Financial Overview

(in million JPY)

	FY ended Mar. 31, 2014	FY ended Mar. 31, 2013	Rate of Change (%)	Factors
Overall
Sales	149,081	133,605	11.6	-
Operating income	13,554	10,085	34.4	-
Ordinary income	15,551	11,833	31.4	-
Net income	6,364	5,569	14.3	-
Sales by Segment
Japan	42,302	41,446	2.1	-Sales increased due to a recovery during the second half of the year in automotive production in Japan, after production levels had fallen because of the eco-car sales-incentive program coming to an end.
Asia	19,516	12,319	58.4	-Even though the rate of growth in automobile sales in China slowed down this past year, sales at the Company still remained strong.
North America	9,077	7,179	26.4	-Strong economic conditions contributed to higher sales
Other	2,162	1,361	58.9	-Higher performance due to winning new orders
Faltec	76,022	71,299	6.6	-Sales at subsidiaries overseas increased.

Recent Development Outside Japan

<Americas>
To Establishing cylinder liner production company in Brazil
-The Company announced that it will establish a cylinder liner production company in Brazil in August 2014. The new subsidiary will be located in Porto Feliz, Sao Paulo, and production is scheduled to start in January 2016. Demand for cylinder liners is expected to grow in Brazil, where production of aluminum block engines is increasing. The new company is likely to hire 70 people in order to produce 3 million cylinder liners per year by 2018. (From an article in the Nikkan Jidosha Shimbun on February 25, 2014)

Commences production of cylinder liner in Tennessee, USA
-In 2014, TPR Federal-Mogul Tennessee, Inc., a joint venture with Federal-Mogul established to produce cylinder liners, launched operations and started mass-production. It plans to expand its production operations whenever the facilities are readied.

<Asia>
To double production of piston ring in Indonesia
-The Company will double production of automotive piston rings by the fiscal year ending March 2017 at PT. TPR Indonesia, the Company's production base in Indonesia. Current monthly production level of around 400,000 units to 500,000 units will be increased significantly to 900,000 units to 1,000,000. Due to the Low Cost Green Car Policy in Indonesia and the second eco-car policy in Thailand, the Company expects a further increase in demand for piston rings for small cars in the ASEAN region even after 2015. Despite concerns over traffic jams and other infrastructure problems in Indonesia and Thailand, the Company will boost production capacity, expecting an increase in vehicle production in the entire ASEAN region. (From an article in the Nikkan Jidosha Shimbun on January 16, 2014)

To expand production of valve seat destined for ASEAN in Vietnam
-The Company will establish a new integrated valve seat production line at its plant in Vietnam around June 2014. The new production line will have a capacity of 3 million valve seats per month. The Company intends to start using the new line as early as possible to maximize production capacity in the latter half of 2015. The Vietnamese plant has been the Company's main production base for customers in the ASEAN countries. However, the Company's Gifu Plant, located in Kago-shi, Gifu Prefecture, Japan, has been providing sintered parts to the plant in Vietnam, which has no powder metallurgy facility. At the moment, the demands in the ASEAN markets are relatively small, ranging from 400,000 to 500,000 units per month. Therefore, it's more cost effective for TPR to send the sintered parts from its plants in Japan. However, demand is expected to grow in the region starting in 2015, mainly from Japanese automakers in Vietnam, Thailand and Indonesia. The Company intends to establish a local integrated production system that covers steps from mixing materials and sintering to finishing, so that it can flexibly meet the needs of its customers. (From an article in the Nikkan Jidosha Shimbun on January 8, 2014)

Established joint venture for producing plastic parts in China
-The Company announced that it will establish a joint venture with Anqing Huanxin Group Co., Ltd. (ARN) to manufacture and sell engineering plastics in Anqing, Anhui Province, China in January 2014. The new company, which will be tentatively called Anqing TPR Engineering Plastic Co., Ltd., will supply plastic parts to local automakers and will also produce industrial plastic products. It will be capitalized at USD 2 million (JPY 200 million), of which 60 percent will be invested by TPR and the remaining 40 percent will be invested by ARN. Operation is expected to start in April 2014. More details, including its production capacity and sales target, were not disclosed. (From an article in the Nikkan Jidosha Shimbun on November 20, 2013)

Outlook for FY ending Mar. 31, 2015

(in million JPY)

	FY ending Mar. 31, 2015 (Forecast)	FY ended Mar. 31, 2014 (Actual Results)	Rate of Change (%)
Sales	158,000	149,081	6.0
Operating income	17,200	13,554	26.9
Ordinary income	19,300	15,551	24.1
Net income	10,000	6,364	57.1

-While sales at existing TPR facilities in Japan have plateaued, sales and profits are forecast to grow outside Japan, mainly in Asia. Sales and profits at the Faltec Group are expected to increase also.

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

Mid-term Management Plan

-Sales targets under the 14 Mid-term Plan, which will end in March 2015, are as follows.

• Consolidated sales: JPY 150,000 million (JPY 75,000 million each at TRP and Faltec)

-Other objectives to be achieved at the end of the 14 Mid-term Plan are as follows.

• Aggressively increase the competitive advantages (performance, quality, costs) of piston rings, cylinder liners, sintered products, resin/plastic products
• Expand business in the rapidly growing global automotive market
• Develop new products that meet customer needs for lighter products, increasing sales by commercializing them
• Stabilize managerial foundation by expanding new businesses centered around Faltec.
• Strengthen ability of production facilities to excel in true product-creation
• Expand operations based on launching new lines of business in rubber, plastics, etc

Awards

-Major awards received during FY ended Mar. 2014:

Awarding Company	Awards
Toyota	Award for Excellence in Quality Control
	Award for Excellence in Cost Improvements
Daihatsu	Award for Excellence in Quality
Isuzu	Award for Excellence in Quality

R&D Expenditure

(in million JPY)

	FY ended Mar. 31, 2014	FY ended Mar. 31, 2013	FY ended Mar. 31, 2012
Overall	3,605	4,034	1,892
-TPR Group	1,826	1,921	1,892
-Faltec Group	1,728	2,060	-

R&D Facilities

-R&D activities are conducted at the Technical Center located within the Nagano Plant.

R&D Activities

-The Company worked on developing new products from a variety of aspects. These included lower friction, heat control, lighter weight, cleaner exhaust gas emissions, and alternate fuels (bio-fuels, CNG).
-The Company, in working to make products that have even greater levels of precision, developed new production methods that automate inline measuring, radically reduce costs, and minimize energy used in production operations.
-In order to quickly respond to the needs arising in line with the growth of electric vehicles, the Company is strengthening its capabilities in non-powertrain products. As a result, the Company focused its energy in introducing new technology in seals that mainly include rubber and composite products made lighter in weight by the use of aluminum and plastics. In this regards, the Company is building its R&D framework to create functional, cost-competitive products ahead of its customers, while exploring new business sectors.

R&D Achievements
<Powertrain components>
1) Piston rings
-Development of super low friction rings and low LOC (lubricating oil consumption) rings which are designed to improve fuel economy.
-Development of highly-functional oil rings, which are designed to improve reliability.
-Creation of a production line that is designed to radically reduce the production costs of piston rings.
 
2) Cylinder liners
-Commercialization of liners for small engines. These liners are smaller in diameter, have super thin walls, are lightweight, and have superior heat-conducting properties, enabling them to respond to the needs for greater output and improved fuel consumption and reliability.
-Commercialization of a new liner material designed for alternative fuels, which demonstrates highly performance in terms of corrosion and abrasion resistance.
-Commercialization of low friction bore liners, which are designed to improve fuel efficiency.

3) Valve seats, valve guides
-Commercialization of valve seat materials which are capable of responding to the need for alternative fuels. These materials are highly resistant to abrasion.
-Development of a new production line with innovative features that remarkably lower costs, enabling the production of low-priced products.
-Commercialization of sintered valve guides.

<Other than powertrain components>
1) Aluminum-based products
-Commercialized a motor frame for EV motors by creating a new casting method and installing equipment.
-Commercialized an aluminum brake drum and bearing-cap by applying a centrifugally casted spiny shaped FC material.

2) Sintered mechanical parts
-Commercialized a small sized seal-ring for turbochargers.
-Development of a processing method that improves the accuracy and enhances the strength of shock absorbers and coupling components

3) Plastic and rubber products
-Commercialized plastic seal-rings for transmissions.
-Created greater precision electromagnetic valve spool rubber seals.

Capital Expenditure

(in million JPY)

	FY ended Mar. 31, 2014	FY ended Mar. 31, 2013	FY ended Mar. 31, 2012
Japan	2,112	2,514	3,066
Asia	2,501	2,767	1,097
North America	2,692	973	319
Others	9	47	0
Faltec Group	3,073	3,666	-
Total	10,389	9,968	4,483

-During FY ended Mar. 2014, the Company made continued investments in its operations overseas, spending to revamp and improve production facilities so as to increase production capacities.

Investment Activities Outside Japan

<China>
-The Company will set up an additional cylinder liner production line at its plant in Anqing City, Anhui, China in 2014. The new line will increase the Company's monthly production capacity by 30% to 2.5 million units from current 1.9 to 2 million units. The products will be supplied to Japanese, U.S, European and Chinese automakers. TRP's cylinder liners have superior adherence property to aluminum alloy blocks in an engine. The Company will leverage this advantage to win new orders in the growing market. (From an article in the Nikkan Jidosha Shimbun on January 10, 2014)

Planned Capital Investments (Automobile related product business)

(As of Mar. 31, 2014)

Name/ Name of the company	Location	Type of facility and purpose	Planned investment (million JPY)	Planned construction start date	Planned completion	Increased capacity upon completion
The Company Nagano factory	Nagano Pref., Japan	Facilities for producing piston rings, conducting R&D activities, etc.	1,700	Apr. 2014	Mar. 2015	No impact on production capacity
TPR Industry Co., Ltd.	Yamagata Pref., Japan	Facilities for producing cylinder liners and conducting R&D activities	1,200	Apr. 2014	Mar. 2015	No impact on production capacity
Anqing TP Goetze Liner Co.,Ltd.	Anhui Province, China	Facilities for producing cylinder liners	1,600	Jan. 2014	Dec. 2014	20% increase
Anqing TP Powder Metallurgy Co., Ltd.	Anhui Province, China	Facilities for producing sintered products	800	Jan. 2014	Dec. 2014	20% increase
Faltec Co., Ltd. Kitakanto Plant	Gunma Pref., Japan	Facilities for plating	735	Apr. 2014	Oct. 2014	100% increase