[Translation](Note) This document has been translated from the Japanese original for reference purposes only. In the event ofany 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 ofdamages arising from the translation.

Securities code: 7220
June 7, 2018
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 91ST ANNUAL MEETING OF SHAREHOLDERS
You are cordially invited to attend the 91st 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 theInternet, etc. Please review the Reference Documents for the Annual Meeting of Shareholders
and exercise your voting rights by 5:00 p.m. on Thursday, June 21, 2018.
Meeting Details
1. Date and Time:
2. Venue:

Friday, June 22, 2018 at 10:00 a.m. (Reception will open at 9:00 a.m.;Japan Standard Time)
Conference Room of the Company’s Head Office39-5 Daizen, Ueta-cho, Toyohashi-shi, Aichi

3. Purposes:
Items to be reported:
1. Business Report and Consolidated Financial Statements, as well as the audit reportsof the Financial Auditor and the Audit and Supervisory Committee forConsolidated Financial Statements, for the 91st fiscal term (from April 1, 2017 toMarch 31, 2018)
2. Non-consolidated Financial Statements for the 91st fiscal term (from April 1, 2017
to March 31, 2018)
Items to be resolved:
Appropriation of Surplus
Proposal 1:
Partial Amendments to the Articles of Incorporation
Proposal 2:
Election of Eight (8) Directors (Excluding Directors Serving as Audit
Proposal 3:
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 thereception 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 postedon the Company’s website (http://www.musashi.co.jp).

-1-[Translation]

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:
Friday, June 22, 2018 at 10:00 a.m. (Reception will open at 9:00 a.m.)
Venue:
Conference Room of the Company’s Head Office39-5 Daizen, Ueta-cho, Toyohashi-shi, Aichi[Exercising Voting Rights in writing]Complete the enclosed Voting Rights Exercise Form by indicating your approval or disapprovalof the proposals and return it without affixing a stamp.
Votes to be received by:Thursday, June 21, 2018 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 smartphoneor 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 ordisapproval of the proposals.
Votes to be given by:
Thursday, June 21, 2018 at 5:00 p.m.
1) Please note that, to prevent unauthorized access to the site by individuals other thanshareholders (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.

-2-

[Translation]

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. Thursday, June 21, 2018.
1.

Voting Website
You can only exercise your voting rights via the dedicated voting website designated by theCompany. 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 andvia the Internet, we will consider only the Internet vote to be valid. If you vote more thanonce 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 tokeep it secure.
(3) If you need to have your “Password” reissued, please contact us at the Helpline below.

-3-[Translation]

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 tointernet 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)-4-

[Translation]

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 91st 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 dividendsi) Type of dividend property
Cashii) Dividend amount to be allocated
Per share of common stock:Total dividends:iii) Effective date of dividends of surplus
June 25, 2018¥39
¥1,217,358,207-5-

[Translation]

Proposal 2:

Partial Amendments to the Articles of Incorporation

1. Reason for Amendments
In order to reflect more accurately the current business activities of the Company and clarify the
purposes of business, the Company proposes to add new business items in the provision of
Article 2 (Purposes) of the current Articles of Incorporation so that the Company could respondto the diversification of the business in the future.
2. Details of amendments
The details of amendments are as follows.
(Amendments are underlined.)
Current Articles of Incorporation

Proposed amendments

Current Articles of Incorporation

Article 2 (Purposes) (Unchanged)

Article 2 (Purposes)
The purpose of the Company shall be to 1) (Unchanged)
engage in the following businesses:
2) (Unchanged)1) (Omitted)
3) Services related to data processing, data2) (Omitted)
communications and data provision(New)4) Worker dispatch business5) Charged employment placement business(New)6) (Unchanged)(New)7) (Unchanged)3) (Omitted)4) (Omitted)-6-[Translation]

Proposal 3:

Election of Eight (8) Directors (Excluding Directors Serving as Audit andSupervisory Committee Members)

The terms of office of nine (9) 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.
In that regard, to execute our management structural reforms and enable strategic, quicker andmore flexible decision making in the Board of Directors, we request the election of eight (8)Directors, a decrease of one (1) person.
As for this proposal, the Audit and Supervisory Committee has judged that all the candidates for
Director are qualified.
The candidates for Director are as follows:

No.

Name
(Date of birth)

Hiroshi Otsuka(Jul. 6, 1965)
Reappointment

1

Number of Board of
Directors’ meetings
attended during the
fiscal year underreview
8/8
Number of years since
appointment as adirector
17 years (at theconclusion of thismeeting)

Career summary, positions and areas of responsibility in the Company,
and significant concurrent positions
Jul. 1993

Entered the Company

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 theCompany

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)

709,750

Reasons for nomination as a candidate for Director
Mr. Hiroshi Otsuka, who was appointed President and CEO in 2016, has
supervised the entire group with a wealth of experience and broad insight.
Holding future vision for the group, he has shown strong leadership throughdeveloping policy and long-term strategy and furthermore implementing
innovative strategies such as applying AI technology into manufacturing
field. Given his long-term excellent management performance, we
determined him a right person to enhance corporate value and nominatedhim as a candidate for Director.

Takayuki Miyata(Nov. 8, 1965)

Dec. 1989

Entered the Company

Apr. 2010

President and Director of Musashi Auto Parts Michigan
Inc.

Reappointment

Apr. 2013

Executive Officer of the Company

Apr. 2015

Managing Executive Officer of the Company

Apr. 2015

Head of Machinery & Tools Division and Purchasing
Division of the Company

Jun. 2015

Director of the Company (current position)

Oct. 2015

Head of Power Train (PT) Division and Forging
Engineering Division of the Company (current position)

Number of Board of
Directors’ meetings
attended during the
fiscal year underreview
8/8

Number of theCompany’s
shares held

Number of years since Mar. 2016
appointment as adirector
Dec. 2017
3 years (at theApr. 2018

President and Director of Musashi Holdings EuropeGmbH (current position)
Head of China Regional Operations of the Company
Senior Managing Executive Officer of the

-7-

5,600

[Translation]

No.

Name
(Date of birth)conclusion of thismeeting)

Career summary, positions and areas of responsibility in the Company,
and significant concurrent positions
Company(current position)
Apr. 2018

CEO of China region of the Company(current position)(Significant concurrent position)
President and Director of Musashi Holdings Europe GmbH
Reasons for nomination as a candidate for Director
Mr. Takayuki Miyata has extensive experience and insight in the PT
Business, which is a core business of the Company. He concurrently serves
as President and Director of Musashi Holdings Europe GmbH, and has a
track record of increasing profit in existing businesses and creating new
demand. The Company has determined, in view of his superior management
ability cultivated through experience in supervision at multiple divisions,that he is necessary to improve the future corporate value of the Group, andnominated him once again as a candidate for its Director.

-8-

Number of theCompany’s
shares held

[Translation]

No.

Name
(Date of birth)Haruhisa Otsuka(Nov. 4, 1960)

Career summary, positions and areas of responsibility in the Company,
and significant concurrent positions
Jan. 1984

Entered the Company

Jan. 1998

President and Director of Musashi Auto Parts CanadaInc.

May 2004

President and Director of Musashi Auto Parts Michigan
Inc.

Jun. 2004

Director of the Company (current position)

May 2006

Head of North America Regional Operations of theCompany

May 2006

President and Director of Musashi Auto Parts Canada
Inc. (current position)

Oct. 2010

Head of North America Regional Sales of the Company(current position)

Apr. 2015

Managing Executive Officer of the Company

Oct. 2015

Head of Linkage & Suspension (L & S) Division of theCompany (current position)

Apr. 2018

Senior Managing Executive Officer of theCompany(current position)

Apr. 2018

CEO of North and South America region of theCompany(current position)

Reappointment

3

Number of Board of
Directors’ meetings
attended during the
fiscal year underreview
8/8
Number of years since
appointment as adirector
14 years (at theconclusion of thismeeting)4

Number of Board of
Directors’ meetings
attended during the
fiscal year underreview
6/6

30,150(Significant concurrent position)
President and Director of Musashi Auto Parts Canada Inc.
Reasons for nomination as a candidate for Director
Mr. Haruhisa Otsuka has extensive experience and insight in the L&S
Business, which is one of the Company’s core businesses. He concurrently
serves as President and Director of Musashi Auto Parts Canada Inc., etc.,
and has a track record of increasing profit in existing businesses andcreating new demand. The Company has determined, in view of his superior
management ability cultivated through experience in supervision over North
America for many years, that he is necessary to improve the future
corporate value of the Group, and nominated him once again as a candidate
for its Director.
Dec. 1997

Entered Musashi Auto Parts Canada Inc.

Oct. 2013

Executive Officer (current position), Compliance Officer
and Senior Manager of Accounting, Purchasing, IT,
HR, Production Control of Musashi Auto Parts Canada
Inc.

Nov. 2013

Director of Musashi Auto Parts Canada Inc. (current
position)

Apr. 2015

Executive Office of the Company

Apr. 2016

In charge of Global IT Strategy of the Company (current
position)

Apr. 2017

Senior Executive Officer of the Company

Apr. 2017

Head of Finance and Accounting Division of theCompany

Tracey Sivill(Dec. 2, 1963)
Reappointment

Number of theCompany’s
shares held

June. 2017
Director of the Company (current position)
Number of years since
Apr.
2018
Managing Executive Officer of the Company(current
appointment as aposition)
director
1 year (at theApr. 2018
CFO of Group of the Company(current position)
conclusion of thisReasons for nomination as a candidate for Director
meeting)
Ms. Tracey Sivill has extensive experience and insight in finance andaccounting and IT divisions. She has been responsible for the finance andaccounting and IT divisions in the Group company , and has a track record-9-0[Translation]

No.

Name
(Date of birth)

Career summary, positions and areas of responsibility in the Company,
and significant concurrent positionsof promoting efficiency of the Group’s management and operations. The
Company has determined, in view of her superior management ability
cultivated through ample experience in overseas subsidiary, that she isnecessary to improve the future corporate value of the Group, andnominated her as a candidate for its Director.

- 10 -

Number of theCompany’s
shares held

[Translation]

No.

5

Name
(Date of birth)

Aug. 2000

Representative Director and President of Gastec Service,Inc.

May 2002
Goro Kamino(Aug. 29, 1960)

Representative Director and President of Sala
Corporation (current position)

Mar. 2012

Representative Director and President of Chubu Gas Co.,Ltd.

Reappointment

Jun. 2012

Director of the Company (current position)

Feb. 2018

Chairman and Representative Director of Gastec Service,
Inc. (current position)

Feb. 2018

Chairman and Representative Director of Chubu Gas Co.,
Ltd. (current position)

Number of Board of
Directors’ meetings
attended during the
fiscal year underreview
8/8(Significant concurrent positions)Representative Director and President of Sala Corporation
Chairman and Representative Director of Gastec Service, Inc. (current
position)
Number of years since Chairman and Representative Director of Chubu Gas Co., Ltd. (current
appointment as aposition)
director
Reasons for nomination as a candidate for Director
6 years (at the
Mr. Goro Kamino has provided appropriate advice on the Company’s
conclusion of thismanagement as its Outside Director based on his extensive experience and ameeting)high level of knowledge as a corporate manager of listed companies. The
Company believes that he will continue to supervise the Company’s
management based on his experience and knowledge, and requests hiselection as Outside Director.
Aug. 1985

Entered General Motors Corporation

Mar. 1987

RetiredMar. 1987

Entered Tenneco Automotive. (currently Tenneco Inc.)

Aug. 1997

Same as above
Asia

Aug. 1999

Same as above Vice President, Managing Director,
South America and Asia

Apr. 2000

Same as above Senior Vice President, Managing
Director, International

Number of Board of
Directors’ meetings
attended during the
fiscal year underreview
6/6

May. 2001

Same as above Executive Vice President, Managing
Director, Europe

Jun. 2005

Same as above Executive Vice President, Managing
Director, Europe, South America and India

Number of years since
appointment as adirector
1 year (at theconclusion of thismeeting)

Hari N. Nair
（Jan. 1, 1960）
Reappointment

6

Career summary, positions and areas of responsibility in the Company,
and significant concurrent positions

Apr. 2009

7,200

Vice President and Managing Director,

Same as above

Appointed to Board of Directors

May. 2010Same as above

Chief Operating Officer

Jul. 2013

Entered Owens-Illinois Inc.
position)Jan. 2015

Retired from Tenneco Inc. Board of Directors

Mar. 2015

Retired from Tenneco

Jun. 2017

Director of the Company (current position)

Dec. 2017

Director of Delphi Technologies PLC. (current position)

Feb. 2018

Chairman of the Board of Sintercom India. (current
position)

Board of Directors(current

Reasons for nomination as a candidate for Director- 11 -

Number of theCompany’s
shares held0

[Translation]

No.

Name
(Date of birth)

Career summary, positions and areas of responsibility in the Company,
and significant concurrent positions

Number of theCompany’s
shares held

Mr. Hari Nair has provided appropriate advice on the Company’s
management as its Outside Director based on his extensive experience and ahigh level of knowledge of an overseas auto part manufacturer. The
Company believes that he will continue to supervise the Company’s
management based on his experience and knowledge, and requests hiselection as Outside Director.

Keisuke Tomimatsu(May 2, 1974)
Reappointment

7

Number of Board of
Directors’ meetings
attended during the
fiscal year underreview
8/8
Number of years since
appointment as adirector
3 years (at theconclusion of thismeeting)

Apr. 1997

Entered SBC Warburg Japan Ltd.(currently UBS
Securities Japan Co., Ltd.)

Dec. 2001

Entered UBS Securities Japan Co., Ltd.

Mar. 2003

Director of UBS Securities Japan Co., Ltd.

Mar. 2006

General Manager/Executive Director, Financial Products
Equities Dept. of UBS Securities Japan Co., Ltd.

Aug. 2008

Managing Director, Equities Dept. of Credit Suisse
Securities (Japan) limited.

Nov. 2009

Executive Director, Equities Dept. of Morgan Stanley
Japan Securities (currently Morgan Stanley MUFG
Securities Co., Ltd.)

Sep. 2011

Resigned Morgan Stanley Japan Securities(currently
Morgan Stanley MUFG Securities Co., Ltd.)

Jun. 2013

Audit & Supervisory Board Member of the Company

Jun. 2014

Director of IR Japan Inc.

Feb. 2015

Director of IR Japan Holdings, Ltd.(current position)

Jun. 2015

Director serving as an Audit and Supervisory Committee
Member of the Company

Jun. 2017

Director of the Company (current position)

1800(Significant concurrent positions)
Director of IR Japan Holdings, Ltd.
Director of ABEJA, Inc.
Reasons for nomination as a candidate for Director
Mr. Keisuke Tomimatsu has extensive experience at various companies inthe securities industry and considerable financial and accounting
knowledge. Based on such experience and knowledge, he has provided
appropriate advice on the Company’s management. The Company believes
that he will supervise the Company’s management based on his experienceand knowledge, and requests his election as Outside Director.

8

Yoshie Munakata(June 20, 1958)
New appointment

Apr. 1981

Entered Dai Nippon Printing Co., Ltd.

Dec. 1983

Entered Intel Japan K.K. (present Intel K.K.)

Apr. 1999

Manager, Communication Product Business
Headquarters of Intel K.K.

Apr. 2001

Executive secretary in charge of corporate
planning/government relation of Intel K.K.

Apr. 2002

Manager, Business Development Headquarters of Intel
K.K.

Apr. 2009

Director and executive deputy president of Intel K.K.

Apr. 2016

Advisor of Intel K.K.

Oct. 2016

Established B.Grove Inc., Representative Director of
B.Grove Inc., (current position)

Jun. 2017

Director of SoftBank Technology Corp. (current
position)

Reasons for nomination as a candidate for Director
Mr. Yoshie Munakata has long been involved in corporate management,- 12 -

0[Translation]

No.

Name
(Date of birth)

Career summary, positions and areas of responsibility in the Company,
and significant concurrent positions

Number of theCompany’s
shares held

serving important positions such as director and executive deputy president
at a global company in the data telecommunications technology industry.
The Company proposes to elect him as Outside Director since it expects
him to perform supervision of the management of the Company by utilizing
his abundant experience and deep insight he has cultivated over years.
Notes:

1.
2.
3.
4.

5.
6.

7.

There are no special interests between the Company and the candidates.
Mr. Yoshie Munakata is new appointee candidates for Director.
Mr. Goro Kamino, Mr. Hari N. Nair, Mr. Keisuke Tomimatsu and Mr. Yoshie Munakata are
candidates for Outside Director.
Mr. Goro Kamino is currently serving as Outside Director of the Company and his term of office willbe 6 years at the conclusion of this Annual Meeting of Shareholders. Mr. Hari N. Nair is currently
serving as Outside Director of the Company and his term of office will be 1 years at the conclusion ofthis Annual Meeting of Shareholders. Mr. Keisuke Tomimatsu is currently serving as Outside
Director of the Company and his term of office will be 3 years at the conclusion of this Annual
Meeting of Shareholders.
Mr. Keisuke Tomimatsu had served as Outside Audit and Supervisory Board Member of theCompany.
The Company, with respect to liability under Article 423, paragraph 1 of the Companies Act, enteredinto an agreement with Mr. Goro Kamino, Mr. Hari N. Nair and Mr. Keisuke Tomimatsu limiting thetotal amount of the liability to the amount stipulated in Article 425, paragraph 1 of the same Act.
Should their election be approved, the Company plans to continue the aforementioned agreements
limiting liability. Should Mr. Yoshie Munakata’s election be approved, the Company, with respect toliability under Article 423, paragraph 1 of the Companies Act, would enter into an agreement withhim limiting the total amount of the liability to the amount stipulated in Article 425, paragraph 1 ofthe same Act.
The Company registered Mr. Goro Kamino, Mr. Hari N. Nair and Mr. Keisuke Tomimatsu as
independent officers with the Tokyo Stock Exchange and the Nagoya Stock Exchange, pursuant to
the guidelines thereof. Should their election be approved, the Company would continue his service as
Independent Officer. Mr. Yoshie Munakata is a candidate for independent officer with the Tokyo
Stock Exchange and the Nagoya Stock Exchange, pursuant to the guidelines thereof. Although theCompany has fuel purchasing transactions etc. with Chubu Gas Co., Ltd. and Gastec Service, Inc., inwhich Mr. Goro Kamino 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. The Company
consigns shareholder registry administrator services to IR Japan, Inc., a wholly-owned subsidiary of
IR Japan Holdings, Ltd. where Mr. Keisuke Tomimatsu concurrently holds a position; however, since
the annual transaction amount relating thereto accounts for less than 1% of sales of the Company andsaid company, we believe that there would be no conflicts of interest with general shareholders. The
Company consigns consulting and other services to ABEJA, Inc., where Mr. Keisuke Tomimatsu
concurrently holds a position; however, the annual transaction amount relating thereto accounts forless than 1% of sales of the Company and said company, we believe that there would be no conflictsof interest with general shareholders.

- 13 -

[Translation](Reference) Composition of the Board of Directors [Scheduled to be effective on June 22, 2018]
The abilities of the Directors of the Company are listed below.

Directors

Areas in charge

HiroshiOtsukaCorporate
management

Manufacturing
andengineering
R&D●

PT & Engineering●●

Haruhisa
OtsukaL&S●●

TraceySivillFinancial affairs●

OutsideDirector.

●

Hari N.
Nair

OutsideDirector.

●

KeisukeTomimatsu

OutsideDirector.

YoshieMunakata

OutsideDirector.
(New)

Nobuyoshi
Sakakibara

Advanced
technology
and IT

●

●

●

●

Asako
Yamagami

OutsideDirector.

Audit and Supervisory
Committee Member

YoshinoriMoritaOutsideDirector.

Audit and Supervisory
Committee Member●

Governance,risk
management
and human
resources

Globalexperience

●

●

●

●

●

●

●

●

●

●

●

●

Audit and Supervisory
Committee Member

Financialaffairs andfinancing●

Takayuki
MiyataGoro
KaminoSales andmarketing

●

●

●

●

●

●

- 14 -

●

●

●

●

●

●

[Translation](Attached materials)
Business Report(April 1, 2017 to March 31, 2018)
1. Overview of the Group(1) Business results for the fiscal year ended March 31, 2018
1) Progress and results of business
During the fiscal year ended March 31, 2018, the global economy remained strong,particularly in the United States and China, and saw a modest tone of recovery.
In the automobile industry, the market, centered around world’s largest market of
China, expanded robustly, and new products and services are being born in quick
succession in the face of a major period of transformation, as represented by thethemes of Connectivity, Autonomous, Shared, Electric (CASE). The Company sees
these changes in the environment as an opportunity to establish its position as a global
supplier, and during the fiscal year under review we made efforts to further strengthen
our existing businesses, develop cutting-edge technology, and open up new businesses.
On the business front, with the goal of maximizing our synergies with the Hay Group,
we will move forward with the manufacture of motorcycle parts that use the superhigh-speed forging machines that are the strength of the Hay Group, carry out wideranging development of manufacturing technology for large gears, and strengthen ourmarketing activities, primarily with European customers. As part of our initiatives tostrengthen our presence in the growing Chinese market, and to respond to the need for
local development and local production, we have established an R&D facility, andexpanded production capacity, primarily at our Nantong site.
In terms of R&D, we are increasing our investments, chiefly in high-performanceparts required for the next generation of vehicles. In the area of cutting-edge
technology also, we are speedily implementing initiatives that will lead to enhanced
competitiveness for both products and services, such as development of automation,
making use of AI, for external inspection of parts, and implementation of cutting-edge
technology developed jointly with Toyohashi University of Technology.
On the sales front, orders for our main product of differentials are strong worldwide,
and we are receiving an increased level of inquiries about next-generation parts, suchas high-precision gears, for which demand is expected to grow in the era of electricvehicles. In the motorcycle business, where we have the global top share fortransmission components, orders from overseas manufacturers, mostly in developing
countries, are increasing.
With regard to management processes, we are promoting measures that will make theCompany a genuinely global company, such as redesigning core key systems,
expanding the global platform*, drawing up “global policies” to be shared throughout
the worldwide network, and improving the efficiency of accounts settlement
operations.
*An integrated core system providing the base for global operations

In the above environment, the Company’s results for the fiscal year under review wereboosted by a full year of the addition of the Hay Group to the results (which had only
contributed six months to the previous fiscal year), by the impact of the weaker yen,
and by rising sales in Asian regions, such that consolidated net sales rose 31.8% year
on year to 237,910 million yen. Consolidated profits grew significantly, with operating- 15 -

[Translation]

profit up 41.2% year on year to 15,767 million yen, ordinary profit up 54.3% year on
year to 15,929 million yen, and profit attributable to owners of parent up 63.9% year
on year to 10,351 million yen.
2) Segment Overview
Net sales in Japan rose 5.7% year on year to 28,778 million yen. Although there wasan increase in R&D expenses, segment profit rose 1.2% year on year to 2,164 million
yen. In North America, net sales were affected by the weaker yen, and came to 43,753
million yen (up 3.5% year on year). In terms of profits, due to the product mix and atemporary increase in production costs, segment profit fell 16.1% year on year to
1,991 million yen. In Europe, due to the addition of the Hay Group to the results, net
sales totaled 77,900 million yen (up 127.3% year on year), and the segment posted a
profit of 1,539 million yen, compared to the loss of 333 million yen recorded in theprevious fiscal year. In Asia, solid results, centered around motorcycles, drove net
sales to 79,120 million yen (up 13.4% year on year), while segment profit was 9,431
million yen, up 27.0% year on year. In South America, the effects of higher sales,
resulting from the market recovery, and of continuous cost reductions led to net salesof 8,357 million yen (up 19.8% year on year) and segment profit of 82 million yen,
compared to a loss of 725 million yen in the previous fiscal year.
3) Group sales by product(million yen)Item

The 90th fiscal
year ended
March 31, 2017

The 91st fiscal
year ended
March 31, 2018

Increase / Decrease

AmountComposition
ratio
(%)

AmountComposition
ratio
(%)

PT Business

107,41859.5

156,86865.9

49,45046.0

L&S Business

18,77410.4

18,441

7.8

(332)

(1.8)

Motorcycle
Business

54,33030.1

62,601

26.3

8,271

15.2

Total

180,522100.0

237,910100.0

57,388

31.8

Note:

AmountYear on Year(%)

Figures are presented with amounts less than one million yen truncated.

4) Status of capital investment
During the fiscal year under review, the Group implemented capital investments
totaling 12,792 million yen, for such purposes as manufacturing newly ordered
products and responding to increases in output by customers.
5) Status of fund procurement
In the fiscal year under review, procurements of funds from financial institutions wereconducted for routine purposes only, and there were no fund procurements made bymeans of capital increases or issuance of corporate bonds.
6) Initiatives toward achieving sustainability
In an environment where the economic and social influence of corporations is on theincrease, we believe that the issue of the Company providing continuous value tosociety and fulfilling its corporate social responsibility for the realization of thesustainable society is of vital importance to the growth of the Musashi Group over the
medium to long term.
In order to win the trust of people all over the world, and to maintain the Company’'s- 16 -

[Translation]

position as a company that contributes to the growth of a sustainable global society,
the Group is promoting various sustainability initiatives based on the “Musashi Group
Basic Policy for Realization of a Sustainable Global Society” that was passed by aresolution of the Board of Directors.
(2) Issues to be handled
The automotive industry is projected to record solid growth going forward, but competition is
expected to intensify further as a result of such factors as an increase in market participants,
and the accelerating speed of development. Under these circumstances, in order to realize
research and development focused on the next generation, the global expansion of its
business, and sustainable growth, the Group is tackling the following issues.
1) Development of new products aimed at the era of electric vehicles, and creation of new
businesses
With regard to research and development, in addition to reinforcing our existing
technological capabilities, we will focus on developing products aimed at the electricvehicle era, such as high-precision gears used in gear reducers, and unit products thattake advantage of the development know-how accumulated thus far. We will also
work actively on research to improve production efficiency by utilizing such cuttingedge technologies as IoT and AI, as well as on the creation of new businesses that do
not fit within the framework of our existing operations.
2) Further expansion of existing businesses and speeding up of management
In the automobile business, we will actively seek to capture growing demand in
China to expand sales, whereas for the motorcycle business, our aim is to grow thebusiness primarily in India. At the same time, by redesigning core systems to matchthe broadening of the business, we will promote the “visualization” and speeding upof global management.
3) Strengthening initiatives aimed at the realization of sustainability
From the perspective of sustainability, we will conduct activities based on theconcepts of CSV*1 and CSR*2, such as the environment, quality, human rights, andharmony with local communities, and strengthen even more than previously our
initiatives for growing together with society.
*1 Creating Shared Value: creating shared value for both society and the company*2 Corporate Social Responsibility- 17 -

[Translation](3) Status of Group assets and income(million yen, except for per share amounts)
The 90th fiscal
The 91st fiscal
year ended
year ended
March 31, 2017
March 31, 2018

The 88th fiscal
year ended
March 31, 2015

The 89th fiscal
year ended
March 31, 2016

Net sales

158,209

164,397

180,522

237,910

Operating income

11,58813,398

11,166

15,767

Ordinary income

11,875

11,44910,323

15,929Profit attributable to ownersof parent

6,379

6,809

6,315

10,351

Item

Earnings per share¥

204.51¥

218.29¥202.47¥331.69Total assets

169,539

155,152

248,482

248,607

Net assets

83,96977,94788,312

100,350

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.

(4) 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 “otheraffiliate” 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 managementof the Company are made by its independent managerial determination, securing its
independence, and therefore the interest of the Company is not impeded intransactions with the parent company, etc.
3) Status of major subsidiaries
Company name

The
Company’s
ownership
ratio
(%)

Capital(million)

Principal business

Kyushu Musashi Seimitsu Co., Ltd.

JPY

100

100.0

Manufacturing of motorcycle andgeneral-purpose engine parts

Musashi Auto Parts Michigan Inc.

USD

40

89.5

Manufacturing of automobile parts

Musashi Auto Parts Canada Inc.

CAD

20

100.0

Manufacturing of automobile parts

Musashi Auto Parts Mexico, S.A. de
C.V.

USD

12.3

100.0

Manufacturing of automobile parts

Musashi do Brasil Ltda.

BRL

105.1

74.9

Musashi da Amazonia Ltda.

BRL

139

100.0

Musashi Auto Parts Co., Ltd.

THB

200

82.3

P.T. Musashi Auto Parts Indonesia

USD

14

80.0

Musashi Auto Parts India Pvt. Ltd.

INR

10,100100.0- 18 -

Manufacturing of motorcycle andgeneral-purpose engine parts
Manufacturing of motorcycle andgeneral-purpose engine parts
Manufacturing of motorcycle andgeneral-purpose engine parts
Manufacturing of motorcycle andgeneral-purpose engine parts
Manufacturing of motorcycle andgeneral-purpose engine parts

[Translation]

Company name

The
Company’s
ownership
ratio
(%)

Capital(million)

Principal business

USD

42

100.0

Manufacturing of motorcycle andgeneral-purpose engine parts

USD

65.2

100.0

Manufacturing of automobile parts

USD

30

100.0

Regional Headquarters in China

Musashi Auto Parts (Nantong) Co., Ltd.

USD

30

(100.0)

Manufacturing of automobile parts

Tianjin Hay Forging Co., Ltd.

EUR

20

(75.0)

Manufacturing of automobile parts

Musashi Hungary Manufacturing, Ltd.

EUR

20.1

100.0

Manufacturing of automobile parts

Musashi Auto Parts Vietnam Co., Ltd.
Musashi Auto Parts (Zhongshan) Co.,Ltd.
Musashi Seimitsu Investment(Zhongshan) Co., Ltd.

Holding shares of subsidiaries
conducting manufacturing and sales
businesses relating to automobileparts
Holding shares of subsidiaries
conducting manufacturing and sales
businesses relating to automobileparts

Musashi Holdings Europe GmbH

EUR

320

75.0

Hay Holding GmbH

EUR

0.1

(75.0)

Johann Hay GMBH & CO.KG
Automobiltechnic

EUR

15

(75.0)

Manufacturing of automobile parts

Hay Machining GMBH & CO.KG

EUR

0.001

(75.0)

Manufacturing of automobile parts

Metallumform GmbH

EUR

6.6

(75.0)

Manufacturing of automobile parts

Metallumform Prazisionswerkstucke
GmbH

EUR

5

(75.0)

Manufacturing of automobile parts

Forjanor, S.L. Unipersonal

EUR

8.7

(75.0)

Manufacturing of automobile parts

Notes: The figures shown in parentheses show the ownership ratio when including ownership by subsidiaries.

(5) Principal business (As of March 31, 2018)
The principal business of the Group consists of the manufacturing and sales ofautomobile power train parts, suspension parts, steering parts and transmission parts,
among others, of which the main products are listed below.
PT
L&S
Motorcycle

Planetary gear assemblies, differential gear assemblies, bevel gears, ring gears,
camshafts, balance shafts
Suspension arm assemblies, suspension ball joints, steering ball joints, various
connection joints
Motorcycle transmission gear assemblies, motorcycle camshafts, motorcycle kickstarter
parts, other motorcycle power train parts and general-purpose engine parts- 19 -

[Translation](6) Principal business locations and plants (As of March 31, 2018)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
For the information on the major subsidiaries and their location, etc., please refer to“(4) Status of parent company and major subsidiaries 3) Status of major subsidiaries.”- 20 -

[Translation](7) Status of employees (As of March 31, 2018)
1) Employees of the Group
Change from previous
fiscal year-end

Number of employees
12,595 (3,790)

102 (403)

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
Change from previous
fiscal year-end

Number of employees
1,157 (179)

Average age

Average years of service

39.2 years old

14.8 Years

16 (138)

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, 2018)
Balance of borrowings(million yen)

LenderThe Bank of Tokyo-Mitsubishi UFJ, Ltd.

26,161

Sumitomo Mitsui Banking Corporation

30,101Development Bank of Japan

14,073

Mizuho Bank, Ltd.

14,679Note: The balance of borrowings is the sum total by lender group.

- 21 -

[Translation]

2. Status of the Company(1) Status of shares (As of March 31, 2018)
1) Total Number of Shares Authorized to be Issued2) Total Number of Issued Shares
3) Number of Shareholders
4) Major Shareholders (Top 10)

70,000,000
31,221,100
2,297
Number of shares(thousand shares)

Shareholder name

Ownership ratio(%)

Honda Motor Co., Ltd.

8,182

26.2

Japan Trustee Services Bank, Ltd. (Trust Account)

2,748

8.8

JPMorgan Chase Bank, 385632

1,497

4.7

The Master Trust Bank of Japan, Ltd. (Trust Account)

1,264

4.0

BNP PARIBAS SEC SERVICESLUXEMBOURG/JASDEC/ABERDEEN GLOBAL CLIENTASSETS874

2.8

Otsuka Holdings Co., Ltd.

801

2.5

Hiroshi Otsuka

709

2.2

Northern Trust Company (AVFC) Re Mondrian International
Small Cap Equity Fund, L.P.

706

2.2

JPMorgan Chase Bank, 385166

590

1.8

JPMorgan Bank, Luxembourg S.A. 380578

576

1.8

Notes:

1.
2.

Shares less than one thousand have been truncated.
Ownership ratio is calculated excluding treasury shares (6,787 shares).

(2) Status of share subscription rights
1) Status of share subscription rights held by the Company’s officers granted as aconsideration 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.

- 22 -

[Translation]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 toshare subscription rights

Common stock of the Company (Share unit: 100 shares)
The number of shares of common stock of the Company to be grantedby the exercise of the share subscription rights shall be the number
obtained by dividing the total face value of corporate bonds in respectof exercise requests by the conversion value below. However, any
fraction less than one share that occurs due to exercise shall betruncated 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)
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 stockof 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 quarterof 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.

Conditions for exercising sharesubscription rights

Balance of convertible bonds

10,006 million yen- 23 -

[Translation](3) Status of Corporate Officers
1) Status of the Directors (As of March 31, 2018)
Position

Areas of responsibility in the Company
and significant concurrent positions

Name

Representative Director
and President

Hiroshi Otsuka

Director

Takayuki Miyata

Director

Haruhisa Otsuka

Director

Koji Horibe

Director

Toru UchidaDirector

Tracey Sivill

Director

Goro Kamino

Director

Hari N. Nair

Director

Keisuke Tomimatsu

Head of PT Business and Forging Engineering
Head of China Regional Operations
President and Director of Musashi Holdings Europe GmbH
Head of L&S Business
Head of North America Regional Operations
President and Director of Musashi Auto Parts Canada Inc.
Head of Motorcycle Business Division
Head of Asia and South America Regional Operations
Representative Director and President of Kyushu Musashi
Seimitsu Co., Ltd.
Head of General Affairs, Sustainability Promotion Division
Head of Finance and Accounting
In charge of Global IT strategy
Representative Director and President of Sala Corporation
Chairman and Representative Director of Chubu Gas Co., Ltd.
Chairman and Representative Director of Gastec Service, Inc.

Director of IR Japan Holdings, Ltd.
Director of ABEJA, Inc.

Director (Full-time
Nobuyoshi
Audit and Supervisory
Sakakibara
Committee Member)
Director (Audit andSupervisory Committee Asako Yamagami
Attorney at law
Member)Director (Audit andSupervisory Committee Yoshinori Morita
Member)Notes:
1. Director Goro Kamino, Hari N. Nair, Keisuke Tomimatsu and Directors (Audit and Supervisory
Committee Members) Asako Yamagami , and Yoshinori Morita are Outside Directors.
2. Director (Audit and Supervisory Committee Member) Asako Yamagami is qualified as a lawyer withhigh level of specialized knowledge in corporate legal affairs and compliance.
3. To strengthen the auditing and supervisory functions of the Audit and Supervisory Committee, thecompany 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 andsufficient cooperation with the internal audit section will be allowed.
4. The Company designated Messrs. Goro Kamino, Hari N. Nair, Keisuke Tomimatsu, Asako Yamagami
and Yoshinori Morita as Independent Officers pursuant to the regulations of the Tokyo Stock
Exchange and the Nagoya Stock Exchange, and registered them as such.
5. The retired Directors during the fiscal year under review are as follows.
The terms of office of Directors Isao Kamiya and Director (Audit and Supervisory Committee
Member)Takeshi Fuji expired as of the conclusion of the 90th Annual Meeting of Shareholders heldon June 23, 2017- 24 -

[Translation](Ref.)The Company has adopted the executive officer system. The executive officers as of April 1, 2018 are as
follows.
Areas of responsibility in the Company
Position
Nameand significant concurrent positions
President and Executive
Hiroshi Otsuka
Officer
Head of PT Business and Forging Engineering
Senior Managing
Takayuki Miyata
CEO of China Region
Executive Officer
President and Director of Musashi Holdings Europe GmbH
Head of L&S Business
Senior Managing
Haruhisa Otsuka
CEO of North and South America region
Executive Officer
President and Director of Musashi Auto Parts Canada Inc.
Managing Executive
CFO of Group of the Company
Tracey Sivill
Officer
In charge of Global IT strategy
Managing Executive
Koji Horibe
Head of Quality Assurance
OfficerManaging Executive
Nobuo Takemasa
Head of R&D
Officer
Senior Executive
In charge of Global Customer, New Business, and Corporate
Takeshi Isaku
Officer
Planning
Senior Executive
Toru Uchida
In charge of Special Task
Officer
Senior Executive
Ulrich Mehlmann
CEO of Europe region
Officer
Senior Executive
Head of Production Management , IT ,and HR/
Takashi Soda
Officer
Chief Compliance Management Officer
CEO of Japan region
Senior Executive
Kenji Morisaki
Head of Manufacturing Engineering
Officer
Chief Risk Management Officer
Executive Officer

Tetsunobu Kawai

Managing Director of Kyushu Musashi Seimitsu Co ., Ltd

Executive Officer

Graham Hill

In charge of Globalization Initiatives
President and Director of Musashi Auto Parts UK Ltd.

Executive Officer

Tetsuro Toyama

Deputy Head of L&S Business

Executive Officer

Satoshi Tada

Head of Purchasing

Executive Officer

Toshihisa Otsuka

COO of China region

Executive Officer

Hideaki Asakura

Head of Motorcycle Business Unit /CEO of Asia region

Executive Officer

Yasunori Amano

Head of Sales

Executive Officer

Tatsuya Yanagisawa

Deputy Head of R&D- 25 -

[Translation]2)

Total amount of remuneration of Directors for the fiscal year under review
Classification

Amount paid
(million yen)

Number of payees

Directors (excluding Directors serving as Audit andSupervisory Committee Members)

10

196

(Outside Director of the above)

(3)

(20)

Directors (Audit and Supervisory Committee Members)

427(Outside Director of the above)

(3)

(12)

Total

14

224

(Outside Officers of the above)

(6)

(32)

Notes:

1.

2.

3.
4.

The maximum amount of remuneration of Directors (excluding Directors serving as Audit andSupervisory Committee Members) 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 Meetingof Shareholders held on June 23, 2015. And apart from this, for the Company’s Directors (excluding
Directors serving as Audit and Supervisory Committee Members), it was approved at the 90th Annual
Meeting of Shareholders held on June 23, 2017, a resolution was adopted that the monetary
remuneration to grant shares with transfer restrictions and monetary remuneration in an amountlinked to the aforementioned share price, etc. shall be not more than 250 million yen per year (ofwhich not more than 40 million yen per year shall be for Outside Directors; however, this excludes
the portion of employee salaries of Directors serving concurrently as employees).
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.
The total amount of remuneration of Directors does not include the portion of employee salaries for
Directors who serve concurrently as employees.
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 relationshipbetween such companies with the Company* Mr. Goro Kamino, Director, also serves as Representative Director and President of
SaLa Corporation and as Representative Director and Chairman of 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, also serves as is Director of IR Japan Holdings,
Ltd., which was established as the wholly-owning parent company of IR Japan Inc.
The Company consigns shareholder registry administrator services to IR Japan, Inc.,
however, the annual transaction amount relating thereto accounts for less than 1% ofsales of the Company as well as IR Japan, Inc. There is no special relationshipbetween the Company and IR Japan Holdings, Ltd. Also, he is a Director of ABEJA,
Inc. The Company consigns consulting operations etc. to ABEJA, Inc., but theannual value of transactions related to these operations account for less than 1% of
the sales of both the Company and ABEJA, Inc.

- 26 -

[Translation]

B. Main activities during the fiscal year under review* Mr. Goro Kamino, Director, attended 8 out of the 8 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.
* Since taking up the role of Director on June 23, 2017, Mr. Hari N. Nair attended 6 outof the 6 Board of Directors Meetings held during the fiscal year under review andhas utilized his abundant experience of company management and the deep insights
cultivated over many years in the industry to actively contribute as required to thedeliberation of resolutions by the Board of Directors.
* Mr. Keisuke Tomimatsu, Director, attended 8 out of the 8 Board of Directors
Meetings held during the fiscal year under review and has utilized his abundant
experience of the securities industry and his wide-ranging knowledge of theeconomy to actively contribute as required to the deliberation of resolutions by the
Board of Directors.
* Ms. Asako Yamagami, Director (Audit and Supervisory Committee Member)attended 8 of the 8 Board of Directors Meeting held during the fiscal year underreview where she raised questions and provided advice whenever appropriate from a
professional perspective as a lawyer. Further, since being appointed to theCompany’s Director, she attended 10 of the 10 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 andSupervisory Committee Member duties.
* Since taking up the role of Director (Audit and Supervisory Committee Member) on
June 23, 2017, Mr. Yoshinori Morita attended 6 out of the 6 Board of Directors
Meetings held during the fiscal year under review and has utilized his abundant
experience and deep insights cultivated over many years to put appropriate questions
and offer appropriate advice to the Board of Directors. Also, since taking up his roleon June 23, 2017, he has attended 7 out of 7 meetings of the Audit and Supervisory
Committee held during the fiscal year under review and has voiced his opinions on
audit methods and on other matters related to the duties of the Audit and Supervisory
Committee.
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 amountstipulated in Article 425, paragraph 1 of the same Act.

- 27 -

[Translation](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

60.0

Total economic benefits, including money, that should be paid to the Financial
72.4
Auditor by the Company and its subsidiaries
Notes:
1. Subsidiaries of the Company are audited by audit corporations other than the Financial Auditor of theCompany.
2. In the audit agreement between the Company and the Financial Auditor, a distinction is not madebetween 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, theamount of the remuneration, etc. of the Financial Auditor for the fiscal year under review includes theamount 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
The Company requested the Financial Auditor to provide advice on international
accounting standards as services other than the services under Article 2, paragraph 1 of
the Certificated Public Accountants Act (non-auditing services), and paid
consideration for such services.
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 andSupervisory Committee shall determine the detail of a proposal with regards todismissal 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 andSupervisory Committee Members, provided that any items of Article 340, paragraph 1of the Companies Act are met. In such case, an Audit and Supervisory Committee
Member designated by the Audit and Supervisory Committee shall report thedismissal of the Financial Auditor and the reason therefor at the first Annual Meetingof Shareholders convened after the dismissal.

- 28 -

[Translation](5) Systems to ensure properness of operations and overview of operational status of thesystems
Basic policy relating to the establishment of the internal control system
Below is an overview of decisions regarding systems for ensuring that the execution ofduties 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 executionof duties by Directors* Establish an information management framework for the proper storage andmanagement of documents relating to the execution of duties by Directors and otherinformation 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 andoptimal business decisions in each region and workplace as well as efficient andeffective 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 andefficiency of business execution as a corporate group.
5) Systems to ensure the properness of operation of the Company and the corporate groupconstituted by the parent and subsidiaries* Formulate “Regulations on Control of Affiliate Companies” for the proper execution oftasks 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 toenhance internal auditing in each region and at subsidiaries and associates.
* The Internal Audit Office informs the audited departments and audited companies
about the results of internal audits, requests plans for measures to improve its
observations and periodically confirms the status of progress on the improvement
measures in addition to reporting to the Board of Directors as appropriate.

- 29 -

[Translation]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 andSupervisory 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 forreporting to Audit and Supervisory Committee* Periodical reports are made to Audit and Supervisory Committee on the status of thebusiness of the Company and subsidiaries, etc. as well as the status of preparation andoperation 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 andSupervisory Committee Members) to disclose reasons for the transfer, evaluation anddisciplinary action, etc. of such employees who made reports.
8) Other systems to ensure that auditing by Audit and Supervisory Committee isconducted effectively* Form an audit framework and establish audit environment to increase the effectivenessof audits. Audit & Supervisory Committee conduct audits on the Company andsubsidiaries, 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.
* When an Audit and Supervisory Committee Member requests prepayment or
reimbursement of expenses that arise in relation to the execution of duties orrepayment of obligations incurred, the Company shall comply, except in cases where
it can be proved that the expenses, etc. did not arise in relation to the execution ofduties of the Audit and Supervisory Committee Member.
Status of operation of the internal control system
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 tocompliance and has established an Internal Control Committee, deliberating businessethics and compliance.
* The Company provides the compliance training for all employees through thecompliance manual, where it explains “Our Compliance” as the code of conduct inplain words, enhancing business ethics. In addition, for the future, the manual ofcompliance was reviewed from the perspective of high awareness among the groupcompanies.
* The Company has handled proposals regarding compliance concerns at the Musashi
compliance hotline, the in-house reporting hotline. In addition to this hotline, there arealso contact points set up with external lawyers and with the Audit and Supervisory- 30 -

[Translation]

Committee, improving the effectiveness of the system by creating an environment inwhich it is easier to disclose information.
2) System for the preservation and management of information relating to the execution ofduties 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.
* In fiscal year 2017, the provisions relating to the management of confidential
information were revised from the viewpoint of strengthening management ofconfidential documents, and training regarding confidentiality management was
implemented for all employees, with the aim of strengthening the management of
stored information.
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 hasdeliberated business continuity risks and its countermeasures and developed theBusiness Continuity Plan (BCP).
* The Company has continuously conducted BCP drills for a large-scale earthquake withan assumption of the maximum risk.
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. In addition, the management strategy andmedium- to long-term management plans for the Group as a whole are actively
deliberated with the aim of enhancing corporate value.
* As a company with an Audit and Supervisory Committee, the Company has delegatedparts of the executions of important operations resolved at the Board of Directors
Meeting to management meetings in accordance with the provisions of the Articles ofIncorporation, making efficient and flexible management decisions.
* Execution of operations is performed with flexibility under the clear accountability ofthe executive officers.
* In order to share these policies with all Group companies and to achieve the aims of thebusiness plan, in addition to holding Global Top Meetings (GTM) to discuss issues
and so on, the Company seeks to optimize the execution of duties and to improve
efficiency for the Group as a whole, primarily through broadening the global platform,by means of redesigning the core systems.
5) Systems to ensure the adequacy of the business of the Company and the corporategroup constituted by the parent company and subsidiaries* The Board of Directors has set out the basic policy relating to the establishment of theinternal control system and is supervising the establishment and the operational statusof 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 Head
Office, and is managing companies of the Group.
* In fiscal year 2017, we performed confirmations of the important rules for each Group
company, and the establishment and operational status of in-house reporting system.
In addition, we promoted the drawing up of shared rules (global policies) to contributeto the efficient management and unified administration of the Group as a whole, andheld meetings between Group companies and those responsible for the internal control
system in order to link these rules to understanding and management.

- 31 -

[Translation]* Each companies of the Group periodically conduct self-assessment regarding laws andregulations 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. In fiscal year 2017, we began selfassessment for the eight major European companies of the Hay Group that were
integrated during the previous fiscal year.
* 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.
6) Matters concerning a Director and employee who is to assist the duties of the Audit andSupervisory Committee and matters concerning the independence of such Director andemployee 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 theInternal 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 isconducted 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 audits byworking to understand the status surrounding the Company, as well as collaboratingwith the Internal Audit Office and providing opportunities for the Audit andSupervisory Committee Members to share information among them.
* The Audit and Supervisory Committee Members have attended management meetingsand other important meetings, thus understanding the status of the operational
execution. Furthermore, the Audit and Supervisory Committee Members have actively
stated their opinions at the Board of Directors Meetings from the standpoint of audit
and supervision, thereby strengthening the supervisory function.
* The Audit and Supervisory Committee Members have conducted audit by collaboratingwith 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.

- 32 -

[Translation]

Consolidated Balance Sheet(As of March 31, 2018)(million yen)Account title
AssetsCurrent assets

AmountAccount title

Amount248,607

Liabilities

148,256

104,843

Current liabilities

71,484

Cash and bank deposits

26,106

Notes and accounts payable – trade21,347

Notes and accounts receivable – trade34,31910,779Merchandise and finished goods

10,117Work in process

5,513

Short-term loans payable
Current portion of long-term loans
payableCurrent portion of bonds

Raw materials and supplies

19,860Accounts payable – other

3,310

Deferred tax assets

1,165

Accrued expenses

6,164

Others7,800

Income taxes payable

1,317

(39)

Provision for bonuses

2,213

Allowance for doubtful accounts

12,64410,006

143,763

Provision for directors’ bonuses

52

Property, plant and equipment

103,716

Provision for product warranties

35

Buildings and structures

22,839Others3611

Machinery, equipment and vehicles

64,652

Non-current liabilities

76,772Tools, furniture and fixtures

4,053

Long-term loans payable

63,362

Land

6,655

7,369

Construction in progress

5,514

Deferred tax liabilities
Liabilities on employees’
retirement benefits
OthersNon-current assets

4,641
1,399

Intangible assets

28,005

Goodwill

9,086

Customer relationship assets

14,123

Net assets

100,350

Software

1,648

Shareholders’ equity

85,423

Software in progress

13

Capital stock

3,006

3,133

Capital surplus

1,985

Investments and other assets

12,041Retained earnings

80,440Investment securities

6,251

Investments in capital81

Long-term loans receivable

61

OthersDeferred tax assets

2,167

Others3,523

Allowance for doubtful accounts(43)

Treasury shares
Accumulated other comprehensive
incomeValuation difference on available-forsale securities
Foreign currency translation
adjustment
Remeasurements of defined benefit
plan
Non-controlling interests

Total assets
248,607 Total liabilities and net assets
Note: Figures are presented with amounts less than one million yen truncated.

- 33 -(8)(2,368)2,706(5,270)
195
17,294
248,607

[Translation]

Consolidated Statement of Income(April 1, 2017 - March 31, 2017)(million yen)Account title

AmountNet sales

237,910

Cost of sales

200,134

Gross profit

37,776

Selling, general and administrative expenses

22,008Operating income

15,767

Non-operating income

1,422Interest income

371

Dividend income

208

Foreign exchange losses

72

Subsidy income

185

Others584

Non-operating expenses

1,260Interest expenses

1,109

Others150

Ordinary income

15,929Extraordinary income

50

Gain on sales of non-current assets

50

Extraordinary losses

256

Loss on sales of non-current assets

85

Loss on retirement of non-current assets

141

Impairment loss

29

Profit before income taxes

15,723

Income taxes – current

4,773

Income taxes – deferred(9)Profit10,959Profit attributable to non-controlling interests

608

Profit attributable to owners of parent
Note: Figures are presented with amounts less than one million yen truncated.

- 34 -

10,351

[Translation]

Consolidated Statement of Changes in Net Assets(April 1, 2017 - March 31, 2018)(million yen)
Shareholders’ equity
Capital surplus

Retained earnings

Treasury shares

Total
shareholders’equity

2,973

1,952

71,114(7)

76,03332

32

Capital stock
Balance at April 1, 2017
Changes of items during
periodShare issuance
Dividends of surplus
Profit attributable toowners of parent
Purchase of treasury
sharesIncrease (decrease) due tochange fiscal year of
subsidiaries
Net changes of items
other than shareholders’equityTotal changes of items during
periodBalance at March 31, 201864
(1,653)(1,653)

10,351

10,351
(0)

(0)

628

628

32

32

9,326

(0)

9,390

3,006

1,985

80,440(8)85,423

Noncontrollin
g interests

Total net
assets

16,73088,312

Accumulated other comprehensive income

Balance at April 1, 2017
Changes of items during
periodValuationdifference
on availablefor-salesecurities

Deferred
gains orlosses onhedgesForeigncurrencytranslation
adjustment

Remeasurementsof defined
benefit plan

Total
accumulat
ed othercomprehensiveincome2,394(0)(6,467)(376)(4,450)Share issuance64

Dividends of surplus
Profit attributable toowners of parent
Purchase of treasury
sharesIncrease (decrease) due tochange fiscal year of
subsidiaries
Net changes of items
other than shareholders’equityTotal changes of items during
periodBalance at March 31, 2018

(1,653)
10,351
(0)
628

311

0

1,197

571

2,082

564

2,646

311

0

1,197

571

2,082

564

12,037

2,706－(5,270)195(2,368)17,294

100,350

Note: Figures are presented with amounts less than one million yen truncated.

- 35 -

[Translation]

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 subsidiariesi) Number of consolidated subsidiaries:31ii) 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.
Musashi Auto Parts (Nantong) Co., Ltd.
Musashi Holdings Europe GmbHHay Holding GmbH
Johann Hay GmbH & Co. KG Automobiltechnik
Hay-Speed-Umformtechnik GmbH
Hay-Tec automotive Verwaltungsgesellshaft mbH
Metallumform GmbH
Metallumform Machining GmbH & Co. KG
Metallumform GmbH & Co. KG Prazisionswerkstucke
MS Umformtechnik GmbH & Co. KG
Tianjin Hay Forging Co., Ltd.
Metaco Union Kft.
Forjanor, S.L. Unipersonaliii) Changes of the scope of consolidation
From the fiscal year under review, Hay Machining GmbH & Co. KG has been
included within the scope of consolidation.
Furthermore, Karl Hay Verwaltungsgesellschaft mit beschränkter Haftung has been
excluded from the scope of consolidation since it has been dissolved through amerger with Hay Holding GmbH in which the latter was the surviving company.
2) Status of non-consolidated subsidiaries:i) Names of principal non-consolidated subsidiaries:
Musashi Auto Parts UK Ltd.
ii) Reason for exclusion from the scope of consolidation
Non-consolidated subsidiaries are excluded from the scope of consolidation because- 36 -

[Translation]

their respective total assets, net sales, profit or loss, and retained earnings do nothave 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 appliedi) Names of principal companies, etc.:
Musashi Auto Parts UK Ltd.
ii) Reason for not applying equity method
Non-consolidated subsidiaries have an immaterial effect on profit or loss andretained 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 26 consolidated subsidiaries of the Company is
December 31. Financial statements as of the foregoing accounts closing date are used toprepare 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.
Regarding P.T. Musashi Autoparts Indonesia and Musashi Hungary Manufacturing, Ltd.,
which are consolidated subsidiaries with account closing date of December 31, theirfinancial statements as of the foregoing dates have been used for consolidated financial
statements and adjustments necessary for consolidation purposes have been made formaterial transactions occurring between December 31 and March 31. However, toincrease the usefulness of financial information as a disclosure based on timely andappropriate information, their account closing date has been changed to March 31 as of
the fiscal year under review.Consequently, profit or loss arising during the period fromJanuary 1, 2017 to March 31, 2017 for P.T. Musashi Autoparts Indonesia and Musashi
Hungary Manufacturing, Ltd., whose account closing date was previously December 31,
are each adjusted in retained earnings.
(4) Matters relating to accounting practices and policy
1) Valuation basis and method for significant assetsi) Securities
A. Shares of subsidiaries
Stated at cost using the moving average method
B. Available-for-sale securities* Securities with market valueMarket 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 directtransfer to capital method, with the disposal cost determined by the moving
average method)* Securities without market value
Stated at cost using the moving average methodii) Derivatives
Market value methodiii) 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- 37 -

[Translation]

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 firstout method or weighted average method.
2) Depreciation methods for material depreciable assetsi) 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 50 years
Machinery, equipment
5 to 20 years
and vehiclesii) Intangible assets (excluding leased assets)
The straight-line method is applied. However, for software for internal use, thestraight-line method is applied based on the expected usable period within the Group(mainly 5 years).
Furthermore, straight-line method is applied for customer relationship assets basedon the expected usable period (11 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 theuseful life with no residual value.

- 38 -

[Translation]3) Accounting policy for significant provisionsi) 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 fromindividual receivables.
ii) Provision for bonuses
To provide for the future payment of employee bonuses, the Company and someconsolidated 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 someconsolidated subsidiaries report the anticipated amount of bonus payments.
iv) Provision for product warranties
To provide for product warranty expenses, the Group reports the anticipated amountof 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 istreated 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 theconversion is shown as foreign currency translation adjustment and non-controllinginterests.
5) Hedge accounting methodi) Hedge accounting method
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.
ii) Hedging instruments and hedged items
Hedging instruments
Forward foreign exchange contracts, currency swap
transactions, and interest-rate swap transactions
Hedged items
Foreign currency denominated borrowings and foreign
currency denominated trade receivables and payablesiii) 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 forborrowings, 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, andno 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 ofboth.
Please note that this assessment is omitted for interest-rate swaps subject to special- 39 -

[Translation]

treatment.
6) Other significant matters that serve as the basis for the preparation of consolidated
financial statementsi) 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’sbenefit 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 theemployees, 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) Method and period for amortization of goodwill
Straight-line method is applied for a period of 15 years.
iii) Accounting treatment of consumption taxes
Accounting treatment for consumption tax and local consumption tax is based on the
tax-excluded method.
iv) Application of Consolidated Taxation System
From this fiscal year Consolidated Taxation System is applied.

- 40 -

[Translation]

3. Notes to the consolidated balance sheet(1) Amount of accumulated depreciation for property, plant and equipment
166,622 million yen(2) Contingent liabilities
The Group has been investigated by overseas authorities for a possible violation ofcompetition laws in certain past transactions and is cooperating fully with the investigation.
Such effect on the consolidated financial statements is difficult to reasonably estimate.

- 41 -

[Translation]

4. Notes to the consolidated statement of changes in net assets(1) Matters concerning total number of issued shares(thousand shares)
Types of shares
Common shares

April 1, 2017

Increase

31,200Decrease
21

March 31, 2018–

31,221(2) Matters concerning number of treasury shares(shares)
Types of shares
Common shares

April 1, 2017

Increase

5,752

Decrease
1,035

March 31, 2018
–

6,787

Note: Increase in 1,035 common shares is due to purchase of shares of less than one unit.

(3) Matters concerning dividends of surplus
1) Paid amount of dividendsi) Matters concerning dividends resolved at the 90th Annual Meeting of Shareholders
held on June 23, 2017
* Total dividends
811 million yen* Dividends per share
26 yen* Record date
March 31, 2017
* Effective dateJune 26, 2017ii) Matters concerning dividends resolved at the Board of Directors Meeting held on
November 6, 2017
* Total dividends
842 million yen* Dividends per share
27 yen* Record date
September 30, 2017
* Effective date
December 1, 20172) 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 91st Annual Meeting of Shareholders to beheld on June 22, 2018
* Total dividends
1,217 million yen* Dividends per share
39 yen* Record date
March 31, 2018
* Effective dateJune 25, 2018
* Source of dividends
Retained earnings- 42 -

[Translation]

5. 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 mitigatedaccording to the Sales Management Rules. Investment securities are mainly shares, andwe quarterly monitor the market prices of listed stock.
Borrowings are used as working capital and capital investment funds. Forward foreignexchange 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, 2018 are as follows.
(million yen)
Consolidatedbalance sheet
amountFair value

Difference(1) Cash and bank deposits

26,106

26,106–(2) Notes and accounts receivable – trade34,31934,319–(3) Investment securities

5,316

5,316

–

65,74265,742–(4) Notes and accounts payable – trade21,347

21,347–(5) Short-term loans payable

10,77910,779–(6) Accounts payable – other

3,310

3,310

–

(7) Accrued expenses

6,164

6,164

–

(8) Income taxes payable

1,317

1,317

–

(9) Current portion of bonds payable

10,006

10,006–(10) Long-term loans payable (*1)

74,006

77,342

1,336

Total liabilities

128,933

130,2691,336(11) Derivative transactions (*2)

66

66

–

Total assets(*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 marketablesecurities 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 attheir book value.
(3) Investment securities
Fair value of investment securities is based on market prices on exchanges.
(4) (4) Notes and accounts payable – trade, (5) Short-term loans payable, (6) Accounts payable – other, (7)Accrued expenses, (8) Income taxes payable, and (9) Current portion of bonds payable
Because their fair value is almost equal to book value due to their short-term settlement, they are posted attheir book value.
(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- 43 -

[Translation]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 withhedged borrowings, accounts receivable – trade, and accounts payable – trade, therefore, their fair value isincluded in the fair value of the relevant account items.
2. Unlisted equity securities (939 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 toascertain fair value by such means as estimating future cash flows.

6. Per share information(1) Net assets per share:(2) Earnings per share:

2,660.82 yen
331.69 yen

7. Significant subsequent events
No items to report.

- 44 -

[Translation]

Non-consolidated Balance Sheet(As of March 31, 2018)(million yen)Account title
AssetsCurrent assets
Cash and bank deposits

AmountAccount title

117,526
17,625320

Liabilities
Current liabilities
Notes payable – trade
Electronically recorded obligations –operatingAccounts payable – trade
Short-term loans payable
Current portion of long-term loans
payableAccounts receivable – trade

10,193Finished goods
Work in process

1,168
1,418

Raw materials and supplies
Current portion of long-term loans
receivable
Prepaid expenses
Deferred tax assets
Accounts receivable – other
OthersNon-current assets
Property, plant and equipment
Buildings
Structures
Machinery and equipment
VehiclesTools, furniture and fixtures
Land
Construction in progress
Intangible assets
Software
Software in progress
OthersInvestments and other assets
Investment securities
Shares of subsidiaries andassociates
Investments in capital
Long-term loans receivable fromsubsidiaries and associates
Investments in capital ofsubsidiaries and associates
Long-term prepaid expenses
OthersAllowance for doubtful accounts

750
1,040
22
568
1,250
893
99,900
10,576
1,977
102
5,007
27
526
2,489
445
744
722
13
8
88,58032
65,21614

Current portion of bonds

76,34435,467
1
3,297
2,673
2,900
12,09810,006

Lease obligations
Accounts payable – otherAccrued expenses
Income taxes payable
Deposits received
Provision for bonuses
Provision for directors’ bonuses
Provision for product warranties
Notes payable – facilities
OthersNon-current liabilities
Long-term loans payable
Lease obligations
Deferred tax liabilities
Provision for retirement benefits
Long-term accounts payable – other
Asset retirement obligations

44
551
2,134
97
183
1,015
40
11
366
46
40,87639,289
56
750
647
71
61

Net assets
Shareholders’ equity

41,182
38,613

Capital stock

3,006

Capital surplus

2,746

760
22,506

AmountLegal capital surplus
Retained earnings

43
42
(36)

Legal retained earnings
Other retained earnings
General reserve
Retained earnings brought forward
Treasury shares
Valuation and translation adjustments
Valuation difference on available-for-salesecurities
Total assets
117,526 Total liabilities and net assets
Note: Figures are presented with amounts less than one million yen truncated.

- 45 -

2,746
32,868306
32,561
23,500
9,061
(8)
2,568
2,568
117,526

[Translation]

Non-consolidated Statement of Income(April 1, 2017 - March 31, 2018)(million yen)Account title

AmountNet sales

48,394

Cost of sales

39,728Gross profit

8,665

Selling, general and administrative expenses

6,686

Operating income

1,979

Non-operating income

4,902Interest income

18

Dividend income

4,309

Guarantee commission received

536

Others37

Non-operating expenses

303

Interest expenses

110

Loss on retirement of non-current assets

19

Foreign exchange losses

148

Others25

Ordinary income

6,577

Extraordinary income

6

Gain on sales of non-current assets

6

Profit before income taxes

6,583

Income taxes – current

1,155

Income taxes – deferred

15

ProfitNote: Figures are presented with amounts less than one million yen truncated.

- 46 -

5,412

[Translation]

Non-consolidated Statement of Changes in Net Assets(April 1, 2017 - March 31, 2018)(million yen)
Shareholders’ equity
CapitalsurplusLegalcapitalsurplusCapitalstock
Balance at April 1, 2017

Retained earnings

2,973

2,714

32

32

Legal
retainedearnings

Otherretainedearnings

Total
retainedearnings

306

28,80329,110TreasurysharesTotalshareholders’equity(7)

34,790Changes of items during period
Share issuance64

Dividends of surplus(1,653)(1,653)(1,653)

Profit

5,412

5,412

5,412

Purchase of treasury shares

(0)

(0)

Net changes of items other thanshareholders’ equity
Total changes of items during period
Balance at March 31, 2018

32

32

–

3,758

3,758

(0)

3,822

3,006

2,746

306

32,561

32,868(8)

38,613

Valuation and translation adjustments
Valuation difference on
available-for-sale securities
Balance at April 1, 2017

Total valuation andtranslation adjustments

2,275

2,275

Total net assets
37,066

Changes of items during period
Share issuance64

Dividends of surplus(1,653)

Profit

5,412

Purchase of treasury shares(0)

Net changes of items other thanshareholders’ equity

293

293

293

Total changes of items during period

293

293

4,115

2,568

2,568

41,182

Balance at March 31, 2018

Note: Figures are presented with amounts less than one million yen truncated.

- 47 -

[Translation]*Other retained earnings(million yen)

23,5007

Retainedearnings
brought
forward
5,295

–

–

(1,653)

–

(7)

7

–

–
–
23,500

–
(7)
–

5,412
3,766
9,061

5,412
3,758
32,561

Reserve for
specialdepreciation

Generalreserve
Balance at April 1, 2017
Change in the fiscal year
Share issuance
Dividends of surplus
Reduction of reserve for advanced
depreciation of machinery
ProfitTotal changes of items during period
Balance at March 31, 2018

Note: Figures are presented with amounts less than one million yen truncated.

- 48 -

Total
28,803–(1,653)

[Translation]

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 of subsidiaries
Stated at cost using the moving average method
2) Available-for-sale securities* Securities with market valueMarket value method based on the market price as of the accounts settlement date (thefull 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 bywriting down the book value where the profitability declines)
However, machinery purchased for sale and in-house manufactured machinery arerecorded 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 years
Machinery and equipment
9 years2) 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 usefullife 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 fromindividual receivables.
2) Provision for bonuses
To provide for the future payment of employee bonuses, the Company reports the- 49 -

[Translation]

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 anticipatedamount 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’sbenefit formula for the attribution of benefits to the end of the fiscal year underreview.
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 straightline method, from the following fiscal year when the actuarial gains and losses isrecognized.
(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 orloss.
(7) Hedge accounting method
1) Hedge accounting method
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.
2) Hedging instruments and hedged items
Hedging instruments
Forward foreign exchange contracts, currency swap
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 denominatedin foreign currencies, the Company uses forward foreign exchange contracts andcurrency swap transactions. To avoid interest-rate fluctuation risk for borrowings, theCompany uses interest-rate swap transactions. It is our policy that these derivativetransactions 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- 50 -

[Translation]

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 basedon the tax-excluded method.
3. Notes to the non-consolidated balance sheet(1) Claims and obligations with respect to subsidiaries and associates
Short-term cash credit
10,566 million yen
Long-term cash credit
760 million yen
Short-term cash debt
1,315 million yen
Long-term cash debt
1,357 million yen(2) Amount of accumulated depreciation for property, plant and equipment
37,357 million yen(3) Contingent liabilities
Guarantee obligations
The following guarantees are made with respect to loans from financial institutions ofsubsidiaries and associates(million yen)Company name

Guarantee balance

Hay Holding GmbH

21,293

Tianjin Hay Forging Co., Ltd.

5,693

Musashi Auto Parts Mexico, S.A. de C.V.

2,656

Musashi Auto Parts Michigan Inc.

2,344

Musashi Auto Parts India Pvt. Ltd.

725

Musashi da Amazonia Ltda.

10

Total

32,722

5. Notes to the non-consolidated statement of income
Transactions with subsidiaries and associates
Net sales
Purchases
Transactions other than operational transactions- 51 -

42,732 million yen
17,305 million yen
4,897 million yen

[Translation]

5. Notes to the non-consolidated statement of changes in net assets
Matters concerning number of treasury shares(shares)
Types of shares
Common shares

April 1, 2017

Increase

5,752

Decrease
1,035

March 31, 2018
–

6,787

Note: Increase of 1,035 common shares is due to purchase of shares less than one unit and forfeiture of rights toreceive restricted share-based remuneration.

6. 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
24
Provision for bonuses
305
Provision for directors' bonuses
12
Accrued social security premiums
49
Loss on evaluation of inventories
157
Credit for foreign tax
337
Over depreciation
178
Provision for retirement benefits
194
Directors’ retirement benefits payable
21
Loss on valuation of investment securities
7
Loss on sales of shares of subsidiaries and associates
1,170
Allowance for doubtful accounts
10
Others45
Subtotal deferred tax assets
2,513
Valuation allowance(1,593)
Total deferred tax assets
920
Deferred tax liabilities
Valuation difference on available-for-sale securities
OthersTotal deferred tax liabilities
Net deferred tax assets (liabilities)- 52 -(1,101)(0)(1,102)(181)

[Translation]

7. Notes concerning transactions with related parties(1) Parent company and principal corporate shareholder
Category

Other
affiliate

Company
nameHonda MotorCo., Ltd.

Ownership
percentage ofvoting rights(%)

RelationshipTransaction
details

Transaction
amounts(million yen)Account
item(Note 3)

Sale of theCompany’s
26.2 products,
purchase of
raw materials

Sales ofproducts(Note 1)

Purchase of
raw materials(Note 2)

Fiscal yearend balance(million yen)
(Note 3)

Accounts
21,555 receivable –
trade

2,693

Accounts
4,816 payable –
trade

139

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 fornegotiation.
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

Subsidiary

Subsidiary

Subsidiary

Company
nameOwnership
percentage ofvoting rights(%)

Relationship

KyushuMusashi
Seimitsu Co.,Ltd.
Musashi Auto
Parts
Michigan Inc.

Debt
guarantees
89.5 andsecondment ofofficers

100.0Transaction
amounts(million yen)Account
item(Note 5)

Product
purchasing
100.0 andsecondment ofofficers

Musashi Auto
Parts India
Pvt. Ltd

Transaction
details(Note 1)

Underwriting ofdebt guarantees

2,344 –

823–

(Note 2)

Receipt ofinterest (Note)
4

Lending offunds(Note 5)

Accounts
10,418 payable –trade

Product
purchasing

Fiscal yearend balance(million yen)

Current
portion of
long-term
loans
receivable

1,040

8 Long-term
loans
receivable
fromsubsidiaries
andassociates

760

Long-term
6 loans
payable1,357

SubsidiaryMusashi
Hungary
Manufacturing, Ltd.

Capitalborrowing and100.0
secondment ofofficers

Interest
payment(Note 3)

SubsidiaryMusashi Auto
Parts Mexico,
S.A. de C.V.

Debt
guarantees
100.0 andsecondment ofofficers

Underwriting ofdebt guarantees(Note 2)2,656 ––

Subsidiary

Hay Holding
GmbH

Debt
75.0 guarantees
andUnderwriting ofdebt guarantees(Note 2)

26,986 ––- 53 -

[Translation]

Category

Company
nameOwnership
percentage ofvoting rights(%)

RelationshipTransaction
details

Transaction
amounts(million yen)
(Note 5)secondment ofofficers

Account
item

Fiscal yearend balance(million yen)
(Note 5)

Guarantee
commissions
536 –income(Note 2)
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. However, guarantee commissions are received from Hay Holding GmbH.
3.
Interest rate in capital borrowing is reasonably determined in consideration with market interest rate.
4.
Interest rate in capital lending is reasonably determined in consideration with market interest rate.
5. Consumption taxes are excluded from transaction amounts, but included in balances at fiscal year-end.

8. Per share information(1) Net assets per share:(2) Earnings per share:

1,319.33 yen
173.41 yen- 54 -–

[Translation][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 11, 2018
To the Board of Directors of Musashi Seimitsu Industry Co., Ltd.

Ernst & Young ShinNihon LLC
Shigeki Hiki

(Seal)

Designated Limited Liability Partner,
Engagement Partner,
Certified Public Accountant

Toshikatsu Sekiguchi(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, 2017 to March 31, 2018, 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 provisionsof 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 inJapan, and for designing and operating such internal control as management determines isnecessary to enable the preparation and fair presentation of the consolidated financial statementsthat 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 theaudit to obtain reasonable assurance about whether the consolidated financial statements are freefrom material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the consolidated financial statements. The procedures selected and applied dependon the auditor’s judgment, based on the assessment of the risks of material misstatement of theconsolidated 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 fairpresentation of the consolidated financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity’s internal control. An audit also includes evaluating theappropriateness of accounting policies used, the method of their application, and thereasonableness 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 abasis for our audit opinion.
OpinionOur opinion is that the above-mentioned consolidated financial statements present fairly the- 55 -

[Translation]

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.
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.

- 56 -

[Translation][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 11, 2018
To the Board of Directors of Musashi Seimitsu Industry Co., Ltd.

Ernst & Young ShinNihon LLC
Shigeki Hiki

(Seal)

Designated Limited Liability Partner,
Engagement Partner,
Certified Public Accountant

Toshikatsu Sekiguchi(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 91st fiscal year from April 1, 2017 to March 31, 2018, comprising the nonconsolidated 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 theaccompanying 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 presentationof 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 theaccompanying financial schedule based on our audit from an independent position. We
conducted our audit in accordance with auditing standards generally accepted in Japan. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about
whether the non-consolidated financial statements and the accompanying financial schedule arefree from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the non-consolidated financial statements and the accompanying financial
schedule. The procedures selected and applied depend on the auditor’s judgment, based on theassessment 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 fairpresentation of the non-consolidated financial statements and the accompanying financial
schedule in order to design audit procedures that are appropriate in the circumstances, but notfor 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 non-consolidated financial statements and theaccompanying financial schedule.

- 57 -

[Translation]

We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinion.
OpinionOur opinion is that the above-mentioned non-consolidated financial statements and theaccompanying financial schedule present fairly the status of assets and earnings during theperiod 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.
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.

- 58 -

[Translation][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 91st fiscal year from April 1, 2017 to March 31, 2018, 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 andemployees 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 thestatus of the establishment and operation of the system (internal control system) establishedin accordance with the resolution, demanded explanations, as the occasion demanded, andexpressed 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 otherdepartments for internal control; attended important meetings; received reports ofexecution of duties from Directors and employees; demanded explanations, as theoccasion demanded; inspected important documents; and investigated the activities andassets 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, andreceived 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 theoccasion 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 (nonconsolidated balance sheet, non-consolidated statement of income, non-consolidated
statements of changes in equity and notes to non-consolidated financial statements) andaccompanying financial schedule as well as the consolidated financial statements(consolidated balance sheet, consolidated statement of income, consolidated statements ofchanges 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 thestatus of the Company in conformity with the laws and regulations and Articles ofIncorporation.
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- 59 -

[Translation]

3)

(2)

(3)

found to exist.
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 andexecution of duty by the Directors regarding the relevant internal control system arefound to accurately present the matters to be stated therein and have nothing to be
pointed out including the internal control system regarding financial reporting.
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.
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 17, 2018
Audit and Supervisory Committee ofMusashi Seimitsu Industry Co., Ltd.
Nobuyoshi Sakakibara(Seal)

Audit and Supervisory Committee Member (Full-time)

Asako Yamagami(Seal)

Audit and Supervisory Committee Member

Yoshinori Morita(Seal)

Audit and Supervisory Committee Member
Notes:

1. Audit and Supervisory Committee Members Asako Yamagami and Yoshinori Morita are outside
directors provided in Article 2, item 15 and Article 331, paragraph 6 of the Companies Act.

- 60 -