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5. Aisan Industry Co., Ltd. Business Report FY ended 2015

Factors
-In FY 2014 both sales and profits increased due to higher sales and favorable currency translation. Sales, operating profit, ordinary profit, and current net profit all set new record highs.
-Japan, North America, and Europe all posted increased sales and profits, while Asia posted decreased sales and profits.

1) Sales
-In addition to favorable currency translation, sales were higher, increasing 10.2% y/y.

• Japan: Sales increased 9.0% y/y due to higher sales of fuel-pump modules, EGR valves, and other products.
• Asia: Sales increased 11.9% y/y due to higher sales of fuel-pump modules.
• North America: Sales increased 12.2% y/y due to higher sales of throttle bodies.
• Europe: Sales increased 19.4% due to higher sales of throttle bodies.

Major polices during FY 2014

Strengthening product appeal and R&D capabilities

• Developed a low-energy fuel-pump module

Expanding global operations

• India: Launched production of throttle bodies at Aisan Auto Parts India (AAI), which is the second plant in India.
• The Americas: Continued preparations for launching production in the summer of 2015 at Aisan Auto Partes Mexico (AAM).
• Thailand: Started supplying newly developed fuel-injection system for the bi-fuel CNG Corolla that Toyota launched in Thailand in January 2014. The injectors, fuel rails and regulators were produced in Japan and Indonesia and shipped to Thailand.

New technology/new-product development

• Developed a hydrogen injector

Factors
-Sales will be flat as a result of lower sales in Japan offsetting increased revenue outside Japan. The Company predicts that it will be able to maintain its same level of operating profit, based on lower operating profits in Japan and America, higher operating profits in Asia, and stagnant operating profit in Europe.
-The number of consolidated subsidiaries will increase from 23 to 25, with the addition of Aisan Auto Parts India (AAI) and Aisan Auto Partes Mexico (AAM).

Major policies for FY 2015

-Follow the Company-wide slogan: Advance ahead toward a new age based on quality assurance and product creation. 1) Strengthen product strategies, 2) Increase systemization and development of new products, 3) Strengthen and focus on creating products.

Strengthening product strategy

• Throttle bodies: Develop smaller and lower-cost throttle bodies
• EGR valves: Reduce engine loss, improve actual fuel efficiency
• CNG fuel systems:  Production began in Thailand in December 2013, with plans to further expand production operations in emerging countries.
• Power saving fuel pump modules:  The Company was able to reduce this module's energy consumption by 20% and lower the height by 35% compared to conventional modules. This adds to improving fuel consumption and making the cabin roomier.
• Hydrogen injector for FCVs:　The Company began producing this injector for the Toyota "Mirai" in November 2014. Parts are being produced at the headquarters' plant in Obu, Aichi Prefecture. This injector is capable of improving generating efficiency for FCVs, based on utilizing the Company's expertise on gas fuel supply technology gained from developing products designed for CNG and LPG systems. The Company developed injectors and valves designed exclusively for FCVs, which decompress compressed hydrogen that is supplied to the stacks. The Company is already developing next-generation systems designed for mass-marketed FCVs forecast to be launched in 2020.

<Working with customers>

• Toyota: Responding to Toyota’s parts standardization concept called "Toyota New Global Architecture (TNGA)"

• Renault-Nissan: Certified as an Alliance Growth Partner (AGP) in March 2015, the Company is delivering throttle bodies.
The Company is working to quicken the pace of expanding its business with the Renault-Nissan Alliance. It invested an additional JPY 1.0 billion at its new production plant in Mexico, which is scheduled to launch operations in the summer of 2015. By 2017, the plant building will be expanded to include additional production capacity, and will be ready to supply throttle bodies to Nissan’s vehicles. In addition, the Company has assigned a technician to work at its European sales company in Belgium, with plans to begin making technical/engineering proposals to European OEMs such as Renault.

Strengthening product creation

• Expanding beyond the mature Japanese market: Develop new technologies and products in Japan, guaranteeing the same level of quality in other regions (the Americas, Europe, and Asia)
• Launch of Mexican plant: Aisan Auto Partes Mexico (AAM) is scheduled to come online in the summer of 2015 and increase product supplies to the Americas.

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

-R&D expenses in FY 2014 were JPY 10,337 million, with JPY 9,695 spent in Japan and JPY 642 in Asia.

R&D Activities

-Responding to needs for lower fuel consumption and increasingly diversifying energies, the Company is strengthening its development activities in order to create products for emerging countries.

• Lower fuel consumption: The Company launched production of a fuel-pump module that reduces energy consumption by 20% compared to conventional products. It launched production also of a PCV valve throttle body and canister that respond to supercharged engines.
• Diversifying energies: The Company launched production of products that control the hydrogen pressure of fuel-cell vehicles.
• Products for emerging countries: The Company developed fuel-injection systems for motorcycle and general-use engines, which are lower in cost but provide the same high level of quality.

-Investment by region:

• Investment outside Japan totaled JPY 9,199 million, with JPY 6,367 invested in Asia alone.
• The Company invested JPY 613 million to improve the commercial appeal of its major products in Japan, enhance system development capabilities, and develop future products for next-generation vehicles.

-Investment by product line:

• The Company invested JPY 7,280 million yen in facilities and equipment for its three major product lines: fuel-pump modules, throttle bodies, and canisters.
• The Company invested JPY 713 million in facilities and equipment for EGR valves, engine valves, and injectors.

Plans for New Facilities

-In FY 2015, the Company plans to invest JPY 1,500 million yen in facilities and equipment.

-The Company continues to invest at a high level in order to replace outdated equipment and install innovative production lines.