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5. TS TECH Co., Ltd. Business Report FY ended 2015

Factors
1) Sales
-Even though currency translation was favorable due to the weak yen, orders from major customers in the Americas, China, and other countries decreased.

<Japan>
-In addition to fewer orders from major customers, sales in Japan were lower 15.5% y/y (JPY 88,677, including intra-Group sales), as a result of a decrease in sales of parts supplied from Japan to other parts of the world.
-The Company launched production of seats and interior products for the Honda Grace, rear-seats and interior products for the N-Box Slash, and seats and interior products for the Legend.
-The interior products business was consolidated at the Saitama Plant, with the launch of production at the new interior-products plant that will increase productivity and reduce logistics and administration expenses.
-The Company reorganized its operations in order to receive more product orders for minicar seats. It is conducting aggressive sales activities to win seat orders for more vehicle models, besides the seats orders it received for the Honda N-WGN and the rear-seats for the N-Box Slash.

<Americas>
-Favorable currency translation due to the weak yen offset a reduction in orders from major customers. Sales increased 2.4% y/y to JPY 219,814, including intra-Group sales.
-In Brazil, the Company launched production of seats for the Honda Fit, and seats and interior products for the City.
-In Mexico, production was launched at a new plant that serves as the supply hub for the Americas. In addition, the Company established a new sewing company in Brazil, which launched operations.
-The headquarters building at TS Tech Americas, Inc., which is the controlling company in the Americas, was expanded to increase business in the Americas and strengthen the sales and R&D functions.

<China>
-Due to the weak yen, currency translation was favorable. However, customer orders decreased, and as a result, sales were 5.2% lower y/y (JPY 98,652 million, including intra-Group sales).
-Production of seats and interior products for the Honda Odyssey were launched.
-Since labor costs are forecast to rise even further, the Company is working to automate production.
-In line with the city-redevelopment project in Guangzhou, the Company is preparing to relocate Guangzhou TS Automotive Interior Systems Co., Ltd.

<Asia, Europe>
-Even though customer orders increased in Indonesia, they were not enough to offset the huge decrease in customer orders in Thailand, and as a result, sales decreased 11.9% y/y to JPY 59,773 million, including intra-Group sales.
-The Company launched production of seats in Thailand for the Honda Jazz and Mobilio, seats in Indonesia for the Jazz, and seats in India for the Mobilio.
-Production of automobile seats in India was launched at the new, second production plant of TS Tech Sun Rajasthan Private Limited.
-TS Tech Hungary Kft. completed preparations for launching production of third-row seats for Volkswagen.

Major contracts in FY ended Mar. 2015

Mid-term business plan

-In working to achieve the objectives set under its 2020 vision, "INNOVATIVE QUALITY COMPANY", the Company announced its 12th mid-term management plan that starts from the fiscal year ending March 2014 and ends in the fiscal year ending March 2017. Under the plan, the Company set an objective to position itself as a global company from the fiscal year ending March 2015. It aims to increase sales to not only its current major OEM customers but also to other OEMs, i.e., to "increase other sales".

-The Company has received new orders for seat trim covers for passenger cars from Volkswagen AG (VW). The Company will supply the products in several regions and expects that this will generate annual sales of JPY 1.1 billion. In May 2015, the Company will start supplying seats for VW's next-generation SUV in Hungary. The newly ordered seat trim covers will be supplied for another model. This is the first order that the company received for an individual component from VW. The Company intends to increase the number of orders from VW for both individual components and seat assembly, capitalizing on this opportunity. (From an article in the Nikkan Jidosha Shimbun on January 30, 2015)

-From the fiscal year ending March 2016, the Company will settle its financial results based on the IFRS. However, its outlook for the fiscal year ending 2016 was calculated based on Japanese accounting standards.

Outlook:

• Japan: Favorable effects from launching new models; decrease in product orders due to a slowdown in automotive demand.
• Americas: favorable currency translation will increase earnings; lower automotive demand is forecast due to a slowdown in the Brazilian economy.
• China: increasing labor costs, worsening product/model mix
• Asia/Europe: economic growth in Asia, especially in India; reduction in orders in Europe due to customers transferring production facilities.

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

-R&D expenses in the fiscal year ending March 2016 are forecast to be JPY 13,000 million, a 0.8% increase y/y.

R&D Facilities

R&D Activities

Automotive Business
<Japan, Americas>
1) Safety technology
-In working to improve the performance of automotive safety features, the Company is analyzing information on seats and interior products based on safety regulations in every country, studies on assessments, and data on real-world collisions. Based on the results, the Company is working to develop products that offer greater levels of safety performance.
-The Company is creating products by conducting research on features that mitigate passenger impact from collisions coming from every angle; and on ways to prevent accidents by reducing drowsiness.

2) Environmental technology
-The Company is making products lighter in weight by developing environmentally friendly materials; integrating products based on optimum designs; and developing new, processing technology.

3) Technology responding to product appeal and comfort
-The Company is developing mechanisms that offer a myriad of easily adjustable seating positions, based on the customers' perspectives.
-The Company is developing parts for various electronic-control devices designed to provide safety and comfort.
-The Company is developing processing and decorating technology that create a feeling/sense of high quality.
-The Company is conducting fundamental research on physiology in collaboration with academia, as an initiative on the pursuit of comfort.
-As an initiative for creating new product innovations, the Company launched a companywide project that searches for "true appeal" demanded by users.

Product Development

-Proprietary R&D on ECUs: The Company successfully developed a mechatronical integration based on its expertise in developing seats.
-New, value-added lighting: area lighting, spot lighting (proprietary-design LED lamp), line lighting, color-changing line lighting (contains 3 color LEDs), and line lighting with moving lights.

-The Company plans to invest JPY 21,500 million (a 2.3% increase y/y) in facilities and equipment in the fiscal year ending March 2016.

<Japan>
-In August 2014, as a result of consolidating and reorganizing the interior-products business at the Saitama Plant, the company sold the plant land for JPY 505 million.

<Brazil>
-The Company will establish a trim cover production subsidiary in Brazil in May 2014. Trim covers are currently produced at TS Tech do Brasil Ltda. that mainly manufactures automotive seats and door trims. TS Tech do Brasil will spin off the trim cover business to form the wholly owned subsidiary. Production at the new company is scheduled to begin in January 2015. In addition to supplying its products to existing customers, the company will make proposals to potential customers in order to expand the Group's trim cover sales. The new subsidiary will be capitalized at BRL 26 million (JPY 1.1 billion). Investment in this project is expected to reach BRL 22.06 million (JPY 1 billion). (From an article in the Nikkan Jidosha Shimbun on April 28, 2014)

<North America>
-By expanding the plant building at TS Tech USA Corporation, the Company will be able to reduce costs by relocating warehouses and installing a new distribution system. Operations are scheduled to launch at the end of 2015.
-By expanding the plant building at TS Tech Americas, Inc., the Americas' headquarters, the Company will be able to strengthen its objective of "increasing other sales" by adding more sales and R&D staff.
-By expanding the plant building at TriMold, LLC., the Company will install new injection facilities, which are scheduled to be completed in the summer of 2015.
-By expanding the plant building at TS Tech Canada Inc., the Company will be able to consolidate production plants and improve efficiencies. The facilities are scheduled to begin operating in the fall of 2015.

<China>
-By relocating Guangzhou TS Automotive Interior Systems Co., Ltd., the Company will improve productivity and distribution efficiencies. The relocation is scheduled to be completed in July 2016.
-By expanding the plant building at Wuhan TS-GSK Auto Parts Co., Ltd., the Company will be able to automate production of, and switch to in-house production of, doors. The project is scheduled to be completed in May 2015.

<India>
-TS Tech Sun Rajasthan Pvt. Ltd. plans to increase its production volume 50% y/y, in line with growing automobile market.

<Hungary>
-From May 2015, TS Tech Hungary Kft. launched production, which will become the main business supplying VW.