KOITO MANUFACTURING : Annual Report 2017

WORLDWIDE AUTOMOTIVE LIGHTING 2017 ANNUAL REPORT

Year ended March 31, 2017

KOITO MANUFACTURING CO., LTD.

PROFILE

KOITO MANUFACTURING CO., LTD. (KOITO) has been marking a history of leadership in automotive lighting since its establishment in 1915. Today, our lighting is widely used in a variety of fields, including transportation such as automobiles, aviation, railways, shipping, and traffic systems. In all these areas, the KOITO Group's lighting contributes to safety. KOITO will continue manufacturing products based on the corporate message, "Lighting for Your Safety."

CONTENTS

P01 ......................... TO OUR SHAREHOLDERS AND OTHER INVESTORS

P02 ......................... FINANCIAL OVERVIEW AND MEDIUM-TERM OUTLOOK

P05 ......................... OPERATIONS BY REGION AND FUTURE DEVELOPMENTS

JAPAN

NORTH AMERICA EUROPE

CHINA ASIA

P12 ......................... RESEARCH AND DEVELOPMENT

P14 ......................... SOCIAL CONTRIBUTION AND ENVIRONMENTAL ACTIVITIES

P16 ......................... CORPORATE GOVERNANCE

P18 ......................... DIRECTORS, AUDIT AND SUPERVISORY BOARD MEMBERS AND CORPORATE OFFICERS

P19 ......................... FINANCIAL SECTION

P40 ......................... CORPORATE INFORMATION

P41 ......................... CORPORATE DIRECTORY

P42 ......................... GLOBAL NETWORK

DISCLAIMER WITH RESPECT TO FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements concerning KOITO MANUFACTURING CO., LTD. and its consolidated subsidiaries' future plans, strategies and performance. These forward-looking statements are not historical facts; rather they represent assumptions and beliefs based on economic, financial and competitive data currently available. Furthermore, they are subject to a number of risks and uncertainties including, but not limited to, economic conditions, worldwide competition in the automotive industry, market trends, foreign currency exchange rates, tax rules, regulations and other factors. KOITO therefore wishes to caution readers that actual results may differ materially from our expectations.

In order to ensure fair disclosure, KOITO publishes annual reports in Japanese in addition to English annual reports. A certified public accoun- tant reviews the financial sections of KOITO's Japanese annual reports to ensure consistency in presentation between the Japanese and English versions. We hope the information presented in this annual report serves to deepen your understanding of KOITO.

TO OUR SHAREHOLDERS AND OTHER INVESTORS

2017 ANNUAL REPORT 01

During fiscal 2017, the period under review ended March 31, 2017, although sales in mini vehicles decreased, the overall automotive production volume in Japan increased year on year due to the effect of introduction of new vehicles and increase in exports. The global automobile production volume as a whole increased year on year mainly due to firm production volume in the U.S. and Europe, and increased demand in China led by a tax reduction on compact cars.

The consolidated performance of the KOITO Group for fiscal 2017 improved year on year due to favorable operation in the mainstay automotive lighting equipment segment. As a result, net sales, operating income, recurring profit and profit attribut- able to owners of parent marked the fifth consecutive fiscal year of record business performance.

Looking ahead, global automobile production is expected to expand, mainly driven by growing demand in China and other emerging countries, even as production volume in Japan is assumed to remain flat.

In this climate, in order to increase sales of automotive light- ing equipment in the mid- and long-term perspective, the KOITO Group is working to reinforce its overseas production capacity and strengthen its product development capability. In June 2016, Hubei Koito Automotive Lamp Co., Ltd. in China started production, and in January 2017, a new manufacturing subsid- iary was established in Brazil, which is scheduled to commence operation in May 2018.

With a view to increasing its market share, the KOITO Group will continue to strive to win orders, expand its production capacity, enhance productivity, reinforce its mutually comple- mentary supply network, and establish business systems that can quickly respond to changes in the market, and promote compliance and corporate governance to establish an even more reliable corporation.

In order to provide even more safety, reliance, and comfort to the society, with our corporate message "Lighting for Your Safety", the KOITO Group is operating its business by striving to develop our mainstay automotive lighting equipment, as well as foreseeing an autonomous driving society and changes in the future automotive industry.

As a leading automotive lighting equipment manufacturer, we will continue to develop the newest and the best technolo- gies, improve performance and quality of our products, promote training for employees to raise their performance and skills, as well as staying true to our basic stance to adopt the perspective of customers to supply products and services that would meet their expectations. We would greatly appreciate your continued understanding and support.

August 2017

Masahiro Otake

Chairman and CEO

Hiroshi Mihara

President and COO

02 KOITO MANUFACTURING CO., LTD.

FINANCIAL OVERVIEW AND MEDIUM-TERM OUTLOOK

Fiscal 2017 Results

During fiscal 2017, the period under review, the Japanese econ- omy experienced a trend of moderate recovery due to pickup in personal consumption led by improvement in employment and personal income, and the increase in capital expenditure and exports. Meanwhile, the global economy continued to be robust as a whole. This was primarily due to comparatively firm econ- omy in the U.S. and Europe, despite the effect of deceleration of growth in China and other emerging countries, as well as con- cerns over the Brexit issue and protectionist policies, and risks in the Middle East.

In the Japanese auto industry, although sales of mini vehicles decreased, the overall production volume increased year on year due to the effect of the introduction of new vehicles and increase in exports. The global automobile production volume as a whole increased year on year mainly due to firm production volume in the U.S. and Europe, and increased demand in China led by a tax reduction on compact cars.

In this climate, despite the effect of yen's appreciation, KOITO Group's consolidated net sales increased 3.4% year on year to

¥841.4 billion. The increase was due to sales growth in the mainstay automotive lighting equipment segment, which was driven by an increase in new orders and a shift in automobile lamps to LED. On the earnings front, operating income was

¥92.5 billion, up 12.5% and recurring profit was ¥95.3 billion, up 13.1% year on year. In addition to the effect of sales increase, the increase was mainly attributable to rationalization effect in Japan and overseas. Profit attributable to owners of parent increased 22.4% year on year to ¥56.6 billion, marking the highest business performance for fifth consecutive fiscal year. The increase was also attributable to loss on compensation for damages related to aircraft seats recorded at consolidated sub- sidiary KI HOLDINGS CO., LTD. in the previous fiscal year.

KOITO's policy is to continuously pay stable dividends to shareholders based on the comprehensive evaluation of our present business results, business climate, etc. Based on this policy, KOITO had paid ¥34 year-end dividend per share, ¥14 higher than that of the previous year.

Accordingly, the full year dividend, including the interim divi- dend, has resulted in ¥54, which is ¥18 higher than the previ- ous year.

Looking ahead, we will continue efforts to achieve even higher earnings to meet the expectations of all shareholders.

Masahiro Otake

Chairman and CEO