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5. Toyoda Gosei Co., Ltd. Business Report FY ended 2015

Performances for FY ended March 2014
1) Sales
-Sales increased 5.6% year-on-year and reached a new high. Sales of auto components grew due to increased vehicle production in North America, and due to greater sales to European and U.S. automakers, which the Company achieved through active marketing efforts. A weak yen also boosted the division's sales.

2) Income
-Operating income, ordinary income, and net income all decreased from the previous year's results. Profit was impacted by decreased vehicle production in both Japan and some emerging markets, a change in the Company's product mix, and up-front investment made during the year.

3)
-Sales at the automotive division increased 9.2% year-on-year. Growth was attributable to strong vehicle sales in the Americas and the addition of Toyoda Gosei Meteor GmbH to the Group's consolidated financial statements. These factors more than offset adverse effects such as sluggish vehicle demand in Japan after the April 2014 consumption tax hike and falling vehicle production in Thailand.

Acquisitions

-The Company announced that it completed the acquisition of Meteor Gummiwerke K.H. Baedje GmbH & Co. KG, a Germany-based automotive rubber products manufacturer, effective April 30, 2014. The assets of Meteor, which include plants, equipment, employees, and patents, were integrated into newly-established Toyoda Gosei Meteor GmbH (TG Meteor). Through this acquisition, the Company has expanded business with European automakers, supplying weatherstrips to Daimler, BMW, and Audi. Sales at TG Meteor are expected to reach JPY 20 billion in fiscal year 2014. (From an article in the Nikkan Jidosha Shimbun on May 22, 2014)

Strengthening production structure in North East Japan

-As of first of April 2015, TG East Japan Co., Ltd. changed its name to Toyoda Gosei East Japan Co., Ltd.

-The Company set up a new plant in Kurihara, Miyagi, Japan and started producing weatherstrips, glass runs and airbags in June 2015. TG East Japan moved its headquarters in Osaki, Miyagi Prefecture to the new plant. Previously, the company assembled parts at a satellite workshop located at the Iwate plant of Toyota Motor East Japan, Inc., in Kanegasaki, Iwate. The new plant will be Toyota Gosei's first full-scale manufacturing base in northeastern Japan to increase its supply capacity. The total investment will be JPY 2.9 billion. The Company hopes to increase the subsidiary's annual sales to around JPY 5 billion by the fiscal year ending in March 2019.

Strengthening production structure in Central and South America

-FY ended March 2015:

• GDBR Industria e Comercio de Componentes Quimicos e de Borracha Ltda. in Brazil started operation as the Company's first production location in South America.
• Toyoda Gosei Rubber Mexico, S.A. de C.V. started production.
• Established Toyoda Gosei Irapuato Mexico, S.A. de C.V. which supplies Interior and Exterior parts.

Contracts

-FY ended March 2015:

• Developed the world's first "lacquer black plating" technology for plastics which increased the darkness of the black color by about 30% compared with the existing dark plating. The technology was first applied to the radiator grille of the Lexus "RC F" of Toyota Motor Corporation,
• Developed "Hydrogen tank liner" for high pressure hydrogen tank, and supplies to Toyota's "MIRAI".

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

-FY ending March 2016, the Capital expenditure is planed to be JPY 32,000 million.

R&D Structure

-R&D activities are conducted globally through cooperation among several organizations within the Company: the R&D center; Production technology development center; Opto Electronics business engineering department, Engineering departments at each business segment outside Japan, namely Toyota Gosei North America Corporation, Toyoda Gosei Asia and Toyota Gosei Europe (Europe & Africa).

<China>
-The Company announced that it has relocated and expanded Toyoda Gosei (Shanghai) Co., Ltd. ("Shanghai TG"), its development base in Shanghai, China. The subsidiary was moved to a new site, which is four times as large as the previous site, in the same city. By adding a testing area to the new facility, the Company has localized its evaluation operations to test materials and products, which had been performed at its facilities in Japan or outsourced to other companies in China. JPY 300 million was invested in this project. By expanding the local subsidiary's development function, the Company aims to meet the needs of automakers more promptly. Shanghai TG plans to increase the number of its engineers by 50% to approximately 50 by March 2018. (From an article in the Nikkan Jidosha Shimbun on January 14, 2015)

R&D Facilities

Product Development

Low loss semiconductor device for high power applications
-The Company has developed low loss semiconductor device technologies for high power applications in switching transistors and rectifiers. These technologies use gallium nitride, which is a key material in blue LEDs and shows superior property in withstanding high voltage. The Company's new low loss metal-oxide-semiconductor field effect transistor allows electric current to flow only when a signal is given to the switch; otherwise no current flows even under high voltage of 1200 V. Application of the new technologies to devices such as power control units used in hybrid vehicles is expected to reduce the size and improve efficiency of the units. (From an article in the Nikkan Jidosha Shimbun on May 23, 2015)

"Lacquer black plating"
-The Company has developed the world's first "lacquer black plating" technology for plastics. The technology was first applied to the radiator grille of the Lexus "RC F" of Toyota Motor Corporation, and the Company has begun supplying the lacquer black plated radiator grilles to Toyota. Previously, in order to add a lustrous jet-black color to automotive parts, a clear smoke coating was applied after the plating process. This method, however, has disadvantages in durability; the clear coating deteriorates over time, decreasing the shine, and it can be chipped or damaged by flying gravel. To overcome these disadvantages, the Company has developed a novel plating solution. The lacquer black plating with the new plating solution increased the darkness of the black color by about 30% compared with the existing dark plating. The Company has successfully produced a lustrous and beautiful black color by only using plating. At the same time, the Company has increased the durability of the plating and successfully received orders. Radiator grilles for the Lexus "RC F" are plated at the Company's Kitakyushu plant located in Yahatahigashi-ku, Kitakyushu City. (From an article in the Nikkan Jidosha Shimbun on October 29, 2014)

Plastic water pipe
-The Company announced that it is mass-producing integrally molded lightweight water pipes made of plastic. Production began at the Company's main plant in Kiyosu, Aichi Prefecture, which has become the first facility that introduced a water-assisted injection molding method in Japan. The water-assisted injection molding method allows for forming plastic pipes with intricate curves. The plastic pipes can replace conventional metal water pipes used in the engine room, while reducing product weight by approximately 40%. The new water coolant pipes are already used on the Toyota Lexus "NX" released in July 2014. The Company has received inquiries about the new technology also from other companies, and expects to win orders from various automakers. (From an article in the Nikkan Jidosha Shimbun on August 27, 2014)

Licensing Contract

-The Company and Osram GmbH announced that they have extended their agreement which allows the companies to use each other's patents for specific light emitting diode (LED), including white LED, and laser technologies. The new agreement extends the scope of the patents covered by the original 2007 agreement, to include patents filed after the execution of the original agreement. (From a press release on October 7, 2014)

-The Company spent JPY 63,400 million for Automotive Parts Business in order to produce new products and increase the production capacity at plants, mainly overseas.
-For FY ending March 2016, capital expenditure is planned to be JPY 51,000 million over all (JPY 49,100 million for Automotive Parts Business).

Investments Outside Japan

<USA>
-The Company announced that its North American subsidiary, TG Fluid Systems USA Corporation (TGFSUS), has held an opening ceremony for a new plant called Big Brighton Plant in Brighton, Michigan, USA. Approximately USD 10.6 million (JPY 1.3 billion) will be invested in the new plant, which manufactures plastic fuel tubes for fuel tanks and engine-related parts. It covers a land area of approximately 76,900 square meters and a floor area of 16,600 square meters. TGFSUS have been producing plastic fuel tubes at its two plants in Brighton and Howell. The Company plans to integrate production operations at the two plants into the Big Brighton Plant by 2017. (From a press release on May 13, 2015)

<Mexico>
-The Company established a new manufacturing company, Toyoda Gosei Irapuato Mexico, S.A. de C.V. (TGIMX), in Irapuato, Guanajuato State, Mexico, for producing plastic interior and exterior parts. TGIMX was capitalized at USD 46.8 million (JPY 4.7 billion). The new company will start operations in April 2016. TGIMX is expected to generate net sales of JPY 9 billion in the fiscal year ending in March 2020 (FY 2019). The Company secured a 150,000-square-meter plot of land in Castro del Rio Techno Industrial Park, in Irapuato, and a 37,000-square-meter plant will be constructed on the land. The construction will start in October 2014. The plant will be equipped with resin injection-molding machines, coating facilities, and other equipment. The investment in TGIMX will amount to USD 67 million (JPY 6.7 billion). This new manufacturing plant will supply radiator grilles, console boxes, and other plastic parts to automakers that assemble vehicles in the U.S. It plans to recruit 280 employees in FY 2019. (From an article in the Nikkan Jidosha Shimbun on September 20, 2014)

<India>
-The Company will open a new automotive rubber hose plant in India in autumn 2015. The Company and Uno Minda (Minda), a major Indian automotive supplier, will establish a joint manufacturing company, Minda TG Rubber Pvt. Ltd., in the state of Haryana, northern part of India. A total investment is JPY 1.2 billion. The Company has been supplying rubber hoses including brake hoses and fuel hoses from its plants in Japan and Thailand to India. By producing these components locally, the Company intends to boost its competitiveness in India. The new plant is scheduled to start operations and supply the products to automakers including Toyota Motor Corporation and Suzuki Motor Corporation in September 2015. It also hopes to receive orders from Indian car manufacturers in the mid-to long-term. The new company is expected to generate revenue of JPY 1.7 billion per annum by the fiscal year ending in March 2020 (FY2019). (From an article in the Nikkan Jidosha Shimbun on December 9, 2014)