47

10.910.2

9.5

38.2 38.7

47.2

10 (Results) 11 (Plan) 13 (Plan)

Billions of yen %

0

20

40

60

0

4

8

12

FY

Results of Operations

Net sales (left) Operating income margin (right)

AutomotivePartsOperations

Testinginanechoicenginebenchroom

AutomotivePartsOperations

9.2

6.6

‒0.8

18.518.4 20.7

Billions of yen %

FY

Results of Operations*

Net sales (left) Operating income margin (right)

10 (Results) 11 (Plan) 13 (Plan)

0

20

10

30

4

0

8

12

* Sprocket operations, which were included in this segment through fiscal 2010, were transferred to chain operations from fiscal 2011.

RigorouslyenhancingproductcapabilitiesthroughtechnicalleadershipByfosteringinnovationinproductiontechnologies,wewillenhanceourproductcapabilitiesandproductivityandachievebusinessgrowth.

20

PowerTransmissionUnitsandComponentsOperations

Theseoperationsarecharacterizedbya largenumberofproductsandintensecompetition.Accordingly,itisessentialtohaveaflexiblemarketingstrategybasedontechnicaldifferentiation.Inparticular,threeofourproductshavebeenhighlyevaluated for their differentiated technologies—cam clutches, linear actuators,andwormgearreducers.Movingforward,thesethreeproductswillplayacentralroleinoureffortstoexpandourshareinoverseasmarkets. Wewill also focusonexpandingourbusiness incomparativelynewfields,suchascamclutchesformotorcyclesandfour-wheeledvehicles.Infiscal2011,endingMarch31,2011,salesofcamclutchesforuseinmotorcyclestartersandinfour-wheeledvehicleautomatictransmissionsareexpectedtorecordsubstantialgrowth,rising50%to100%fromfiscal2010. Inaddition,thissegmentwillworktogetherwiththechainsegmenttoimple-mentbusinessdevelopment initiatives innewmarkets, suchasmining.Asonefacetof thoseactivities,wehave restartedsalesofultra-largecouplingsused inpetroleumplants.Inthefuture,throughsustainedinnovationinproductiontech-nologies,wewillendeavortofurtherexpandthescopeofthesegment’sbusiness.

TheTsubakiGroup’sPerformanceandStrategies

MaterialsHandlingSystemsOperations

Thissegment’sresultsareheavilyinfluencedbytrendsinprivate-sectorcapitalinvestment.Inthisoperatingenvironment,tofosterstablegrowthinthisseg-mentwemustbolstertheprovisionofsolutionsandenhancecustomerser-vice. Accordingly, we will strengthen all functions and services in sales,engineering, and maintenance and will work closely with our customers attheirworksitestoprovidesolutionsthathelpthemtoresolvetheirchallenges. Also,wewillfocusonenhancingthecapabilitiesofourautomaticsortingsystems,whichhavebeenhighlyevaluatedfortheiroperationalstabilityandsortingprecision.Atthesametime,wewillstrengthenouroperationsintheModuleBusiness,whereweexpectgrowth,andwillstepupourfocusonmain-tenanceoperations,whichhelpcustomerstoachievestableoperationandin-creasedproductivitywithinstalledfacilities.

Buildingafoundationforstable,ongoingoperationsbybolsteringsolutionsprovisionactivitiesandcustomerserviceWewillbolstertheprovisionofsolutionsandstepupourpromotionoftheModuleBusinessandourfocusonincreasingmaintenanceservices.

38ｘ47

6.5

‒0.3

0.2

20.4

25.2

29.4

Billions of yen %

10

20

30

4

0 0

8

12

FY

Results of Operations

Net sales (left) Operating income margin (right)

10 (Results) 11 (Plan) 13 (Plan)

PowerTransmissionUnitsandComponentsOperations

MaterialsHandlingSystemsOperations