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5. F-tech Inc. Business Report FY ended 2015

Contracts

Pedals for Renault-Nissan Common Module Family (CMF)
-The Company received orders for pedals from the Renault-Nissan Alliance for vehicles under their Common Module Family (CMF) scheme and has started supplying the products. The pedals for the first CMF models (CMF1) in the C/D segments are manufactured in the U.S. and China. While the Company has been providing its pedals and other components for Nissan, it will also start supplying Renault with its products for the CMF models in some regions. As Nissan and Renault planned to share the basic mechanism of their pedals, the Company and a European supplier jointly developed the pedals for the Alliance. The pedals for Nissan will be supplied mainly by the Company while those for Renault by the European supplier. The Company started production of the pedals for the CMF1 at its plants in Georgia, the U.S. and in Wuhan, Hubei province, China. The Company is supplying them for Nissan's plants in the U.S., China and the U.K. where the automaker is building the CMF1 vehicles. The pedals for Renault Samsung in Korea will be manufactured by a local supplier on a contract basis. F-Tech's Wuhan plant is expected to supply the products for the Renault version of the CMF1 built by Renault-Dongfeng's joint venture in Wuhan. (From an article in the Nikkan Jidosha Shimbun on July 22, 2014)

-Major orders (with monetary amounts) won during the fiscal year that ended in March 2015:

• Started delivery in Japan, China, and the U.S. of pedals for Nissan's mid- and compact-sized vehicles (JPY 1.0 billion annually)
• F-Tech Wuhan Inc. in China started delivery of a sub-frame for the Shanghai GM Buick Excelle (CNY 122 million annually)
• F-Tech Zhongshan Inc. in China started delivery of a sub-frame for the Beijing Automobile Works' Senova (JPY 15 million annually)
• F-Tech Mfg. (Thailand) Ltd. started delivery of a suspension arm for the Mitsubishi Triton (THB 200 million annually)

Recent Development outside Japan

Increasing sales of chassis components toward GM
-The Company will increase annual sales of its chassis components to General Motors Company, LLC (GM). The unit sales achieved in the fiscal year ending in March 2014 (FY 2013) will be tripled such that chassis parts for 1.8 million vehicles will be sold in FY 2018. The Company's chassis components will be supplied to more models, as the Company will start supplying them in China in FY 2015 and in Mexico in FY 2017. The sales from Honda Motor Co., Ltd. account for 80% of the Company's total sales. Thus, the Company needs to expand sales to European and U.S. automakers other than Honda. Thanks to the increase in intake of orders, the ratio of sales to GM in FY 2017 and FY 2018 is expected to rise to around 16%, which is twice the company's FY 2014 sales forecast. The Company has primarily supplied body frame components to GM in Canada and the U.S. Since the Company has received new orders for its main products, chassis components such as sub-frames and front lower arms, for use in GM's global models in China and Mexico, the sales volume of the products will increase. (From an article in the Nikkan Jidosha Shimbun on December 25, 2014)

Business Plan

-In 2014, the Company formulated its 12th mid-term management plan, which covers the period between the fiscal year ending in March 2015 and the fiscal year ending March 2017. Under the slogan of “Aim to be a chassis-system maker with extremely strong competitive advantages”, the Company set the following performance targets:

• Sales: JPY 200,000 million
• Operating income: JPY 10,000 million

-The basic policies are outlined below:

1. Reorganize the chassis-system operations
-Develop integrated, multi-function, single-unit chassis systems built from individual components such as sub-frames, suspension arms, etc.

2. Advance global operations
-Making use of the Japanese operations as the base functions, advance sales, R&D, production, and purchasing functions at operations outside Japan such as in North America, China, and Southeast Asia.
-Develop global human resources

3. Strengthen capabilities in environmentally friendly technology
-Build chassis systems that are even lighter in weight; and conduct deeper research in core technologies such as hydroforming, friction stir welding, and tube/pipe annealing.
-Work to have electronic pedal parts and electronic technology applied in chassis.
-Establish optimal production technologies suited to every region under the aim of innovating proprietary technology such as precision stamping, laser-based welding/joining, etc.

>>>Financial Forecast for the Next Fiscal Year (Sales, Operating Income etc.)

-By region for FY ended March 2015: Japan (JPY 1,316 million), North America (JPY 1,509 million), and Asia (JPY 529 million).

R&D Structure

-The Company will introduce a road simulator to its development center in Troy, Ohio, the U.S., by the end of the fiscal year ending in March 2015 (FY2014). The road simulator will be introduced to the center for the first time among the Company's development centers in and outside Japan. The simulator can reproduce driving conditions that are very similar to actual driving conditions. This move is in response to non-Japanese automakers' requests for suppliers to develop and supply suspension system itself instead of individual parts. The Company, which mainly supplies parts to Honda Motor Co., Ltd., aims to expand business with foreign carmakers including General Motors Company (GM) in the future. In order to win more orders from non-Japanese automakers, the Company will prepare for the development of suspension system to compete with European and U.S. suppliers which supply the systems. (From an article in the Nikkan Jidosha Shimbun on July 16, 2014)

R&D Activities

-In the fiscal year that ended in March 2015, the Company significantly lightened the weight, lowered the costs, and increased productivity of sub-frames and suspensions for the Honda StepWGN.

-The Company has started operations on its new advanced forging press line at its Kuki Plant (Kuki, Saitama Prefecture). The new blanking technology that significantly improves yield rate and accuracy was developed in-house at F-Tech. The Company will supply its products made on the new line not only to customers in Japan but also to those overseas to benefit from the weaker yen. The Honda-affiliated supplier has been expanding business with European and US automakers. It aims to broaden its customer base further by offering more cost competitive products utilizing the advanced processing technology, while bolstering its products lineup. (From an article in the Nikkan Jidosha Shimbun on December 2, 2014)

-By region for FY ended March 2015: Japan (JPY 2,061 million), North America (JPY 9,006 million), and Asia (JPY 5,134 million)