Financial Overview

(in millions of JPY)

	FY ended Mar. 31, 2014	FY ended Mar. 31, 2013	Rate of Change (%)	Factors
Overall
Sales	148,820	125,993	18.1	1)
Operating income	8,567	938	813.3	-
Ordinary profit	9,623	2,597	270.5	-
Net income	6,827	2,529	169.9	-

Factors
1) Sales
<Japan>
-Operating revenue increased 0.2% year-on-year to JPY 35,421 million. Operating profit fell 23.0% year-on-year to JPY 2,760 million.

<North America>
-Due to favorable currency translation, in spite of lower sales to major customers, operating revenue increased 16.2% year-on-year to JPY 30,567 million. Operating profit increased 151.6% year-on-year to JPY 1,104 million.

<Europe>
-Due to favorable currency translation, in spite of lower sales volumes of automobile products, operating revenue increased by 3.0% year-on-year to JPY 5,305 million. Operating profit was JPY 485 million, a 15.2% year-on-year increase.

<Asia>
-Operating revenue increased 39.4% year-on-year to JPY 62,771 million, thanks to higher sales volumes of automobile products. Operating profit was JPY 3,229 million due to a recovery from the flooding in Thailand and favorable currency translation as result of the weak yen. (The Company posted an operating loss of JPY 3,835 million the previous year.)

<South America>
-Due to favorable currency translation, in spite of lower sales of products for motorcycles, operating revenue, which was JPY 14,755 million, increased 4.2% year-on-year; and operating profit, which was JPY 327 million, fell 35.4% year-on-year.

Contracts

Location winning contract	Customer, Vehicle model, Delivery to, etc.	Products (parts)	Remarks
Headquarters (Japan)	Honda New "Fit"	Transmission parts, engine parts and suspension parts	Launched production and delivery from July 2013
	Honda "Accord Hybrid"	Transmission parts, engine parts and suspension parts	Launched production and delivery from December 2012
Musasi Auto Parts India (India)	Honda Cars India "City"	Manual transmission parts, engine parts and suspension parts	Launched production and delivery from December 2013
	Honda Cars India's diesel car  "Brio Amaze" for Indian market	Engine parts and suspension parts	Launched production and delivery from March 2013
Musashi Auto Parts Michigan (USA)	Chrysler "Jeep Cherokee", "200"	Differential assemblies	Launched production and delivery from January 2014
	ZF's new transmission	Differential assemblies	Launched production and delivery from February 2013
Musashi Auto Parts Canada (Canada)	New engine for Ford "F-150"	Camshafts	Launching production and delivery from September 2015
Musashi Auto Parts (Thailand)	Dana Holding Corporation to supply to Ford vehicles, for Thailand, South Africa and Argentina market	Bevel gears	Launched production and delivery from November 2013
	JATCO Ltd. to supply for light vehicles in Asian market	Gears for CVT	Launched production and delivery from July 2013
Musashi Auto Parts Indonesia (Indonesia)	Astra Daihatsu Motor's light vehicles	Transmission parts	Launched production and delivery before April 2014
	Honda Precision Parts Manufacturing; for Honda "CR-V"	Differential assemblies	Launched production and delivery from February 2013
Musashi Auto Parts (Zhongshan) Co., Ltd. (China)	JATCO Ltd. to supply for light vehicles in Asian market	Gears for CVT	Awarded contract

Mid-term Management Plan

-In October 2013, the Company announced its mid-term management plan through the fiscal year ending March 31, 2017 (FY 2016). In the plan, the Company aims to boost sales to JPY 170 billion by the end of FY 2016. This is an increase of JPY 25 billion from the target figure for the fiscal year ending March, 2014. The Company has also set a sales target of JPY 200 billion with an operating profit ratio of 10% for the fiscal year ending March, 2021. There are six pillars of the mid-term plan: creating an original, next-generation brand; fostering capable employees globally; restructuring its two-wheel and four-wheel vehicle business; combining and improving the Company's operations from receiving orders to mass production; and creating a system to evaluate and improve the Company's plants in three control areas of quality, production, and process management. (From an article in the Nikkan Jidosha Shimbun on November 1, 2013)

-Product category ratio in Sales

(%)

	FY ending Mar. 31, 2020 (Planning)	FY ended Mar. 31, 2014 (Actual result)
Gear and others	-	68
-Differential gear	16	10
-Planetary gear	10	3
Camshaft	-	18
Ball joint	-	14

-Differential gear: Develop product range for all types of vehicles (from compact to full-size) designed for all markets, which are smaller, lighter, and unitized.
-Planetary gear: Create global production structure achieving speed, automation, and unitization.

Outlook for FY ending March 31, 2015

(in millions of JPY)

	FY ending Mar. 31, 2015 (Forecast)	FY ended Mar. 31, 2014 (Actual result)	Rate of Change (%)
Sales	160,000	148,820	7.5
Operating income	12,000	8,567	40.1
Ordinary income	11,500	9,623	19.5
Net income	7,000	6,827	2.5

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

R&D Expenditure

(in millions of JPY)

	FY ended Mar. 31, 2014	FY ended Mar. 31, 2013	FY ended Mar. 31, 2012
Overall	1,563	1,481	1,539

R&D Structure

(in millions of JPY)

Division	Business in charge	Number of engineers	R&D cost
Development Div.	- Developing chassis, engine and drivetrain products - Developing technologies for the next generation - Managing intellectual properties	71 persons	924
Production Technology Dept. / Clay-modeling Engineering Department	-Conducting R&D work on new production technology -Conducting R&D work on new clay-modeling technology	101 persons	311
Production technology Dept., Technology Div., Kyushu Musashi Seimitsu Co., Ltd.	-Conducting R&D work on production technology for motorcycle and general-purpose gears, camshafts, etc.	38 persons	327

R&D Activities

Development of Chassis system components
-The Company has launched mass-production for its major customers' models, for the most part according to plan. It developed lighter-weight ball joints for models developed in FY ended March 2014. It is continuing to propose light-weight designs for models developed in FY ending March 2015 and after, developing and appraising specs and production methods making use of locally produced steel.

Development of engine system components
-The Company is working to enhance its cost advantages in order to expand its business operations in the area of camshafts, balance shafts, and other products for both automobiles and motorcycles, designing them to be compatible with advanced engines and individual customers' own specs.

Development of drivetrain system components

<Differential gears>
- As the nucleus of its prowess and expertise in making bevel gears smaller and more precise based on the shape of its proprietary three-dimensional gear teeth, the Company completed a series of light-weight, 2-pinion differential assemblies that ideally match the shapes of differential cases.

-The Company has expanded its business by commercially producing 2-pinion differential assemblies for its customers.
-The Company launched mass-production for new customers outside Japan for differential assemblies.
-Development of new technology specializing in making differential assemblies even lighter-weight and less costly.
-The Company is developing products with local specs suited to each region by making use of its Musashi Global Network, expanding local production.

<Planetary gears>
-Began mass-production of planetary gears as scheduled as a result of winning new orders from new customers.
-Further developing and winning orders for advanced planetary gear assy.

Development of advanced technologies

-In the area of elemental technology, the Company together with academia is jointly developing technology to improve the quality of surfaces based on tribology technology.
-The Company is conducting advanced development of power units, developing new products and technology for hybrid vehicles, EVs, and electric-powered mobility vehicles.

Development production technologies
-The Design department and Production department are developing new products built to achieve functionality and performance and improve productivity.
-For differential assemblies, strengthening local deformation processing of bevel gears.
-For processing differential cases, installing the latest, energy-saving and efficient production facilities in and outside Japan
-Setting up a global supply network for planetary assemblies.
-Set up environmentally friendly, seamless production operations for cold forging and machining; and new assembly lines outside Japan, which guarantee functionality of assemblies.
-In the area of clay-modeling, boosting capability of existing stamping machines to the maximum extent, working on developments as quickly as possible so as to be compatible with new skeletal transmissions being developed by customers.
-Using proprietary equipment for clay-modeling, reduced molding load by 30% and lowered both costs and investment also.

Contracts for Technical Assistance

(As of Mar. 31, 2014)

Name of the partner company (Country)	Product items	Contents of contract	Term
Musashi Auto Parts Michigan Inc. (USA)	Special parts customized and then produced at the time they are needed for vehicles, motorcycles, and general-purpose products	1. Technical assistance for production, assembly, and marketing of customized parts 2. Providing industrial ownership rights	1994.02.01-1999.01.31 Automatically renewed annually after the term
Musashi Auto Parts Co., Ltd. (Thailand)	Special parts customized and then produced at the time they are needed for vehicles, motorcycles, and general-purpose products	1. Technical assistance for production, assembly, and marketing of customized parts 2. Providing industrial ownership rights	1987.12.28-1992.12.27 Automatically renewed annually after the term
P. T. Musashi Auto Parts Indonesia (Indonesia)	Special parts customized and then produced at the time they are needed for vehicles, motorcycles, and general-purpose products	1. Technical assistance for production, assembly, and marketing of customized parts 2. Providing industrial ownership rights	1996.05.08-2001.05.07 Automatically renewed annually after the term
Musashi Auto Parts Canada Inc. (Canada)	Special parts customized and then produced at the time they are needed for vehicles, motorcycles, and general-purpose products	1. Technical assistance for production, assembly, and marketing of customized parts 2. Providing industrial ownership rights	1998.01.01-2002.12.31 Automatically renewed annually after the term
Musashi Hungary Manufacturing Ltd. (Hungary)	Special parts customized and then produced at the time they are needed for vehicles, motorcycles, and general-purpose products	1. Technical assistance for production, assembly, and marketing of customized parts 2. Providing industrial ownership rights	2001.01.01-2005.12.31 Automatically renewed annually after the term
Musashi Auto Parts India Private Ltd. (India)	Special parts customized and then produced at the time they are needed for vehicles, motorcycles, and general-purpose products	1. Technical assistance for production, assembly, and marketing of customized parts 2. Providing industrial ownership rights	2003.04.01-2004.03.31 Automatically renewed annually after the term
Musashi da Amazonia Ltda. (Brazil)	Special parts customized and then produced at the time they are needed for vehicles, motorcycles, and general-purpose products	1. Technical assistance for production, assembly, and marketing of customized parts 2. Providing industrial ownership rights	5 years from 2009.11.01-2014.11.01
Musashi Auto Parts (Zhongshan) Co., Ltd. (China)	Special parts customized and then produced at the time they are needed for vehicles, motorcycles, and general-purpose products	1. Technical assistance for production, assembly, and marketing of customized parts 2. Providing industrial ownership rights	10 years from 2006.0101-2015.12.31
Musashi Auto Parts Vietnam Co., Ltd. (Vietnam)	Special parts customized and then produced at the time they are needed for motorcycles and general-purpose products	1. Technical assistance for production, assembly, and marketing of customized parts 2. Providing industrial ownership rights	For an indefinite period from 2012.12.15
Musashi Auto Parts Mexico, S.A. de C.V. (Mexico)	Special parts customized and then produced at the time they are needed for vehicles and general-purpose products	1. Technical assistance for production, assembly, and marketing of customized parts 2. Providing industrial ownership rights	For an indefinite period from 2012.04.01

Capital Investment

(in millions of JPY)

	FY ended Mar. 31, 2014	FY ended Mar. 31, 2013	FY ended Mar. 31, 2012
Overall	24,314	22,907	18,182

-Breakdown of investments by region

(in millions of JPY)

Region	Respond to new models	Increase production	Streamline operations	Renew existing facilities	Total
Japan	1,590	1,450	-	-	3,816
North America	4,441	937	-	-	5,837
Europe	-	278	17	-	320
Asia	5,522	2,300	-	-	13,031
South America	791	-	-	140	1,310

Investments Outside Japan

<Mexico>
-The Company will start producing unit parts in Mexico in 2015. The Company will produce differential assemblies for suspension parts and planetary gears for continuously variable transmissions (CVTs). Honda Motor Co., Ltd., its major customer, has requested the Company to supply unit parts locally instead of supplying individual parts separately. To meet this requirement, the Company will supply unit parts assembled in Mexico. The Company is expanding production of assemblies globally, planning to boost production of differentials and planetary gears significantly by the fiscal year ending March 2017. The Company intends to improve profitability by expanding the sales of value-added unit parts. (From an article in the Nikkan Jidosha Shimbun on April 4, 2014)

<India>
-The Company will double its production capacity of automotive parts in India. The annual production capacity at the Bawar plant (in Haryana, northern India), will be doubled to 240,000 units in spring 2014 from current 120,000 units. Honda Motor Co., Ltd., its major customer, is planning to start up its second vehicle plant in India by the end of 2014. The Company has just started production of automotive parts in 2012. Following the production increase of Honda, the Company will boost production in India at an early date to supply parts to Honda locally. (From an article in the Nikkan Jidosha Shimbun on November 21, 2013)

Capital Investment Plan

(As of Mar. 31, 2014)

Region	Planned investment (in millions of JPY)	Major details and objectives of production facilities
Japan	3,100	Readying for production of new vehicle models, renewing existing facilities, streamlining operations
North America	2,100	Increasing production capacity for vehicles parts, renewing existing facilities, streamlining operations
Europe	800	Readying for production of new vehicle models, streamlining operations
Asia	14,000	Readying for production of new vehicle models, increasing production capacity for vehicle & motorcycle parts
South America	1,000	Renewing existing facilities, streamlining operations