No.1922017.1

What we have built till today mirrors our future.

Contents

No.192 Casual Ramblings No.159 (Mr. Satoru Iwata and Mr. Tamotsu Fujioka) ………… 1 - 2How the Company Was Born …………………………………………………………… 3 - 6New Year's Greeting/Pre-Entry Training ………………………………………………7 - 10FY2016 1st Half Financial Results ……………………………………………………… 11Factory Tour for Institutional Investors/Compressor Business Expansion in the Australian Area………………………………………………………………………………… 12Thanksgiving Festival Commemorating the 90th Anniversary of ANEST IWATA's Foundation ……………………………………………………………………………… 13 - 16

Introduction to AI-BR in Brazil …………………………………………… 17 - 18Global Conference 2016 ………………………………………………… 19 - 20Call for Articles …………………………………………………………………… 21Editors' Comments ………………………………………………………………… 22Report on In-house Sports Club Activities ……………………………………… 23

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　No.192 2017.1

A hundred and twenty-four days in fiscal 2014, a hundred and fifty-three days in fiscal 2015 and a hundred and three days as of the end of December of this year. These are the numbers of days that I spent on business trips overseas. Since I travel a lot on business, which I am not sure is a good thing or bad thing, I get many opportunities to meet business associates across the globe. I have just returned from an around-the-world business trip, which has now become my year-end annual event.

I spent a total of 13 days attending the meetings of six companies in four countries: the U.S., Brazil, Germany and India. The staff of the companies in the U.S., Brazil and Germany, who could not take part in the thanksgiving festival held in Japan to commemorate the 90th anniversary of ANEST IWATA's foundation, threw parties to celebrate both the 90th anniversary and Christmas with their family members. So I joined them.

I had discussions with people from a total of 10 companies (including those under the control of the Coating Division) on these year-end occasions, and we dined and wined together and talked about a lot of things. I suppose that a total of more than 250 people gathered. The companies I visited vary in the level of involvement with ANEST IWATA and the number of years they have spent doing business with us. Some companies have a long business relationship, like the North American joint venture partner with which we have conducted business for 30 years, and some are relatively new partners like the Brazilian company. Despite these differences, though, the people who attended the parties all seemed to be proud of the milestone of the 90th anniversary and having a good time. From their attitude, I felt their profound love for ANEST IWATA.

The party in the U.S. was held in Cincinnati, and a lot of people travelled long distances to attend, including the owners of ASET which we commission to market our spray

guns in the North American automotive repair market and the management members of AI-MD, a subsidiary for selling airbrushes that I was in charge of before. The fact that these people spent many hours on travel just to join the party delighted me more than having been able to see them for the first time in four years.

My latest trip made me realize once again that we have wonderful business partners, which is the key to our business growth.

The number of companies we deal with has been increasing every year; some are longstanding partners and some are quite new. In business, we do not always agree with each other. Sometimes we get frustrated by a business partner, and other times we frustrate them. It seemed that none of the people who attended the parties came just out of obligation. I felt that they were there to celebrate the occasion from the bottom of their hearts and have a good time with friends. I guess that their attitude reflects the pride and loyalty that they have for their companies. The more strongly they feel about their companies, the better and stronger the companies can become. So we should not see our three keywords - Only ONE, Number ONE (No.1) and ONE ANEST IWATA - just as a superficial slogan. If every one of us has a common goal and a deep passion, we will definitely be able to celebrate the 100th anniversary in a great atmosphere. My around-the-world business trip was a tough one but very meaningful as a year-end event.

By the way, I have heard that this article will appear in the January 2017 issue of our company newsletter.

So I would like to send my New Year's greeting to you all.Let's work together to make the year 2017 splendid for all

of us!I will cherish what I felt during my last trip and devote my

energies to bolstering our existing partnerships even more and finding new ones.

Happy New Year!We are now at the beginning of a new year, starting the process

of moving forward from the 90th anniversary of foundation to the 100th anniversary. I reflect on what ANEST IWATA will be like in 2026 when it marks its 100th anniversary.

Looking back at 1985, when I joined the company, the International Science and Technology Exposition was held in Tsukuba Science City based on the concept of "Dwellings and Surroundings - Science and Technology for Man at Home," which drew 20.33 million visitors from across the world. This was the time when Japan was exploring new areas of science and technology as the economic growth driven by the key industries of automobiles, machinery and electronics slowed down and Japanese manufacturers began to shift from export to overseas production because of trade friction. At the time, the microelectronics revolution that exploited computers and robot technology gave birth to automated factories. The words "Made in Japan" became a synonym of high quality, and products such as TVs, VCRs, Walkman players, motorbikes and passenger cars took the world by storm, a trend symbolizing "Japan as Number One."

In the next 10 years or so , during which the company implemented corporate identity and changed its name to ANEST IWATA Corporation, we brought to market a number of industry-impacting products, such as oil-free scroll compressors, oil-free scroll vacuum pumps and resin piston compressor, in the current air energy field alone. Having been able to take part in the development of these products has built the foundation for what I am doing today. Then came a wave of globalization, an era of manufacturing process automation, changing employment systems and ever increasing focus on cost. Our company faced this ruthless tide of globalization, as many others did, and overcame it.

In the past 10 years, when I speak with people outside the company and students, I have heard many of them express their aspirations to get involved in "monozukuri" (manufacturing). "Monozukuri" is a purely Japanese word.

It not only refers to the act of production but also involves added values such as Japan's technology and spirit as well as highly sophisticated procurement and production techniques. A fancy word, "monozukuri" seems to be abused to mean something abstract that is often confused with the "manufacturing industry." Our line of business is manufacturing. We are a manufacturer and a Japanese-style company that is capable of "monozukuri." Since we are not in the raw material industry, I think we should support our industry and preserve the environment by supplying our products widely in society.

Since several years ago, Industry 4.0, called the fourth industrial revolution, has been underway mainly in Germany. "Smart factory" is its keyword. Factories are one of our major markets, so this is something we are going to have to face.

What will society be like in 2026 when our company marks its 100th anniversary of foundation? Assisted living robots may be in widespread use, China may rival or surpass the U.S. in economy and our corporate activities may change substantially. We may speak English as the official corporate language, and project-based business involving freelance workers may be common. In 2025, a mandatory retirement age of 65 will be fully enforced. In Yokohama City, where our head office is located, an effort is going on to invite an international garden/flora exposition in 2026, and the city government is considering introducing new transport systems called light rail transit (LRT) and bus rapid transit (BRT) to receive an estimated 15 million visitors during the six-month period of the expo.

It may be that our company has never had a genius. But we have had a lot of people who achieved innovation by seeing through the true nature of changes of the times and creating appropriate concepts through effective frameworks based on our corporate culture.

The countdown has already started to the 100th anniversary that we will have to celebrate successfully. Now, what are we going to do?

Love for ANEST IWATA

100th Anniversary of Foundation and the World of 2026

No.159

Mr. Satoru Iwata (Chief of the Business Strategy Office, Air Energy Division, ANEST IWATA Corporation)

Mr. Tamotsu Fujioka (General Manager of the Air Energy Development Department, ANEST IWATA Corporation)

The two men to the right of Mr. Iwata are Bill and Ray of ASET.

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■ Integration of factories and reinforcement of the national sales networkAt the beginning of 1965, our country tumbled into a recession, which

would be called the 1940 recession (stock market slump) later. Many corporations in our industry went bankrupt because of the slumping economy. Iwata Air Compressor Mfg. Co., Ltd. had to tighten its management policy and promote the streamlining.

The biggest issue was to integrate the production facilities dispersed between two factories - Tsunashima Factories No.1 and No.2. It was expected that, by integrating all the facilities into Factory No.2, the company would

be able to reduce management cost and inventory and promote environmental measures.

The construction work for the integration started in August 1965, and the movement of equipment from Factory No.1 began in February the following year and finished in November of the same year. At the new factory site, a separate building was constructed for every product category (spray guns, air compressors, coating facilities, etc.) to boost productivity for each of these products significantly. Also, the company built a "general technology center" to enable more advanced research and development activities.

In order to conduct sales activities more aggressively, Iwata Air Compressor

Mfg. Co., Ltd. absorbed two firms in the Kansai and Kyushu regions - Iwata Coating Equipment Corporation (Osaka City) and Kyushu Iwata Coating Equipment Corporation (Kita-Kyushu City) - both established jointly with Umei Industry Co., Ltd. The two firms became Osaka Branch in October 1966 and Kyushu Sales Office in April 1968, respectively. Kyushu Sales Office was relocated to Fukuoka City in August of the same year, and its name was changed to Fukuoka Sales Office.

Setting up these two branches brought about huge effects not only in cutting on commissions but also in boosting sales and improving after-sales service.

■ Entry into the medium-sized air compressor marketAs industrialization progressed, the trend of air compressor demand began

to change in the mid-1960s. While compact air compressors had been most popular until then, demand for medium-sized air compressors with larger capacity was growing. Iwata Air Compressor Mfg. Co., Ltd. started the development of medium-sized air compressors around 1965. In the medium-sized air compressor market, however, there was fierce competition, with pioneering major manufacturers in dominant positions. So they laid out a development strategy based on the results of intensive marketing researches, including those conducted abroad, with the focus on air-cooled models. For the development, the company purchased a piece of land next to Yokohama Factory and completed the construction of a factory dedicated to medium-sized air compressors in 1968. This factory was put into full-scale operation in the fall of 1969, launching mass production.

■ Foray into overseas marketsBy the mid-1960s, Iwata Air Compressor Mfg. Co., Ltd. had started to ship

its products to 20 countries in the world. Particularly, its spray guns were well received in Taiwan, and its small-sized air compressors in Thailand. With the company completely tied up meeting the demand of the domestic market, however, the foray into overseas markets remained an issue to be considered.

At the time, the most appealing market for the company was Europe. In 1965, they exported wider spray guns to European nations, such as Finland, Sweden and Denmark, where very positive market feedback was gained. Moreover, the popularity of these guns provided a foothold for marketing in Belgium and the Netherlands as well. Based on these circumstances, the company came to the conclusion that it should open a resident office in Europe to establish a sales network. In October 1968, a local subsidiary called Europe Iwata was established in The Hague of the Netherlands (Den Haag). Two employees were dispatched to this subsidiary and started to market coating equipment and air compressors.

After dealership agreements were signed with 10 local dealers and actual sales activities began, however, problems surfaced that could not be identified through the marketing researches. As in Japan, coating jobs were unpopular because they were considered difficult, dirty and dangerous (a situation that is referred to as the "3K problem" in Japan). The quality of workers engaged in these jobs was extremely low, and coating equipment was handled poorly. Unfortunately, Iwata Air Compressor Mfg. Co., Ltd. was focusing on the development of medium-sized air compressors at the time, which consequently derailed its effort to develop products that would suit the

MCB-15

Shinyoshida Factory

How the Company Was Born- Looking Back 90 Years Ago - Part 3

Inside of the medium-size compressor factory at the time

Continued from the previous issue(No.191) ＞＞＞

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2017.1　No.192

needs of the European markets, stalling the local sales activities. In July 1969, Europe Iwata was closed down.

This attempt to do business in Europe, however, gave the company a deep understanding of the markets there and allowed it to acquire local dealerships. These provided vital experiences that would form the foundation for future overseas expansion. Twenty years later, the experiences paid off in a big way.

■ Construction of a new coating equipment factoryAs the land surrounding Yokohama Factory was designated as an

urbanization control area in 1969, Iwata Air Compressor Mfg. Co., Ltd. began a nationwide research to find a site for a factory dedicated to coating equipment and air compressors besides Yokohama Factory in anticipation of a future increase in demand.

From several candidate sites, the company chose the premises of Fujiki Junior High School located in Omagari City (now Daisen City) of Akita Prefecture that was planned to be closed down. They decided to construct a coating equipment factory there.

In October 1972, the new factory was established as Tohoku Iwata Coating Equipment Co., Ltd. (later renamed Akita Iwata Coating Equipment Co., Ltd.; now Akita Factory of the Coating Division) with a capital of 50 million yen. Ever since, the factory has continued steady growth not only to become a central site for the production of our spray guns but to function as the technical backbone for spray gun production overseas.

■ New management team to get through a recessionOn May 29, 1973, Iwata Air Compressor Mfg. Co., Ltd. carried out a

management shakeup, including the change of the president. Sukezo Iwata, who had headed the company in place of the first president, Hatsutaro Iwata, since 1965, stepped down to serve as the chairman, and Kazuya Iwata, the then senior managing director, became the new president. As the new president took office, the company announced a three-year management plan, its first ever.

The economic environment surrounding the new management team was not very favorable, however. On the contrary, the company was facing a life-and-death crisis when they got started. In October 1973, the first oil shock hit our country's economy overheated due to the so-called Japanese archipelago remodeling plan. The coating equipment market shrank substantially, and the company experienced runaway inflation.

The drastic organizational reform was intended to respond to these changes. The first thing that was done was to shift several departments, mainly R&D and production departments, to a divisional structure consisting of the coating equipment division and air compressor division, thus allowing the company to meet market needs for specific products quickly. Secondly, the company made the production engineering department an independent organization so that it could handle all kinds of product. Around 1973, the economic landscape grew even darker, sending Japan into a period of low growth from the high-growth period that had lasted for many years, and the nation's economy found itself in difficult times.

In order to rev up its business performance, which had started to falter,

Iwata Air Compressor Mfg. Co., Ltd. took a series of measures such as relocating excess labor to support sales and reducing personnel. In fact, the company did everything it could. It was through these frantic blood-sweating efforts that IWATA survived the nightmarish 1975-1976 period during which company after company went bankrupt.

The five years after the oil shock were a time of trial and endurance.

■ Launch of Fukushima IwataWhile making all-out efforts to get over the recession, Iwata Air

Compressor Mfg. Co., Ltd. was also accelerating the establishment of three domestic factories to prepare for the future need to increase production. In particular, the relocation of the air compressor machining and assembly departments, which occupied the majority of the floor space of Yokohama Factory, was seen as the key to a future increase in production. Of the several candidate sites, one met all the site conditions - availability of industrial water, electric power and labor and the convenience of logistics - which was Yabuki Town in Shirakawa County, Fukushima Prefecture.

In September, 1975, Fukushima Iwata Coating Equipment Co., Ltd. (now Fukushima Factory of the Air Energy Division) was founded with a capital of 80 million yen. Fukushima Factory, where small-sized air compressor were manufactured, was furnished with NC lathes, machining centers and other state-of-the-art facilities including the latest automated production lines in order to survive cutthroat price competition.

The capital of the factory was increased to 300 million yen in 1978, and the second phase of construction work began in April 1981. As the construction of production facilities (air tanks, coating lines and assembly lines) was completed, Fukushima Factory was put into full-scale operation as a small-sized air compressor factory in October. With a production capacity of 3,000 units per month, the factory first produced the N series small-sized air compressors and then the P series.

■ Introduction of factory automation (FA)One problem that plagued our nation's industrial sector at the time was

shortages of human resources resulting from workers avoiding so-called "3K" jobs. Coating jobs were also seen as "3K," and it was imperative for Iwata Air Compressor Mfg. Co., Ltd. to introduce factory automation (FA).

To address this situation, IWATA formed a business alliance with Mitsubishi Heavy Industries, Ltd. and jointly developed Japan's first coating robot "AR-62." In August 1975, the company brought to market this new robot, which earned a good reputation not just in Japan but abroad as well.

In 1980, IWATA launched the "AR-63," the world's first coating robot equipped with a microcomputer-based data processor. This was followed by the MRP series released in 1982, which was the first microcomputer-controlled coating robot in the world. In 1985, the company unveiled the MRP-400 series, the world's first electric direct teaching robot. The coating robots developed by IWATA gained high acclaim because, when combined with facilities such as conveyors and driers, they enabled the provision of comprehensive solutions to customer needs for automated coating. Since then, these robots have been improved continuously as the foundation for the expansion of the company's coating facility business.

Article in No.70 of our company newsletter

Fukushima Iwata

Production line in the factory

AR-62 coating robot (hydraulic type)

Appearance of Tohoku Iwata’s factory

Completion ceremony for Tohoku Iwata’s factory

I extend my congratulations to you all as we usher in the new year of 2017. First of all, I would like to thank you for the generous support and devotion you gave to the series of events held to commemorate the 90th anniversary of our company's foundation last year. Also, as the president , I would like to express my profound appreciation for your understanding of our management policy and your hard work.Thank you very much.

President　Takahiro Tsubota

On the reform of our corporate culture

■ What we have accomplished

We need to work harder to improve our business performance. On the other hand, though, I feel that little changes for the better are taking place thanks to the corporate culture reform that we have been pushing ahead since last year although we are still halfway through.

In my New Year message of last year, I mentioned what a then outside director told me. Let me quote his words here once again.

"Regarding the formation of an ideal company, there are some things I can say from my experience of getting involved in the management of a number of companies. First, employees respect their superiors. Second, the superiors trust their subordinates. Third, employees can proudly speak of their company and products to their family. These things are common to every excellent company that I have seen. Of course, the higher the wages, the better. But I don't think that is all that matters." His words struck a deep chord in my heart, and I decided to launch a reform of our corporate culture.

Most of the measures we have taken are low-profile. They include: Promoting the reuse of Yokohama Head Office's resources and improving the office work environment; Stepping up the efforts to achieve work-life balance by prohibiting unpaid overtime work and requiring employees to get permission when they need to work overtime; Actively hiring new graduates and mid-career workers and promoting the hiring of contract workers as ful l -t ime employees ; Reviewing our excessively flat organization, adopting a team system and transferring a wider range of authority; Improving the unregulated "free-address" office system; Relaxing the restriction on the use of minicars as company cars. In addition to these measures, we have worked to reinforce the sense of collaboration with our labor union for the growth of the company.

The views and opinions about the progress of this corporate culture reform may vary for every one of you. But I have gotten positive feedback from the outside directors, as well as an employee who returned to our

company in last November from a temporary assignment at another company, who said: "Compared to before I got transferred, the company is clearly changing for the better."

Also, in the past few years, the turnover rate of new recruits was approaching 30% in three years, as high as that of the average company. In 2015 and 2016, however, we saw the turnover rate of new recruits improve significantly. This may also be a sign of change.

We will continue to push forward the reform efforts that we find necessary through consultation with you. For example, we intend to establish communication spaces at the factories in Fukushima and Akita, open Anest-Iwata Café and Anest-Iwata Bar to support and step up communication promotion activities, make the work environment and systems more friendly to employees, especially female ones, and continue the active hiring of human resources and promote and bolster the overseas training system for younger employees. We are going to think out of the box and lead other companies as we move forward on our corporate culture reform.

■ Need to continue with the reform

Of course, implementing these culture reform measures costs us money. For example, keeping raising base pay, beefing up human resources, hiring contract workers as full-time employees, having employees get permission to work overt ime and establ ish ing communication spaces will definitely add to our costs. They may even reduce our revenue. Many corporate leaders and institutional investors may criticize these

measures as a contradict ion to the profit-driven management style. However, what we need to do now, a t ime when shortages of human resources a re accelerating, is to get back to the corporate philosophy that the founding family cherished - that is, see the company as one large family, put employees before everything else and work with them to prosper together. I want you to understand that behind these reform measures lies my strong aspiration to see all of you to work as one to boost sales and profits so that our company will mark its 100th year, or even 110th year, in business.

Let me remind you, however, that culture reform is not "deregulation." To repeat what I have said, this reform is intended to ensure that our company continues to grow while placing emphasis on your work-life balance. I want you to know that you should work smart to bring out your best within the limited working hours, and consequently contribute to increasing our sales and profits. The company is a family for us, and that means every member needs to fulfill their roles, just as with your own family. If you just keep demanding what you want, only costs will go up and the family - that is, the company - will fall apart. I think that is plain to see for everyone.

■ To share the vision

In order to share the corporate philosophy, action guidelines, key strategies and business performance data, we currently hold briefing sessions at the head office during the working hours over a two-day period to explain our quarterly business results, assessments of the departments, policies for the necessary reform activities and so forth. These sessions are broadcast live to Akita Factory and Fukushima Factory via a web system so that more employees can listen to what we have to say. To staff members of the domestic branches and sales offices of AICP and AICS and those working abroad, however, the information presented at these briefing sessions is available only in written form. I am well aware that the president of each company tries to complement the distributed documents with additional information as needed. But, as a result of this, I occasionally feel that

there is a difference in the level of understanding as to our strategic goals and corporate culture reform between the people of these companies and expatriate employees and the members of the head office and the two factories. Of course, I know I am the one who is to blame. To improve this situation, therefore, I am going to visit the three branches and two sales offices on a quarterly basis and hold a briefing session at each of those locations, beginning in this quarter. Such a session will be conducted twice a day at each location or outside the working hours so that sales activities are not affected.

For employees working abroad, similar sessions will be held when the General Managers of the two divisions and Business Administration Department and I make overseas business trips.

Toward the 100th anniversary

■ Three keywords

The current mid-term business plan cites three keywords for turning ANEST IWATA into a "True World-Class Company." As you well know, they are: ① ONLY ONE, ② NO.1 (NUMBER ONE) and ③ ONE ANEST IWATA.

I have already explained about this basic policy on many occasions, so I am not going into detail here.

Based on the basic policy, we will continue to work with integrity to celebrate the coming 100th anniversary. One thing I want you to understand is that implementing this basic policy requires you to change your way of

working and thinking in line with the times. If we just keep doing things in the next 10 years in the same way we have done in the past without making any big change that is necessary, we will not be able to survive to mark our 100th year in business. I want all of you to bear this in mind.

■ What we can do in the next 10 years

For example, take a look at some of the events that took place last year - the UK's exit from the EU, the presidential race victory of Mr. Trump who was considered a minor candidate in the beginning and the ensuing appreciation of the yen. All these things overturned the predictions by experts and assumptions of the public. We have long relied on the opinions of experts and newspaper reports and editorials in making a judgment . From now on, when we think about something, we will have to keep in mind that we cannot take what experts say at face value any more. Although some of the expert views may be informative, things may not necessarily turn out the way they predict. We should be aware that no answer is written on pages of The Nikkei or an economic magazine or in a result list of a search engine.

In other words, in this increasingly chaotic world, we need to see what lies ahead of a corner ourselves and decide on our own as we move forward.

Our main line of business falls into the category of so-called mature products. Will coating jobs still exit 10 years from now? What kind of added value should we create so that coating jobs continue in existence and

evolve? How should we develop and change markets to ensure air compressors that consume large amounts of electric energy remain in general use 10 years from now as more machinery and equipment become motorized? Unless we find the way to survive ourselves, we will not be able to become a 100-year-old company. Or worse, there is even a chance that our company may perish.

To avoid that , the executive officers and senior management members are determined to make every effort to explore ways to keep our company in business. At the same time, I want those of you who are in their 20s to 40s to understand that you should think seriously about this as your own future issue. In the 100-year-old company that we are aiming to become, you will play the key role. Unless you understand this, there will be no future for our company. It is your efforts and a change in your awareness that drive our company toward its 100th anniversary - and 110th anniversary.

Conclusion

I may have used a tone that is a little too harsh for a New Year message.

I am confident, however, that working with you all to overcome these challenges will help our company survive and grow, enabling its stakeholders, particularly its employees, to lead stable lives.

The primary intention of my New Year message is to make you understand this. I really look forward to working with you again this year.

January 2017Preface

We are already three quarters through fiscal 2016.Compared to fiscal 2015, when we posted the highest

profits in the history of our company, we suffered losses in revenue and earnings in the first half of the current fiscal year. These results were unsatisfactory especially when we were celebrating the company's 90th year in business. As you know, the major reason for this setback is the sharp appreciation of the yen resulting from the UK's decision to leave the EU following the British referendum that took place on June 23 of last year.

In the third quarter, after Mr. Trump was elected to

be the next president of the U.S., the value of the yen fell, beating the market projections. Nevertheless, the situation has been such that we cannot say that our consolidated sales and revenue have improved from the first half of the fiscal year.

All that remains of fiscal 2016 is the fourth quarter. The members of management and those in management positions are determined to lead the company to ensure that the final business results of fiscal 2016 are good enough for us to proudly mark the 90th anniversary of our company's foundation. I sincerely look forward to your active support.

Happy New Year!New Year's Greeting

New communication lounge opened in the head office in Yokohama

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　No.192

On the reform of our corporate culture

■ What we have accomplished

We need to work harder to improve our business performance. On the other hand, though, I feel that little changes for the better are taking place thanks to the corporate culture reform that we have been pushing ahead since last year although we are still halfway through.

In my New Year message of last year, I mentioned what a then outside director told me. Let me quote his words here once again.

"Regarding the formation of an ideal company, there are some things I can say from my experience of getting involved in the management of a number of companies. First, employees respect their superiors. Second, the superiors trust their subordinates. Third, employees can proudly speak of their company and products to their family. These things are common to every excellent company that I have seen. Of course, the higher the wages, the better. But I don't think that is all that matters." His words struck a deep chord in my heart, and I decided to launch a reform of our corporate culture.

Most of the measures we have taken are low-profile. They include: Promoting the reuse of Yokohama Head Office's resources and improving the office work environment; Stepping up the efforts to achieve work-life balance by prohibiting unpaid overtime work and requiring employees to get permission when they need to work overtime; Actively hiring new graduates and mid-career workers and promoting the hiring of contract workers as ful l -t ime employees ; Reviewing our excessively flat organization, adopting a team system and transferring a wider range of authority; Improving the unregulated "free-address" office system; Relaxing the restriction on the use of minicars as company cars. In addition to these measures, we have worked to reinforce the sense of collaboration with our labor union for the growth of the company.

The views and opinions about the progress of this corporate culture reform may vary for every one of you. But I have gotten positive feedback from the outside directors, as well as an employee who returned to our

company in last November from a temporary assignment at another company, who said: "Compared to before I got transferred, the company is clearly changing for the better."

Also, in the past few years, the turnover rate of new recruits was approaching 30% in three years, as high as that of the average company. In 2015 and 2016, however, we saw the turnover rate of new recruits improve significantly. This may also be a sign of change.

We will continue to push forward the reform efforts that we find necessary through consultation with you. For example, we intend to establish communication spaces at the factories in Fukushima and Akita, open Anest-Iwata Café and Anest-Iwata Bar to support and step up communication promotion activities, make the work environment and systems more friendly to employees, especially female ones, and continue the active hiring of human resources and promote and bolster the overseas training system for younger employees. We are going to think out of the box and lead other companies as we move forward on our corporate culture reform.

■ Need to continue with the reform

Of course, implementing these culture reform measures costs us money. For example, keeping raising base pay, beefing up human resources, hiring contract workers as full-time employees, having employees get permission to work overt ime and establ ish ing communication spaces will definitely add to our costs. They may even reduce our revenue. Many corporate leaders and institutional investors may criticize these

measures as a contradict ion to the profit-driven management style. However, what we need to do now, a t ime when shortages of human resources a re accelerating, is to get back to the corporate philosophy that the founding family cherished - that is, see the company as one large family, put employees before everything else and work with them to prosper together. I want you to understand that behind these reform measures lies my strong aspiration to see all of you to work as one to boost sales and profits so that our company will mark its 100th year, or even 110th year, in business.

Let me remind you, however, that culture reform is not "deregulation." To repeat what I have said, this reform is intended to ensure that our company continues to grow while placing emphasis on your work-life balance. I want you to know that you should work smart to bring out your best within the limited working hours, and consequently contribute to increasing our sales and profits. The company is a family for us, and that means every member needs to fulfill their roles, just as with your own family. If you just keep demanding what you want, only costs will go up and the family - that is, the company - will fall apart. I think that is plain to see for everyone.

■ To share the vision

In order to share the corporate philosophy, action guidelines, key strategies and business performance data, we currently hold briefing sessions at the head office during the working hours over a two-day period to explain our quarterly business results, assessments of the departments, policies for the necessary reform activities and so forth. These sessions are broadcast live to Akita Factory and Fukushima Factory via a web system so that more employees can listen to what we have to say. To staff members of the domestic branches and sales offices of AICP and AICS and those working abroad, however, the information presented at these briefing sessions is available only in written form. I am well aware that the president of each company tries to complement the distributed documents with additional information as needed. But, as a result of this, I occasionally feel that

there is a difference in the level of understanding as to our strategic goals and corporate culture reform between the people of these companies and expatriate employees and the members of the head office and the two factories. Of course, I know I am the one who is to blame. To improve this situation, therefore, I am going to visit the three branches and two sales offices on a quarterly basis and hold a briefing session at each of those locations, beginning in this quarter. Such a session will be conducted twice a day at each location or outside the working hours so that sales activities are not affected.

For employees working abroad, similar sessions will be held when the General Managers of the two divisions and Business Administration Department and I make overseas business trips.

Toward the 100th anniversary

■ Three keywords

The current mid-term business plan cites three keywords for turning ANEST IWATA into a "True World-Class Company." As you well know, they are: ① ONLY ONE, ② NO.1 (NUMBER ONE) and ③ ONE ANEST IWATA.

I have already explained about this basic policy on many occasions, so I am not going into detail here.

Based on the basic policy, we will continue to work with integrity to celebrate the coming 100th anniversary. One thing I want you to understand is that implementing this basic policy requires you to change your way of

working and thinking in line with the times. If we just keep doing things in the next 10 years in the same way we have done in the past without making any big change that is necessary, we will not be able to survive to mark our 100th year in business. I want all of you to bear this in mind.

■ What we can do in the next 10 years

For example, take a look at some of the events that took place last year - the UK's exit from the EU, the presidential race victory of Mr. Trump who was considered a minor candidate in the beginning and the ensuing appreciation of the yen. All these things overturned the predictions by experts and assumptions of the public. We have long relied on the opinions of experts and newspaper reports and editorials in making a judgment . From now on, when we think about something, we will have to keep in mind that we cannot take what experts say at face value any more. Although some of the expert views may be informative, things may not necessarily turn out the way they predict. We should be aware that no answer is written on pages of The Nikkei or an economic magazine or in a result list of a search engine.

In other words, in this increasingly chaotic world, we need to see what lies ahead of a corner ourselves and decide on our own as we move forward.

Our main line of business falls into the category of so-called mature products. Will coating jobs still exit 10 years from now? What kind of added value should we create so that coating jobs continue in existence and

evolve? How should we develop and change markets to ensure air compressors that consume large amounts of electric energy remain in general use 10 years from now as more machinery and equipment become motorized? Unless we find the way to survive ourselves, we will not be able to become a 100-year-old company. Or worse, there is even a chance that our company may perish.

To avoid that , the executive officers and senior management members are determined to make every effort to explore ways to keep our company in business. At the same time, I want those of you who are in their 20s to 40s to understand that you should think seriously about this as your own future issue. In the 100-year-old company that we are aiming to become, you will play the key role. Unless you understand this, there will be no future for our company. It is your efforts and a change in your awareness that drive our company toward its 100th anniversary - and 110th anniversary.

Conclusion

I may have used a tone that is a little too harsh for a New Year message.

I am confident, however, that working with you all to overcome these challenges will help our company survive and grow, enabling its stakeholders, particularly its employees, to lead stable lives.

The primary intention of my New Year message is to make you understand this. I really look forward to working with you again this year.

January 2017

ONLY ONE

NUMBER ONE（NO.1）ONE ANEST IWATA

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After attending the ceremony held on October 27 to welcome prospective employees, 13 new graduates who have been hired at the head office to start working from April 2017 came to Yokohama for pre-entry training on December 6. This issue of Wa highlights the ceremony for the prospective employees and the get-together party. During the training, the new recruits listened to speakers on the stage with a serious expression on their faces in a strained atmosphere, which made them look very dependable. During recesses, by contrast, they chatted with relaxed smiling faces, and that left a deep impression on me. These people will play a part as a young generation in pushing ANEST IWATA to the next milestone of the 100th anniversary. Looking at the new graduates clad in well-pressed business suits from behind, I found every one of them shining. Expectations are high for these new employees. Ceremonies were also held for the two new graduates hired for professional track jobs at Akita Factory and another four hired for similar jobs at Fukushima Factory, respectively. The next issue of Wa will feature an article on these new recruits, introducing you to them one by one. (Akari Ueda, IR Public Relations Office)

Pre-Entry Training for New Graduates Who Will Join the Company in AprilPre-Entry Training for New Graduates Who Will Join the Company in April

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2017.1　No.192

SalesOperating Income

Air Energy

Coating

Ordinary IncomeQuarterly Net Income*

1,86514,465

1,6781,855

12.9100.0

11.612.8

Vacuum Pump Equipment

Air Compressor

Coating System

Coating Equipment

2,03914,526

1,4692,292

14.0100.0

10.115.8

174 60

209437

8.60.4

14.219.1

1,80014,800

1,6001,950

103.697.7

104.995.1

1.1

1.53.0

FY2016 1st Half Consolidated Financial Results - P/L Statement

Actual Amount

2016 2QComposition Ratio Actual Amount

2015 2Q

Business Segment

Total

Compared to Same Q of Previous Year Compared to Projected ValueComposition Ratio Increase/

Decrease AmountIncrease/

Decrease Rate

Increase/DecreaseAmount

Increase/Decrease

Rate

Change in CompositionRatio (Points) Projected Value Achievement Rate

839

6,888

1,009

5,728

5.8

47.6

7.0

39.6

918

6,741

1,076

5,789

6.3

46.4

7.4

39.9

78

146

67

60

8.6

2.2

6.3

1.1

14,465 100.0 14,526 100.0 60 0.4

FY2016 1st Half Consolidated Financial Results - Sales by Product

Sales

2016 2QComposition

RatioComposition

RatioSales

2015 2Q Compared to SameQ of Previous Year

* Attributable to parent company shareholders

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* The amounts shown in Figure-1 and Figure-2 are in millions of yen.* Figure-3 gives a graph showing the growth of sales of overseas subsidiaries in major local

currencies. The changes in the growth rate from the level of the second quarter of fiscal 2012 are presented. The marks for the currencies of the regions with high sales rates are shown in yellow (CNY, EUR and USD). Thailand: Political unrest continued from 2013 through 2014; Vietnam: Subsidiary established in 2015; Indonesia: Subsidiary established in 2016

Figure-1

Figure-2

In the second quarter of fiscal 2016, the Japanese economy saw an improvement in the employment situation whereas, due to the continued appreciation of the yen, the recovery of corporate earnings and equipment investments lacked momentum. As for overseas markets, while the U.S. economy continued to grow steadily, uncertainties lingered because of such factors as economic stagnation and political unrest in China and several other emerging economies.

Amid this market environment, we have made all-out efforts to become the "True World-Class Company," a goal cited in our new mid-term business plan from fiscal 2016. We have joined forces on a company-wide basis in order to develop new products, address new markets, increase productivity, cut costs, improve product quality and services, etc.

As a result, our consolidated business performance in

the second quarter grew on a local currency basis, as shown in Figure-1 and Figure-3. However, exchange rate losses stemming from the appreciation of the yen left us with 14,465 million yen in sales (down 0.4% from the same quarter of the previous year), 1, 865 million yen in in operating income (down 8.6% from the same quarter of the previous year), 1, 855 million yen in ordinary income (down 19.1% from the same quarter of the previous year) and 1, 678 million yen in quarterly net income attributable to the parent company's shareholders (up 14.2% from the same quarter of the previous year). The quarterly net income attributable to the parent company's shareholders includes the loss of 450 million yen incurred when making affiliated companies accounted for using the equity method our consolidated subsidiaries. Subtracting this amount from the quarterly net income weighs down our financial results, leaving us with reductions in revenue and income.

As for the sales by product, the air energy business continued to grow steadily again in this quarter, with air compressors selling well in the domestic market, as shown in Figure-2. The growth rate of air compressors was also high abroad. By contrast, the sales of vacuum pump equipment were sluggish, particularly in overseas markets, showing the worst result of all.

In the coating business, where the overseas sales account for more than 70% of the total sales, the coating equipment, which is susceptible to the effect of the strong yen, suffered a slight decline in sales from the same quarter of the previous year. The sales of coating facilities were down because the overseas sales were not enough to make up for the weak domestic sales.

As a conclusion, it can be said that the slowdown in the Coating Division and Vacuum Equipment Department is

the main reason for the reductions in revenue and income we suffered in this quarter.

When we look at the overseas sales on a local currency basis, all the subsidiaries posted increases in revenue from the same quarter of the previous year. The only exception is the sales in Thailand, which are on the recovery track but still remain stagnant compared to fiscal 2012.

While the sales are growing on a local currency basis, the consolidated financial results indicate that the sales growth is decelerating or weak. This shows how exchange rate fluctuations affect our business performance. We will continue to monitor the currency movement closely and act appropriately.

(Toru Watanabe, IR Public Relations Office)

FY2016 1st Half Financial Results

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150

100

50

0

-50

2013.9 2014.9 2015.9 2016.9

Sales Growth Rate by Local Currency

Gro

wth

Rat

e (%

)

CNY (China)

INR (India)

KRW (South Korea)

THB (Thailand)

EUR (Europe)*

GBP (UK)

USD (U.S.)

AUD (Australia)

RUB (Russia)

Legend

Figure-3

* Excluding Sweden and Poland

Factory Tour for Institutional Investors - Akita Factory (December 14)

Business Expansion in the Australian Area by Purchasing Air Compressor Sales and Service Business

The institutional investors we invited are staff of securities firms, such as Mizuho Securities Co., Ltd. and SMBC Nikko Securities Inc., and managers of funds that invest collected money in stocks and other financial instruments. These people are important for us because corporate reports and other financial analyses they create may lead to more investors getting interested in our company, which consequently influences our share price. A total of 16 institutional investors came to Akita Factory, the mother factory of spray guns of ANEST IWATA that aims to become the international top brand, despite their very busy year-end schedules. They took a close look at the core parts one by one, going through the entire manufacturing process from machining and the polishing stage brimming with craftsmanship to the automated assembly lines. While the snow from the previous week still remained and another heavy snowfall was expected, the investors spent the whole day on the factory tour. It was the first time for them to see the machine tools, manufacturing process, assembly lines, paint spraying with spray guns and other equipment and jobs in the factory, which must have been a new experience not anticipated from the regular written or oral explanations by the IR personnel. We received a lot of questions from the participants about these pieces of equipment and jobs.

While the 5S principles are thoroughly implemented at Akita Factory all the time to keep the workplace tidy and clean, the work sites and facilities were meticulously cleaned in preparation for the factory tour. In particular, the site for the automatic buffing process was cleaned with special care for visitors, as a result of which the facilities looked as new as when they were installed. The staff of Akita Factory also put in all-out efforts on preparations including the creation of explanatory panels and the arrangement of meals. We believe that their efforts helped the institutional investors deepen their understanding of our company. And we appreciate Factory Manager Nakayama giving a well-prepared presentation to explain why we manufacture products in an area as remote as Akita and the other members of Akita Factory preparing for the factory tour and explaining about the factory during the tour.

The institutional investors who participated in the tour complimented Akita Factory, saying these things: "There is no waste in the movement of materials, and the things between the processes are kept well organized. I can tell this because the delivery robots are stopped;" "Many parts of the factory are automated, and the number of human workers is very small compared to the number of devices and processes. That brings home to me that I am in an automated factory;" and "The buffing and all the other processes of spray gun production have an atmosphere similar to that of an art studio." A lot of other positive feedback was received, some commenting: "I expect you to invest more in equipment to boost production and use and develop local human resources;" and "I find your workplace cheerful and energetic. I hope ANEST IWATA keeps its employees highly motivated and evolves this factory as a vigorous organization." (Toru Watanabe, IR Public Relations Office)

We invited institutional investors and showed them around the factory.

ANEST IWATA Australia (AI-AU), a consolidated subsidiary founded 14 years ago as a business hub in the Oceanian region, purchased air compressor sales and service business from Broadbent Compressor Services. This company has had strength in the fields of sales and service of air compressors in the local market, and its longstanding business track record has earned it a high reputation across Australia. With this new member added to our group, the ANEST IWATA Group is poised to launch full-scale sales and service provision activities in the Oceanian region and accelerate its effort to deploy a business model that integrates development, production, sales and service for this business in Asia and Oceania. We intend to spread the philosophy of our group, which takes pleasure in satisfying customers by providing advanced products and excellent services, to an even wider region.

We the editorial staff of this magazine welcome the new group member from the bottom of our hearts. ANEST IWATA Australia's new organization after the business integration, new members and details of the new business will be reported in our future issues.

AI-AU's head office in Sydney

T OP I C S

❶Tour participants seeing photovoltaic panels; a perfect location for cooling their heads heated during the factory tour. ❷Conference room on the 2nd floor of the factory, where presentations were given with 24 people (participants and presenters) sitting side by side.❸Process of machining spray gun nozzles and needles. Explanatory panels prepared by factory members in charge.

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2017.1　No.192

The event drew1,500 visitors!

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9 0To commemorate the 90th anniversary of ANEST IWATA's foundation, festive events were held in its head office in Yokohama and its two factories with great success. Here is a report on these events.

Thanksgiving Festival Commemorating the 90th Anniversary of ANEST IWATA's Foundation

Thank You!!!!

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Part 1 Part 2Part 1 of the festival, which was intended for the family members of employees and pupils of elementary schools in the neighborhood, featured a number of attractions that employees had created through trial and error, drawing large crowds throughout the day. Children watched the exhibited spray guns and air compressors - equipment that they rarely see in their daily lives - with sparkling eyes. It was a wonderful occasion where the visitors got to know what we create at ANEST IWATA and what kind of company it is.

❶The weather was fine, and the yellow gate stood out against the blue sky in the background. ❷The event opened with a glamorous cheerleading performance. ❸Children having fun at Kart Factory. ❹Inside the building were colorful balloons. ❺The mascot bear was very busy all day long. ❻A scientific experiment on the stage drew big cheers. ❼Attractions for children were all popular. ❽Do you know them? ❾Powerful Japanese drum performance Ultra Man also came for the peace of ANEST IWATA!　　

In Part 2 of the festival, which was open only to current employees, their family members and former employees, we had groups of employees gather from across the world, who enjoyed lively conversations all over the place while enjoying food and drinks in a buffet style. A band formed by employees, called "Yama-chan Band," came on stage, and their performance helped liven up the party. In the middle of Part 2, a lottery was held to decide who would get the presents brought by staff members of the overseas sites, drawing cries of joy and exclamation. At the end of the thanksgiving festival, many people from different divisions and sites sang "We are the World" with their arms around one another's shoulders. That put together the minds of all the employees working toward the 90th anniversary of ANEST IWATA's foundation, making 2016 a splendid year suitable for the anniversary.

❶Overseas employees gathered as well. ❷Japanese ritual known as Kagamibiraki. ❸Family members also enjoyed stage performances and food. ❹People enjoyed conversations in the crowded room. ❺Visitors included many former employees. ❻Spectacular stage performances constantly received huge cheers. ❼The seven members of the Yama-chan Band helped liven up Part 2. ❽A lottery was held to decide who would get the presents brought by staff members of the overseas sites. ❾At the end of the festival, all participants sang "We are the World" together.

Party Held at Hotel New Otani to Commemorate the 90th Anniversary of ANEST IWATA's FoundationOn November 10, a party was held in the Ho banquet room of Hotel New Otani to commemorate the 90th anniversary of ANEST IWATA's foundation. Executives and staff of about 200 of our suppliers came to the party and enjoyed a meal leisurely with our company's employees. Particularly, many participants were satisfied that every table was attended by two employees of our company who had pleasant conversations with them.

At our overseas sites in Brazil and other countries, big dinner parties were thrown to celebrate the 90th anniversary of ANEST IWATA's foundation. Four U.S. companies (AI-US, AI- AE, AI- MD and P-I) had a joint dinner party in Cincinnati to commemorate ANEST IWATA's 90th year in business, which was a festive event attended by board directors as well.

Dinner parties were also thrown overseas to commemorate the 90th anniversary!

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A total of1,900 visitors

showed up!

90Thanksgiving Festival Commemorating the 90th Anniversary of ANEST IWATA's Foundation

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❶Akita Factory, which last summer organized a participation-type exhibition, "Akita Vision Festival," with the participation of local residents, only threw a celebration party without holding any event. ❷Opening speech by Factory Manager Nakayama ❸Apprentice geisha dancer rumored to be one of the main attractions for tourists in Akita ❹Show by the NAMAHAGE SATOKAGURA dancer team with "Namahage" running around the room and causing a stir among not only children but also adults ❺Akita Factory's employees working to keep the party going smoothly ❻Former employees chatting happily over old stories ❼Children's eyes were riveted to the large tuna being dismantled in front of them. ❽Participants naturally smiled and cheered at old images.

❶The thanksgiving festival was held under splendid weather. ❷About 1,900 people came to the event, bringing a festive mood to the factory premises. ❸The factory tour was very popular, receiving a lot of attention from both adults and children. ❹Children were very excited at the popular "Kyoryujar" show. ❺At the party that began in the evening, everyone at every table was smiling. ❻The party opened with a light show. ❼In the lottery, lucky people won gorgeous prizes. ❽Members of the team involved in the preparation of the thanksgiving festival for ANEST IWATA's 90th anniversary.

On November 12, Fukushima Factory had two events to celebrate the 90th anniversary of ANEST IWATA's foundation: a thanksgiving festival that took place during the day and a celebration party that began in the evening. The thanksgiving festival, held on the premises of Fukushima Factory under splendid weather, was attended by a large number of visitors, including employees, their family members and retiree club members as well as elementary school pupils living nearby and local residents and their children. The festival featured a number of attractions that factory employees had planned and created mainly to have visiting pupils get to know ANEST IWATA and love the company. The particularly popular attraction was the factory tour. Every workplace had a unique attraction, such as a performance using an automatic machine tool and a shooting game using air guns. These attractions received a lot of attention from visitors of all ages, and many of them told us they had a good time. We organized a stamp rally and felt it was very well received as we soon ran short of prizes. In the evening, we had a party at Hotel Hamatsu with the participation of employees, their family members and retiree club members. A lottery over gorgeous prizes was held and, each time a winner was announced, a cheer rose from one table or another, bringing a lot of excitement to the party. Everyone was smiling, with many employees casually taking pictures with board members. The thanksgiving festival for the 90th anniversary at Fukushima Factory was a day when we were able to express the gratitude that we always feel toward local residents and enjoy a sense of achievement from working together and overcoming difficulties in organizing this event from scratch. We will continue to work in unity toward the celebration event of next year for the 40th anniversary of Fukushima Factory's establishment, as well as toward the events that will be held to commemorate ANEST IWATA's 100th year in business.

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To celebrate the 90th anniversary of the company's foundation, Akita Factory held a party at Grand Palace Kawabata in Daisen City on October 29, which coincided with a party commemorating the 30th anniversary of the unification of labor unions. While it was a very cold day threatening to snow for the first time in the season, a total of 155 people attended the party, including Akita Factory's employees, their family members and retiree club members. This festive event was gorgeous, cheerful and heart-warming. On the day of the party, the general assembly of the "ANEST IWATA's Retiree Club" also took place, the first of its kind ever held by Akita Factory. It was the first time in a long while for us to see so many club members who had supported Akita Factory for a number of years, including Mr. Mitsuru Takasaki, the chairman of the retiree club, and Mr. Kiyoshi Sato, the first secretary general of the branch. During the party, while the participants were having cheerful conversations at the tables, a series of performances were presented, such as a tuna dismantling show by a Japanese chef, a dance of apprentice geisha dancers and a Japanese-style drum show by a team of local dancers called NAMAHAGE SATOKAGURA, bringing additional excitement to the party. Toward the end, a collection of old photos of ANEST IWATA Akita, prepared by the event team of the executive committee for this party, were shown. These impressive images - a reminder that the efforts of all those employees who supported Akita Factory has led to the success of the present day - emotionally moved the participants in the party. The 90th anniversary celebration party turned out to be a passionate event that provided the participants with an opportunity to thank Akita Factory for its past achievements and made them determined to work as one toward the 100th anniversary of ANEST IWATA.

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Introduction to ANEST IWATADO BRASIL COMERCIAL LTDA.

Date of foundationQ1.

February 2011

Location of the officeQ3.

Until the end of 2015, our office was located on Paulista Street, the central part of Sao Paulo City. The office was relocated at the end of 2015, and we now work in Limeira City in the suburb of Sao Paulo.

Number of staff membersQ2.

We have four staff members: an administrative staffer, two sales reps and me.

Ethnic compositionQ4.

There are four major ethnic groups: native, African, European and Asian. Geographically speaking, many mixed-blood people of African descent live in the northeastern part of the country, and the southwestern part is inhabited by many descendants of Italian, German and Japanese immigrants.

LanguageQ6.

The official language is Portuguese. People from different regions of the country speak with slightly different accents. There are subtle differences in pronunciation among people of Rio de Janeiro, southern states and Sao Paolo, like we have the Kanto and Kansai accents in Japan. It is surprising how few people in Brazil speak English. So, unless you have the basic level of Portuguese speaking skills, you will have a hard time living in this country. Since all the local employ-ees of AI-BR speak only Portuguese, we do business only in Portuguese, which I think is a very challenging work environ-ment for a Japanese company. (As far as I know, of all the Japanese companies operating in Brazil, AI-BR is the only one that adopts this Portuguese-only style.) By the way, whenever I have a problem, I go to Ms. Erika for help, who works at AI-AZ near our company. Of course, when I ask for her help, I have to speak in Portuguese anyway (laughter).

Regional cultureQ5.

As you imagine, Brazil has a huge number of soccer fans. During the last World Cup, there were binges going on everywhere. Most people - young and old, men and women - love to talk about soccer, and their comments on soccer games are sometimes quite harsh. In the last World Cup, Brazil suffered a terrible defeat, losing to Germany 1 to 7, and I was stunned to see the Brazilian fans stop rooting for their national team halfway through the game and start to cheer every time the German team scored a goal. Another thing that always amazes me is Brazilian people's love for barbeque. A lot of people barbeque at home on weekend, and even companies throw a barbeque party to celebrate good business performance. I come across people barbequing in many areas of everyday life.

ClimateQ7.

The climate is mild throughout the year, except for summer when it is very hot. Even in the winter season, the tempera-ture goes up to around 15 degrees Celsius during the day, so it basically does not snow here.

Is there anything that is contrary to the stereotype that foreigners tend to have about the country or its people?Q8.

Not everyone loves soccer or carnivals. Foreigners tend to think of Brazilians as happy-go-lucky people but, in reality, they are very sensitive in some aspects. Also, the Japanese food is more popular than generally thought in Japan, and there are many Japanese restaurants across Brazil serving Sushi, Sushi rolls, Sashimi, etc. (The Japanese dishes these restaurants serve taste more or less differently than in Japan because they are tailored to the taste buds of Brazilian people.) Another thing I would like to say about Brazil is that, when you think of this country, the first thing that comes to mind is probably is the statue of Christ in Rio de Janeiro or the Amazon, but Sao Paolo, Brazil's economic center, has a population of about 12 million, almost the same as that of Tokyo. It is the biggest city in the southern hemisphere.

Economic trendQ9.

In the annual global GDP ranking, Brazil has been in 7th to 9th place for years. Of the BRICS nations, the size of the Brazilian economy is as large as that of India. But after peaking at 7.5% in 2010, its economic growth rate dropped to minus 3% in 2015. And in 2016, Brazil is stuck in a deep recession. When we look at the auto industry that is related to our company, Japanese and European automakers have many manufacturing plants here. But the annual produc-tion hit its peak at 3.74 million cars in 2013. In 2016, the annual production decreased to 2.1 million cars, down about 45% from the peak, leaving us in a serious slump. Some people say that there are signs of recovery thanks to the economic measures taken by the new president who replaced the former president accused of corruption.

Q10.

Our spray guns are very well received for their superb performance. They enjoy a good reputation for their atomizing performance, durability and lightness, so, as far as performance is concerned, they have virtually no rival. Since Brazil does not have a high-end model market yet, we are trying to create one by giving demonstrations to spray gun users. Of course, the prices of these high-end models are higher than those of low- and middle-end brands, but the repeat order rate is very high. So, the creation of a high-end model market is the mission of AI-BR.

Sales activities

Because no one speaks English not just in my office but anywhere else, it is essential to be able to communicate in Portuguese. Personally, that is one of the challenges. I consider that, in any case, what is important is simple and make it a point to try to simplify the complicated sales situation as much as I can in order to share it with everyone else. One thing that helps me is that Brazilian people welcome foreigners who try to speak to them in Portuguese. The local staff say that they face the barriers of low name recognition of our company and the prices of our products that are higher than those of low- and middle-end brands. We are now breaking down these barriers by giving demonstrations directly to end users.

Others

What makes it difficult to do business in Brazil is its complex tax system whereby a tax is levied on every business transaction and regulations meant to collect taxes. In Japan, all you need to do business are two things: price lists and discount rates. Here, five different indirect taxes are levied on an ordinary transaction, and we have to do calculations that are impossible to do without a computer system. For a quotation to be considered legitimate - even one for a single tiny part - it needs to be issued by a computer system. Other problems are enormous exchange rate fluctuations and the inflation that has continued for years. Also, the country is rife with political corruption. Every time a scandal comes to light, exchange rates fluctuate significantly, impacting the import and the prices of exported goods. Currently, Brazil is in deep recession, and many European and Japanese companies are withdrawing from its market. Seeking to reconstruct a money-losing company in these adverse circumstances is a very difficult challenge. But I see it positively as an opportunity to train myself as a business person and work hard every day.

Q11.

Q12.

How are ANEST IWATA's products received in the country?

We asked Mr. Yuji Noguchi, who works at AI-BR in Sao Paulo, Brazil, 12 questions about a range of topics from work to everyday life.

Brazil

Mr. Ladisael enjoying barbequing

From left to right: Mr. Ladisael, Mr. Noguchi, Mr. Ernani and Ms. Fernanda

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11.3-11.4 Air Energy Division

11.6 Coating Division

During a two-day period from November 3 to 4, 2016, the Air Energy Division held its global conference in Japan, where members gathered from across the world and had spirited discussions.

On November 6, 2016, marketing members from across the world gathered at the global headquarters in Yokohama and passionately discussed the future of the coating market and ANEST IWATA.

●Welcome party

The cooperation and teamwork of those involved made this global conference informative and meaningful.The global conference offers an opportunity for the people related to the coating business to get together.We will continue to work as a team, rather than as individuals, on a global scale and make united efforts.

Enormous cooperation of the people involved made this global conference very productive and meaningful. The members of the division are determined to work in unity to implement the products and strategies that were presented at the conference.

●Presentations of new products

*1: With IoT, not only computers and other information and communications devices but all the other things in this world are provided with communication capability and connect and interact with the Internet to enable automatic recogni-tion, automatic control, remote measurement, etc.

●Visit to the factory of DMG MORI Co., Ltd.

Global Conference 2016

This year, the global conference was held in the newly created communication lounge of Yokohama Head Office, where representatives of a total of 24 companies in 21 countries and regions gathered. The participants had serious discussions in a relaxed atmosphere. The departments in charge of coating equipment, liquid application equipment and coating systems presented their respective mid-term plans to make the Coating Division's mid-term plan better understood. They

exchanged in format ion and v iews about fu ture prospects with dealers and members of the factories. The conference let the par t ic ipants spend very meaning ful t ime for ensuring that al l the people involved in the coating business of ANEST IWATA work together toward the 100th anniversary of the company's foundation. The information and views that were shared at the conference will form the basis for future business activities of each company.

After the conference, a welcome party was held. Not only did it allow newcomers and members of group companies who do not interact in their usual business activities to get to know one anothe r, bu t i t p rov ided a p rec ious oppor tunit y for them to broaden their networks of communication. The program of this day ended, with the participants clapping their hands with smiles on their faces.

The following day, the participants visited to see the factory of DMG MORI Co., Ltd. , one of the leading Japanese machine tool manufacturers that support the global manufacturing industry. The purposes of this factory visit were to get hands-on experience with the cutting edge of IoT (*1), a technology used to connect production equipment to the Internet, and to gain direct insight into the company's business strategies and business expansion plans. The visit took the whole day because it involved a trip to Iga City, Mie Prefecture. But it provided powerful inspiration for the sales strategies and product development of each company of our group.

New products, including those still in the development stage, were presented using demos. Hearing opinions from the perspective of the market of each country concerned, the division members were able to gain useful information for their development projects.

This fiscal year is one in which ANEST IWATA marks its 90th anniversary of its foundation and the Air Energy Division was created in line with the mid-term business plan. For these reasons, the conference was attended by a record number of participants and held in a banquet room of a hotel that was rented for the whole day. The conference began with the representatives of each company reporting and asking about the progress of the mid-term business plan, the implementation of the existing strategies, future strategies and so on. After that, heated, serious discussions continued beyond the time limit. Development engineers of the Air Energy Department presented proposals of new products. In this conference, many young and mid-level development engineers went on stage who are expected to carry ANEST IWATA's future on their shoulders. With beads of sweat on their foreheads despite the cool autumn weather and smiles on their faces disappearing at times, they gave presentations in English to the representatives from the participating countries to explain new products that could be the core of our future business. Their presentations were very well received and earned high praise from the participating representatives.

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2017.1　No.192

Editors' Comments Investor & Public Relations OfficeI took part in celebration events for the 90th anniversary of last year as a member of the secretariat, and I somehow managed to get the job done under the new organization. I appreciate the cooperation of all the people involved and the opportunity to spend a joyful time as an active employee. This has made me more determined to move forward toward an even bigger milestone. (Toru Watanabe)

The events for the 90th anniversary brought home to me the concept of “ONE ANEST IWATA,” and I was glad that I joined the company in the year when it was marking its 90th year in business. I look forward to working as a member of ANEST IWATA in the coming fiscal year, which will be a step toward the 100th anniversary. (Akari Ueda)

Let me say one thing about the thanksgiving festival held at Yokohama Head Office to celebrate the 90th anniversary of the company's foundation, which is featured in this issue of our company newsletter. Many people volunteered after the quitting time to help us pack novelty goods to be given to visitors, even though their own jobs were not finished yet. I was impressed to see a lot of people work together toward a common goal, and that is one of the very good memories for me. It is true that results count most. But I was reminded that success comes only from accomplishing necessary processes before achieving results. I will continue to stay focused on those processes. (Motoya Sato)

no.3 Group activitiesWe will feature various teams of employees and get-together events, such as teams at the workplace, small group activities, hobby groups, groups of same-age employees and groups of employees living in the same neighborhood. Send in your articles.

▼ About images to be submittedData format: JPEG Image resolution: 300 dpi or more Copyright: Any image submitted must be one shot by an individual, and its copyright must not be held by a third party.▼ Accompanying commentSubmit a comment about one page of A4 size paper in length, along with one to three photos showing the activities, including yourself.

Send your photo to: motoya.sato@anest-iwata.co.jp (Motoya Sato, editor)

no.2 Photos from anyone are welcome.

Theme About meYour photos and comments will be posted on the page just as in Instagram. Please feel free to send your photos and comments about what you like to do, how you spend holidays, your pets or whatever you see and feel in your daily lives.

▼ About images to be submittedData format: JPEG Image resolution: 300 dpi or more Copyright: Any image submitted must be one shot by an individual, and its copyright must not be held by a third party. Be sure to add a comment to the photo.

Send your photo to: akari.ueda@anest-iwata.co.jp (Akari Ueda, editor)

Send your photo to: toru.watanabe@anest-iwata.co.jp (Toru Watanabe, editor)

Introducing a group company through the cover photo

Take a photo of a building, landscape or other object in the country or city where you live. We will show a selected photo on the cover of the newsletter. A photo of your favorite city landscape or a thing unique to the place where you live will be welcome.▼ About images to be submittedOrientation: Portrait Data format: JPEG Image resolution: 300 dpi or more Copyright: Any image submitted must be one shot by an individual, and its copyright must not be held by a third party.▼ Accompanying commentSend your comment with the photo. Make sure that the comment does not exceed one-fourth of A4 size paper in length and contains information about where, when and why you took the photo.

Theme The city where I live

no.1

ーCall for ArticlesーMany people cooperate in the publication of every issue of our in-house newsletter. Because we want more people to participate in the editing and publication processes, we encourage you to write articles for us. Ever since the first issue was published in 1962, the newsletter has been around for more than half a century now, with the publication of the 200th issue planned in the near future. In 2013, we began to publish the English and Chinese versions as one of the publications intended to share information throughout the ANEST IWATA Group. By doing so, we aim to turn this newsletter into a common communication tool for the employees of our group. A copy of this newsletter is distributed to every group employee so that it connects the company with the employees and their family.Your articles will be very much welcome!

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2017.1　No.192

Publisher：ANEST IWATA Corporation　　Published by：Kouichi Takano, Business Planning Department　　Editor：Toru Watanabe, IR Public Relations Office　　Printed by：Noge Printing Corporation

Company Newsletter No.192 Issued January 2017

Report on In-house Sports Club ActivitiesBaseball ClubAkita Factory

The purposes of this club are to promote interactions among people inside and outside the company and to deepen communication between younger employees and older ones.

Current status of the club

Results of recent games

Because of members getting old and quitting, the club became inactive in 2008. After a hiatus of about eight years, though, it has resumed its activities with the participation of newly hired employees and mid-career workers. The team played a game for the first time in a long while, and they won despite lack of practice and the fact that many of the members were novices. The members hope to play against a wider range of opponents and deepen interactions with people both inside and outside the company.

ANEST IWATA beat Mimori Printing 8 to 6.ANEST IWATA lost to Saitect 2 to 8.

Futsal ClubFukushima FactoryAs more employees got transferred from the head office in Yokohama to Fukushima Factory, the club started its activities to increase interactions outside work with factory staff members. The club is now in its third year of existence.

Current status of the club

Results of recent games

The club is made up of people from many different departments who want to enjoy the sport and get some exercise, regardless of their experience. Every year, when new recruits come to the factory for on-the-job training, we invite those who are interested to play the sport and have meals with us, which we think helps them relieve stress.Currently, the club has about 15 members. We want to continue this club activity in a fun way to promote interactions among employees and get exercise.The club does practice twice a month (on the first and third Thursdays); it becomes inactive during the winter season (from December to March).Typically, the club participates in one or two tournaments a year.

In a recent tournament in Sukagawa, the club came in third place.

The members are keen

to win first place in a tournament!

Here is one of the club's best hitters.

Cheerful and

Energetic