Financial Overview

(in millions of JPY)

	FY ended Mar. 31, 2013	FY ended Mar. 31, 2012	Rate of Change (%)	Factors
Overall
Sales	472,843	430,929	9.7	-Sales in Japan increased year-on-year due to a recovery in demand after the Great East Japan Earthquake and due to eco-car sales incentives. While production volumes dropped in Europe due to lower demand, production volumes increased in China, North America, Thailand, Indonesia and other developing countries.
Operating income	37,668	31,725	18.7	-Profit significantly increased year-on-year, thanks to greater vehicle production levels, the launch of commercial production at new facilities outside Japan, and initiatives implemented to lower costs.
Ordinary income	40,007	31,496	27.0	-
Current net income	16,625	13,391	24.1	-

Business Overview

<Japan>
-Operating revenue increased 2.7% year-on-year to 261.5 billion yen due to a significant increase in vehicle production levels because of the economic recovery following the Great East Japan Earthquake and eco-car sales incentive programs.

<North America>
-Operating revenue increased 54.5% to 62.8 billion yen because vehicle production levels increased in line with the recovery in automotive demand, and because the Company won more program business from OEMs in the region.

<China>
-Operating revenue increased 7.5% year-on-year to 94.0 billion yen due to the Company's enhanced sales activities directed toward Chinese OEMs and efforts to increase sales. This was in spite of negative factors such as stagnant market demand because of waning economic growth, and lower production levels at Japanese OEMs due to the worsening relationship between Japan and China.

<Asia>
-Operating revenue increased 29.5% year-on-year to 42.7 billion yen, supported by a huge increase in vehicle production in Thailand, and greater production volumes of both two- and four-wheel vehicles in Indonesia.

<Europe>
-Operating revenue fell 22.8% year-on-year to 11.5 billion yen as a result of the slow European economy and the slowdown in auto sales in the region.

Recent Development Outside Japan

<USA>
-In January 2012, North American Lighting, Inc. launched operations at Plant No. 2 at its Alabama Plant; and in March 2012 a die factory in Indiana commenced operations.

<Thailand>
-In April 2012, operations were launched at Plant No. 4 and at the technical center at Thai Koito Company Limited in Prachinburi.

<India>

-In March 2013, Plant No. 2 at India Japan Lighting Private Limited in Chennai came online, raising annual output capacity for headlamps in Chennai by 50 percent. The move came when Japanese OEMs was increasing their local production  in southern India.

(from a Dec. 26, 2012 Automotive Daily news article)

<Mexico>

• Established North American Lighting Mexico, S.A. de C.V., first production subsidiary in Mexico, in Dec. 2012
• Location: San Luis Potosí at Colina de San Luis Industrial Park (central Mexico)
• Plant Area: 109,000 sq. meters
• Plant building floor space: 27,000 sq. meters
• Cost: 5 billion yen.
• Capitalization: 150 million pesos (approx.. 1 billion yen)
• Employees: 300 by end of 2014
• Production launch: July 2014
• Estimated annual production volume: 500,000 each of automotive headlamps and marker-lights.

(From Nov. 28, 2012 Automotive Daily news article)

Mid-term Management Plan

Koito Manufacturing Co., Ltd. announced its midterm business plan for fiscal 2013 through 2015. In Japan, the company will focus on the development of new high-function lightweight products such as LED headlamps and the introduction of highly-efficient production lines at all of its plants. Overseas, Koito will start its new plant operation in Mexico while increasing its production capacities in the U.S. and China, and strengthening local development capacity in Thailand. Combining all these efforts to win new orders globally, the company aims to boost its sales to 600 billion yen in fiscal 2015, up 26.9 percent from fiscal 2012. (From an article in the Nikkan Jidosha Shimbun on May. 10, 2013)

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

R&D Expenditure

(in millions of JPY)

	FY ended Mar. 31, 2013	FY ended Mar. 31, 2012	FY ended Mar. 31, 2011
Overall	20,000	17,600	17,177

-R&D expenses: 20,000 million yen total.

By region (in millions of yen)

• Japan: 11,900
• North America: 3,300
• China: 2,600
• Asia: 1,800
• Europe: 300

R&D Structure

Staff: 2,316 Group wide

- R&D activities are aimed to respond to new developments at global OEM's, and are conducted at the following locations:

• Japan: R&D Headquarters, and R&D offices
• North America: Technical center at North American Lighting, Inc.
• China: Technical Center at Shanghai Koito Automotive Lamp Co., Ltd.
• Europe: Technical Section at Koito Europe NV in Belgium.

-The Company will increase the number of its development staff in Thailand to 120 by 2015, up 20 percent from the current level. By enhancing its engineering capabilities in the country, the company aims to meet rising needs for local development in Asia, while expanding its operations in the emerging markets, where demand for vehicles is expected to grow. In line with automakers' move to localize their development work, Koito will further improve its development capacity in its five major markets in the world, namely Japan, U.S., Europe, China and Asia to win more orders for increasing number of new models launched on the global market. (From an article in the Nikkan Jidosha Shimbun on Apr. 3, 2013)

R&D Activities

<Japan>
-Developing core technologies in the field of automotive lighting, namely in the areas of optics, electronics, machinery, structural mechanics, etc.
-Developing production technology
-Developing simulation technology
-Developing electronic parts for railroad cars
-Developing systems that will serve as ITS equipment
-Developing systems that respond to the Internet
-Developing auto parts outside of the lighting sector
-Developing aircraft parts
-Developing new products for new business areas.

<North America, China, Asia, and Europe>
-Developing core technologies in the field of automotive lighting, namely in the areas of optics, electronics, etc.
-Developing production technology

-The Company announced on October 16 that the company has developed a new fluorescent body, which enables production of white light-emitting diodes (LEDs) suitable for indoor illuminations through a joint project with Tokyo Institute of Technology and Nagoya University. Compared with a conventional white LED, which generates a point light source, the white LED using the new fluorescent substance can provide a significantly large luminous area, which is 10 times larger than that of conventional technology, while decreasing the dazzle level by more than 90 percent. The Company says the innovative white LED technology is applicable to automotive components such as cabin interior lightings. For vehicle headlamp applications, high-intensity blue chip LEDs, which are the mainstay LED products, are currently regarded as the most appropriate. The Company, however, is looking to develop white LED headlamps by employing the new fluorescent. (From an article in the Nikkan Jidosha Shimbun on Oct. 17, 2012)   

Product Development

Next generation headlamp system
-The Company. will develop Adaptive Driving Beam (ADB) LED headlamps. On detecting an oncoming vehicle or a preceding car during driving using high beam lights, the ADB system shields lights in the area of the detected vehicle to prevent glare of the other driver. Current ADB system installed in some models of European and Japanese automakers mechanically shields light source with a shade. The new ADB system achieves equivalent function by switching on/off multiple LED lamps. Starting this year, Koito's LED headlamps will be installed on mini cars, which will bring the manufacturing cost down with an increase in production volume. The company will use LEDs to widen the function of its headlamps, with the aim of enhancing vehicle safety and energy conservation. (From an article in the Nikkan Jidosha Shimbun on Mar. 7, 2013) 

Licensing of Technology to Other Companies

(As of Mar. 31, 2013)

Company	Agreement details	Contract Period
Hella Automotive Mexico S.A. de C.V. (Mexico)	Provide technological information, sales and manufacturing license	22 years from Apr. 22, 1992
Industrias Arteb S.A (Brazil)	Provide technological information, sales and manufacturing license	10 years from Dec. 12, 2006
Farba Otomotiv Aydinlatma ve Plastik Fabrikalari A.S. (Turkey)	Provide technological information, sales and manufacturing license	15 years from Oct. 24, 1997
Automotive Lighting UK Ltd. (UK)	Provide technological information, sales and manufacturing license	21 years from Feb. 24, 1993
Hella Australia Pty Ltd. (Australia)	Provide technological information, sales and manufacturing license	20 years from May 1, 1994
Lumotech (Pty.) Ltd. (South Africa)	Provide technological information, sales and manufacturing license	10 years from May 4, 2006
EP Polymers (M) Sdn. Bhd. (Malaysia)	Provide technological information, sales and manufacturing license	20 years from Apr. 29, 1995
AuVitronics Ltd. (Pakistan)	Provide technological information, sales and manufacturing license	10 years from Mar. 7, 2005
AMS Co., Ltd. (Korea)	Provide technological information, sales and manufacturing license	7 years from Jan. 16, 2013
AVTOSVET Limited Liability Company (Russia)	Provide technological information, sales and manufacturing license	5 years from Mar. 21, 2013

Capital Expenditure

(in millions of JPY)

	FY ended Mar. 31, 2013	FY ended Mar. 31, 2012	FY ended Mar. 31, 2011
Overall	22,200	21,400	16,400

 

-Capital investment in FY2012: 22,200 million yen.

Invested to rationalize and renew production facilities, enhance product quality, reduce costs

By region (in millions of yen)

• Japan: 8,300
• North America: 3,600
• China: 2,200
• Asia: 7,200
• Europe: 800

-The Company is planning to invest approximately 39.1 billion yen in plants and equipment during fiscal year 2013, which is an increase of 76.1 percent from the previous term. In addition to doubling its spending overseas by investing heavily in North America and China, the company will also raise investment in Japan by 37.3 percent due to a rise in costs to deal with model changes. The company, which is outlaying an average of 30 billion yen each year, has decided to step up investment this year in order to cope with increased orders it won in the U.S. and prepare for the resumption of new plant project in China. Planned domestic investment is 11.4 billion yen, up 3.1 billion yen from FY2012 when the company spent 8.3 billion yen. Overseas, the company is outlaying 27.7 billion yen, up 13.8 billion yen from last year's 13.9 billion yen. Major factors that led to the significant rises include new tooling costs in connection with model changes in Japan, and facility expansion projects at plants overseas. In China, the company will resume its plan to construct a second plant in Guangzhou, a project that has been suspended because sales of Japanese vehicles were hit by growing anti-Japanese sentiment triggered by island disputes. Having seen gradual recovery in demand for Japanese vehicles, however, the company will soon install new equipment, planning operation launch in the summer-fall period this year. (From an article in the Nikkan Jidosha Shimbun on Apr. 30, 2013)

Planned Capital Investments

(As of Mar. 31, 2013)

Company / Plant	Equipment to be introduced	Estimated amount of investment (in million JPY)	Project Period
			From	To
Shizuoka Plant (Shizuoka Pref., Japan)	Manufacturing equipment for automotive lamps, etc.	3,876	Apr. 2013	Mar. 2014
Haibara Plant (Shizuoka Pref., Japan)	Manufacturing equipment for automotive lamps, etc.	1,474	Apr. 2013	Mar. 2014
Koito Kyushu Ltd. (Saga Pref., Japan)	Manufacturing equipment for automotive lamps, etc.	3,190	Mar. 2013	Mar. 2014
North American Lighting Inc. (Illinois, USA)	Manufacturing equipment for automotive lamps, etc.	10,216	Mar. 2013	Mar. 2014
North American Lighting Mexico, S.A. de C.V.(Mexico) (San Luis Potosi, Mexico)	Manufacturing equipment for automotive lamps, etc.	2,569	Mar. 2013	Mar. 2014
Guangzhou Koito Automotive Lamp Co., Ltd. (Guangzhou, China)	Manufacturing equipment for automotive lamps, etc.	7,795	Mar. 2013	Mar. 2014
Thai Koito Co., Ltd. (Samutprakarn, Thailand)	Manufacturing equipment for automotive lamps, etc.	2,323	Mar. 2013	Mar. 2014