[Translation] - 1 - (Note) This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. The Company assumes no responsibility for this translation or for direct, indirect or any other forms of damages arising from the translation. Securities code: 7220 June 3, 2016 To our shareholders: Hiroshi Otsuka Representative Director and President Musashi Seimitsu Industry Co., Ltd. 39-5 Daizen, Ueta-cho, Toyohashi-shi, Aichi NOTICE OF CONVOCATION OF THE 89TH ANNUAL MEETING OF SHAREHOLDERS You are cordially invited to attend the 89th Annual Meeting of Shareholders of Musashi Seimitsu Industry Co., Ltd. (the “Company”). If you are unable to attend the meeting, you can exercise your voting rights in writing or via the Internet, etc. Please review the Reference Documents for the Annual Meeting of Shareholders and exercise your voting rights by 5:00 p.m. on Wednesday, June 22, 2016. Meeting Details 1. Date and Time: Thursday, June 23, 2016 at 10:00 a.m. (Reception will open at 9:00 a.m.; Japan Standard Time) 2. Venue: Conference Room of the Company’s Head Office 39-5 Daizen, Ueta-cho, Toyohashi-shi, Aichi 3. Purposes: Items to be reported: 1. Business Report and Consolidated Financial Statements, as well as the audit reports of the Financial Auditor and the Audit and Supervisory Committee for Consolidated Financial Statements, for the 89th fiscal term (from April 1, 2015 to March 31, 2016) 2. Non-consolidated Financial Statements for the 89th fiscal term (from April 1, 2015 to March 31, 2016) Items to be resolved: Proposal 1: Appropriation of Surplus Proposal 2: Election of Seven (7) Directors (Excluding Directors Serving as Audit and Supervisory Committee Members) 4. Instructions for Exercising Voting Rights, etc.: Please refer to “Instructions for Exercising Voting Rights, etc.” on page 2. * If you plan to attend the meeting in person, please present the enclosed Voting Rights Exercise Form at the reception desk. Please also bring this notice to the meeting for use as a meeting agenda. * If any changes have been made to the Reference Documents for the Annual Meeting of Shareholders, Business Report, Non-consolidated Financial Statements or Consolidated Financial Statements, such changes will be posted on the Company’s website (http://www.musashi.co.jp).
Transcript
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(Note) This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. The Company assumes no responsibility for this translation or for direct, indirect or any other forms of damages arising from the translation.
Securities code: 7220 June 3, 2016
To our shareholders:
Hiroshi Otsuka Representative Director and President
Musashi Seimitsu Industry Co., Ltd. 39-5 Daizen, Ueta-cho, Toyohashi-shi, Aichi
NOTICE OF CONVOCATION
OF THE 89TH ANNUAL MEETING OF SHAREHOLDERS You are cordially invited to attend the 89th Annual Meeting of Shareholders of Musashi Seimitsu Industry Co., Ltd. (the “Company”). If you are unable to attend the meeting, you can exercise your voting rights in writing or via the Internet, etc. Please review the Reference Documents for the Annual Meeting of Shareholders and exercise your voting rights by 5:00 p.m. on Wednesday, June 22, 2016.
Meeting Details 1. Date and Time: Thursday, June 23, 2016 at 10:00 a.m. (Reception will open at 9:00
a.m.; Japan Standard Time) 2. Venue: Conference Room of the Company’s Head Office
Items to be reported: 1. Business Report and Consolidated Financial Statements, as well as the audit reports
of the Financial Auditor and the Audit and Supervisory Committee for Consolidated Financial Statements, for the 89th fiscal term (from April 1, 2015 to March 31, 2016)
2. Non-consolidated Financial Statements for the 89th fiscal term (from April 1, 2015 to March 31, 2016)
Items to be resolved:
Proposal 1: Appropriation of SurplusProposal 2: Election of Seven (7) Directors (Excluding Directors Serving as
Audit and Supervisory Committee Members) 4. Instructions for Exercising Voting Rights, etc.:
Please refer to “Instructions for Exercising Voting Rights, etc.” on page 2. * If you plan to attend the meeting in person, please present the enclosed Voting Rights Exercise Form at the
reception desk. Please also bring this notice to the meeting for use as a meeting agenda. * If any changes have been made to the Reference Documents for the Annual Meeting of Shareholders, Business
Report, Non-consolidated Financial Statements or Consolidated Financial Statements, such changes will be posted on the Company’s website (http://www.musashi.co.jp).
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Instructions for Exercising Voting Rights, etc. You may exercise your voting rights by one of the following three methods: [Attending the General Meeting of Shareholders] Present the Voting Rights Exercise Form to the receptionist at the meeting.
Date and Time: Thursday, June 23, 2016 at 10:00 a.m. (Reception will open at 9:00 a.m.)
Venue: Conference Room of the Company’s Head Office 39-5 Daizen, Ueta-cho, Toyohashi-shi, Aichi
[Exercising Voting Rights in writing] Complete the enclosed Voting Rights Exercise Form by indicating your approval or disapproval of the proposals and return it without affixing a stamp.
Votes to be received by: Wednesday, June 22, 2016 at 5:00 p.m.
[Exercising Voting Rights via the Internet] Access the voting rights exercise website (https://www.net-vote.com/) from a PC, a smartphone or a mobile phone, input the “Login ID” and “Temporary password” indicated on the enclosed Voting Rights Exercise Form, follow the instructions on the screen, and input your approval or disapproval of the proposals.
Votes to be given by: Wednesday, June 22, 2016 at 5:00 p.m.
1) Please note that, to prevent unauthorized access to the site by individuals other than
shareholders (persons impersonating shareholders) or unauthorized alteration of votes already made by authentic shareholders, we may request shareholders to change their “Temporary password” at the voting website.
2) Shareholders will be informed of the new “Login ID” and “Temporary password,” every time a Meeting of Shareholders is called.
3) All costs associated with the access to the voting website (cost of internet connections, telephone tolls, etc.) need to be borne by the shareholder. Also, when voting by mobile phone, packet communication fees and other costs entailed by the use of mobile phones also need to be borne by the shareholder.
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Exercise of Voting Rights via the Internet, etc. To exercise your voting rights as a shareholder via the Internet, please refer to the information below and complete the necessary procedures by 5:00 p.m. Wednesday, June 22, 2016. 1. Voting Website
You can only exercise your voting rights via the dedicated voting website designated by the Company. This can be found at the following website address: https://www.net-vote.com/
2. Handling of votes via the Internet, etc.
(1) When exercising your voting rights via the Internet, input the “Login ID” and “Temporary password” provided in the enclosed Voting Rights Exercise Form, follow the instructions on the screen, and input your approval or disapproval of the proposals.
(2) If a shareholder duplicates his or her vote by exercising the voting rights both by mail and via the Internet, we will consider only the Internet vote to be valid. If you vote more than once over the Internet, we will consider the latest vote to be valid, irrespective of whether it was cast from a personal computer, smartphone, tablet, or mobile phone.
3. Handling of “Login ID” and “Password”
(1) The “Login ID” and “Temporary Password” noted on the enclosed Voting Rights Exercise Form are valid for this meeting only.
(2) The “Password” is used to confirm the identity of the shareholder when exercising his or her vote and is therefore very important information. Please take adequate precautions to keep it secure.
(3) If you need to have your “Password” reissued, please contact us at the Helpline below. 4. System’s environment used by shareholder to exercise vote via the Internet
Please confirm that to exercise your vote via the Internet your system’s environment meets the appropriate requirements given below.
(1) If you plan to exercise your vote by personal computer 1) Screen display resolution
1024 x 768 pixels (minimum resolution) 2) Web-browsing software (“browser”)
Microsoft Internet Explorer, Version 6 SP3 (or higher version) Firefox 35.0.1 Chrome 40 Note: Cookies must be enabled for all the above browsers.
(2) If you plan to exercise your vote by smartphone Models loaded with Android Version 4.0 (or higher version) iPhone4s (or more recent models)
(3) If you plan to exercise your vote by tablet computer Models loaded with iOS8
(4) If you plan to exercise your vote by mobile phone Models equipped with i-mode, EZweb, Yahoo!-keitai or 128 bit SSL encrypted communication security can be used. Mobile phones and other mobile devises, including smartphones, equipped with full browsing facilities can generally be used but there are some exceptions.
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Information for electronic voting platform Institutional investors who have already applied to use of the electronic voting platform operated by ICJ Inc., may also use this platform to exercise their voting rights, in addition to internet platforms listed above. Inquiries for System, etc. IR Japan Inc., Transfer Agency Services Department Helpline: 0120-975-960 Reception: 9:00 a.m. - 5:00 p.m. (excluding Saturdays, Sundays and public holidays)
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Reference Documents for the Annual Meeting of Shareholders Proposal 1: Appropriation of Surplus
Returning profit to shareholders is recognized as one of the highest priorities in the Company’s management, and the payment of stable, continuous dividends commensurate to business results is our basic policy. Regarding the appropriation of surplus for the 89th fiscal term, taking into account such factors as our business results for the fiscal year under review, the strengthening of our management structure and future business development, and considering to secure internal reserves on one hand, we propose the following. Matters relating to year-end dividends
i) Type of dividend property Cash
ii) Dividend amount to be allocated Per share of common stock: ¥25 Total dividends: ¥779,861,525
iii) Effective date of dividends of surplus June 24, 2016
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Proposal 2: Election of Seven (7) Directors (Excluding Directors Serving as Audit and Supervisory Committee Members)
The terms of office of six (6) Directors (excluding Directors serving as Audit and Supervisory Committee Members; the same is applied throughout this proposal) shall expire upon the conclusion of this Annual Meeting of Shareholders. Therefore, to strive for further strengthening and enhancement of our management foundation, we request the election of seven (7) Directors, an increase of one (1) person. The candidates for Director are as follows:
No. Name
(Date of birth) Career summary, positions and areas of responsibility in the Company,
and significant concurrent positions
Number of the Company’s shares held
1
Hiroshi Otsuka (Jul. 6, 1965)
Reappointment
Jul. 1993 Entered the Company
701,550
Apr. 1997 President and Director of TAP Manufacturing Ltd. (currently Musashi Auto Parts UK Ltd.)
Feb. 2000 President and Director of Musashi Hungary Manufacturing, Ltd.
Jun. 2001 Director of the Company
May 2002 Senior General Manager of Sales Division of the Company
Jun. 2004 Managing Director of the Company
Jun. 2005 Senior General Manager of Sales and Management Divisions of the Company
Jun. 2005 Senior Managing Director of the Company
May 2006 Representative Director and President of the Company (current position)
Apr. 2015 President and Executive Officer of the Company (current position)
2
Takayuki Miyata (Nov. 8, 1965)
Reappointment
Dec. 1989 Entered the Company
1,300
Jul. 1999 Director of Motogear Norte Industria de Engrenagens Ltda. (currently Musashi do Brasil Ltda.)
Apr. 2010 President and Director of Musashi Auto Parts Michigan Inc.
Apr. 2013 Executive Officer of the Company
Apr. 2013 Senior General Manager of Production Engineering Division of the Company
Apr. 2014 Senior General Manager of South America Regional Operations of the Company (current position)
Apr. 2015 Managing Executive Officer of the Company (current position)
Apr. 2015 Senior General Manager of Machinery & Tools Division (current position) and Purchasing Division of the Company
Jun. 2015 Director of the Company (current position)
Oct. 2015 Senior General Manager of Power Train (PT) Division and Forging Engineering Division of the Company (current position)
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No. Name
(Date of birth) Career summary, positions and areas of responsibility in the Company,
and significant concurrent positions
Number of the Company’s shares held
3
Haruhisa Otsuka (Nov. 4, 1960)
Reappointment
Jan. 1984 Entered the Company
29,250
Jan. 1992 Executive Vice President and Director of Technical Auto Parts Inc. (currently Musashi Auto Parts Michigan Inc.)
Jan. 1998 President and Director of Musashi Auto Parts Canada Inc.
May 2004 President and Director of Musashi Auto Parts Michigan Inc.
Jun. 2004 Director of the Company (current position)
May 2006 Senior General Manager of North America Regional Operations of the Company (current position)
May 2006 President and Director of Musashi Auto Parts Canada Inc. (current position)
Oct. 2010 Senior General Manager of North America Regional Sales of the Company (current position)
Apr. 2015 Managing Executive Officer of the Company (current position)
Oct. 2015 Senior General Manager of Linkage & Suspension (L & S) Division of the Company (current position)
(Significant concurrent position) President and Director of Musashi Auto Parts Canada Inc.
4
Koji Horibe (Mar. 23, 1960)
New appointment
Apr. 1983 Entered the Company
10,600
Apr. 1999 Director of Musashi Auto Parts Europe Ltd. (currently Musashi Auto Parts UK Ltd.)
Feb. 2001 Vice President and Director of Musashi Hungary Manufacturing, Ltd.
May 2006 General Manager of Overseas Planning Promotion Office of the Company
Apr. 2007 Executive Officer of the Company
Apr. 2007 Senior General Manager and General Manager of Production Engineering Division of the Company
Feb. 2009 Senior General Manager of Europe Regional Operations of the Company
Apr. 2009 President and Director of Musashi Hungary Manufacturing, Ltd.
Apr. 2012 Senior General Manager of Quality Division of the Company
Jun. 2012 Director of the Company
Apr. 2013 Senior General Manager of India Regional Operations of the Company
Apr. 2013 President and Director of Musashi Auto Parts India Pvt. Ltd.
Apr. 2015 Senior Executive Officer of the Company (current position)
Apr. 2015 Senior General Manager of Asia Regional Operations of the Company (current position)
Apr. 2015 President and Director of Musashi Asia Co., Ltd.
Jun. 2015 Retired from Director of the Company
Apr. 2016 Senior General Manager of Motorcycle Business Division of the Company (current position)
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No. Name
(Date of birth) Career summary, positions and areas of responsibility in the Company,
and significant concurrent positions
Number of the Company’s shares held
5
Toru Uchida (Mar. 18, 1958)
New appointment
Apr. 1982 Entered Honda Motor Co., Ltd.
600
Jun. 1997 Honda of The U.K. Manufacturing Ltd. under assignment to Human Resources Division of Honda Motor Co., Ltd.
Apr. 2000 Honda Motor Europe Ltd. under assignment to Human Resources Division of Honda Motor Co., Ltd.
Jul. 2005 General Manager of Human Resources Development Center, Human Resources Division of Honda Motor Co., Ltd.
Jun. 2009 General Manager of General Affairs Division, Guangzhou Honda Automobile Co., Ltd. (currently Guangqi Honda Automobile Co., Ltd.) under assignment to Human Resources Division of Honda Motor Co., Ltd.
Jun. 2011 Managing Director of Honda Health Insurance Association under assignment to Human Resources Division of Honda Motor Co., Ltd.
Apr. 2015 Entered the Company, Senior Executive Officer (current position)
Apr. 2015 Senior General Manager (current position) and General Manager of General Affairs Division of the Company
Apr. 2016 Senior General Manager of Sustainability Promotion Division of the Company (current position)
6
Isao Kamiya (Feb. 11, 1959)
New appointment
Apr. 1982 Entered Oki Electric Industry Co., Ltd.
100
Jan. 1989 Entered Sony Corporation
Nov. 1998 General Manager of Administration Division, Europe TV & DVD Audio Battery Factory of Sony Corporation
Jun. 2005 General Manager of Administration Division, Thailand Semiconductor Factory of Sony Corporation
Dec. 2006 General Manager of Finance Division, China Digital Camera Factory of Sony Corporation
Jul. 2011 Seconded to Japan Display Inc., General Manager of Administration Division, China LCD Factory
Dec. 2014 Entered the Company, Advisor to Senior General Manager of Finance and Accounting Division
Apr. 2015 Executive Officer of the Company
Apr. 2015 Senior General Manager of Finance and Accounting Division of the Company (current position)
Apr. 2016 Senior Executive Officer of the Company (current position)
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No. Name
(Date of birth) Career summary, positions and areas of responsibility in the Company,
and significant concurrent positions
Number of the Company’s shares held
7
Goro Kamino (Aug. 29, 1960)
Reappointment
Aug. 2000 Representative Director and President of Gastec Service, Inc. (current position)
3,800
May 2002 Representative Director and President of Sala Corporation (current position)
Mar. 2012 Representative Director and President of Chubu Gas Co., Ltd. (current position)
Jun. 2012 Director of the Company (current position)
(Significant concurrent positions) Representative Director and President of Sala Corporation Representative Director and President of Chubu Gas Co., Ltd. Representative Director and President of Gastec Service, Inc.
Notes: 1. There are no special interests between the Company and the candidates. 2. Mr. Koji Horibe, Mr. Toru Uchida, and Mr. Isao Kamiya are new appointee candidates for Director. 3. Mr. Goro Kamino is a candidate for Outside Director. 4. Mr. Goro Kamino has extensive experience and a high level of knowledge as a corporate manager,
and has provided various advices on the Company’s management as Outside Director of the Company. We request for his election as Outside Director, believing that he will continue to supervise the Company’s management based on his experience and knowledge.
5. Mr. Goro Kamino is currently serving as Outside Director of the Company and his term of office will be 4 years at the conclusion of this Annual Meeting of Shareholders.
6. The Company, with respect to liability under Article 423, paragraph 1 of the Companies Act, entered into an agreement with Mr. Goro Kamino limiting the total amount of the liability to the amount stipulated in Article 425, paragraph 1 of the same Act. Should his reelection be approved, the Company plans to continue the aforementioned agreements limiting liability.
7. The Company registered Mr. Goro Kamino as independent officer with the Tokyo Stock Exchange and the Nagoya Stock Exchange, pursuant to the guidelines thereof. Should his reelection be approved, the Company would continue his service as Independent Officer. Although the Company has fuel purchasing transactions etc. with Chubu Gas Co., Ltd. and Gastec Service, Inc., in which he serves concurrently. However, since the annual transaction amount relating thereto accounts for less than 1% of sales of the Company, Chubu Gas Co., Ltd. and Gastec Service, Inc., we believe that there would be no conflicts of interest with general shareholders.
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(Attached materials)
Business Report (April 1, 2015 to March 31, 2016)
1. Overview of the Group
(1) Business results for the fiscal year ended March 31, 2016 1) Progress and results of business
The economic climate encompassing the Group (Musashi Seimitsu Industry Co., Ltd. (the Company) and consolidated subsidiaries; same shall apply hereafter) during the fiscal year under review saw a modest recovery mainly in consumer spending in developed countries such as the United States and Europe. However, in the developing countries including China, prospects remained uncertain due to the impact of the slowdown in economic growth and currency devaluation. Meanwhile, although consumer spending was sluggish in Japan, the economy continued to recover through the stable employment environment. As for the automobile industry, with the continuing expansion of the global market, initiatives toward technological development became active to reflect increasing recognition of environment and safety. The Group considered this environmental change as a chance, and concentrated in the expansion of global production systems, establishment of an optimal operations, and development of new products. First, in terms of production, the Group started mass production in Musashi Auto Parts (Nantong) Co., Ltd. which is the second site established in China, the world’s largest market, in October 2015. In the North American market where sales were strong, the Group launched to increase production capacity of Musashi Auto Parts Mexico, S.A. de C.V. in Mexico. In terms of product development, unit products including differential *1 in which fuel efficiency is realized through downsizing and lightening, planetary *2 in which importance is increased with the change in transmission mechanism were introduced to the global market, receiving high evaluations from customers. Furthermore, for the purpose of accelerating the realization of the long term vision of “Musashi Global Vision 2020” and further strengthening competition, a divisional organizational structure where global strategies are planned and promoted on a division-by-division basis was established. “PT Division *3” and “L&S Division *4” were newly established in addition to the existing Motorcycle Division. In response to customers’ needs, the Group is consolidating functions at each business unit, and establishing a high quality and swift structure. *1 = The mechanism parts which allocate torque and absorb the difference of rotation
between left and right wheels when vehicles turn around. *2 = The parts which convert engine power to the vehicle’s adequate revolution speed
and torque. *3 = Power Train (automobile power train parts business) *4 = Linkage & Suspension (automobile frame linkage and suspension parts business) Under such circumstances, consolidated net sales for the fiscal year under review totaled 164,397 million yen (up 3.9% year on year), with consolidated operating income at 13,398 million yen (up 15.6% year on year). A segment breakdown reveals that, in Japan, due to a lull in domestic demand, net sales amounted to 27,717 million yen (down 11.0% year on year) with a segment profit of 2,517 million yen (up 171.4% year on year). In North America, due to a strong market environment, sales totaled 46,925 million yen (up 28.1% year on year) with a segment profit of 2,944 million yen (up 25.8%
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year on year). In Europe, against a backdrop of stable demand, sales totaled 6,645 million yen (up 9.7% year on year) with a segment profit of 942 million yen (up 6.3% year on year). In Asia, although there was a slowdown in growth, sales totaled 73,772 million yen (up 3.4% year on year) with a segment profit of 7,725 million yen (up 9.6% year on year). In South America, due to the strong impact of the stalled economy and the depreciation of the local currency, sales totaled 9,336 million yen (down 28.4% year on year) with a segment loss of 1,132 million yen (compared with a segment income of 9 million yen in the previous fiscal year). Impairment loss of non-current assets posted for consolidated subsidiaries in South America was 1,455 million yen. Consolidated ordinary income was 11,449 million yen (down 3.6% year on year) with profit attributable to owners of parent of 6,809 million yen (up 6.7% year on year).
Group sales by product
(million yen)
Item
The 88th fiscal year ended
March 31, 2015
The 89th fiscal year ended
March 31, 2016 Increase / Decrease
Amount Composition
ratio (%)
Amount Composition
ratio (%)
Amount Year on Year
(%)
PT Business 73,863 46.7 84,748 51.6 10,885 14.7
L&S Business 20,357 12.9 20,882 12.7 525 2.6
Motorcycle Business
63,987 40.4 58,767 35.7 (5,220) (8.2)
Total 158,209 100.0 164,397 100.0 6,188 3.9
Note: Figures are presented with amounts less than one million yen truncated. 2) Status of capital investment
A total of 9,295 million yen was invested by the Group during the fiscal year under review to manufacture newly ordered products and meet customer volume increases.
3) Status of fund procurement
During the fiscal year under review, only regular procurement from financial institutions occurred, with no capital increases or corporate bond issuances.
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(2) Status of Group assets and income (million yen, except for per share amounts)
Note: Net sales, operating income, ordinary income, profit attributable to owners of parent, total assets, and net assets are presented with amounts less than one million yen truncated.
(3) Status of parent company and major subsidiaries
1) Status of the parent company No items to report.
2) Matters concerning to transactions with the parent company, etc.
With regard to transactions with Honda Motor Co., Ltd., a company defined as “other affiliate” of the Company, prices are determined similarly to ordinary transactions through negotiations based on market values. In addition, the Company’s Board of Directors deems that decisions pertaining to the business operation and management of the Company are made by its independent managerial determination, securing its independence, and therefore the interest of the Company is not impeded in transactions with the parent company, etc.
3) Status of major subsidiaries
Company name Capital
(million)
The Company’s ownership
ratio (%)
Principal business
Kyushu Musashi Seimitsu Co., Ltd. JPY 200 100.0Manufacturing of motorcycle and general-purpose engine parts
Musashi Auto Parts Michigan Inc. USD 40 89.5 Manufacturing of automobile parts
Musashi Auto Parts Co., Ltd. THB 200 49.0Manufacturing of motorcycle and general-purpose engine parts
P.T. Musashi Auto Parts Indonesia USD 14 80.0Manufacturing of motorcycle and general-purpose engine parts
Musashi Auto Parts Canada Inc. CAD 20 100.0 Manufacturing of automobile parts
Musashi do Brasil Ltda. BRL 105.1 74.9Manufacturing of motorcycle and general-purpose engine parts
Musashi Hungary Manufacturing, Ltd. EUR 20.1 100.0 Manufacturing of automobile parts
Musashi da Amazonia Ltda. BRL 139 100.0Manufacturing of motorcycle and general-purpose engine parts
Musashi Auto Parts India Pvt. Ltd. INR 10,100 100.0Manufacturing of motorcycle and general-purpose engine parts
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Company name Capital
(million)
The Company’s ownership
ratio (%)
Principal business
Musashi Auto Parts (Zhongshan) Co., Ltd.
USD 65.2 100.0 Manufacturing of automobile parts
Musashi Auto Parts Vietnam Co., Ltd. USD 42 100.0Manufacturing of motorcycle and general-purpose engine parts
Musashi Auto Parts Mexico, S.A. de C.V.
USD 12.3 100.0 Manufacturing of automobile parts
Notes: 1. Musashi da Amazonia Ltda. increased capital by 43.4 million reals, all of which was contributed by the Company on December 15, 2015. Furthermore, capital was increased by 34.9 million reals through debt equity swap (DES) on February 26, 2016, as indicated above.
2. Although the ownership ratio of Musashi Auto Parts Co., Ltd. is not more than 50%, it is substantially controlled by the Company and therefore listed as a subsidiary.
4) Status of the specified wholly-owned subsidiary
Name of the specified wholly-owned subsidiary Musashi Auto Parts India Pvt. Ltd.
Address of the specified wholly-owned subsidiary Sector-7, Industrial Growth Center, Bawal, Haryana, India
Book value of shares of the specified wholly-owned subsidiary at the Company and its wholly-owned subsidiaries
17,782 million yen
Total assets of the Company 82,426 million yen
(4) Issues to be handled
In the global automotive market, motorcycles and four-wheel vehicles are both expected to expand in the long term. On the other hand, the business environment surrounding the Group is becoming stricter due to factors such as the strengthening of environmental regulations, the acceleration of electrification, and the advancement of technology related to automatic driving. The Group, perceiving this change to the business environment be an opportunity, and for ongoing growth, recognizes the following issues. 1) In the business area:
* Strengthening next generation MSI branded product development to contribute to the reduction of environmental burden and the advancement of mobility
* Strengthening the business foundation in markets where expansion is expected 2) In the systems area:
* Realizing global optimal operations to maximize the Group’s combined strengths * Establishing a structure that is able to continually provide high quality products
3) In the “people” area: * Strengthening of management that trains personnel around the world and utilizes
them, with a focus on the Musashi philosophy (5) Principal business (As of March 31, 2016)
The principal business of the Group consists of the manufacturing and sales of automobile power train parts, suspension parts, steering parts and transmission parts, among others, of which the main products are listed below.
PT Planetary gear assemblies, differential gear assemblies, bevel gears, ring gears, camshafts, balance shafts, metal molds, jigs and tools, machinery and instruments
L&S Suspension arm assemblies, suspension ball joints, steering ball joints, various connection joints
Motorcycle Motorcycle transmission gear assemblies, motorcycle camshafts, motorcycle kickstarter parts, other motorcycle power train parts and general-purpose engine parts
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(6) Principal business locations and plants (As of March 31, 2016) 1) Musashi Seimitsu Industry Co., Ltd.
Head Office and Ueta Plant (Aichi) Akemi Plant #1 (Aichi) Akemi Plant #2 (Aichi) Horai Plant (Aichi) Suzuka Plant (Mie)
2) Principal subsidiaries
Kyushu Musashi Seimitsu Co., Ltd. (Kumamoto) Musashi Auto Parts Michigan Inc. (Michigan, USA) Musashi Auto Parts Co., Ltd.
P.T. Musashi Auto Parts Indonesia Plant #1 (Bekasi, Indonesia) Plant #2 (Karawang, Indonesia)
Musashi Auto Parts Canada Inc. (Ontario, Canada) Musashi do Brasil Ltda. (Pernambuco, Brazil) Musashi Hungary Manufacturing, Ltd. (Ercseny, Hungary) Musashi da Amazonia Ltda. (Amazonas, Brazil) Musashi Auto Parts India Pvt. Ltd.
Musashi Auto Parts (Zhongshan) Co., Ltd. (Guangdong, China) Musashi Auto Parts Vietnam Co., Ltd. (Hung Yen, Vietnam) Musashi Auto Parts Mexico, S.A. de C.V. (San Luis Potosi, Mexico)
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(7) Status of employees (As of March 31, 2016) 1) Employees of the Group
Number of employees Change from previous
fiscal year-end
10,172 (2,492) -264 (-615)
Note: Number of employees means the number of full-time employees currently at work only, and the average number of part-time and temporary employees for the year is indicated in parentheses.
2) Employees of the Company
Number of employees Change from previous
fiscal year-end Average age Average years of service
1,102 (106) -42 (-72) 38.9 years old 14.6 years
Note: Number of employees means the number of full-time employees currently at work only, and the average number of part-time and temporary employees for the year is indicated in parentheses.
(8) Status of major lenders (As of March 31, 2016)
Lender Balance of borrowings
(million yen)
The Bank of Tokyo-Mitsubishi UFJ, Ltd. 17,184
Mizuho Bank, Ltd. 12,946
Sumitomo Mitsui Banking Corporation 2,601
Note: The balance of borrowings is the sum total by lender group.
(9) Other important issues related to the current operations It was resolved at the Board of Directors Meeting held on May 9, 2016, to conclude a share transfer agreement between the Company and the Gores Group (located in the US) to acquire all shares of Hay Holdings GmbH (located in Germany), which is the holding company of all companies in the Hay Group.
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2. Status of the Company (1) Status of shares (As of March 31, 2016)
1) Total Number of Shares Authorized to be Issued 70,000,000 2) Total Number of Issued Shares 31,200,000 3) Number of Shareholders 2,541 4) Major Shareholders (Top 10)
Shareholder name Number of shares (thousand shares)
Ownership ratio (%)
Honda Motor Co., Ltd. 8,182 26.2
Japan Trustee Services Bank, Ltd. (Trust Account) 1,872 6.0
BNP PARIBAS SEC SERVICES LUXEMBOURG/JASDEC/ABERDEEN GLOBAL CLIENT ASSETS
1,293 4.1
JPMorgan Chase Bank, N.A. 385632 1,125 3.6
Northern Trust Company (AVFC) Account Non Treaty 999 3.2
Otsuka Holdings Co., Ltd. 801 2.5
The Master Trust Bank of Japan, Ltd. (Trust Account) 764 2.4
Hiroshi Otsuka 701 2.2
MELLON BANK, N.A. AS AGENT FOR ITS CLIENT MELLON OMNIBUS US PENSION
605 1.9
JPMorgan Chase Bank, N.A. 385166 595 1.9
Notes: 1. Shares less than one thousand have been truncated. 2. Ownership ratio is calculated excluding treasury shares (5,539 shares).
(2) Status of share subscription rights 1) Status of share subscription rights held by the Company’s officers granted as a
consideration for the execution of duties No items to report.
2) Status of share subscription rights granted to employees, etc. during the fiscal year
under review as a consideration for the execution of duties No items to report.
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3) Other important matters concerning share subscription rights Overview of euro-yen denominated convertible bonds subject to call due 2018 issued based on a resolution made at the Board of Directors Meeting held on November 20, 2013
Item Euro-yen denominated convertible bonds subject to call due 2018
(Issued December 6, 2013, London time)
Number of share subscription rights 1,000 units
Type and number of shares subject to share subscription rights
Common stock of the Company (Share unit: 100 shares) The number of shares of common stock of the Company to be granted by the exercise of the share subscription rights shall be the number obtained by dividing the total face value of corporate bonds in respect of exercise requests by the conversion value below. However, any fraction less than one share that occurs due to exercise shall be truncated and no adjustment in cash shall be made.
Conversion value 3,441 yen
Period when share subscription rights can be exercised
December 20, 2013 to November 22, 2018 (in the local time of the location where exercise requests are received)
Conditions for exercising share subscription rights
Partial exercising of the share subscription rights may not be made. Until September 6, 2018, holders of bonds with share subscription rights can exercise their rights during the period from the first to the last day of the following fiscal quarter (however, September 5, 2018 for the quarter beginning on July 1, 2018) only if the closing price of the common stock of the Company for any 20 trading days in a period of 30 consecutive trading days ending on the last trading day of any particular fiscal quarter of the Company is more than 120 percent of the conversion value in effect on the last trading day of such fiscal quarter of the Company.
Balance of convertible bonds 10,026 million yen
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(3) Status of Corporate Officers 1) Status of the Directors (As of March 31, 2016)
Position Name Areas of responsibility in the Company
and significant concurrent positions Representative Director and President
Hiroshi Otsuka
Director Naohiro Matsumoto Representative Director and President of Kyushu Musashi Seimitsu Co., Ltd.
Director Haruhisa Otsuka President and Director of Musashi Auto Parts Canada Inc.
Director Tetsuro Hamada Senior General Manager of R&D
Director Takayuki Miyata
Senior General Manager of PT Business, Forging Engineering and Machinery & Tools Divisions Senior General Manager of South America Regional Operations
Director Goro Kamino Representative Director and President of Sala Corporation Representative Director and President of Chubu Gas Co., Ltd.Representative Director and President of Gastec Service, Inc.
Director (Full-time Audit and Supervisory Committee Member)
Nobuyoshi Sakakibara
Director (Audit and Supervisory Committee Member)
Takeshi Fujii
Director (Audit and Supervisory Committee Member)
Keisuke Tomimatsu Director of IR Japan Holdings, Ltd.
Director (Audit and Supervisory Committee Member)
Asako Yamagami Lawyer
Notes: 1. The Company has transitioned to a company with an Audit and Supervisory Committee (such transition hereinafter, the “Transition”) by resolution of the Annual Meeting of Shareholders held on June 23, 2015. With the Transition, the terms of office of Audit & Supervisory Board Member (full-time) Nobuyoshi Sakakibara, Audit & Supervisory Board Member Takeshi Fujii, and Audit & Supervisory Board Member Keisuke Tomimatsu have expired, each having been appointed as Directors serving as Audit and Supervisory Committee Members (hereinafter, the “Directors (Audit and Supervisory Committee Members)”)
2. Director Goro Kamino and Directors (Audit and Supervisory Committee Members) Takeshi Fujii, Keisuke Tomimatsu, and Asako Yamagami are Outside Directors.
3. Director (Audit and Supervisory Committee Member) Keisuke Tomimatsu has considerable financial and accounting knowledge nurtured through his extensive experience at various companies in the securities industry.
4. Director (Audit and Supervisory Committee Member) Asako Yamagami is qualified as a lawyer with high level of specialized knowledge in corporate legal affairs and compliance.
5. To strengthen the auditing and supervisory functions of the Audit and Supervisory Committee, the company has designated Mr. Nobuyoshi Sakakibara as Audit and Supervisory Committee Member (full-time) so that information gathering from the Director (excluding Audit and Supervisory Committee Member), information sharing through attendance of important in-house meetings and sufficient cooperation with the internal audit section will be allowed.
6. The Company designated Messrs. Goro Kamino, Takeshi Fujii, Keisuke Tomimatsu, and Ms. Asako Yamagami as Independent Officers pursuant to the regulations of the Tokyo Stock Exchange and the Nagoya Stock Exchange, and registered them as such.
7. The retired Directors and Audit & Supervisory Board Members during the fiscal year under review are as follows.
1) The terms of office of Directors Koji Horibe and Takeshi Isaku expired as of the conclusion of the 88th Annual Meeting of Shareholders held on June 23, 2015
2) Audit & Supervisory Board Member Hideki Sorimachi retired his position as of the conclusion of the 88th Annual Meeting of Shareholders held on June 23, 2015, in line with the Transition.
[Translation]
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(Ref.) The Company has adopted the executive officer system. The executive officers as of April 1, 2016 are as follows.
Position Name Areas of responsibility in the Company
and significant concurrent positions Representative Director, President and Executive Officer
Hiroshi Otsuka
Director and Managing Executive Officer
Naohiro Matsumoto Representative Director and President of Kyushu Musashi Seimitsu Co., Ltd.
Director and Managing Executive Officer
Haruhisa Otsuka
Senior General Manager of L&S Business Division Senior General Manager of North America Regional Operations President and Director of Musashi Auto Parts Canada Inc.
Director and Managing Executive Officer
Tetsuro Hamada Senior General Manager of R&D Division
Director and Managing Executive Officer
Takayuki Miyata
Senior General Manager of PT Business, Forging Engineering and Machinery & Tools Divisions Senior General Manager of South America Regional Operations
Senior Executive Officer
Koji Horibe Senior General Manager of Motorcycle Business Division Senior General Manager for Asia Regional Operations
Senior Executive Officer
Takeshi Isaku Senior General Manager of Sales Division
Senior Executive Officer
Toru Uchida Senior General Manager of General Affairs, Sustainability Promotion Division
Senior Executive Officer
Isao Kamiya Senior General Manager of Finance and Accounting Division
Executive Officer Takehiko Tsuji Senior General Manager of Quality Division
Executive Officer Tetsunobu Kawai Representative Director and Vice President of Kyushu Musashi Seimitsu Co., Ltd.
Executive Officer Takashi Soda Senior General Manager of Management Division Senior General Manager for China Regional Operations
Executive Officer Graham Hill In charge of Globalization Initiatives Senior General Manager for Europe Regional Operations President and Director of Musashi Auto Parts UK Ltd.
Executive Officer Tracey Sivill In charge of Global IT Strategy Director of Musashi Auto Parts Canada Inc.
Executive Officer Tadashi Utagawa Senior General Manager of Purchasing Division
Executive Officer Kenji Morisaki Senior General Manager of Production Division
[Translation]
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2) Total amount of remuneration of Directors and Audit & Supervisory Board Members for the fiscal year under review
Classification Number of payees Amount paid (million yen)
Directors (excluding Directors serving as Audit and Supervisory Committee Members)
8 165
(Outside Director of the above) (1) (6)
Directors (Audit and Supervisory Committee Members) 4 25
(Outside Director of the above) (3) (13)
Audit & Supervisory Board Members 4 8
(Outside Audit & Supervisory Board Members of the above) (3) (4)
Total 16 198
(Outside Officers of the above) (7) (24)
Notes: 1. Amount paid to the Audit & Supervisory Board Members corresponds to the period before the Transition and the amount paid to the Directors (Audit and Supervisory Committee Members) corresponds to the period after the Transition.
2. The maximum amount of remuneration of Director before the Transition was determined as 35 million yen per month (excluding employee salaries) by resolution at the 82nd Annual Meeting of Shareholders held on June 23, 2009. The maximum amount of remuneration of Directors (excluding Directors serving as Audit and Supervisory Committee Members) after the Transition was determined as 400 million yen per year (of which, 80 million yen or less for Outside Directors; provided, however, that this excludes the portion of employee salaries for Directors who serve concurrently as employees) by resolution at the 88th Annual Meeting of Shareholders held on June 23, 2015.
3. The maximum amount of remuneration of Directors (Audit and Supervisory Committee Members) was determined as 80 million yen per year by resolution at the 88th Annual Meeting of Shareholders held on June 23, 2015.
4. The maximum amount of remuneration of Audit & Supervisory Board Member was determined as 7 million yen per month by resolution at the 82nd Annual Meeting of Shareholders held on June 23, 2009.
5. The total amount of remuneration of Directors does not include the portion of employee salaries for Directors who serve concurrently as employees.
6. The total amount of remuneration paid includes the provision for Directors’ bonuses for the fiscal year under review.
3) Matters regarding Outside Officers
A. Status of significant concurrent positions at other companies, etc. and relationship between such companies with the Company
* Mr. Goro Kamino, Director, also serves as Representative Director and President of Sala Corporation, Chubu Gas Co., Ltd. and Gastec Service, Inc. The Company has fuel purchasing transactions etc. with Chubu Gas Co., Ltd and Gastec Service, Inc. However, the annual transaction amount relating thereto accounts for less than 1% of sales of the Company as well as the two companies. There is no special relationship between the Company and Sala Corporation.
* Mr. Keisuke Tomimatsu, Director (Audit and Supervisory Committee Member), assumed office as Director at IR Japan, Inc. in June 2014 and at IR Japan Holdings, Ltd., which was established as the wholly-owning parent company of IR Japan, Inc., in February 2015. The Company consigns shareholder registry administrator services to IR Japan, Inc., however, the annual transaction amount relating thereto accounts for less than 1% of sales of the Company as well as IR Japan, Inc. There is no special relationship between the Company and IR Japan Holdings, Ltd.
[Translation]
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B. Main activities during the fiscal year under review * Mr. Goro Kamino, Director, attended 10 of the 12 Board of Directors Meetings held
during the fiscal year under review at which he actively provided comments necessary for the deliberation of agenda items of the Board of Director Meetings thereat based on his broad experience and extensive knowledge in corporate management.
* Mr. Takeshi Fujii, Director (Audit and Supervisory Committee Member), attended 4 of the 12 Board of Directors Meeting held during the fiscal year under review as Audit & Supervisory Board Member where he provided advice and suggestions to ensure the adequacy and appropriateness of the Board of Directors’ decision-making. Further, he attended 7 of the aforementioned Board of Directors Meeting as Director (Audit and Supervisory Committee Member) where he raised questions and provided advice whenever appropriate based on his abundant experience and extensive knowledge cultivated over the years. Further, he attended 3 of the 3 Audit & Supervisory Board Meetings, and 6 of the 6 Audit and Supervisory Committee Meetings held during the fiscal year under review where he expressed opinions regarding matters that concern the audit methods and execution of Audit and Supervisory Committee Member duties.
* Mr. Keisuke Tomimatsu, Director (Audit and Supervisory Committee Member), attended 4 of the 12 Board of Directors Meeting held during the fiscal year under review as Audit & Supervisory Board Member where he provided advice and suggestions to ensure the adequacy and appropriateness of the Board of Directors’ decision-making. Further, he attended 8 of the aforementioned Board of Directors Meeting as Director (Audit and Supervisory Committee Member) where he raised questions and provided advice whenever appropriate based on his abundant experience in the securities industry and broad knowledge in economics. Further, he attended 3 of the 3 Audit & Supervisory Board Meetings, and 6 of the 6 Audit and Supervisory Committee Meetings held during the fiscal year under review where he expressed opinions regarding matters that concern the audit methods and execution of Audit and Supervisory Committee Member duties.
* Ms. Asako Yamagami, Director (Audit and Supervisory Committee Member), after being appointed, attended all of the 8 Board of Directors Meeting held during the fiscal year under review where she raised questions and provided advice whenever appropriate from a professional perspective as a lawyer. Further, since being appointed to the Company’s Director, she attended 6 of the 6 Audit and Supervisory Committee Meetings held during the fiscal year under review where she expressed opinions regarding matters that concern the audit methods and execution of Audit and Supervisory Committee Member duties.
C. Overview of limited liability agreements * The Company and the Outside Directors entered into limited liability agreements that
limit the amount of liability under Article 423, paragraph 1 of the Companies Act, pursuant to the provisions of Article 427, paragraph 1 of the same Act. The maximum amount of liability for damages under these agreements is the amount stipulated in Article 425, paragraph 1 of the same Act.
[Translation]
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(4) Financial Auditor 1) Name: Ernst & Young ShinNihon LLC 2) Amount of remuneration, etc.
Amount paid (million yen)
Remuneration, etc. of the Financial Auditor for the fiscal year under review 44.7
Total economic benefits, including money, that should be paid to the Financial Auditor by the Company and its subsidiaries
44.7
Notes: 1. Subsidiaries of the Company are audited by audit corporations other than the Financial Auditor of the Company.
2. In the audit agreement between the Company and the Financial Auditor, a distinction is not made between the remuneration for auditing based on the Companies Act and that for auditing based on the Financial Instruments and Exchange Act, nor is such distinction effectively possible. Therefore, the amount of the remuneration, etc. of the Financial Auditor for the fiscal year under review includes the amount of remuneration, etc. for auditing based on the Financial Instruments and Exchange Act.
3. The Audit and Supervisory Committee gives consent regarding the remuneration etc. of the Financial Auditor pursuant to Article 399, paragraph 1 of the Companies Act, after it has obtained necessary materials and received reports from the Directors, relevant departments within the Company and the Financial Auditor, confirmed the performance of previous financial audits etc. by the Financial Auditor and reviewed the details of the audit plan of the Financial Auditor and the calculation basis for the estimated amount of remuneration etc. for the fiscal year under review.
3) Description of non-auditing services
No items to report 4) Policy on decisions concerning dismissal or non-reappointment of the Financial Auditor
When the Financial Auditor has difficulty in execution of duties, the Audit and Supervisory Committee shall determine the detail of a proposal with regards to dismissal or non-reappointment of the Financial Auditor submitted to an Annual Meeting of Shareholders when it recognizes necessity for doing so. The Financial Auditor may also be dismissed by a unanimous consent of the Audit and Supervisory Committee Members, provided that any items of Article 340, paragraph 1 of the Companies Act are met. In such case, an Audit and Supervisory Committee Member designated by the Audit and Supervisory Committee shall report the dismissal of the Financial Auditor and the reason therefor at the first Annual Meeting of Shareholders convened after the dismissal.
5) Business suspension order to which the Financial Auditor was subject during past two years
The outline of the disciplinary action announced by the Financial Services Agency on December 22, 2015 (i) Subject of administrative order
Ernst & Young ShinNihon LLC (ii) Content of administrative order
Suspension from accepting new engagements for three months from January 1, 2016 to March 31, 2016
(iii) Reason for administrative order * False attestation due to errors by partners * The audit corporation’s operation of services was found to be grossly
inappropriate.
[Translation]
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(5) Systems to ensure properness of operations and overview of operational status of the systems
Basic policy relating to the establishment of the internal control system Below is an overview of decisions regarding systems for ensuring that the execution of duties by Directors comply with laws and regulations and the Articles of Incorporation, and other systems for ensuring proper operations.
1) Systems for ensuring that the execution of duties by Directors and employees comply
with laws and regulations and the Articles of Incorporation, and any other systems for ensuring proper operations
* Appoint an Officer in charge of promoting compliance and establish a systematic framework.
* Establish a committee to deliberate matters regarding business ethics and compliance. * Articulate “Our Compliance” as a code of conduct which must be adhered to by all
employees of the Group when dealing with customers and society and striving for the improvement of business ethics.
* Establish a hotline to receive proposals regarding compliance concerns.
2) Systems for the preservation and management of information relating to the execution of duties by Directors
* Establish an information management framework for the proper storage and management of documents relating to the execution of duties by Directors and other information based on the document management rules.
3) Rules and other systems for loss risk management and other systems
* Appoint an Officer in charge of promoting risk management and establish a systematic risk management framework.
* Promote formation of relevant regulations on organizations and actions to be taken by employees in the event of a crisis.
4) Systems to ensure efficiency of the execution of duties by Directors
* Establish a framework for monitoring the global execution of duties by the Board of Directors that includes governance and regional governance.
* Appoint Officers in charge of regional business and execution functions for rapid and optimal business decisions in each region and workplace as well as efficient and effective operations.
* Management meetings deliberate important managerial matters within the scope of authority delegated by the Board of Directors.
* Establish GTM (Global Top Meeting) for the extraction and handle issues for sharing group policies and realizing business plans, as well as enhancing the optimality and efficiency of business execution as a corporate group.
5) Systems to ensure the properness of operation of the Company and the corporate group
constituted by the parent and subsidiaries * Formulate “Regulations on Control of Affiliate Companies” for the proper execution of
tasks by all constituent companies of the Group, manage thereof according to such regulations, and receive reports from all constituent companies of the Group.
* All constituent companies of the Group conduct periodical self-assessment based on checklists.
* The Internal Audit Office, an independent internal audit section of the Company, conducts audits on the status of the business execution of all sections and works to enhance internal auditing in each region and at subsidiaries and associates.
[Translation]
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6) Matters concerning Directors and employees requested by Audit and Supervisory
Committee to assist its duties, and matters regarding the independence of the Directors and employees from other Directors (excluding Directors serving as Audit and Supervisory Committee Members (hereinafter referred to as “Audit and Supervisory Committee Members”))
* Provide assistance in the duties of Audit and Supervisory Committee in the internal audit section to contribute to the formation of an efficient and effective audit framework and deepen collaboration with such Audit and Supervisory Committee while ensuring the independence of the internal audit section.
7) System for reporting from Directors (excluding Audit and Supervisory Committee
Members) and employees to Audit and Supervisory Committee, and other systems for reporting to Audit and Supervisory Committee
* Periodical reports are made to Audit and Supervisory Committee on the status of the business of the Company and subsidiaries, etc. as well as the status of preparation and operation of internal control system covering areas such as compliance and risk management. Also, other factors that may potentially have significant influence on the Company have to be reported.
* Audit and Supervisory Committee Members have no obligation to report information obtained from Directors (excluding Audit and Supervisory Committee Members) or employees to the third parties, and may request Directors (excluding Audit and Supervisory Committee Members) to disclose reasons for the transfer, evaluation and disciplinary action, etc. of such employees who made reports.
8) Other systems to ensure that auditing by Audit and Supervisory Committee is
conducted effectively * Form an audit framework and establish audit environment to increase the effectiveness
of audits. Audit & Supervisory Committee conduct audits on the Company and subsidiaries, etc. in close collaboration with the Internal Audit Office, the internal audit section, and Audit & Supervisory Committee Members attend management meetings and other important meetings.
Status of operation of the internal control system
The Company has transitioned to a company with an Audit and Supervisory Committee by the resolution of the Annual Meeting of Shareholders held on June 23, 2015, fortifying the auditing and supervisory functions and enhancing the efficacy of internal control. Major operational status of the systems to ensure the adequacy of operations for the fiscal year under review is as follows:
1) Systems for ensuring that the execution of duties by Directors and employees comply
with laws and regulations and the Articles of Incorporation, and any other systems for ensuring proper operations
* The Company has appointed a compliance officer who promotes initiatives relating to compliance and has established an Internal Control Committee, deliberating business ethics and compliance.
* The Company has ensured that “Our Compliance” is fully understood by all employees through the compliance manual where it explains “Our Compliance” as the code of conduct in plain words, enhancing business ethics.
* The Company has handled proposals regarding compliance concerns at the Musashi compliance hotline, the in-house reporting hotline. In April 2015, it has newly added hotlines by outside lawyers and the Audit and Supervisory Committee Members
[Translation]
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respectively, enhancing the efficacy of the system by creating an environment where proposals regarding compliance concerns can be more easily made.
2) System for the preservation and management of information relating to the execution of
duties by Directors * The Company has preserved and managed information by prescribing matters relating
to management and preservation period of documents in the document management rules. It also has properly managed information regarding the execution of duties of Directors by specifying the preservation period and indicating the degree of confidentiality under the document management rules.
3) Rules concerning loss risk management and other systems
* The Company has appointed a risk management officer who promotes initiatives concerning risk management. It has established a BCP Committee where it has deliberated business continuity risks and its countermeasures and developed the Business Continuity Plan (BCP).
* In fiscal year 2015, the Company conducted a BCP drill with an assumption of a large-scale earthquake.
4) Systems to ensure efficiency of execution of duties by Directors
* The Board of Directors have allocated duties of Directors and appointed executive officers, efficiently operating the duties. Furthermore, the GTM (Global Top Meeting) where policies are shared and issues are discussed with companies of the Group have been held.
* In fiscal year 2015, the Company has transitioned to a company with an Audit and Supervisory Committee by resolving the amendment of the Articles of Incorporation at the 88th Annual Meeting of Shareholders for such transition. Such transition was made to fortify auditing and supervisory functions and governance, and to enhance the soundness and efficiency of business through rapid decision-makings and execution of operations by delegating authorities. With this transition, the Company has delegated parts of the executions of important operations resolved at the Board of Directors Meeting to management meetings in accordance with the provisions of the Articles of Incorporation, making efficient and flexible management decisions. Execution of operations is performed with flexibility under the clear accountability of the executive officers.
5) Systems to ensure the adequacy of the business of the Company and the corporate
group constituted by the parent company and subsidiaries * The Board of Directors has set out the basic policy relating to the establishment of the
internal control system and is supervising the establishment and the operational status of the system of the Group.
* The Company has formulated the “Regulations on Control of Affiliate Companies” which stipulates matters to be reported from companies of the Group to the Company, managing them according to the importance of the operations executed by the companies of the Group, and receiving reports from each company.
* Each companies of the Group periodically conduct self-assessment regarding laws and regulations complied and risks considered in business operations by using checklists. Based on the assessment results, the Internal Control Committee has deliberated issues which need to be taken as a Group.
* The Internal Audit Office belonging to the internal audit section of the Company periodically audits each section of the Company and companies of the Group.
[Translation]
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6) Matters concerning a Director and employee who is to assist the duties of the Audit and Supervisory Committee and matters concerning the independence of such Director and employee from other Directors (excluding Directors serving as Audit and Supervisory Committee Members (hereinafter, the “Audit and Supervisory Committee Members”))
* The Internal Audit Office independent from the business execution section assists the Audit and Supervisory Committee, thereby fortifying the auditing function. As the Internal Audit Office is an office independent from other business execution sections, when assisting the duties of the Audit and Supervisory Committee, the Internal Audit Office follows the instructions of the Audit and Supervisory Committee.
7) System of reporting from Directors (excluding Audit and Supervisory Committee
Members) and employees to the Audit and Supervisory Committee, and other systems reporting to the Audit and Supervisory Committee
* The internal audit section, internal control section and other business sections periodically report to the Audit and Supervisory Committee so that the Committee may obtain information necessary for auditing.
8) Other systems to ensure that auditing by the Audit and Supervisory Committee is
conducted effectively * In addition to the periodical audits conducted by the Audit and Supervisory Committee,
the Company has developed an environment to enhance the efficacy of audit by collaborating with the Internal Audit Office and providing opportunities for the Audit and Supervisory Committee Members to share information among them.
* The Audit and Supervisory Committee Members have attended management meetings and other important meetings, thus understanding the status of the operational execution. Furthermore, the Audit and Supervisory Committee Members have conducted audit by collaborating with the Internal Audit Office and being present in audits conducted by the Office.
(6) Policy on the determination of dividends from surplus, etc.
Returning profit to shareholders is recognized as one of the highest priorities in the Company’s management, and the payment of stable, continuous dividends commensurate to business results is our basic policy. The Company plans to appropriate internal reserves for the repayment of debts that contributes to the improvement of its financial position as well as the augmentation of production facilities and R&D activities in the future, aiming at the further expansion of the business.
[Translation]
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Consolidated Balance Sheet (As of March 31, 2016)
(million yen)
Account title Amount Account title Amount
Assets 155,152 Liabilities 77,204
Current assets 58,800 Current liabilities 44,029
Cash and bank deposits 13,059 Notes and accounts payable – trade 11,122
Allowance for doubtful accounts (51) Remeasurements of defined benefit plan
(637)
Non-controlling interests 11,125
Total assets 155,152 Total liabilities and net assets 155,152
Note: Figures are presented with amounts less than one million yen truncated.
[Translation]
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Consolidated Statement of Income (April 1, 2015 - March 31, 2016)
(million yen)
Account title Amount
Net sales 164,397
Cost of sales 136,601
Gross profit 27,796
Selling, general and administrative expenses 14,397
Operating income 13,398
Non-operating income 460
Interest income 66
Dividend income 138
Others 255
Non-operating expenses 2,410
Interest expenses 996
Loss on retirement of non-current assets 43
Foreign exchange losses 1,080
Others 290
Ordinary income 11,449
Extraordinary income 150
Gain on sales of non-current assets 150
Extraordinary losses 1,506
Loss on sales of non-current assets 32
Loss on retirement of non-current assets 18
Impairment loss 1,455
Profit before income taxes 10,092
Income taxes – current 2,335
Income taxes – deferred (165)
Profit 7,923
Profit attributable to non-controlling interests 1,113
Profit attributable to owners of parent 6,809
Note: Figures are presented with amounts less than one million yen truncated.
[Translation]
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Consolidated Statement of Changes in Net Assets (April 1, 2015 - March 31, 2016)
(million yen)
Shareholders’ equity
Capital stock Capital surplus Retained earnings Treasury shares Total
shareholders’ equity
Balance at April 1, 2015 2,973 2,714 61,429 (7) 67,111
Changes of items during period
Dividends of surplus (1,528) (1,528)
Profit attributable to owners of parent
6,809 6,809
Purchase of treasury shares (0) (0)
Change in the scope of consolidation (607) (607)
Net changes of items other than shareholders’ equity
Total changes of items during period
– – 4,673 (0) 4,672
Balance at March 31, 2016 2,973 2,714 66,103 (7) 71,783
Accumulated other comprehensive income
Non-controlling
interests
Total net assets
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Remeasurements of defined
benefit plan
Total accumulated
other comprehensive
income
Balance at April 1, 2015 2,919 2,671 (672) 4,918 11,940 83,969
Changes of items during period
Dividends of surplus (1,528)
Profit attributable to owners of parent
6,809
Purchase of treasury shares (0)
Change in the scope of consolidation (607)
Net changes of items other than shareholders’ equity
(759) (9,156) 35 (9,880) (814) (10,694)
Total changes of items during period (759) (9,156) 35 (9,880) (814) (6,022)
Balance at March 31, 2016 2,160 (6,485) (637) (4,961) 11,125 77,947
Note: Figures are presented with amounts less than one million yen truncated.
[Translation]
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Notes to Consolidated Financial Statements 1. Notes relating to the assumptions of the going concern
No items to report 2. Significant matters that serve as the basis for the preparation of consolidated financial
statements (1) Matters relating to the scope of consolidation
1) Status of consolidated subsidiaries i) Number of consolidated subsidiaries:
12 ii) Names of consolidated subsidiaries:
Kyushu Musashi Seimitsu Co., Ltd. Musashi Auto Parts Michigan Inc. Musashi Auto Parts Co., Ltd. P.T. Musashi Auto Parts Indonesia Musashi Auto Parts Canada Inc. Musashi do Brasil Ltda. Musashi Hungary Manufacturing, Ltd. Musashi da Amazonia Ltda. Musashi Auto Parts India Pvt. Ltd. Musashi Auto Parts (Zhongshan) Co., Ltd. Musashi Auto Parts Vietnam Co., Ltd. Musashi Auto Parts Mexico, S.A. de C.V.
iii) Changes of the scope of consolidation From the fiscal year under review, Musashi Auto Parts Mexico, S.A. de C.V. has been included within the scope of consolidation because of increases in the significance.
2) Status of non-consolidated subsidiaries: i) Names of principal non-consolidated subsidiaries:
Musashi Europe GmbH Musashi North America Inc. Musashi Asia Co., Ltd. Musashi Harvest K.K. Musashi Auto Parts UK Ltd. Musashi India Pvt. Ltd. Musashi Seimitsu Investment (Zhongshan) Co., Ltd. Musashi Auto Parts (Nantong) Co., Ltd.
ii) Reason for exclusion from the scope of consolidation Non-consolidated subsidiaries are excluded from the scope of consolidation because their respective total assets, net sales, profit or loss, and retained earnings do not have a material effect on the consolidated financial statements.
(2) Matters concerning application of equity method Status of non-consolidated subsidiaries to which the equity method is not applied
i) Names of principal companies, etc.: Musashi Europe GmbH Musashi North America Inc. Musashi Asia Co., Ltd. Musashi Harvest K.K. Musashi Auto Parts UK Ltd. Musashi India Pvt. Ltd. Musashi Seimitsu Investment (Zhongshan) Co., Ltd.
[Translation]
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Musashi Auto Parts (Nantong) Co., Ltd. ii) Reason for not applying equity method
Non-consolidated subsidiaries have an immaterial effect on profit or loss and retained earnings; they do not have a material effect on the items of the consolidated financial statements and are therefore not accounted for by the equity method.
(3) Items relating to the fiscal years, etc. of consolidated subsidiaries The account closing date of the Company’s consolidated subsidiaries Musashi Auto Parts Co., Ltd., P.T. Musashi Auto Parts Indonesia, Musashi Auto Parts Canada Inc., Musashi do Brasil Ltda., Musashi Hungary Manufacturing, Ltd., Musashi da Amazonia Ltda., Musashi Auto Parts Mexico, S.A. de C.V., and Musashi Auto Parts (Zhongshan) Co., Ltd. is December 31, and that of Musashi Auto Parts Michigan Inc. is January 31. Financial statements as of the foregoing accounts closing date are used to prepare consolidated financial statements. However, material transactions occurring during the period from the accounts closing date of a subsidiary and the consolidated accounts settlement date are adjusted as necessary for consolidation.
(4) Matters relating to accounting practices and policy 1) Valuation basis and method for significant assets
i) Securities A. Shares in subsidiaries
Stated at cost using the moving average method B. Available-for-sale securities
* Securities with market value Market value method based on the market price as of the accounts settlement date (the full amount of the valuation difference is charged to net assets using the direct transfer to capital method, with the disposal cost determined by the moving average method)
* Securities without market value Stated at cost using the moving average method
ii) Derivatives Market value method
iii) Inventories The Company and consolidated subsidiaries mainly state inventories at cost using the moving average method (figures on the balance sheet are adjusted by writing down the book value where the profitability declines), however, some overseas consolidated subsidiaries use the lower of cost or market method by the first-in first-out method or weighted average method.
2) Depreciation methods for material depreciable assets i) Property, plant and equipment (excluding leased assets)
Depreciated using the straight-line method. Please note that the main useful lives are as follows. Buildings and structures 20 to 47 yearsMachinery, equipment and vehicles
5 to 10 years
ii) Intangible assets (excluding leased assets) The straight-line method is applied. However, for software for internal use, the straight-line method is applied based on the expected usable period within the Group (mainly 5 years).
iii) Leased assets Leased assets in non-ownership-transfer finance lease transactions
Depreciation is calculated on the straight-line method over the lease term as the useful life with no residual value.
[Translation]
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3) Accounting policy for significant provisions i) Allowance for doubtful accounts
To provide for losses due to bad debt, the Group reserves an estimated bad debt allowance on ordinary receivables based on historical bad debt ratios and on highly doubtful receivables and other specified debt based on the recoverability from individual receivables.
ii) Provision for bonuses To provide for the future payment of employee bonuses, the Company and some consolidated subsidiaries report the anticipated amount of bonus payments.
iii) Provision for directors’ bonuses To provide for the future payment of directors’ bonuses, the Company and some consolidated subsidiaries report the anticipated amount of bonus payments.
iv) Provision for product warranties To provide for product warranty expenses, the Group reports the anticipated amount of warranty expenses.
4) Accounting policy for translating significant assets or liabilities denominated in foreign currencies into Japanese currency
Foreign currency-denominated receivables and payables are converted to yen at the spot exchange rate on the consolidated closing date and the translation adjustment is treated as a profit or loss. Please note that assets and liabilities of overseas subsidiaries and others are converted into yen based on the spot exchange rate on the day of consolidated closing date, and revenue and expenses are converted into yen by using the average exchange rate during the fiscal year, while the difference arising from the conversion is shown as foreign currency translation adjustment and non-controlling interests.
Deferred hedge accounting is used for derivative transactions satisfying hedge accounting requirements. However, appropriation accounting is applied to forward foreign exchange contracts and currency swap transactions that satisfy requirements for appropriation accounting, and special treatment is applied to the interest-rate swap transactions that meet the requirements for special treatment.
transactions, and interest-rate swap transactions Hedged items Foreign currency denominated borrowings and foreign
currency denominated trade receivables and payables iii) Hedging policy
To avoid foreign exchange fluctuation risk for receivables and payables denominated in foreign currencies, the Group uses forward foreign exchange contracts and currency swap transactions. To avoid interest-rate fluctuation risk for borrowings, the Group uses interest-rate swap transactions. It is our policy that these derivative transactions are carried out in accordance with its internal rules which stipulate authorization and limitation amount of transactions, and used to avoid foreign currency exchange and interest-rate fluctuation risks, and no speculative transactions are allowed.
iv) Hedge effectiveness evaluation method The effectiveness of hedges is evaluated by comparing the cumulative cash flow fluctuations of hedged items or market fluctuations with cumulative cash flow fluctuations of the hedging method or market fluctuations based on the changes of both. Please note that this assessment is omitted for interest-rate swaps subject to special
[Translation]
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treatment. 6) Other significant matters that serve as the basis for the preparation of consolidated
financial statements i) Accounting treatment for retirement benefits
A. The attribution of benefits to periods of service For the calculation of projected benefit obligation, the Group adopts the plan’s benefit formula for the attribution of benefits to the end the fiscal year under review.
B. Accounting method of actuarial gains and losses and past service costs Past service costs are amortized using the straight-line method over a certain period (mainly, 15 years), which is within the average remaining service period of the employees, when they are recognized. Actuarial gains and losses will be amortized over a certain period (mainly, 15 years), which is within the average remaining service period of the employees, using the straight-line method, from the following fiscal year when the actuarial gains and losses is recognized.
ii) Accounting treatment of consumption taxes Accounting treatment for consumption tax and local consumption tax is based on the tax-excluded method.
3. Change of accounting policies
(Application of Accounting Standard for Business Combinations, etc.) Effective from the fiscal year under review, the Company has applied the “Accounting Standard for Business Combinations” (ASBJ Statement No. 21, September 13, 2013), the “Accounting Standard for Consolidated Financial Statements” (ASBJ Statement No. 22, September 13, 2013), the “Accounting Standard for Business Divestitures” (ASBJ Statement No. 7, September 13, 2013), etc. In addition, the presentation method for “net income” and other related items was changed, and the presentation of “minority interests” was changed to “non-controlling interests.”
[Translation]
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4. Notes to the consolidated balance sheet Amount of accumulated depreciation for property, plant and equipment
146,482 million yen 5. Notes to the consolidated statement of income
Impairment loss The Group posted impairment losses with respect to the following assets.
Location Purpose of use Category Impairment loss
(million yen)
Musashi da Amazonia Ltda. Assets for business Machinery, equipment
and buildings 1,455
The Group groups assets for the smallest cash-generating unit that independently generates cash inflow. The Group reduced the book value of the asset groups that became less profitable down to their recoverable value, and posted the reduced amount as impairment loss as part of extraordinary loss. While the recoverable value of the asset group was measured in terms of its value in use while its future cash flows were computed by discounting them by 15.7%.
[Translation]
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6. Notes to the consolidated statement of changes in net assets (1) Matters concerning total number of issued shares
(thousand shares)
Types of shares April 1, 2015 Increase Decrease March 31, 2016
Common shares 31,200 – – 31,200
(2) Matters concerning number of treasury shares
(shares)
Types of shares April 1, 2015 Increase Decrease March 31, 2016
Common shares 5,466 73 – 5,539
Note: Increase in 73 common shares is due to purchase of shares of less than one unit.
(3) Matters concerning dividends of surplus 1) Paid amount of dividends
i) Matters concerning dividends resolved at the 88th Annual Meeting of Shareholders held on June 23, 2015 * Total dividends 748 million yen * Dividends per share 24 yen * Record date March 31, 2015 * Effective date June 24, 2015
ii) Matters concerning dividends resolved at the Board of Directors Meeting held on October 30, 2015
* Total dividends 779 million yen * Dividends per share 25 yen * Record date September 30, 2015 * Effective date December 1, 2015
2) Of the dividends whose record date belongs to the fiscal year under review, dividends whose effective date falls in the next fiscal year
The following shall be presented at the 89th Annual Meeting of Shareholders to be held on June 23, 2016
* Total dividends 779 million yen * Dividends per share 25 yen * Record date March 31, 2016 * Effective date June 24, 2016 * Source of dividends Retained earnings
[Translation]
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7. Notes concerning financial instruments (1) Matters concerning the conditions of financial instruments
The Group procures necessary capital through loans from banks and other financial institutions and through bond issuances. Temporary surplus funds are managed only as short-term deposits. Credit risk of customers in terms of notes and accounts receivable – trade are mitigated according to the Sales Management Rules. Investment securities are mainly shares, and we quarterly monitor the market prices of listed stock. Borrowings are used as working capital and capital investment funds. Forward foreign exchange contracts and currency swap contracts are used against the exchange fluctuation risk for foreign-denominated borrowings, and interest rate swap contracts are used against interest rate fluctuation risk. Please note that derivative transactions are conducted only in the scope of actual demand according to internal rules.
(2) Matters concerning fair values, etc. of financial instruments Amounts on the consolidated balance sheet, fair values and their differences at March 31, 2016 are as follows.
(million yen)
Consolidated balance sheet
amount Fair value Difference
(1) Cash and bank deposits 13,059 13,059 –
(2) Notes and accounts receivable – trade 16,851 16,851 –
(3) Investment securities 4,503 4,503 –
Total assets 34,414 34,414 –
(4) Notes and accounts payable – trade 11,122 11,122 –
(*1) Includes current portion of long-term loans. (*2) Net claims and obligations derived from derivative transactions are indicated in net amounts. Notes: 1. Calculation method of the fair value of financial instruments and matters concerning marketable
securities and derivative transactions (1) Cash and bank deposits and (2) Notes and accounts receivable – trade Because their fair value is almost equal to book value due to their short-term settlement, they are posted at
their book value. (3) Investment securities Fair value of investment securities is based on market prices on exchanges. (4) Notes and accounts payable – trade and (5) Short-term loans payable Because their fair value is almost equal to book value due to their short-term settlement, they are posted at
their book value. (6) Accounts payable – other, (7) Accrued expenses and (8) Income taxes payable Because their fair value is almost equal to book value due to their short-term settlement, they are posted at
their book value.
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(9) Bonds payable The fair value of bonds issued by the Group is calculated at the present value thereof equal to the total of
capital and interests discounted by an interest rate reflecting the remaining terms adjusted for credit risk. (10) Long-term loans payable The fair value of long-term loans is calculated at the present value thereof equal to the total of capital and
interests discounted by an interest rate reflecting the remaining terms adjusted for credit risk. Please note that, for loans requiring interest rate renewals at certain periods, their fair value is roughly
equal to book value, and therefore they are determined by the relevant book value. (11) Derivative transactions The fair value of derivative transactions is determined by the quoted price obtained from financial
institutions. However, interest rate swap contracts meeting special treatment criteria are treated together with hedged
borrowings, therefore, their fair value is included in the fair value of the relevant borrowings. However, forward foreign exchange contracts meeting appropriation accounting criteria are treated together with hedged borrowings, accounts receivable – trade, and accounts payable – trade, therefore, their fair value is included in the fair value of the relevant account items.
2. Unlisted equity securities (940 million yen posted) among investment securities are not included in “(3) Investment securities” as no quoted market price is available and it is extremely difficult to ascertain fair value by such means as estimating future cash flows.
8. Per share information
(1) Net assets per share: 2,142.11 yen (2) Earnings per share: 218.29 yen
9. Significant subsequent events
(Business combination through acquisition) The Company has decided to acquire shares of a holding company, Hay Holding GmbH, from The Gores Group in order to make Hay Holding and its operating subsidiaries into the Company’s subsidiaries, through a wholly-owned special purpose company (SPC) to be established for that purpose, by the resolution at the Board of Directors Meeting held on May 9, 2016.
(1) Reason for carrying out business combination Since its establishment in 1938, the Company, on the basis of its spirit of foundation, “Shitsujitsu-Goken” (Simple and Sturdy), “Shisei-Ikkan” (Consistent Sincerity), has aimed to continue to explore and develop our original Monozukuri (Committing pride, passion and craftsmanship to the whole process of creating products of excellence, which fully satisfy our customers’ expectations) and thereby contribute to the global society by providing trusted and attractive products as its corporate mission. Taking the 70th anniversary year of the Company’s founding as an opportunity, the Company has established a long-term strategic plan, “Musashi Global Vision 2020” and put emphasis on the following points which include strengthening of high precision forging technology, expansion of global production and sales network, optimization of global operations, and creation of next generation MSI branded products. Meanwhile, in order to achieve further business growth, the Company has been well aware of the needs to strengthen its business foundation in Europe, where its presence is relatively weak, to further expand its business and products portfolio, and eventually to enhance the Company’s presence in global markets and to grasp global technical trend and customer needs in a more accurate manner. Hay Group, headquartered in Germany, is the largest forging and machining producer in Europe and has a competitive edge in such products as unique parts for large-scale powertrain applications. Furthermore, Hay Group has established a strong relationship with the main European OEMs and automotive suppliers. To this day, it has supplied products such as engine parts and gear parts through its 8 manufacturing plants in 3 European countries including Germany, Hungary and Spain. In addition, the latest plant in China has begun its operation, allowing the Company to tap further into the largest automotive market in the world.
[Translation]
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Through the acquisition, the Company projects to benefit from the reinforcement of business foundation in Europe, further enhancement of its presence in global markets, and synergy effects in areas of production, development and sales. Going forward, the Company endeavors to achieve further progress as a true global company with high competitiveness all over the world.
(2) Name, business contents and size of acquired entity
Corporate Name Hay Holding GmbH Business Contents Shareholding of its subsidiary which engages in the
production and sale of automotive parts Business size (For the fiscal year ended
December 2015) Amount of capital 136,800 euro Consolidated net assets 34 million euro Consolidated total assets 355 million euro Consolidated net sales 524 million euro
(3) Date of business combination June 30, 2016 (tentative)
(4) Number of shares to be acquired, acquisition costs and ratio of voting rights after business combination
Number of shares to be acquired 136,800 shares Acquisition costs (estimated) 361 million euro Ratio of voting rights after business combination 100%
(5) Amount of goodwill to be recognized, reason for recognition, and method and period for amortization of goodwill
Unable to confirm at present.
(6) Amount and components of assets to be acquired and liabilities to be assumed on date of business combination
Unable to confirm at present.
(7) Financing and payment methods of funds for acquisition
1) Lender Domestic financial institutions 2) Total borrowing amount 44 billion yen (tentative) 3) Borrowing rate Around 0.3% (floating) 4) Borrowing date June 30, 2016 (tentative) 5) Repayment date Up to one year 6) Provision of security Not applicable
[Translation]
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Non-consolidated Balance Sheet (As of March 31, 2016)
(million yen)
Account title Amount Account title Amount
Assets 82,426 Liabilities 46,636Current assets 19,609 Current liabilities 19,287
Cash and bank deposits 3,080 Notes payable – trade 123
Accounts receivable – trade 10,366Electronically recorded obligations – operating
3,266
Finished goods 854 Accounts payable – trade 3,424Work in process 959 Short-term loans payable 6,100
Raw materials and supplies 813Current portion of long-term loans payable
2,421
Short-term loans receivable 1,505 Lease obligations 31Prepaid expenses 10 Accounts payable – other 391Deferred tax assets 536 Accrued expenses 1,819Accounts receivable – other 769 Income taxes payable 228Others 713 Deposits received 105
Non-current assets 62,816 Provision for bonuses 966Property, plant and equipment 8,899 Provision for directors’ bonuses 30
Buildings 1,830 Provision for product warranties 22Structures 105 Notes payable – facilities 307Machinery and equipment 4,238 Others 46Vehicles 3 Non-current liabilities 27,349Tools, furniture and fixtures 380 Bonds payable 10,026Land 2,136 Long-term loans payable 15,933Construction in progress 204 Lease obligations 70
Intangible assets 908 Deferred tax liabilities 413Software 357 Provision for retirement benefits 774Software in progress 542 Long-term accounts payable – other 71Others 8 Asset retirement obligations 60
Investments and other assets 53,008 Net assets 35,789Investment securities 166 Shareholders’ equity 33,738Shares of subsidiaries and associates 29,882 Capital stock 2,973
Investments in capital 3 Capital surplus 2,714Long-term loans receivable from subsidiaries and associates 1,800 Legal capital surplus 2,714
Investments in capital of subsidiaries and associates 21,139 Retained earnings 28,057
Long-term prepaid expenses 9 Legal retained earnings 306Others 43 Other retained earnings 27,750Allowance for doubtful accounts (36) General reserve 23,500 Reserve for special depreciation 19 Retained earnings brought forward 4,231 Treasury shares (7) Valuation and translation adjustments 2,051
Valuation difference on available-for-sale securities
2,051
Total assets 82,426 Total liabilities and net assets 82,426Note: Figures are presented with amounts less than one million yen truncated.
[Translation]
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Non-consolidated Statement of Income (April 1, 2015 - March 31, 2016)
(million yen)
Account title Amount
Net sales 46,105
Cost of sales 37,956
Gross profit 8,149
Selling, general and administrative expenses 5,415
Operating income 2,734
Non-operating income 1,921
Interest income 54
Dividend income 1,823
Rent income 9
Others 33
Non-operating expenses 218
Interest expenses 113
Loss on retirement of non-current assets 28
Foreign exchange losses 35
Others 40
Ordinary income 4,437
Extraordinary income 0
Gain on sales of non-current assets 0
Extraordinary losses 245
Loss on assignment of claims 245
Profit before income taxes 4,192
Income taxes – current 1,066
Income taxes – deferred 356
Profit 2,769
Note: Figures are presented with amounts less than one million yen truncated.
[Translation]
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Non-consolidated Statement of Changes in Net Assets (April 1, 2015 - March 31, 2016)
(million yen)
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings Treasury
shares
Total shareholders’
equity Legal capital surplus
Legal retained earnings
Other retained earnings
Total retained earnings
Balance at April 1, 2015 2,973 2,714 306 26,510 26,816 (7) 32,497
Changes of items during period
Dividends of surplus (1,528) (1,528) (1,528)
Profit 2,769 2,769 2,769
Purchase of treasury shares (0) (0)
Net changes of items other than shareholders’ equity
Total changes of items during period – – – 1,240 1,240 (0) 1,240
Balance at March 31, 2016 2,973 2,714 306 27,750 28,057 (7) 33,738
Valuation and translation adjustments
Total net assets Valuation difference on available-for-sale securities
Total valuation and translation adjustments
Balance at April 1, 2015 2,765 2,765 35,262
Changes of items during period
Dividends of surplus (1,528)
Profit 2,769
Purchase of treasury shares (0)
Net changes of items other than shareholders’ equity
(714) (714) (714)
Total changes of items during period (714) (714) 526
Balance at March 31, 2016 2,051 2,051 35,789
Note: Figures are presented with amounts less than one million yen truncated.
[Translation]
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*Other retained earnings (million yen)
General reserve
Reserve for special
depreciation
Reserve for advanced
depreciation of machinery
Retained earnings brought forward
Total
Balance at April 1, 2015 23,500 19 2 2,988 26,510Change in the fiscal year
Dividends of surplus – – – (1,528) (1,528)Establishment of reserve for special depreciation
– 0 – (0) –
Reduction of reserve for advanced depreciation of machinery
– – (2) 2 –
Profit – – – 2,769 2,769Total changes of items during period – 0 (2) 1,242 1,240Balance at March 31, 2016 23,500 19 – 4,231 27,750
Note: Figures are presented with amounts less than one million yen truncated.
[Translation]
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Notes to Non-consolidated Financial Statements 1. Notes relating to the assumptions of the going concern
No items to report 2. Matters pertaining to significant accounting policies
(1) Valuation basis and method for securities 1) Shares in subsidiaries
Stated at cost using the moving average method 2) Available-for-sale securities
* Securities with market value Market value method based on the market price as of the accounts settlement date (the full amount of the valuation difference is charged to net assets using the direct transfer to capital method, with the disposal cost determined by the moving average method)
* Securities without market value Stated at cost using the moving average method
(2) Valuation basis and method for derivative transactions Market value method
(3) Valuation basis and method for inventories 1) Finished goods, work in process and raw materials
Cost using the moving average method (figures on the balance sheet are adjusted by writing down the book value where the profitability declines) However, machinery purchased for sale and in-house manufactured machinery are recorded at cost using the individual method
2) Supplies of metal molds Stated at cost using the individual method
3) Other supplies Stated at cost using the final purchase cost method
(4) Depreciation method for non-current assets 1) Property, plant and equipment (excluding leased assets)
Straight-line method Please note that the main useful lives are as follows. Buildings 31 to 47 yearsMachinery and equipment 9 years
2) Intangible assets (excluding leased assets) i) Software for internal use
The straight-line method is applied based on the expected usable period within the Company (5 years).
ii) Other intangible assets Straight-line method
3) Leased assets Leased assets in non-ownership-transfer finance lease transactions Depreciation is calculated on the straight-line method over the lease term as the useful life with no residual value.
(5) Accounting policy for provisions 1) Allowance for doubtful accounts
To provide for losses due to bad debt, the Company reserves an estimated bad debt allowance on ordinary receivables based on historical bad debt ratios and on highly doubtful receivables and other specified debt based on the recoverability from individual receivables.
2) Provision for bonuses To provide for the future payment of employee bonuses, the Company reports the
[Translation]
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anticipated amount of bonus payments. 3) Provision for directors’ bonuses
To provide for the future payment of directors’ bonuses, the Company reports the anticipated amount of bonus payments.
4) Provision for product warranties To provide for product warranty expenses, the Company reports the anticipated amount of warranty expenses.
5) Provision for retirement benefits To provide for employee retirement benefits, this provision is posted based on an estimate of retirement benefit obligations and plan assets at fiscal year-end.
i) The attribution of benefits to periods of service For the calculation of projected benefit obligation, the Company adopts the plan’s benefit formula for the attribution of benefits to the end of the fiscal year under review.
ii) Accounting method of actuarial gains and losses and past service costs Past service costs are amortized using the straight-line method over a certain period (15 years), which is within the average remaining service period of the employees, when they are recognized. Actuarial gains and losses will be amortized over a certain period (15 years), which is within the average remaining service period of the employees, using the straight-line method, from the following fiscal year when the actuarial gains and losses is recognized.
(6) Accounting policy for translating assets or liabilities denominated in a foreign currencies into Japanese currency
Foreign currency-denominated receivables and payables are converted to yen at the spot exchange rate on the closing date and the translation adjustment is treated as a profit or loss.
Deferred hedge accounting is used for derivative transactions satisfying hedge accounting requirements. However, appropriation accounting is applied to forward foreign exchange contracts and currency swap transactions that satisfy requirements for appropriation accounting, and special treatment is applied to the interest-rate swap transactions that meet the requirements for special treatment.
transactions and interest-rate swap transactions Hedged items Foreign currency denominated borrowings and foreign
currency denominated trade receivables and payables 3) Hedging policy
To avoid foreign exchange fluctuation risk for receivables and payables denominated in foreign currencies, the Company uses forward foreign exchange contracts and currency swap transactions. To avoid interest-rate fluctuation risk for borrowings, the Company uses interest-rate swap transactions. It is our policy that these derivative transactions are carried out in accordance with its internal rules which stipulate authorization and limitation amount of transactions, and used to avoid foreign currency exchange and interest-rate fluctuation risks, and no speculative transactions are allowed.
4) Hedge effectiveness evaluation method The effectiveness of hedges is evaluated by comparing the cumulative cash flow fluctuations of hedged items or market fluctuations with cumulative cash flow fluctuations of the hedging method or market fluctuations based on the changes of
[Translation]
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both. Please note that this assessment is omitted for interest-rate swaps subject to special treatment.
(8) Other significant matters that serve as the basis for the preparation of financial statements Accounting treatment of consumption taxes Accounting treatment for consumption
tax and local consumption tax is based on the tax-excluded method.
3. Notes to changes in the presentation method
The presentation method for “technical support fee,” which had previously been presented in non-operating income, has been changed, and it is included in “net sales” from the fiscal year under review. This change has been made in order to present the result of the Company’s operating activities more appropriately, in view of the future increase in the aforementioned fee, which is the consideration for the technical supports, etc. by the Company, along with the recent expansion of production and sales activities at overseas consolidated subsidiaries. Accordingly, technical support fee of 436 million yen for the fiscal year under review is presented as part of “net sales.”
4. Notes to the non-consolidated balance sheet
(1) Claims and obligations with respect to subsidiaries and associates Short-term cash credit 11,535 million yenLong-term cash credit 1,800 million yenShort-term cash debt 1,583 million yenLong-term cash debt 1,357 million yen
(2) Amount of accumulated depreciation for property, plant and equipment 36,697 million yen
(3) Contingent liabilities Guarantee obligations
The following guarantees are made with respect to loans from financial institutions of subsidiaries and associates
(million yen)
Company name Guarantee balance
Musashi Auto Parts India Pvt. Ltd. 5,380
Musashi Auto Parts Michigan Inc. 4,408
Musashi Auto Parts Mexico, S.A. de C.V. 1,014
Musashi Auto Parts (Zhongshan) Co., Ltd. 833
Musashi Auto Parts (Nantong) Co., Ltd. 589
Musashi Auto Parts Canada Inc. 214
Total 12,438
5. Notes to the non-consolidated statement of income
Transactions with subsidiaries and associates Net sales 42,154 million yenPurchases 16,853 million yenTransactions other than operational transactions 2,145 million yen
[Translation]
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6. Notes to the non-consolidated statement of changes in net assets Matters concerning number of treasury shares
(shares)
Types of shares April 1, 2015 Increase Decrease March 31, 2016
Common shares 5,466 73 – 5,539
Note: Increase in 73 common shares is due to purchase of shares of less than one unit. 7. Notes concerning tax effect accounting
Breakdown of major causes for the occurrence of deferred tax assets and deferred tax liabilities
(million yen) Deferred tax assets
Payable for enterprise tax refund 53 Provision for bonuses 292 Provision for directors’ bonuses 9 Accrued social security premiums 46 Loss on evaluation of inventories 105 Credit for foreign tax 841 Over depreciation 193 Provision for retirement benefits 232 Directors’ retirement benefits payable 33 Loss on valuation of investment securities 1,231 Asset retirement obligations 18 Allowance for doubtful accounts 10 Others 52
Deferred tax liabilities Reserve for special depreciation (8) Property, plant and equipment (1) Valuation difference on available-for-sale securities (864)
Total deferred tax liabilities (874)
Net deferred tax assets (liabilities) 122
[Translation]
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8. Notes concerning transactions with related parties (1) Parent company and principal corporate shareholder
Category Company
name
Ownership percentage of voting rights
(%)
Relationship Transaction
details
Transaction amounts
(million yen)(Note 3)
Account item
Fiscal year-end balance
(million yen)(Note 3)
Other affiliate
Honda Motor Co., Ltd.
26.2
Sale of the Company’s products, purchase of raw materials
Sales of products (Note 1)
20,720Accounts receivable – trade
1,144
Purchase of raw materials(Note 2)
6,209Accounts payable – trade
144
Conditions of transactions and policy for determining the conditions of transactions Notes: 1. Sale prices are determined by drafting estimates taking into consideration market values based on
economic rationality and the Company’s production technologies, etc. which are submitted for negotiation.
2. The purchase of raw materials is determined under the same requirements as general transactions upon price negotiations based on market values.
3. Consumption taxes are excluded from transaction amounts, but included in balances at fiscal year-end. (2) Subsidiaries
Category Company
name
Ownership percentage of voting rights
(%)
Relationship Transaction
details
Transaction amounts
(million yen)(Note 6)
Account item
Fiscal year-end balance
(million yen)(Note 6)
Subsidiary
Kyushu Musashi Seimitsu Co., Ltd.
100.0
Product purchasing, and secondment of officers
Product purchasing (Note 1)
9,030Accounts payable – trade
1,083
Subsidiary Musashi Auto Parts Michigan Inc.
89.5
Sales of products, debt guarantees and secondment of officers
Sales of products (Note 1)
3,190Accounts receivable – trade
1,094
Underwriting of debt guarantees (Note 2)
4,408 – –
Subsidiary Musashi Auto Parts Canada Inc.
100.0
Sales of products and secondment of officers
Sales of products (Note 1)
2,548Accounts receivable – trade
1,167
Subsidiary Musashi da Amazonia Ltda.
100.0
Capital lending, debt guarantees and secondment of officers
Capital lending (Note 4)
1,000 – –
Interest income (Note 4)
4Other current assets
1
Underwriting of capital increases (Note 5)
2,135 – –
[Translation]
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Category Company
name
Ownership percentage of voting rights
(%)
Relationship Transaction
details
Transaction amounts
(million yen)(Note 6)
Account item
Fiscal year-end balance
(million yen)(Note 6)
Subsidiary Musashi Auto Parts India Pvt. Ltd.
100.0
Capital lending, debt guarantees and secondment of officers
Interest income (Note 4)
24
Long-term loans receivable from subsidiaries and associates
1,800
– –Other current assets
1
Underwriting of debt guarantees (Note 2)
5,380 – –
Subsidiary P.T. Musashi Auto Parts Indonesia
80.0
Sales of products, capital lending and secondment of officers
Sales of products (Note 1)
2,560Accounts receivable – trade
1,032
– –
Short-term loans receivable from subsidiaries and associates
1,505
Interest income (Note 4)
12Other current assets
0
Subsidiary
Musashi Hungary Manufacturing, Ltd.
100.0
Capital borrowing and secondment of officers
Interest payment (Note 3)
4Long-term loans payable
1,357
Subsidiary
Musashi Auto Parts (Zhongshan) Co., Ltd.
100.0
Sales of products, debt guarantees and secondment of officers
Sales of products (Note 1)
3,645Accounts receivable – trade
1,282
Underwriting of debt guarantees (Note 2)
833 – –
Subsidiary Musashi Auto Parts Mexico, S.A. de C.V.
100.0
Sales of products, debt guarantees and secondment of officers
Sales of products (Note 1)
2,405Accounts receivable – trade
1,082
Underwriting of debt guarantees (Note 2)
1,014 – –
Subsidiary
Musashi Seimitsu Investment (Zhongshan) Co., Ltd.
100.0 Secondment of officers
Underwriting of capital increases (Note 6)
969 – –
Conditions of transactions and policy for determining the conditions of transactions Notes: 1. Prices and other transaction requirements are determined based on basic agreements with subsidiaries
and taking into account market conditions. 2. Debt guarantees are underwritten by each company for loans from financial institution, no guarantee
commissions are received. 3. Interest rate in capital borrowing is reasonably determined in consideration with market interest rate.
Transaction amounts are presented as net amounts. 4. Interest rate in capital lending is reasonably determined in consideration with market interest rate. 5. Underwriting of capital increases includes underwriting of capital increase through shareholder’s
[Translation]
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allotment of 1,380 million yen and contribution in kind of loans through debt-for-equity swaps of 755 million yen.
6. Capital increases are underwritten by shareholder allocation. 7. Consumption taxes are excluded from transaction amounts, but included in balances at fiscal year-end. 9. Per share information
(1) Net assets per share: 1,147.29 yen (2) Earnings per share: 88.77 yen
10. Significant subsequent events
The Company has decided to acquire shares of a holding company, Hay Holding GmbH, from The Gores Group in order to make Hay Holding and its operating subsidiaries into the Company’s subsidiaries, through a wholly-owned special purpose company (SPC) to be established for that purpose, by the resolution at the Board of Directors Meeting held on May 9, 2016. For the details, please refer to the “Notes to Consolidated Financial Statements (9. Significant subsequent events).”
[Translation]
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[English Translation of the Audit Report Originally Issued in the Japanese Language] Audit Report of Financial Auditor on Consolidated Financial Statements
Independent Auditor’s Report
May 18, 2016 To the Board of Directors of Musashi Seimitsu Industry Co., Ltd.
Ernst & Young ShinNihon LLC Shinji Tamiya (Seal) Designated Limited Liability Partner, Engagement Partner, Certified Public Accountant Shigeki Hiki (Seal) Designated Limited Liability Partner, Engagement Partner, Certified Public Accountant Atsusada Kato (Seal) Designated Limited Liability Partner, Engagement Partner, Certified Public Accountant
We have audited the consolidated financial statements of Musashi Seimitsu Industry Co., Ltd. for the fiscal year from April 1, 2015 to March 31, 2016, comprising the consolidated balance sheet, the consolidated statement of income, the consolidated statement of changes in net assets and notes to consolidated financial statements for the purpose of reporting under the provisions of Article 444, paragraph 4 of the Companies Act. Management’s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with corporate accounting standards generally accepted in Japan, and for designing and operating such internal control as management determines is necessary to enable the preparation and fair presentation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on the consolidated financial statements based on our audit from an independent position. We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected and applied depend on the auditor’s judgment, based on the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used, the method of their application, and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
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basis for our audit opinion. Opinion Our opinion is that the above-mentioned consolidated financial statements present fairly the status of assets and earnings during the period relating to the relevant consolidated financial statements of the corporate group consisting of Musashi Seimitsu Industry Co., Ltd. and its consolidated subsidiaries in every important point in accordance with the corporate accounting standards generally accepted in Japan. Emphasis of Matter As described in the “Significant subsequent events,” the Company has decided to acquire shares of a holding company, Hay Holding GmbH, from The Gores Group in order to make Hay Holding and its operating subsidiaries into the Company’s subsidiaries, through a wholly-owned special purpose company (SPC) to be established for that purpose, by the resolution at the Board of Directors Meeting held on May 9, 2016. This matter does not affect our conclusion. Conflicts of Interest Our audit corporation and engagement partner have no financial or other interest in the Company required to be stated by the provisions of the Certified Public Accountant Act of Japan.
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[English Translation of the Audit Report Originally Issued in the Japanese Language] Audit Report of Financial Auditor on Non-consolidated Financial Statements
Independent Auditor’s Report
May 18, 2016 To the Board of Directors of Musashi Seimitsu Industry Co., Ltd.
Ernst & Young ShinNihon LLC Shinji Tamiya (Seal) Designated Limited Liability Partner, Engagement Partner, Certified Public Accountant Shigeki Hiki (Seal) Designated Limited Liability Partner, Engagement Partner, Certified Public Accountant Atsusada Kato (Seal) Designated Limited Liability Partner, Engagement Partner, Certified Public Accountant
We have audited the non-consolidated financial statements of Musashi Seimitsu Industry Co., Ltd. for the 89th fiscal year from April 1, 2015 to March 31, 2016, comprising the non-consolidated balance sheet, the non-consolidated statement of income, the non-consolidated statement of changes in net assets and notes to non-consolidated financial statements and the accompanying financial schedule for the purpose of reporting under the provisions of Article 436, paragraph 2, item 1 of the Companies Act. Management’s Responsibility for the Non-consolidated Financial Statements Management is responsible for the preparation and fair presentation of the non-consolidated financial statements and the accompanying financial schedule in accordance with corporate accounting standards generally accepted in Japan, and for designing and operating such internal control as management determines is necessary to enable the preparation and fair presentation of the non-consolidated financial statements and the accompanying financial schedule that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on the non-consolidated financial statements and the accompanying financial schedule based on our audit from an independent position. We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the non-consolidated financial statements and the accompanying financial schedule are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the non-consolidated financial statements and the accompanying financial schedule. The procedures selected and applied depend on the auditor’s judgment, based on the assessment of the risks of material misstatement of the non-consolidated financial statements and the accompanying financial schedule, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the non-consolidated financial statements and the accompanying financial schedule in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An
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audit also includes evaluating the appropriateness of accounting policies used, the method of their application, and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the non-consolidated financial statements and the accompanying financial schedule. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion Our opinion is that the above-mentioned non-consolidated financial statements and the accompanying financial schedule present fairly the status of assets and earnings during the period relating to the relevant non-consolidated financial statements and the accompanying financial schedule in every important point in accordance with the corporate accounting standards generally accepted in Japan. Emphasis of Matter As described in the “Significant subsequent events,” the Company has decided to acquire shares of a holding company, Hay Holding GmbH, from The Gores Group in order to make Hay Holding and its operating subsidiaries into the Company’s subsidiaries, through a wholly-owned special purpose company (SPC) to be established for that purpose, by the resolution at the Board of Directors Meeting held on May 9, 2016. This matter does not affect our conclusion. Conflicts of Interest Our audit corporation or operating partner has no financial or other interest in the Company required to be stated by the provisions of the Certified Public Accountant Act of Japan.
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[English Translation of the Audit Report Originally Issued in the Japanese Language] Audit Report of Audit and Supervisory Committee
Audit Report The Audit and Supervisory Committee has conducted audit on the performance of duties of the Directors during the 89th fiscal year from April 1, 2015 to March 31, 2016, and hereby reports the methods and results of audit as follows: 1. Auditing Methods and Contents The Audit and Supervisory Committee regularly received reports from Directors and
employees on the contents of regulation of the Board of Directors relating to the matters set forth in the Article 399-13, paragraph 1, item 1 (b) and (c) of the Companies Act and the status of the establishment and operation of the system (internal control system) established in accordance with the resolution, demanded explanations, as the occasion demanded, and expressed its opinions. The audit was conducted by the following methods.
1) In accordance with the Audit and Supervisory Committee’s auditing standards, auditing
policies, share of assignment, and other matters stipulated by the Audit and Supervisory Committee, we cooperated with the Internal Auditing Department and other departments for internal control; attended important meetings; received reports of execution of duties from Directors and employees; demanded explanations, as the occasion demanded; inspected important documents; and investigated the activities and assets of the head office and of other principal places of business. As for the subsidiaries, we communicated and exchanged information with the Directors and Audit & Supervisory Board Members, etc. of the subsidiaries, and received reports on their business operations as the occasion demanded.
2) We monitored and verified whether or not the Financial Auditor had maintained their
independent positions and had conducted appropriate audits and received reports on activities of execution of duty from the financial auditor and received explanation as the occasion demanded. Also, we received notice that the “system to assure that duty is executed appropriately” (the matters listed in the items of Article 131 of the Corporate Accounting Rules) has been maintained in accordance with the “Quality Control Standards for Audits” (October 28, 2005, the Business Accounting Council) from the Financial Auditor and demanded explanation as the occasion demanded.
Based on the above methods, we examined the business report and accompanying financial
schedule for the relevant fiscal year, non-consolidated financial statements (non-consolidated balance sheet, non-consolidated statement of income, non-consolidated statements of changes in equity and notes to non-consolidated financial statements) and accompanying financial schedule as well as the consolidated financial statements (consolidated balance sheet, consolidated statement of income, consolidated statements of changes in equity and the notes to consolidated financial statements).
2. Results of Audit
(1) Results of audit on the business report 1) The business report and accompanying schedule are found to accurately present the
status of the Company in conformity with the laws and regulations and Articles of Incorporation.
2) In connection with the performance by the Directors of their duties, no dishonest act or significant fact of a violation of laws, regulations, or the Articles of Incorporation is
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found to exist. 3) The contents of the resolutions of the Board of Directors regarding the internal control
systems are found to be proper. Also, the descriptions in the business report and execution of duty by the Directors regarding the relevant internal control system are found to accurately present the matters to be stated therein and have nothing to be pointed out including the internal control system regarding financial reporting.
(2) Results of audit on the non-consolidated financial statements and accompanying financial schedule
The methods and results of the audit made by the Financial Auditor, Ernst & Young ShinNihon LLC, an incorporated auditing firm, are found to be proper.
(3) Results of audit on the consolidated financial statements The methods and results of the audit made by the Financial Auditor, Ernst & Young
ShinNihon LLC, an incorporated auditing firm, are found to be proper. May 19, 2016
Audit and Supervisory Committee of Musashi Seimitsu Industry Co., Ltd. Nobuyoshi Sakakibara (Seal) Audit and Supervisory Committee Member (Full-time) Takeshi Fujii (Seal) Audit and Supervisory Committee Member Keisuke Tomimatsu (Seal) Audit and Supervisory Committee Member Asako Yamagami (Seal) Audit and Supervisory Committee Member
Notes: 1. Audit and Supervisory Committee Members Takeshi Fujii, Keisuke Tomimatsu, and Asako Yamagami
are outside directors provided in Article 2, item 15 and Article 331, paragraph 6 of the Companies Act. 2. The Company transitioned to a company with an Audit and Supervisory Committee from a company
with an Audit & Supervisory Board as of June 23, 2015 by resolution at the 88th Annual Meeting of Shareholders held on June 23, 2015. Status from April 1, 2015 to June 22, 2015 is based on the contents succeeded from the former Audit & Supervisory Board.
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