Financial Overview

(in million JPY)

	FY ended Mar. 31, 2014	FY ended Mar. 31, 2013	Rate of Change (%)	Factors
Overall
Sales	38,972	35,493	9.8	-Increased production in North America and Asia; favorable currency translation due to weak yen.
Operating income	1,161	1,008	15.2	-Income increased due to cost-reduction initiatives and favorable currency translation due to weak yen, in spite of increased costs due to greater production volumes in North America.
Ordinary income	1,637	1,479	10.7
Current net income	192	(1,018)	-	-
Small engine valve
Sales	30,008	26,070	15.1	1)
Operating income	740	1,046	(29.3)	-
Variable cam phase, gears
Sales	4,603	4,674	(1.5)	2)
Operating income	273	(211)	-	-

Factors
1) Sales - Small engine valves
-Japan: Even though sales of engine valves for automobiles were higher than initially forecast, sales in Japan were lower due to sluggish sales of products destined for markets outside Japan.

-Asia: Sales were higher due to launches of new automotive products, strong motorcycle sales, and favorable currency translation due to weak yen.

-North America: Sales were significantly higher because of favorable currency translation due to weak yen and increased production levels due to a recovery in the market.

2) Sales - Variable cam phase, gears
-Variable valves: As of the end of the fiscal year that ended March 2014, income was higher due to greater sales of products for China, in spite of fewer orders due to model changes.

-Precision forged gears: Sales fell because the Company sold fewer products for mid- and large-sized models in Asia.

Recent Development Outside Japan

<USA>
-The Company is going to boost its capacity to produce automotive engine valves in the U.S. to 90 million units a year by early 2014, up 80 percent from the current level of 50 million units. The Company has decided to accelerate its original expansion plan to meet surging demand from Japanese OEMs' facilities in the American market since April 2013. To cover the shortage in local supply capacity, the Company has temporarily been delivering some products for the U.S. market from Japan, China and Poland. Early development of an optimum local supply structure will allow the Company to slash shipping costs. Expecting further growth in demand, Nittan Valve is mulling the possibility of raising the yearly production capacity to 100 million units in the future. (From an article in the Nikkan Jidosha Shimbun on May. 27, 2013)

Outlook for FY ending Mar. 2015

(in million JPY)

	FY ending Mar. 31, 2015 (Forecast)	FY ending Mar. 31, 2014 (Actual Results)	Rate of Change (%)
Sales	40,700	38,972	4.4
Operating income	2,400	1,161	106.7
Ordinary income	2,700	1,637	64.9
Net income	1,000	192	420.8

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

R&D Expenditure

(in million JPY)

	FY ended Mar. 31, 2014	FY ended Mar. 31, 2013	FY ended Mar. 31, 2012
Overall	616	716	696
-Engine Valve	366	365	174
-Variable cam phaser	132	244	379

R&D Activities

Small engine valves
-Small engine valves: Finalized sales awards for next-generation, coolant-encapsulated hollow valves designed to improve fuel efficiency as a result of their being built lighter but with greater heat-resistant performance. Production of the valves, which will be equipped on new engines developed by the Company's customers, has already started.

Variable cam phaser, gears
-The Company is developing variable valve timing mechanisms in order to increase their content ratio on new-type engines designed to continually improve fuel efficiency and comply with stricter exhaust-gas-emission regulations that will go into effect from 2020.

Valve lifters
-The Company is developing, prototyping, and testing roller rocker arms and hydraulic lash adjusters for new customers.

Technical Licensing-in Agreements

(As of Mar. 31, 2014)

Partner (Country)	Content of agreement	Project Period
Beijing Yoosung Shinhwa Automobile Part Co., Ltd. (China)	License agreement on lash adjusters	10 years from Dec. 7, 2006
	License agreement on mechanical tappets	10 years from Jan. 1, 2008
U.S. Engine Valve (Partnership) (USA)	License agreement on engine valves	10 years from Aug. 4, 2008
Nittan Euro Tech sp.zo.o. (Poland)	License agreement on automobile  engine valves	Five years from the day on which the products under agreement are first shipped. (agreement signed August 29, 2008)
PT. Federal Nittan Industries (Indonesia)	License agreement on small engine valves	5 years from Jun. 1, 2010
Shinhwa Precision Co., Ltd. (Korea)	License agreement on oil pressure valve lifters	5 years from Aug. 1, 2010
	License agreement on mechanical tappets	5 years from Dec. 5, 2012
Guangzhou Nittan Valve Co., Ltd. (China)	License agreement on engine valves	10 years from Apr. 1, 2011
Nittan (Thailand) Co., Ltd. (Thailand)	License agreement on small engine valves	5 years from Feb. 1, 2012
Nittan Vietnam Co., Ltd. (Vietnam)	License agreement on small engine valves	10 years from Jan. 1, 2013

Capital Expenditure

(in million JPY)

	FY ended Mar. 31, 2014	FY ended Mar. 31, 2013	FY ended Mar. 31, 2012
Overall	7,023	4,660	4,158
-Small engine valve	6,763	4,049	3,292
-Variable cam phaser	124	403	506

 
-Major capital investment toward Small engine valve business in FY ended Mar. 2014 are as follows:

Facilities	Amount of investment (in million JPY)	Description of capitalization
Small engine valves
The Company	1,211	Installation of additional equipment; and modification and rationalization of equipment to produce engine valves
U.S. Engine Valve (Partnership) (USA)	2,288
Nittan Vietnam Co., Ltd. (Vietnam)	1,119
Guangzhou Nittan Valve Co., Ltd. (China)	784
PT. Federal Nittan Industries (Indonesia)	660
Nittan Euro Tech sp.z o.o. (Poland)	522
Nittan (Thailand) Co., Ltd. (Thailand)	124

Investment Outside Japan

<USA>
-In February 2014, the Company and Eaton Corporation have announced their joint venture U.S. Engine Valve (USEV) will invest USD 40 million in engine valve manufacturing facilities in South Carolina and Nebraska over the next five years. The investment will result in the creation of up to 150 new jobs by 2016.

• Between 2013 and 2017, USEV will invest nearly USD 34 million in a 38,000 square-foot expansion, and new valve machining equipment and forge presses for its Westminster, S.C. facility. The Westminster facility expansion is underway and scheduled to be completed March 2014.
• USEV will invest an additional USD 6 million in Eaton's Kearney, Neb. facility to support expanded valve production.

Planned Capital Investment (Automotive Parts Business)

(As of Mar. 31, 2014)

Plant	Equipment to be installed	Estimated amount of investment (in million JPY)	From	To	Increase in production capacity
Headquarters (Kanagawa Pref., Japan)	Manufacturing equipment for engine valves.	530	2014.04	2015.03	Mainly to rationalize and renew facilities
	Manufacturing equipment for precision forged gears	110	2014.04	2015.03	Mainly to rationalize and renew facilities
Sanyo Plant (Yamaguchi Pref., Japan)	Manufacturing equipment for engine valves	1,420	2014.04	2015.03	Mainly to rationalize and renew facilities
PT. Federal Nittan Industries (Indonesia)	Manufacturing equipment for engine valves	530	2014.01	2014.12	Mainly to rationalize and renew facilities, increasing production capacity by 16%
U.S. Engine Valve (partnership) (U.S.A.)	Manufacturing equipment for engine valves	1,020	2014.01	2014.12	Mainly to rationalize and renew facilities, increasing production capacity by 14%
Nittan (Thailand) Co., Ltd. (Thailand)	Manufacturing equipment for engine valves	770	2014.01	2014.12	Mainly to rationalize and renew facilities
Guangzhou Nittan Valve Co., Ltd. (China)	Manufacturing equipment for engine valves	540	2014.01	2014.12	Mainly to rationalize and renew facilities, increasing production capacity by 50%
Nittan Vietnam Co., Ltd. (Vietnam)	Manufacturing equipment for engine valves	390	2014.01	2014.12	Mainly to rationalize and renew facilities, increasing production capacity by 30%