ADVICS Co., Ltd. Business Report FY ended Mar. 2017

Recent Years

Business Overview (FY ended Mar. 31, 2016)

-In the fiscal year that ended in March 2017, sales rose 0.7% year-over-year, to JPY 555,400 million due to increased production levels of new vehicles at Japanese and non
-Japanese OEMs. Operating income fell 33.7% year-over-year, down to JPY 6,100 million because of the effect of negative currency translation.

Business Plan

-Toyota Motor Corporation (Toyota) announced that Aisin Seiki Co., Ltd. (Aisin), Denso Corporation (Denso), Sumitomo Electric Industries, Ltd. (Sumitomo Electric) and Toyota have agreed to increase the capital and adjust the share-holding ratio of Advics, Co., Ltd. (Advics), a brake manufacturer in Kariya, Aichi Prefecture. In September 2016, Advics will issue new stocks of JPY 10.338 billion through third-party allocation with Aisin, Toyota, and Denso underwriting the sale. At the same time Sumitomo Electric will transfer a portion of its holdings to Denso. As a result, Aisin's stake in Advics will change from 55% to 51%, Denso's stake from 18% to 34%, and Sumitomo Electric's stake from 18% to 6%. Toyota's stake will remain unchanged at 9%. The increased capital will be used to strengthen Advics' business foundation. (From an article in the Nikkan Jidosha Shimbun on May 2, 2016)

Contracts

-The Company announced that its 6-pot opposed aluminum brake calipers have been adopted for Toyota Motor Corporation's new Lexus LC500 and LC500h. The 6-pot brake caliper is the world's first to use a "center pin torque receiving structure." It dampens sound generated during braking. (From an article in the Nikkan Jidosha Shimbun on March 29, 2017)

-The Company is accelerating its development of new customers in Europe. The company received its first order from German Daimler AG for brake calipers, built a new plant in Czech Republic, and started supply in 2015. While early orders were only for the Mercedes-Benz GLC, Advics received further orders for the Mercedes-Benz E-class and AMG C43 by the summer of 2016. The company's German sales unit said that it has realized a weight reduction of 20% by using aluminum as the material for the brake caliper body instead of cast iron, and earned an excellent evaluation. The company is aiming to receive new orders for European luxury brand electrified vehicles, and started making overtures to Porsche AG and Audi AG. (From an article in the Nikkan Jidosha Shimbun on October 3, 2016)

R&D Expenditure

(in millions of JPY)

	FY ended Mar. 31, 2017	FY ended Mar. 31, 2016	FY ended Mar. 31, 2015
Total	18,000	19,300	19,000

Product Development

-The Company will draw a technology roadmap for the next 10 years in order to increase its development efficiency. The long-term plan is scheduled to be finalized by the end of 2016. Special focus will be placed on next-generation technologies and products for Advanced Driver Assistance Systems (ADAS) and autonomous vehicles, as well as those that can reduce environmental impact. The company believes that brake systems will hold a key to high performance ADAS, and will step up exploratory development for sophisticated brake technologies that can stop the car safely and can be integrated into the next-generation ADAS. (From an article in the Nikkan Jidosha Shimbun on April 20, 2016)

Capital Expenditure

(in millions of JPY)

	FY ended Mar. 31, 2017	FY ended Mar. 31, 2016	FY ended Mar. 31, 2015
Total	39,771	23,730	25,800

Planned Capital Investment

-In the fiscal year that ended in March 2017, the Company invested JPY 22,000 million in capital improvements for facilities and equipment to manufacture brakes and chasses.