NTN Report 2018
For the fiscal year ended March 31, 2018

F o r N e w Te c h n o l o g y N e t w o r kMake the World “NAMERAKA”*
NTN is a precision equipment manufacturer that engages in R&D,
production and sales of products such as bearings and driveshafts.
We have one of the world’s No. 1 market shares for bearings,
a components used to reduce friction in various rotating parts.
Our bearing technology is used to produce hub bearings that havethe world’s No. 1 market share and our driveshafts have the world’s
No. 2 market share.
NTN’s products ensure the smooth operation of various machineryby providing high quality and reliability. They are used in a wide range ofindustries such as automobile, construction machinery, wind turbine,
aerospace and rolling stock, and help make modern life possible forusers around the world.
* “NAMERAKA” means “smooth” in Japanese

CONTENTS

Creating value to help ensure sustainability.
About Us
03 Corporate Philosophy System
05 FOUNDERS’ SPIRIT
06 ABOUT BEARINGS
07 A Century in Business
11 Strengths Gained Through theYears

13 Revenue Structure,Main
Products

15 Financial/Non-Financial
Highlights

Our Business Model
17 Value Creation Process
19 Value Creation in the Value Chain
21 Value Creation Risks andOpportunities

23 Our Vision
24 NTN in 10 Years
25 Management Review and Issues
27 New Medium-Term Management Plan
“DRIVE NTN100” Basic Policy

33 Management Commitment
41 A Message From Derector in

charge of Finance Headquarters

Business Strategies
43 Special Feature 1:
Major Opportunities in Core
Business Areas
From Stricter Global Environmental
Regulations
and Changing Market Needs

45 Special Feature 2:
New Areas with Proprietary Technologies
Developed from Core Business

47 Research & Development
49 Business Overview: Aftermarket
51 Business Overview: Industrial
machinery market* About product photos: some photos are cross-sectional models of products.

Editorial Policy
NTN believes that the active disclosure ofmanagement plans and business results, aswell as its basic policy for corporate social
responsibility (CSR), CSR activities, andenvironmental preservation initiatives, among
other information, will help garner theunderstanding and support of all stakeholders.
This “NTN Report,” which has been issued
since the fiscal year ended March 31, 2010
after combining the “Annual Report” with the“CSR Report,” is part of this active approach
to information disclosure

1

NTN REPORT 2018

Organization Covered andReporting Period
Reporting period:
Fiscal year ended March 31, 2018
(April 1, 2017 to March 31, 2018)
Includes some activities for the fiscal year
ending March 31, 2019.
Organization covered:
NTN Group
Includes some reports for NTN only.

Governance Strategies
55 Foundation Supporting NTN
Business

57 Corporate Governance
61 Officer Profiles (Directors/
Outside Directors)

63 Officer Profiles (Audit &Supervisory Board Members/
Executive Officers)

64 Outside Director Dialog
67 Internal Control
68 Risk Management
69 Compliance
71 CSR Management

Resource Strategies
73 Special Feature 3:"HITOZUKURI" behind our"MONOZUKURI"

75 Human Resources
77 Procurement
79 Production
81 Quality
83 Environment
89 Contribution to Local Communities

Reference Guidelines

Types of Information Provided by NTN
MoregeneralDisclaimer
Moredetailed

NTN Report

Securities reports

Financial Information(Past 11 Years)

93 Non-Financial Data
95 Management Performance/Financial Analysis
98 Consolidated Balance Sheet
99 Consolidated Statement of Income/Consolidated
Statement of Comprehensive Income

100 Consolidated Statement of Changes inShareholders’ Equity

101 Consolidated Statement of Cash Flows
102 Notes to Consolidated Financial
Statements

International Integrated Reporting Council (IIRC)
International <IR> Framework

This report contains future results and forecasts regarding
NTN’s future plans, strategies, and business results.
Please understand that actual business results may varyfrom the forecasts made herein by the Company.

91 Consolidated Financial Indicators

122 Auditor’s Report from Independent Audit Firm
123 Third-Party Opinion
124 Investor Information
125 Global Network

53 Business Overview: Automotive market

Ministry of Economy, Trade and Industry
Guidance for Integrated Corporate Disclosure andCompany-Investor Dialogues for Collaborative Value Creation

Financial/Company Data

Business reports(to shareholders)

Reports on corporate
governance

Financial Report

CSR activities information(on website)

This report presents both financial and nonfinancial information, focusing on especially
important topics. More detailed financial
information is available in securities reports and in
Financial Reports. Detailed information on the
Company’s CSR activities is also available on our
website.
https://www.ntnglobal.com/en/index.html

Non-financial Information

NTN REPORT 20182

About Us

Corporate Philosophy System
About Us

Corporate Philosophy
We shall contribute to international society through creating new technologies
and developing new products.

Our Business Model

To mark our 100th anniversary, we have reviewed our corporate philosophy system. We have also supplemented our corporate
philosophy with the addition of NTN Spirit, a new corporate philosophy code of conduct. Based on the new corporate philosophy
system, we will work on to achieve “a company where the corporate philosophy is understood by all employees around the world
and where all employees think and act for themselves” as stated in NTN’s long-term vision.
The NTN corporate philosophy system consists of the NTN Spirit, the mindset and actions NTN group employees are to aim for,based on our founders’ spirit (Frontier spirit, Coexistence and co-prosperity spirit), with NTN corporate philosophy (MISSION,VALUES) at the summit.
NTN will use “NTN Spirit” as a cornerstone of its own work, put the corporate philosophy into practice during each employee’s
everyday tasks more than ever, and contribute towards achieving a smooth society.

For New Technology Network
1 Creation of original technologies.
2 Offering the technologies for additional value and service that are suitablefor each customer and end user.

Employees

Business Strategies

3 Improvement of employees’ standard of living, distribution of fair returns to stockholders,Customers

and contribution to society based on the steady growth of our business.
4 Promotion of globalization, and formation of management systems/corporate

Business Contributing to“NAMERAKA” means*“Smooth”
in JapaneseEnvironment
Partners

organization which are essential for NTN, as an international leading company.

NTN SPIRIT

Local
Communities
Shareholders

CredosChallenge• We challenge passionately without being satisfied with the current situation.
• We respond quickly to any changes, emphasizing on-site verification.
• We enrich our lives by thinking and acting with initiative and continuing to grow.

Financial/Company DataNTN SPIRIT

Buds appear when wechallenge with frontier spirit

Guidelines
Resource Strategies

NTN SPIRIT

Governance Strategies“NAMERAKA*
Society”(Credos & Guidelines)

Corporate
Philosophy

VALUESMISSION

Founder’s
Spirits

3

NTN REPORT 2018

DNA

Collaboration
Leaves grow through the spiritof collaboration with coexistence
and co-prosperity

Commitment
Flowers bloom and fruits growthrough fulfilling our commitments• We accept and respect differences in each other.
• We help each other, treating all associates honestly.
• We take care of the natural environment and maintain coexistence withlocal community.

• We maximize the quality of work aiming for first-class quality undersafety-first policy.
• We intend to be the strongest partner delivering customer delightbeyond satisfaction.
• We support improving lives of people around the world through our work.

NTN REPORT 2018

4

FOUNDERS’ SPIRITABOUT BEARINGSNTN Corporation celebrated its 100th anniversary in March 2018.

Bearings are eco-products that reduce energy consumption

Founded just over a century ago by Noboru Niwa and Jiro Nishizono, NTN has a long history of rising to meetby supporting various rotating mechanical parts and reducing friction.

each new challenge head-on. Our founders emphasized the importance of having “Frontier Spirit” andBearings are mounted inside machinery and are usually hidden from view.

“Coexistence and Co-prosperity Spirit”—two key traits that define the Founders’ Spirit.

But they play a key role in improving the safety and reliability of machinery, helping contribute to “NAMERAKA* Society.”

Frontier Spirit
Co-founder Noboru Niwa became interested in the idea of
manufacturing bearings in Japan to meet the country’s demand at
the time. Learning that a ship carrying a cargo of foreign bearings
had sunk in the Port of Yokohama, Niwa lost no time in bidding
successfully for the entire cargo. He then engaged engineer Jiro
Nishizono to refurbish the bearings, selling them as reclaimed
parts. Bearing manufacturing got fully underway after the proceedsof the sale were put toward research and prototyping work done
by Nishizono to produce bearings in Japan. After its founding, theCompany had to overcome a long series of hardships, struggling
to do business as a solo independent operator not affiliated withthe government or a major conglomerate. The founders’ “Frontier
Spirit” strongly influenced work on later challenges such as
developing original products, actively seeking out technology
partnerships and expanding overseas.

“Through creating new technologies
and developing new products”

Coexistence andCo-prosperity Spirit
Niwa was also committed to the idea of sharing the wealthcreated from business profits instead of monopolizing it. It was avalue his mother had taught him from an early age. He realizedthat being able to produce low-cost bearings in Japan as analternative to expensive imported bearings would assist thegrowth of a wide range of industries. This realization came fromthe values his mother had taught him, and inspired him to workwith Nishizono to attempt to manufacture bearings in Japan.
“Coexistence and co-prosperity Spirit” is still a core of theCompany’s activities. It is behind our work on tribology
technology used in energy-saving applications designed to help
the global environment, and our CSR activities that return
business profits to the community.

*“Nameraka” means “smooth” in Japanese.

History

Bearings date back to the time of the ancient
Egyptians. The Egyptians placed logs on the
ground for use as rollers when moving the heavy
blocks used to build the pyramids. Rolling theblocks over the logs reduced friction, enablinghuman workers to move the massive blocks.
Modern bearings are devised on the sameroller principle used since ancient times.

Outer ring

Inner ring

Components“Contribute to international society”
Rolling element (ball/roller)
Retainer

5

Noboru Niwa

Jiro Nishizono

NTN’s first president. Created the company to manufacture bearings.

NTN’s co-founder. Did the first research and development work on bearings.

NTN REPORT 2018

General-purpose bearings are composed of fourtypes of components: an outer ring, inner ring,rolling elements (balls/rollers) and retainers. While
the structure seems simple, any irregularities orcracks in the rings or rolling elements will preventthe bearing from turning smoothly.
Every ball used in bearings must be
manufactured with a high degree of technologicalexpertise and enough precision to ensure that
irregularities will vary by less than one tenthousandth of a millimeter.

Key Role inEveryday
Life

The NTN brand as it appeared at the time of
our founding (left) and today (right)
Bearings are in widespread use in everyday mechanical equipment. For
example, the average automobile contains anywhere from 100 to 150
bearings. Bearings also support a wide range of industries. They are used inconstruction machinery, aerospace applications, rolling stock, wind turbines,
medical equipment and other areas requiring high technological expertise.

NTN REPORT 2018

6

A Century in Business

1963 Start of driveshaft manufacturing

The quality-first approach practiced since our founding boosted NTN’s reputation and achievements,
setting the stage for our vision of how to engage with the world over the next hundred years.
NTN has started looking to its next hundred years in business, helping create a smooth society.

1918

Start of ball bearing research and manufacturing at
Nishizono Ironworks

Origin of the Company name
The two Ns in the name NTN stand for Niwa andNishizono. Noboru Niwa was the Company’s firstpresident who provided its startup capital, and Jiro
Nishizono was its co-founding engineer.
The T linking the two letters stands for Tomoe
Trading, the organization that initially handled theCompany’s sales. The Company‘s products havealways carried the NTN logo since the name wasadopted.
The Company’s name has changed a number oftimes through the years. It was first renamed “NTN
Manufacturing,” and then became “Toyo Bearing
Manufacturing” in 1937 as the Company’s presence
expanded from Japan to the entire East Asia region(Toyo in Japanese). It was again renamed in 1972,
becoming “NTN Toyo Bearing Company.”
The Company was renamed “NTN Corporation”
in 1989, representing “For New Technology Network,”
which was adopted as a new direction the Company
should moving forward to.

Young engineer Jiro Nishizono started the Nishizono Ironworks in Kuwana, Mie
Prefecture in 1918 at the age of 21. Nishizono had decided to become an
independent metalworker after honing his skills for about 2 years at a local
ironworks. Noboru Niwa (later the Company’s first president) was running amachinery and tool shop that he had started in Osaka at the age of 22. The two
co-founders met when Niwa approached Nishizono Ironworks for production
work needed when he began to manufacture and sell rice polishers.
In 1922, Tomoe Trading Co. successfully bid for an entire cargo of bearings
that had been aboard a Swedish vessel that sank in Japan. Nishizono
Ironworks was commissioned to refurbish the bearings, which were then soldfor a higher profit than anticipated. Motivated strongly to produce bearings
domestically, Niwa bought three grinders with the proceeds of the sale. He
installed them at Nishizono Ironworks, urging Nishizono to work on bearing
research and development. Bearing manufacturing got fully underway when
Nishizono started research and prototyping work to create a domestically
produced bearing alternative to the imported ball bearings that were the only
option available in Japan at the time.

1918
Milestones of
Our Business

1964

Shortly after technology partnerships had become
permitted under Japan’s Foreign Investment Law,NTN entered into a technology partnership withGerman manufacturer Industriewerk Schaeffler in
1962. The project resulted in the construction of the
INA-NTN needle roller bearing plant next to the
Iwata Works. Another technology partnership wasformed with UK manufacturer Hardy Spicer toproduce driveshafts (constant velocity joints), a
promising product expected to enjoy rapid future
growth in demand for automotive applications.
Production started in 1963 at the Kuwana Plant.

* Tribology Heritage:
Tribology related technology andthings recognized by theJapanese Society of Tribologists
as having a particularly
important contribution to thedevelopment of science andtechnology

the Deming Prize*

NTN (then known as “Toyo Bearing Manufacturing”) was one of thefirst machinery manufacturers to adopt statistical quality control.
Quality control was applied throughout the Company, and not
limited to just plants. These achievements were recognized when
we won the Deming Prize in 1954. This honor was a first for not
only a bearing manufacturer, but also for any Japanese machinery
manufacturer. The Deming Prize is one of the world’s mostprestigious awards for TQM (total quality management). NTN is thefirst bearing manufacturer to win the award.
*Deming Prize: A prize created by the Japanese Union of Scientists and Engineers to honor
the achievements of W. Edwards Deming, a US engineer, statistician, professor,
author, lecturer, and management consultant who popularized statistical quality
control in postwar Japan and built the foundation needed to raise the quality ofJapanese products to world standards.

7

NTN REPORT 20181960s Overseas sales expansion/
augmentation

Starting around 1956, rising bearing export
growth started boosting sales. With help fromtrading companies, NTN began steadily
expanding its overseas markets. In 1961, we
opened our first overseas sales company (inDusseldorf, Germany) as a way to flexibly
adapt to local demand. Our overseas sales
expansion continued with the opening of asales company in New York in 1963, followedby sales companies in France and the UK theyear after.

Current head office building

1980

1970
Demand for front-engine, front-wheeldrive (FF) vehicles increases along with
the increasing popularity of morecompact, fuel-efficient models.
Driveshafts improving the ride comfort ofFF vehicles contribute greatly to their rise.

The latter

1970s Evolution of hub bearings

1971 Overseas production expansion/

onwards augmentation
becomes the first Japanese
1954 NTN
machinery manufacturer to win

NTN Corporation

First driveshaft model produced

1970s

The Company has helped enable faster and lighter rolling stocks bydeveloping technology tailored to the evolution of high-speed railand providing high-quality, high-reliability products.
Our journal bearings for 0 Series Shinkansen trains were recognizedas Tribology Heritage* by the Japanese Society of Tribologists.

1989 Name changes to NTN Corporation

NTN became the first Japanese manufacturer toopen a production base in Europe with theestablishment of a German bearing manufacturingsubsidiary in 1971. A bearing manufacturingsubsidiary in U.S. was also established that year.
Our presence in the Americas was later expandedby opening bases in Brazil and Mexico, and weboosted our local production system by
establishing plants for both finished products andpre-processes.
In the Asia region, we established manufacturingsubsidiaries in countries such as China, Thailand
and India.
Establishing these overseas manufacturingsubsidiaries has augmented our local production.
NTN products are produced at the locations where
they are needed by customers around the world.

The latter half of the 1970s saw the Company release its firstgeneration axle bearings (GEN1) that were the forerunners of our hub
bearings that now have the world’s top-ranked market share. These
products evolved into second-generation hub bearings (GEN2) bycombining the axle bearing with peripheral components such as
knuckles in a single unit.
The evolution into third-generation products (GEN3) was subsequently
accomplished by packaging additional parts such as hub bolts, flanges
and knuckles into a single unit to improve ease of hub bearing
assembly on automobile assembly lines. The third-generation lineup
began mass-production in Japan for the first time in the mid-1980s.
The third-generation lineup has continued to evolve since its debut.
Refinements are still being made today, such as by adding sensors andimproving ease of assembly.

First generation

Second generation

Third generation

NTN REPORT 2018

8

1983

2014

NTN products are delivered to major engine
manufacturers and supplied for use incommercial passenger aircraft around the world.

The Hayabusa 2
asteroid probe islaunched. Sphericalplain bearings aremounted in thehinges used to open
the solar panels.

2010

2000

2015 Start of four new business areas
2008 SNR ROULEMENTS acquisition

1986 Construction of Japan’s first aerospace

Seeking to expand business in Europe, the Company
invested in French bearing manufacturer SNR ROULEMENTS
in 2007, making it a consolidated subsidiary the following
year. The addition of SNR ROULEMENTS to the NTN Grouphas boosted previously struggling European sales. It has also
made our business more geographically balanced, with sales
from Japan, the Americas, Europe, and Asia and otherregions each accounting for roughly 25% of the total.

bearing plant

Since then, NTN has been continuing to produce bearings
for aerospace applications with consistently high quality
and reliability. We are a certified supplier of main shaft
bearings to the world’s four major jet engine manufacturers,
a currently unrivaled
achievement among
Japanese manufacturers.

In 2015, the Company began focusing on creating
businesses in new areas fueled by the technologies acquired
throughout our product development history. We have beendeveloping products and technologies for business areas
such as energy, EVs, robotics and service solutions.

NTN Micro
Hydro Turbine

2018 Company’s 100th

NTN Hybrid Street
Light

NTN Green Power Park (Kuwana, Mie Prefecture)anniversary

In March 2018, the Company
celebrated its 100th anniversary
and created a new Medium-termManagement Plan called “DRIVE
NTN100.” The plan is designed
to realize our long-term vision
for sustainable growth over the
next hundred years.

2017 NTN Next Generation Research Alliance Laboratories
Jet engine main shaft bearings
Jet engine cross-section

Milestones of

ur BusinessSupporting O

1999

E “NTN Environment Policy” is established
14001 multi-site certification
E ISO
acquired for business sites in Japan2002

E Start of forest conservation project

2004

G Start of Executive Officer System
9

NTN REPORT 2018

NTN-SNR ROULEMENTS (Current head office building)ElEnvironmenta

S

2005

SocialG CSR Department is established (now known as
Corporate Value Promotion Department)

S Start of project to encourage women in theSworkplaceStart of “Meister Program”

2006

G “CSR Committee” is establishedThis research facility was created in the Graduate School of Engineering at
Osaka University, a center of cutting-edge technology. The lab’s activities aredesigned to create a stronger partnership between NTN and university, augment
our portfolio of core technologies by acquiring pioneering technologies, andenable R&D work for creating next-generation business areas.

e

G Governanc

2007

E “NTN Group Green Procurement

2010

G Release of first “NTN Report” asintegrated report

Standards” is established2008

G “Risk Management Committee” isGestablishedAn outside director is appointed
for the first time2009

S “Bear Kids Land Iwata” is opened

2011

E Start of project to protect andencourage firefly habitats(woodland biodiversity)

2012
G “Fair Trade Monitoring Committee”
is established2014

G “CSR Headquarters” is established
S “Global Human Resource Development

Department” is establishedStart of “Diversity Team Project” (now known
as Diversity Promotion Group)

2015

G Stakeholder Dialog is held with CSR experts forthe first time.

G “Compliance Committee” is established
G Endorsement of UN Global Compact

2016
E Setting of medium-to-longterm Japan CO2 targets

S “NTN CSR Procurement

Guidelines” is established

G “Compensation Advisory

Committee” is established2018

G New Corporate Philosophy
System is established

Kids Land Kuwana”
S “Bearis opened

NTN REPORT 201810

About Us

Strengths Gained Through the Years

Driveshafts
World's1

No.

2

market share

02

Well-established Local Brands with Long Histories
in Countries around the World72%

NTN REPORT 2018

A host of world-class manufacturers place every
confidence in NTN's precision technology. Its quality
products are selectively used for a broad spectrum of
demanding applications that work under extremely severe
environment such as for jet engines at high temperature(200°C) and high-speed revolution (10,000 RPM), and highspeed railcars throughout the globe running at 300 Km/hor over. NTN products are also adopted for wind turbines,
rockets, automobiles and medical instruments that require
technological competence. Furthermore, its quality
products are used for home appliances and copiers that
require high performance with less energy consumption.

04
Bearings

Broadening the Application
Fields of Bearings

Bearing units

i-WRIST

66%

CMS

Driveshafts

Hub bearings

Electric motors
and actuators

In-wheel motors

Individual
products

Unit

ModuleSystemB-to-B300°CNTN Micro
Hydro Turbine

Overseas employee ratio

With over 25,000 employees at about 220 business locations in 33 countries, the NTN Group
strives to offer even better products and services while engaging in R&D, manufacturing,marketing and technical support. NTN has taken full advantage of premium regional brands tostrengthen its worldwide network. In Europe, NTN-SNR ROULEMENTS was established in 2008
by integrating SNR ROULEMENTS, the largest bearing manufacturer in France. Now NTN-SNR
ROULEMENTS has secured an unshakable status as the market leader utilizing maximized
synergy effect in terms of technological, geographical and commercial enhancement.
Since its foundation in North America in 1963, NTN Bearing Corporation of America plays a keyrole in developing aggressive multi-brand strategy working closely together with BCA and
BOWER brands. While in Asia, NTN offers highly value-added products suited to local needs,
deploying manufacturing, marketing and R&D facilities in China, South Korea, Singapore,
Thailand and India. Uniting the entire NTN Group strength to pursue more synergy effect, NTN
endeavors to promptly respond to the needs and expectations of its customers around the world.

11

200

m
diameter blades

NTN hybrid
street lights

05

km/h

Technical Service units
in use throughout
the World

visits727

clientWe, at NTN, are committed to be a reliable partner tomanufacturers who need to use our products. At our local sales
offices, technical service units with maintenance tools andsample products regularly visit customers’ work sites andconduct technical analysis and training sessions. Thus, NTN
takes great care to support our customers and help them workthrough their diverse problems.

B-to-C

Unit products can be created by adding gears, motors (drive
circuits) and other peripheral components to core products such as
bearings used as mechanical elements. Control technology canalso be added to create module products and system products.
In addition to our traditional B-to-B business areas, we are now
working on growing our B-to-C business through areas such as
sales of natural energy products. Bringing safety and security tousers will be an ongoing focus.

NTN REPORT 2018

12

Financial/Company Data

Overseas sales ratio

100

Resource Strategies

Driveshaft

Helping ensure safety at

Operating at temperatures ofGovernance Strategies

Hub bearing

Turning

Business Strategies

market share

Headquartered in Osaka, Japan, NTN is a leading manufacturer ofprecision mechanical parts and components. Particularly in the world
bearing market, NTN has the largest market share of hub bearings andthe second largest of driveshafts. As a quality leader in the industry,
NTN products are selected by a number of world-class industrial
customers for their products, ranging from automobile, railcar,
construction machinery, jets to medical instruments. NTN products
support the well-being of people around the world.

Reliance on Advanced Technology

Our Business Model

No.

03

A Leading Bearing Manufacturer

Hub bearings
World's

About Us01

About Us

Revenue Structure, Main Products

744.4 billion yen Operating income: 39.6 billion yen

Industrial machinery applications

P. 51-52

Construction machinery

Gearboxes

Agricultural machinery

Wind turbines

Aerospace

Applications forresource mining
and civil
engineering

Helping ensurehigh robot
productivity

Helping ensurestable foodsupplies

Meeting growing
renewableenergy demand

Used for worldwide jetengine applications

Rolling stock

Machine tools

Office equipment

Electronic devices

Medical equipment

Helping ensure safetyof worldwide
high-speed
railways

Helping ensure highmachining precisionHelping ensure smooth
copier/multifunctional
printer operation

Used for Hard drive andthin fan motor
applications

CT scanner andartificial heart
applications

About Us

Sales:

Main Products(Fiscal year ended March 31, 2018)
Automotive applications

508.6 billion yen (68%)

21.8 billion yen (55%)

Aftermarket applications

116.7 billion yen (16%)

Aftermarket applications

15.0 billion yen (38%)

204.3 billion yen (27%)
162.8 billion yen (22%)

Operatingincome bybusiness sector

Net Sales bybusiness sector

Net Sales byregionEurope119.1 billion yen (16%)
Main Products

Industrial machinery applications

2.8 billion yen (7%)

Americas175.6 billion yen (24%)
201.7 billion yen (27%)

Aftermarket applications
Metal industry equipment

Paper-making machinery

Main Products

Automotive applications

Food processing machinery
Split needle
roller bearings(for camshafts)

P. 53-54

High-density, high-strength
sintered gears for starter motors

Auto tensioner with the variable damper
mechanism for ISG-equipped engine

Pulley bearings forhigh-speed rotation[Accessories][Engines]

Mechanical clutch units
for next-generation
steering systems[Steering components]

Sealed four-row
tapered roller
bearings

Auto parts

ULTAGE sphericalroller bearings
Type EA,
Type EM

PolyLube sealed
bearings for foodprocessing
machinery

Technical training/maintenance tools
Part kits with combinations of several
bearings

Financial/Company Data

Spherical roller
bearings withreinforced retainers[Seats]Needle roller bearings forrocker arms

Clutches for seat lifters[Axle/Drivetrain]Long-life series
TAB bearings

Induction
heater[Brakes]

Hub bearings[Automatic/manual transmissions]Self-centering hydraulicpuller with arms

Ball screw drive
modules for electric
hydraulic brakes

Thrust needle
roller bearings

Driveshafts
CVTs

Technical service unitsULTAGE tapered roller
bearings for automotive
applications

13

NTN REPORT 2018

BEAREE
seal rings

Needle roller andcage assembly
bearings forplanetary gear
NTN REPORT 2018

Resource Strategies

Mining machinery

P. 49-50

Governance Strategies

Industrial machinery applications

Japan

Business Strategies

Asia and
OthersOur Business Model

Automotive applications

14

About Us

Financial/Non-Financial Highlights
Non-financial Capital

Net Sales

Operating Income/Operating Margin
Operating Income

39.6

billion yen(Billions of yen)(Billions of yen)800

701.9 717.0 683.3

639.0

744.4 750.0

80
5.2%

600

Operating Margin

billion yen

Operating income

6.2% 6.7%%

operating margin

20.4

400

(Billions of yen)

5.2% 5.3% 5.7%

23.4

35.6

33.0

39.6

21.0

25
20

0

2.8
0

–20

2014 2015 2016 2017 2018 2019

(Forecast)(Fiscal years ended/ending March 31)

2.6% 2.6%

18.1

17.8

2.8

%

Ratio of R&D expenditures
to sales

2.8% 2.8% 2.8%
21.0

18.5 19.2

Percentage ofHired female Graduates*

67

14

%

(%)

(%)

100

35

80

21.0

64

66

66

67

66

21

20

19

17

16

14

15

40

10
20

5
–14.6

32

25

66

60

10

%

30

15

–10

(Forecast)(Fiscal years ended/ending March 31)

2.8%

15.0

10

43.0

20

2014 2015 2016 2017 2018 201920.4

billion yen

Percentage of Employees Overseas

02014 2015 2016 2017 2018 201902014 2015 2016 2017 2018 2019

(Forecast)(Fiscal years ended/ending March 31)

502014 2015 2016 2017 2018 2019

(Forecast)(Fiscal years ended/ending March 31)(Forecast)(Fiscal years ended/ending March 31)

2014 2015 2016 2017 2018 2019

(April hires)(Forecast)* Organization covered: NTN only

Business Strategies

200

30

Ratio of R&D expenditures
to salesR&D expenditures(Billions of yen)

20

40

21.0

billion yen

30

47.8

R&D Expenditures;
Ratio of R&D Expenditures to Sales
R&D expenditures

60
43.9

0

5.3

Net Income (loss) Attributable to
Shareholders (parent company)

Our Business Model

744.4

About Us

Financial Capital

P.47

8.4

Equity to Capital Ratio

30.2

%

Cash Dividends

15

%

(%)

(%)

(yen)

15

40

15

10.5
10

8.4

8.1

6.3

30.2

15

10

20

52

%

(%)

100
86

83

87

88

88

98

%

%

5

100

0%

80

‘Needs some
improvement’

86

60

60

40

40

20

20

0

0

2
–7.3
2014 2015 2016 2017 2018 201902014 2015 2016 2017 2018 2019

(Forecast)(Fiscal years ended/ending March 31)0(Forecast)(Fiscal years ended/ending March 31)

50

50

52

52

50

50

2014 2015 2016 2017 2018 2019

‘Good’

2014 2015 2016 2017 2018 2019

(Forecast)(Fiscal years ended/ending March 31)

Inventories/Inventory Turnover Ratio(Forecast)(Fiscal years ended/ending March 31)

Capital Expenditures

Inventories

37.6

billion yen

Depreciation and Amortization

37.5

Capital expenditures(Billions of yen)60

billion yen

Depreciation andamortization

55.0

50

179.7

billion yen(Billions of yen)

39.3

40
33.2

31.3

4.1

Inventory turnover ratio

Inventories (left axis)

300
240

40.4 38.3
36.3 35.4 36.6 37.6 37.5

Inventory Turnover Ratio

0.93

CO2 Emissions [Scopes 1 and 2]* Figures for domestic production and non-production bases
have undergone third-party verification.
Domestic Scope 1 Domestic Scope 2 Overseas Scope 1 Overseas Scope 2

49,000 237,000 54,000 301,000

times

metric tons

3.8

3.8

4.0

4.0

4.1

184.1 178.2

171.5 179.7

70

189.0

60
1.27
1.11

1.0

1.11 1.05

0.93

30
20

0.5

60

10

40

61.7

60.6

61.9

metric tons

Domestic Scope 2
Overseas Scope 2

64.1

66.6

25.7

28.4

28.5

29.4

P.79
Water Consumption(Japan/Overseas)

Waste Quantities andRecycling Rates(Japan/Overseas)

Japan

Generated waste

1.94

Overseas

million m3

1.28

million m3

Japan(10,000 m3)

Overseas

400
312

30.1

110

31.5

5.1

4.9

4.6

4.8

5.4

5.5

21.7

23.0

22.4

22.8

23.7

24.5

327

320

323

322

131

124

128

128

10
202

196

196

195

194

188

(Forecast)(Fiscal years ended/ending March 31)02014 2015 2016 2017 2018 2019

(Forecast)(Fiscal years ended/ending March 31)02014 2015 2016 2017 2018 2019

(Forecast)(Fiscal years ended/ending March 31)

0

5.5
2014

5.4
2015

5.1
2016

4.9
2017

4.9
2018

5.1
2019

(Forecast)(Fiscal years ended/ending March 31)

P.88
P.86
NTN REPORT 2018

097.9% 98.2% 98.3% 98.1% 97.9% 98.3%

15.0

15.3

15.9

16.3

8.8

8.8

9.3

10.0

6.2

6.5

6.6

6.3

5

2014 2015 2016 2017 2018 2019

(Forecast)(Fiscal years ended/ending March 31)

97.9%

Generated waste (Overseas)(10,000 metric tons)

15

132

Recycling rate

metric tons

Generated waste (Japan)
Recycling rate

20

320

200

100

176,000

10
2014 2015 2016 2017 2018 2019

* Number of respondents: 101(Forecast)(Fiscal years ended/ending March 31)

300

50
0.99

120

20

58.0

metric tons

Domestic Scope 1
Overseas Scope 1(10,000 metric tons)

4.0
1.5

166.5

metric tons

(times)

2.0

40.0
180

Net D/E Ratio

69%

2014 2015 2016 2017 2018 2019

0

17.6

10.8

6.8

17.9

11.1

6.8

2014 2015 2016 2017 2018 2019

(Forecast)(Fiscal years ended/ending March 31)

P.86
P.88

P.86
P.88
NTN REPORT 201816

Financial/Company Data

Capital Expenditures/
Depreciation and Amortization

15

29%

2%

P.77

0

‘Excellent’

10

–5

30

(Fiscal year ended March 31, 2018)‘Needs much improvement’

10

6

Client Satisfaction Survey Responses
Either ‘Excellent’ or ‘Good’

(%)

80
10

0

–10

15

29.5

23.5
1.2

88

yen

Ratio of Overseas Production

Resource Strategies

529.2 28.7

28.6

30

Ratio of Local Procurement

Governance Strategies

Net Income/Average Shareholders’ Equity (ROE)Our Business Model

Value Creation Process

Reducing energy loss

Our stakeholders

About Us

Based on our corporate philosophy, we create products such as
bearings and driveshafts by applying the resources we haveaccumulated over our 100-year history to a value chain consisting of
R&D, Procurement, Production and Sales processes.
Our business activities help bring solutions to social issues while

Our Business Model

providing value to all our stakeholders.
These activities are also designed to further improve our corporate
value through reinvestment of applied resources.

Fi n

NTN will continue working to achieve a smooth society by making
proposals for ensuring sustainability.

d
in

g
So

lu t

n/
Qu
alit
y

Resource Strategies

te

R&

va
lu

Noise Pollution

Proposal of sustainable
society using natural energy

Governance Strategies

io
ct
u
d
Pro

g co

Sa

le
s

Automotive P. 53-54
applications

rp o
ra

Environmental
Pollution

Industrial machinery P. 51-52
applications

Improvin

P. 21-22es

We shall contribute tointernational society
through creating newtechnologies anddeveloping new
products.

Business StrategiestAging Society

Corporatephilosophy

Value creation
risks andopportunities

ial Issu

enSocial Issues

Employment
Problem

Aftermarket P. 49-50
applications

Achieving a smooth society

Business activities thatbring value to the world

r

S oc

cu

s to

D

em

Growth of Emerging
Nations

Pro

Providing safety and comfort

io n

Global Warming

Financial/Company Datae

Value Chain
P.19-20

NTN’s Resources and GovernanceIntellectual
CapitalManufacturing
CapitalHuman CapitalSocial and
Relationship Capital

Financial Capital

R&D

Production/
qualityHuman
resources

Procurement/
local communities

The
environment

Financialstrategies

P. 47

P. 79, 81

P. 75

P. 77, 89

P. 83

00
P.P.41

Corporate Governance17

Natural Capital

NTN REPORT 2018

P. 57

Aftermarket applications

Industrial machinery applications

Automotive applications

NTN helps to improve the productivity of customers’
equipment and maintain consistent operations throughthe stable supply of products and a quick delivery
system by our global supply chain. For the maintenanceneeds of automobiles, we offer a wide range of autoparts that combine bearings and peripheral
components. We also provide after-sales services, suchas holding engineering seminars with a technical service
units, to help our customers improve their production
efficiency and ensure their stable operation.

NTN ULTAGE Series, the world’s highest class new
generation bearings, is expanding its lineup toaddress the needs for higher precision and speed.
In response to various industrial market needs,
NTN’s products provide solutions that contributeto low torque and reduction in size, weight andenvironmental burdens. Going forward, NTN
continue to develop elemental technologies ofbearings, as well as highly value-added products
by unitizing or systemizing peripheral components.

Our work in the automotive segment includes developing more advanced
bearings, hub bearings and driveshafts to create higher added value. We
are also combining these core products with core technologies todevelop module products. To prepare for the coming era of electrification
and autonomous driving, we have released a series of “Electric Motorand Actuators” composed of ball screws, motors and controllers. We areworking on expanding their range of applications and proposing them tocustomers. Marketing these products globally will allow us to meetdemands for better fuel efficiency and ride comfort in conventional
vehicles, while also meeting rapidly growing needs for electrification.
NTN REPORT 201818

Our Business Model
R

en
t
on
/Q
uali
ty

i
ct
du
Pro

Our R&D approach: Global four-region R&D system

Production Engineering Advanced Technology New Product Development Industrial Technical
NTN Next Generation
R&D Center
R&D Center
R&D Center
CenterResearch Alliance Laboratory

Share database information
Design data, Testing data, Experimental data,
Production technology data, Customer project, etc.

NTN Automotive Center

NTN-SNR R&D Center

The "Basic Procurement Policy" clarifies our
direction with the concept of: globalization,
faireness/impartiality, and environmental
preservation, and it is used to guide our
procurement activities. We engage in green
procurement, giving priority to trading partners
with outstanding environmental preservation
work or environmental quality. We also work topromote procurement in local and the optimal
regions. Guided by the "NTN CSR Procurement
Guidelines" we have created, we actively
encourage suppliers to take part in CSR
activities to promote CSR throughout the entire
supply chain. We have started holding Supplier
Meeting events to improve our communication
through Supplier Meeting, growing partnerships Explaining the Company’s policies at a Supplier Meetingwith suppliers.

NTN China Technical Center

Reps from our sales departments visit
customer development sites to discuss
the issues they face while developing new
products, and even provide precisely
targeted responses to any problems they
are having with existing models. We also
maintain adequate stock and extensive
lineups to meet customer productionplans. The staff of our sales departments
include sales technology reps who canrapidly identify customer needs andsuggest appropriate solutions. Before
customer put our products into actual use,
we provide them with after-sale services in
the form of on-site briefings to explain
topics such as bearing usage methods.

19

NTN REPORT 2018

Along with selling products, sales reps also visit customers in technicalservice units, hold technical workshops and provide other technical services.

QualityP. 81

We engage in worldwide production in areas of local
demand as a way to meet customer needs, reduce
total lead time and reduce distribution costs.
Establishing smart factories is an area of focus in
Japan. We will promote concentrated production ofball bearings (a core product) at the Wakayama
Works, a new facility that manufactures high valueadded products with growing market demand.
At our overseas production bases, we are working
on creating more robust rules for model transfers andprocess changes, while sending out support staff frommother plants and quality control departments tohandle on-site auditing, investigation of past problems
Jet engine main shaft bearingsand process improvement. These activities aredesigned to ensure stable quality from the very startJet engine cross-sectionof production and quality assurance systems that
conform to the same standards worldwide.
Developing and producing our manufacturing
NTN is the only certified Japanese supplier of bearings to theequipment in-house lets us expand on our portfolio of world’s four major jet engine manufacturers, and provides highly
proprietary expertise, while our proactive approach to reliable bearings for aerospace applications.
human resources training ensures that this expertise
passes to the next generation of employees.
NTN REPORT 2018

Financial/Company Data

P. 49-54

P. 79

Resource Strategies

Production
Sales

Governance Strategies

Americas
China

P. 77

Business StrategiesJapan

Our Business Model

Procurement

About Us

les

Sa

R&D P. 47

Europer

Corporatephilosophy

The Company’s corporate philosophy is “We shall contribute to international society through creating new technologies anddeveloping new products.” We are investing the capital acquired over our 100 year history to bring based on this philosophy—working on R&D, procurement, production and sales activities to improve the lives of users around the world.
The interactions among each business process enable sustainable growth by keeping the cycle of value chain processes flowing.

The Company’s R&D work focuses on
tribology technology and is divided amongfour regions throughout the world.
To rapidly identify and respond to
customer needs, each region sharesinformation on areas such as design,
prototyping, testing, production
technology and customer projects. We aremoving into new business areas byrefining individual bearings into module
products that incorporate sensors andother peripheral technologies, and systemproducts that combine mechatronics andcontrol technologies.
In September 2017, we created the"NTN Next Generation Research Alliance
Laboratories" to help us strengthen ourcore technologies and create businesses
in new areas.

cuem

Value Creation in the Value Chain

Pro

&D

20

Our Business Model

Value Creation Risks and Opportunities

Relationship to SDGs

Risks and opportunities

Strategies for Risks and Opportunities

The nine Global Risks managed by NTN

Strategies for managing the nine Global Risks

1 Leakage of confidential information

1

2 Computer virus / cyberterrorism
3 Violation of Anti-Monopoly Act
4 Natural disaster5 Fire disaster / explosion

7 Industrial accident

4

8 Complaint about product quality
9 Violation of bribery-related laws

7

1 Environmental impact reduction needs

1● Demands for energy-saving products for various
machinery types● The rise of the renewable energy industry

3 The shrinking production workforce

NTN REPORT 2018

● Needs for conflict-free raw material procurement● Expanding local production*CASE: An acronym for ‘connected’, ‘autonomous’, ‘shared’ and ‘electric’—four words
representing developments that are currently on the verge of creating majorchanges in the automotive industry.

2
Contribute to saving of energy through sales ofbearings that are eco-friendly products to support
rotating parts of machinery and reduce energy issues.
Help the renewable energy industry produce renewableenergy by selling bearings used in wind turbines andnatural energy products such as NTN Hybrid Street
Lights and NTN Micro Hydro Turbines.

● Major automotive industry innovations throughdevelopments such as CASE*● Use of the IoT and AI

4 Raising human rights awareness

21

9Strategies for creating value through opportunities● Promoting diversity in the workplace● Demands for manufacturing productivity improvements■ Combating noise
pollution

Establishment andmanagement of quality
assurance systems based on
the international standards(ISO9001 and IATF16949)

6

Business opportunities

2 Rapidly proceeding electrification■ Environmental pollution

8

Evacuation training, sharing
measures for disaster casestudies, autonomous checkingof firefighting and related
equipment, periodic firefighting
training

3

3

Improve employee work-life balance and create pleasantwork places to remain competitive in the face of ashrinking production workforce by providing in-house
daycare centers and more than the legally mandated lineupof employee leave programs accommodating needs suchas childcare and long-term care. Improve work productivity
through a robotics business area that sells Wrist Joint
Modules (i-WRIST). These sales will help replace manual
processes with robots and create manufacturing sites
where humans and robots work alongside each other.

4

Establishment and proper
operation of Anti-Monopoly law
compliance rules based on
HQ’s rules and local regulations

Establishment and proper
operation of the rule to verify
the age of new staff based on
the local regulations and toprohibit from forced labor andany form of harassment

Establishment and proper
operation of anti-bribery law
compliance rules based on thelocal regulations and consultingwith HQ’s rules

Financial/Company Data

■ Japan’s
aging population

Establishment and proper operationof the rule concerned with industrial
accidents including emergency actionplans, reporting to the responsible
person and regular training, patroland safety self-checks based on thesafety and health standards

5

In addition to information security
management, establishingsystems for rapid contact whenproblems arise and checking of IT
equipment and security software(ensuring the latest versions are
installed) on a Groupwide basis.

Resource Strategies■ Unemployment

Clarification of the initial
response procedures fordisasters (such as safety checkand evacuation procedures) andperiodic evacuation training andcheck of emergency reserves

2

Governance Strategies■ Growth of
emerging nations

6 Issue of human rights

Establishment of the confidential
information management rule
which contains the definition ofconfidential information (including
personal information etc.) andregular confirmation of education,
enlightenment and training

Business Strategies■ Global warming

Our business activities are also designed to achieve the UN’s Sustainable Development Goals (SDGs),
helping create a world of sustainability, diversity and inclusion in which no one is left behind.

Our Business Model

Issues of public concern

About UsTo respond to changes in the external environment and social issues, the NTN Group periodically and comprehensively checks
on the status of risks surrounding Group business.
We have selected a set of nine Global Risks for priority management that are common to all the regions we do business in, andare expected to have major business impacts if actualized.
While we identify changes in the external environment or social issues as risks, we also recognize their potential as business
opportunities as we engage in business activities designed to grow the NTN Group and help resolve these issues.

Help create major automotive industry innovations
through new automotive products such as sHUB,
eHUB and Electric Motor and Actuators. Aim to fuelbusiness growth by harnessing these products as new
earnings sources. Generate new added value and aim
to grow earnings by combining AI and the IoT with theindustrial machinery sensing technologies NTN has
acquired over many years.

To ensure the use of conflict-free materials, weperiodically survey our suppliers on their awareness ofconflict mineral issues. Under the provisions of our NTN
CSR Procurement Guidelines, we ask our suppliers to
not engage in activities linked to human rights
infringements and work to ensure respect for humanrights throughout the entire supply chain. We also help
create jobs by promoting local production and hiring
local workers.

NTN REPORT 201822

Our Business ModelNTN Corporation celebrated its 100th anniversary in March 2018.
To enable sustained growth over the next hundred years, we have created a long-term (10-year) vision.
In order to realize “Our Vision,” we will pursue competitive advantages by strengthening our core technologies and products tocreate competitive advantages, while developing businesses in new areas by harnessing our core technologies and R&D
achievements.
We are also stepping up our development speed by proactively seeking outside partnerships, while enabling sustainablegrowth by creating a more robust business platform to support these new business areas.

Before creating our 3-year Medium-term Management Plan, we set targets to be achieved in 10 years targets to be achieved in
the following 10 years after the plan.
These 10 year numerical targets were set with the aim of moving away from our traditional role as a manufacturer to become aprovider of client value through both tangible and intangible means. We will achieve these targets by approaching changes inthe external environment as growth opportunities. We will respond to new market needs and transform our business structure
while strengthening our core technologies and products.
Our automotive and industrial machinery business is working on strengthenings core business areas and responding to new
customer needs. Our aftermarket business is expanding our technical services while shifting the business focus from products
to services.
We will also work on growing our natural energy product segment and other new business areas that provide solutions to social issues.

Initiatives Realizing “Our Vision”

10 year targets

Our Vision

2

Issues of public concern
Population increase, climatechange, resource depletion,
poverty, starvation, etc. (SDGs)

1 trillion yen or more

Operating margin

10% or more

Total asset turnover

1.0 or more

Exchange rate sensitivity

To be halved fromthe current level

Develop businesses in
new areas
Utilize core competence andcooperation with externalorganizations

 ESG
 Profit creation
 Pursue high productivity and quality
 Improve efficiency in asset management

1 trillion yen(Billionsof yen)Industrial machinery

800

Aftermarket
Industrial machinery
600

Aftermarket

Transform ourbusiness structure toachieve the 10-yeargoals

New businesses(natural energy, etc.)
Robotization and IoT needs
Expand core businesses
Expand the scope ofservices

400

Corporate Philosophy“We shall contribute to international society
through creating new technologies anddeveloping new products”

Automotive
200

0

2018

23

NTN REPORT 2018

Respond to newmarket needs createdby changes in external
environment
Strengthen coretechnologies andproducts

Automotive

2028

Respond to vehicle
electrification
Expand core businesses(Fiscal years
ended/ending March 31)

NTN REPORT 2018

24

Financial/Company DataManagement bases that
support our businesses

Industrywide
IoT, robotization, and AI

Net sales

Resource Strategies

Pursue competitive
advantages

Numerical targets

Governance Strategies

Strengthen coretechnologies and products

SustainablegrowthChanges in external
environment
Automotive industry
A change that occurs only oncea century (CASE)

Our vision
toward a New 100 years

1

Transform from a “Manufacturing Company” into a“Company that Delivers Value to Customers through Products and Services”

Business Strategies

1 A company where its corporate philosophy is understood by all employees around theworld and where all employees think and act for themselves
2 A company with original new products and services, appreciated for its high quality andfunctions, and with a global presence
3 A company where everyone involved with NTN will be able to be proud of the “NTN” brand

Our Business Model

NTN in 10 Years
About Us

Our VisionOur Business ModelManagement Review and Issues(Billionsof yen)900

Net sales(left axis)

Operating income(right axis)

Net income(right axis)

539.6
5,396

500

3.8%
3.8

300

33.0 330

20.7 207200

6.0 59

100
0

1.3

72
7.3 -14.2-142

2013 2013

6.7

6,833
683.3

6.7%
478 47.8

5.2 5.2%

5.3 5.3%

356 35.6

23.4 234

7.1

80

7.1%

70

570 57.0

60
50

396 39.6
203 20.4

150 15.0

40

300 30.030
20
1028 2.8-14.6-146
2014 2014

7,444
744.4

2015 20152016 20162017 201702018 20182021 2021 (Fiscal years ended /ending March 31)

Revival 2014 (April 2013 to March 2015)

Basic policy: Acceleration of globalization by “On local
sites with local materials by local personnel”

Basic policy: Reform business structure to generate profit■ Activities and achievements■ Activities and achievements

We adopted an approach of "On local sites with local materials by
local personnel" to seek business growth in growth markets.
The policies implemented were designed to grow business, reduce
costs and improve local management in each region.
In Japan, we worked to achieve earlier commercialization of EV
system products by creating the EV System Division, exhibiting ademonstration vehicle (Q’mo) at the 2011 Tokyo Motor Show, andgiving presentations on the new potential of in-wheel motors.
We also worked on achieving overseas business growth at anumber of locations worldwide. Our ratio of overseas production
increased and products produced at overseas plants were supplied
to a number of destinations worldwide. While large amounts ofcapital were invested as a result, our business environment wassignificantly altered by events such as the Great East Japan
Earthquake and other natural disasters, and the European debt
crisis and Chinese credit squeeze. Our 3 year Medium-termManagement Plan was terminated prematurely.

Declining earnings caused us to reset the “Global Advance 2013”
worldwide high-growth strategy. Instead, we worked on improving
profitability and strengthening our financial structure through a setof policies in four areas. These areas were “Emergency Measures”(short-term measure to generate profit), “Centralization ofManagement Resources” (centralization of resources to priority
fields), “Structural Reform” (mid-term business structural reform)and “Expansion of New Product and New Business” (towards
further growth).
Our efforts to improve our automotive business’ earnings, growour aftermarket business and reduce inventories were aided byfavorable exchange rates, resulting in an upward revision to ourforecast for the fiscal year ended March 31, 2015. We were able torecover from the crisis, get back on course and even work on our
next growth phase.

■ Challenges■ Challenges“Global Advance 2013” was created to achieve high worldwide
growth, but a number of adverse events forced us to make a course
correction. Aftershocks from the Great East Japan Earthquake ofMarch 2011 continued to rock Japan. The Greek government debt
crisis that came to light in 2010 grew into a European financial crisis
when Greece received a further credit downgrade in July 2011. Floodsin Thailand beginning in late October 2011 negatively impacted theautomotive industry, dragging our earnings down with it.

Although we managed to exceed the numerical targets planned for
figures such as net sales and income, much of the success camefrom favorable exchange rates. Our basic policy of “reforming ourbusiness structure to generate profit” remained challenging.
Creating new business areas along with our core products andsegments was still the challenge to overcome to achievesustainable large-scale growth over the next hundred years.

Basic policy: Basic period for Our Vision
Implement main policies based on 3 Basic Policies to become a co-creative partner company for customers
AS
Chi EAN, etc.
nau
Ame roperJap
an icas
nal
gio
Re E

Major Themes

Business unit

Prod

uct

Bus
in
stra ess
tegy

wth

ro

eG

g
ana

M

rofi
ge P

lity

tabi

a

Man

Busi

n

Philo ess basibusinsophy
ess , poli cproc cy,
ess..
.

un

e Fo

ag
Man

on
dati

Concentrate resources(personnel, materials andcash) on strategic areas

Growth

1. Develop Businesses in New Areas
2. Expand Aftermarket Business

Reform business structurefrom “volume” to “value” togenerate profit

Profitability

3. Structural Reform of the
Driveshaft business4. “Monozukuri” with Next-generation
Technology

Strengthen management
and financial foundations

Foundation

5. Strengthen the Management
Foundation
6. Strengthen the Financial
Foundation■ Activities and achievements
To overcome the unresolved challenges of
Revival 2014, we worked on six major themes
guided by our three basic policies of “Manage
Growth” (concentrate resources: personnel,materials and cash on strategic areas), “Manage
Profitability” (reform business structure from“volume” to “value” to generate profit) and“Manage Foundation” (strengthen management
and financial foundations).
For the first of these basic policies (Manage
Growth), we worked on creating business in new
areas by signing licensing agreements for in-wheel
motors, marketing products for electrification andstarting sales of natural energy products. Anotheractivity area for this basic policy was “Expand
Aftermarket Business” by especially focusing on■ Challenges
expanding our technical services.
For the second basic policy (Manage
Profitability), we worked on “Structural Reform of
the Driveshaft business” by focusing on improving
earnings. We achieved a 4.5 percentage point
increase in earnings over 3 years. “Monozukuri’with Next-generation Technology” was anothertheme for this basic policy. Progress was made oncompleting next-generation technologies such as
electron beam welding.
Our third basic policy (Manage Foundation)
consisted of activities to “strengthen the
management foundation and the financial
foundation.” Activity areas for this policy
included strengthening compliance globally andreducing interest-bearing debt.

The coming years will require reforms toadapt to major changes in the external
environment, enhancements to our coretechnologies and products, and work in new
business areas. Meeting these needs and“Drive forward the transformation ofbusiness structure for the new 100 years”
are the issues we have identified as the nextchallenges the Company will face.

Next page:

DRIVE NTN100
NTN REPORT 2018

26

Financial/Company Data

NTN REPORT 2018

NTN 100 (April 2015 to March 2018)

Resource Strategies

25

Global Advance 2013 (April 2011 to March 2013)

Governance Strategies

2012 2012

1.3%

43.9 439

7,170
717.0

Business Strategies

400

5.2%
5.2

701.9
7,019
6.2%
6.2

90

8,000
800.0

Our Business Model

639.0
6,390
543.5
5,435

April 2018 to March 2021

(Billions of yen)

800

600

DRIVE NTN100

NTN 100

Operating margin

700

About Us

Revival 2014

Global Advance 2013

Our Business Model

New Medium-Term Management Plan

Natural energy andother areas

In addition to the meaning of “acceleration,” each letter of DRIVE also includes a meaning: Integrate latest technologies (Digitalization) into the
management resources that NTN has cultivated (Resources). Develop innovative technologies, products, and services (Innovation). Accelerate
global procurement and centralized purchasing (Variable cost reformation). Achieve the world's highest productivity and quality and improved
efficiency in asset management (Efficiency improvement). With acceleration of these elements, NTN will realize “Our Vision” and achieve ourtarget in 10 years.

R esources
Management resourcesthat NTN has cultivatedDeveloping innovativetechnologies,
products and services

improvement

Procurement reformation

Improving efficiency
in asset management

NTN REPORT 2018

Reinforce sales andtechnical service network

Strengthen coretechnologies and products
Strengthen management
bases that support ourbusiness

Focus our efforts on
improvements in profitability
and asset management efficiency
in preparation for
new competitive environment

E fficiency

reformation

Aftermarket
business

Targets for the fiscal year ending
March 31, 2021

Financial/Company Data

27

Develop businesses in
new areas

Expand core businesses
Develop robot and IoT-related
businesses

Resource Strategies

I nnovation

V ariable costIndustrial machinery
business

Governance Strategies

×

Improve the profitability of core products
Product development in response tovehicle electrification

Business Strategies

Latest digitaltechnologies

Automotive
business

Utilize core technologies andexternal technologies

Our Business Model

Drive forward the transformation of business structure
for the next 100 years〜DRIVE NTN Transformation for New 100〜

D igitalization

About Us

“DRIVE NTN100” Basic Policy (April 2018 to March 2021)

Variable cost reformation
Structural reform of man-hours
and resources
Enhancing SCM*,
concentrating investment

Net Sales

800.0 billion yen

Operating Income

57.0 billion yen

Operating Margin

7.1%

Net income Attributable to
Shareholders (parent company)

30.0 billion yen(Foreign exchange rates: 1 USD = 110 JPY, 1 EUR = 115 JPY)

* SCM: Supply chain management

NTN REPORT 201828

Our Business Model

New Medium-term Management Plan “DRIVE NTN100”

Aftermarket Business
TargetP.49-50

Automotive Business
TargetAs an indispensable presence for the automotive market, NTN will become acompany that offers products and services for vehicles all over the world

Strengthen core technologies and products
Check & Repair
business

MRO*

Aftermarket
bearings

Overall bearing
maintenance service

Low friction/Lightweight

Respond to 48 V mild HVs

Hub bearings

Results and projections of net sales
and operating margins(Billionsof yen)

12.9%

150

Actions

16.0%World’s No. 2 market share
Driveshafts

Vehicle stabilization

125.0

4.3%

100
(Billionsof yen)
500

50

508.6

5.5%
New
business
areas

550.0

0

2018

2021

2028

Electric Motor andActuator(Fiscal years
ended/ending
March 31)2018

P.51-52

NTN will become a company that customers in the industrial machinery market
rely on most for its exceptional technological competence
P.43-44

For gearboxes of robots For main spindles ofmachine tools

For main spindles of wind
power generators

Compact,high rigidity

Long-life,
large and offshore needs

Proprietary aircooling technology(Billionsof yen)
150

2.3%

2028

(Fiscal years ended/ending March 31)

New Business: Green Energy Products Business
TargetFrom B to B to B to C, build sales and service networks for green energy products

NTN Green Power Park (Kuwana, Mie Prefecture)

5.6%

NTN Micro Hydro Turbine

NTN Hybrid Street Light

The world’s first flow-throughhydro power generator

The highest hybrid power generation
performance in the world

Launch the type intended forelectric power selling
Promoting the development ofhigh-power type

Promote the creation of demand for this product asa social stock that contributes to crime prevention
and disaster preparedness. Develop a community
surveillance function and a Wi-Fi-based
communication function jointly with Osaka
University, etc. Install this product at disasterevacuation sites (500,000 locations in Japan).

Financial/Company Data

Further development of core technologies;
development of high-performance products

Results and projections of net sales
and operating margins

2021

New
businessarea

119.1 125.0Corebusiness
area

100

50

Tapered roller bearing

Machine Tool Main Spindle
Bearing with Air Cooling Spacer

Develop businesses in new areas“Asymmetrical Spherical Roller
Bearings” for Wind Turbine Main Shafts0

Develop system products for collaborative robots
Enhance proprietary control technologies

Service,solutions business

From monitoring to AI and WEB services
Industry-academia collaboration for enhanced bearing
residual life prediction

NTN REPORT 2018

2021

2028

(Fiscal years ended/ending March 31)

P.45-46

Robot-related
business(robotics)

29

2018

“i-WRIST™” Wrist Joint Module

Resource Strategies

Industrial Machinery Business

Strengthen core technologies and products

Expand the scope ofelectric-powered
devicesCorebusinessareas

0Target“sHUB," a Hub Bearing
with Steering Assist
Function

Results and projections of net sales andoperating margins

Governance Strategies● Continue to improve technical services including maintenance● Establish a production system independent of OEM business,and maintain sufficient quantities of aftermarket parts in stock
Utilize overseas production bases and globally available stocks
Aftermarket part production and efficient stock
management using a new core IT system

116.7“eHUB,” Hub Bearing
with Motor Generator
Function

Business Strategies● Enhance brand power through the expansion of MRO sales● Expand aftermarket part lineup to not miss sales opportunities

Respond to electrificationand EVs

World’s No. 1 market share* MRO: Maintenance, repair and overhaul

Tasks

P.45-46

Become the world’s top
maker of drive-train systems(including EVs)

Blanket contracts foraftermarket demand

Independent demand

Develop businesses in new areas

P.43-44

Our Business Model

Transform our business from products to services, or from selling bearings to providing
selling services
Utilize bearing sensing technology for industrial machinery business

P.53-54

About Us

Business Policies and Targets

Green energy circulation model "Green Power Park" where electricity
generated from wind, water and solar light is used to charge up
Electric Vehicles (EVs) and power the air conditioning control
systems at vegetable factories

Contribute to a low-carbon society; responding to the needs to utilize natural energy in local communities
NTN REPORT 201830

Our Business Model

New Medium-term Management Plan “DRIVE NTN100”

Changes in external environment

New market needs

CASE, robotization, IoT, AI

Develop businesses in new areas
Robust management foundation

New competitive environment● Variable cost reformation● Structural reform of manhours and resources

Improve profitability
Business expansion without
the need for additional workforce
Improve efficiency in asset management● Enhanced supply chain
management● Concentrated investment

Structural Reform of Man-Hours and Resources

Build a procurement network that supports the expansion of global production capacity andthe utilization of external production capacity
Reduce external procurement cost

Use IoT, AI, and robots to take care of part ofoperations in the manufacturing department
Introduce RPA to improve the quality ofoperations in backoffice departments● Promote procurement in the most appropriate regions
based primarily on local procurement● Pursue cost reduction effects● Minimize exchange and inventory risks

3rd year: 3.0 billion yen on top of conventional cost reductions

10th year: 30.0 billion yen on top of conventional cost reductions

2. Accelerate centralized purchasing

Reducing external
procurement cost

3. Establish Procurement Headquarters (April 2018)

Purchasing information management
QCD assessment + CSR assessment in
Supply chain*QCD: Quality, cost, delivery

Enhance Supply Chain Management● Utilize the new core IT system● Efficient inventory holdings and reducing lead timeInventory visualization and efficient inventory holdings
Promoting the utilization of globally available inventories

Reducedman-hours

Reducedinventory

Standardization
Cost
reduction

Enhance and optimize supply chain management
31

NTN REPORT 2018

1. Promote the introduction of smart factory designs● Optimize and automate manufacturing
processes using IoT and AI● Use robots to take care of part of operationsin the manufacturing department● Reduce lead time to improve responsivenessto customer needs

Smart factory
Material
input
Wakayama Works
Start mass-production inJune 2019 (planned)

Utilize IoT,
AI and robots

Inspection &shipment

Lead time for prototyping 1/2X,
lead time for production 1/3X

2. Use robots to take care of part of operationsin indirect departments (introduction of RPA)
● Introduce RPA (Robotics Process Automation) in indirect departments● Use robots to take care of routine operations in technical and administrative departments
Routine operations
Repetitive operations
Simple operations
outside the system

Introduce RPA
To take care ofoperations

Unmanned routine operations
Create extra labor hours

High-value-added operations
Shift workforce to more professional
work such as new product development

Concentrated investment

Sales
expansion

Renew core
IT system

Technical and administrative departments: 0.5 billion yen

Financial/Company Data

● Promote global procurement● Promote centralized purchasing● Quality, price, production capacity, and complianceassessment(QCD* and CSR assessment)

Global procurement
Centralized purchasing

Manufacturing departments: 1.0 billion yen

Resource Strategies● Promote the control of the number of suppliers andthe centralization of procurement price management

3-year goals for reductions in personnel expense

Governance Strategies

1. Accelerate global procurement

Business Strategies

Variable Cost Reformation

Goals for effects ofvariable cost reformation

Our Business Model

Declining population in japan

About Us

Strengthen management bases that support our businesses● Intensively investing management resources in processes
in which our technical strengths can be demonstrated
Proactively utilizing outsourcing

Outsource forstandard products

Reorganize existing domestic production
with a central focus on Wakayama Works● Reorganize domestic radial ball bearing
production bases in Japan● Intensively invest in high-value-added products
such as for Evs
Utilize outsource for standard products

Radial ball bearings

Concentrate on high-value-added products
NTN REPORT 201832

Our Business ModelManagement Commitment

Hub bearing

President

Driveshaft

Our Vision
1 A company where its corporate philosophy is understoodby all employees around the world and where all
employees think and act for themselves
2 A company with original new products and services,
appreciated for its high quality and functions, and has a
global presence
3 A company where everyone involved with NTN is able tobe proud of the "NTN" brand

33

NTN REPORT 2018

Employees
Customers

Business Contributing toEnvironment
Partners“NAMERAKA
Society”

Local
Communities
Shareholders

NTN SPIRITNTN SPIRIT
Corporate
Philosophy

VALUESMISSION

Founder’s
Spirits

DNA

New corporate philosophy system

NTN REPORT 201834

Financial/Company Data

NTN's technologies play an indispensable role in thedevelopment of safer and more comfortable automobiles.
We supply bearings of high quality and reliability that wereused in Japan’s first fully domestically produced aircraft, andcontinue to be used for aerospace applications today.
We are a certified bearing supplier to the world’s four major
jet engine manufacturers, a currently unrivaled achievement
among Japanese manufacturers. The NTN Group has about
220 bases in 33 countries throughout the world. More than
25,000 employees are engaged in research, development,
production, sales and service activities designed to enable
better products. Their passion and technical expertise fuels
the evolution of our historic brand. We are harnessing ourtechnologies to help protect the environment, contribute to
local communities . And we work to realize long-term vision“Our Vision” for sustainable growth over the next hundredyears.

Resource Strategies

We are engaged in business activities based on our
corporate philosophy “We shall contribute to internationalsociety through creating new technologies and developing
new products.” We have marked our centennial byrenovating the framework used to bring our corporate
philosophy to life, creating a new corporate philosophy
code of conduct called NTN Spirit. The long-term vision“Our Vision” statement is to create a company where its
corporate philosophy is understood by all employees
around the world and where all employees think and act forthemselves. To determine the best approach to thisawareness-raising, we have analyzed in-housequestionnaire surveys and created a study committee(working group) to research the issue. Our efforts haveenabled us to document the attitudes and actions that all
NTN Group employees need to aim for as they work on
bringing the corporate philosophy to life. These activities
were designed to give employees a better understanding of
the corporate philosophy, helping them put it into practiceby showing them how it relates to their routine operations.
By putting our corporate philosophy into practice, wewant to help solve global social issues through our technicalexpertise and products. Our mission is to develop “smoothsociety” and help ensure its sustainability over the next 100
years.

Governance Strategies

NTN marked its 100th anniversary on March 1, 2018.
I would like to express my sincere gratitude to you for yourlong-standing patronage and support, without which wewould not have reached this mark. NTN is a precisionequipment manufacturer with a global business presence.
Our major products are bearings, which are eco-friendly
components that lower energy consumption by reducing
friction. Our products help make everyday life possible, andare used by customers around the world in an extensive
lineup of machinery such as automobile, rolling stock,construction machinery, aircraft and medical equipment.
Our products for automotive applications have been helping
improve vehicle ride comfort and fuel efficiency for many
years. Our hub bearings (used to support tire rotation) havethe world’s No. 1 market share , and our driveshafts (usedto transmit engine drive power to the tires) have the world’s
No 2 market share.

Business Strategies

Spreading our corporate philosophy

Our Business Model

Celebrating our 100th anniversary

About Us

Based on Our New Medium-Term Management
Plan “DRIVE NTN100,”
We accelerate our efforts to realize “Our Vision.”Our Business ModelManagement Commitment

Bearings are used in nearly every rotating device. High-end
bearings are required for applications such as robots andmachine tools. NTN provides products satisfying demands
for characteristics such as high rigidity, precision and speed.
Renewable energy is currently attracting a lot ofinterest. Demand for wind power is expected to grow, andwind turbines are becoming larger. Today’s turbines canhave a nacelle height of about 60 meters, and blades'
diameter of about 100 meters. Bearings support turbine
blades at the center of rotation, making them key turbine
components. NTN excels at manufacturing main shaft
bearings for wind turbines, and has created an integrated
production system for large bearings in the Noto region of
Ishikawa prefecture. We have developed new products“Asymmetrical Spherical Roller Bearings” for Wind Turbine
Main Shafts. They support the operating conditions uniqueto wind turbine main shafts, helping the rise of renewableenergy. Aircraft and rolling stock are also promising areasfor growth in demand.

1 trillion yen(Billions of yen)

D igitalization

×Management resourcesthat NTN has cultivated

Aftermarket
Industrial machinery
600

Aftermarket

Transform our businessstructure to achieve the10-year goals“Asymmetrical Spherical Roller Bearings”
for Wind Turbine Main Shafts

New business(natural energy etc.)
Robotization and IoT
needs
Expand core businesses
Expand the scope ofservices

Resource Strategies

Latest digitaltechnologies

R esources

Industrial machinery

800

Governance Strategies

Our new Medium-term Management Plan includes a goal tobe achieved over the next 10 years. This goal is to transformfrom a "Manufacturing Company" into a "Company that
Delivers Value to Customers through Products and Services."
We will continue our "Monozukuri" by providing products tocustomers and maintaining the same high productivity andworld-class quality as always. We will also transform businessstructure to “Services” by providing intangible value in theform of various services such as technical services.
We want to make our organization not easily affectedby exchange rates, and are targeting a 50% reduction inforeign exchange sensitivity in 10 years’ time. Other
numerical targets for the fiscal year ending March 31, 2028
are net sales of 1 trillion yen or more, an operating margin of
10% or more and a total asset turnover ratio of 1.0 or more.
We will achieve these targets by approaching changes in theexternal environment as growth opportunities. We will
respond to new market needs and innovate our businessstructure while strengthening our core technologies andproducts.

Business Strategies

DRIVE NTN100 is the name selected for our current
Medium-term Management Plan. The plan began in April
2018 and runs for 3 years. The name “DRIVE NTN100” isan abbreviation of “DRIVE NTN Transformation for New
100.” In addition to the meaning of acceleration, the fiveletters of “DRIVE” represent the first letters of key areas. The
latest digital technologies (Digitalization) will be integrated
into the management resources (Resources) that NTN has
cultivated, in order to develop innovative technology,
products and services (Innovation). In profit-related area, wewill work on Variable cost reformation and Efficiency
improvement
Under our previous Medium-term Management Plan“NTN 100.” We have built the foundation for "Our Vision."
Over the next 3 years, we will work on implementing “DRIVE
NTN100” by building on the foundation created by “NTN100.” Our aim is to step up business structure reforms
designed to sustain us over the next 100 years, while
realizing “Our Vision” and attaining our 10 year targets.

400

Automotive
200

I nnovation

35

V ariable costreformation

E fficiency
improvement

Procurement
reformation

Improving efficiency
in asset management

NTN REPORT 20182018

Automotive

2028

Respond to vehicle
electrification
Expand core businesses(Fiscal years ended/ending March 31)

Expanding Business in theaftermarket applications market

Financial/Company Data

Developing innovativetechnologies,
products and services

0

Respond to newmarket needs createdby changes in external
environment
Strengthen coretechnologies andproducts

Our Business Model

NTN in 10 years

Bearings used in industrial machinery need to provide
low friction and long operating life under operating
environments characterized by high temperatures andspeeds. Users also demand ever smaller and lighter
models. We will continue to meet these demands bycultivating core technologies to release advanced productsthat can help reduce environmental impact and provide
solutions to other social issues.

About Us

From “NTN 100” to “DRIVE NTN100”

Strengthening our core technologies andproducts for the industrial machinery market

Reforms for the aftermarket segment do not yield benefits
rapidly. We are aiming to become a leading name in theaftermarket product market, and will continue to strengthen
the immediate delivery system and technical service systemcreated through our previous Medium-term Management
Plan “NTN 100.”
We want to create further service and sales growth byrenovating our sales system in Japan, and throughworldwide efforts that will draw on our overseas production
network and global product stocks. A new initiative of“DRIVE NTN100” is our work on transform our businessfrom products to services, or from selling bearings toproviding services. We will use bearing sensing technology
to predict future bearing demand, and provide a full rangeof bearing maintenance services.

NTN REPORT 201836

Our Business ModelManagement Commitment

eHUB

sHUB

Desktop Type
High-speed Microscopic
Coating Applicator
Used at circled
locations
i-WRISTIn-Wheel Motor Drive System

37

NTN REPORT 2018

NTN REPORT 201838

Financial/Company Data

Low-Friction Hub Bearing II

Resource Strategies

NTN began to research and develop in-wheel motor
drive systems around 2003. We have been demonstrationtesting these systems and reducing their size and weightsince then. We have recently signed a technical licensing
agreement with a Chinese EV manufacturer for thesesystems. Along with the in-wheel motor drive systems wehave researched over many years, the agreement also
covers a new vehicle motion control system we havedeveloped called i2-Drive System. It licenses the use of
these technologies in EVs, to enable acceleration massproduction of the world's first EVs with in-wheel motors.
Mass production will start in 2019, and the annual
production volume is expected to be 300,000 units in 2023.
NTN is a global provider of products designed toaccommodate the coming CASE era.

Governance Strategies

CFJ-W

The automotive market is currently facing changes
encapsulated by the acronym CASE (for ‘connected’,‘autonomous’, ‘shared’ and ‘electric’). CASE is used to signify
the rise of connectivity, autonomous driving, ridesharing/
carpooling and EVs. But other new changes are also occurringthat we view as business opportunities rather than risks.
To adapt to the rise of EVs, we have started a new
business of “Electric Motor and Actuator.” We are confident
that it will become a core product for automotive structural
support in the next generation of vehicles. Our "eHUB" and"sHUB" bearing models have been developed to meet demand
for autonomous driving applications. "eHUB" has a motor
generator function, and "sHUB" a steering assist function.

Business Strategies

Japan’s declining working-age population is a major issue
for every industry. With robots currently on the rise as a way
to tackle this issue, NTN is active in the robotics segment.
One of the products developed for this segment is aparallel-link high-speed angular control device called
i-WRISTTM that can reproduce human wrist movements.
The product uses constant velocity joint technology toenable operation in a smaller space than a two-arm robot,
and is being marketed for appearance inspection robot
applications.
We are also using bearing diagnostic and sensing
technologies to step up work on our service solutions
segment. We provide bearing status monitoring services
using a wind turbine condition monitoring system (CMS) we
have developed. We will apply technology to rolling stock inorder to help improve rail service safety.

We have also been finding new applications for ourlegacy technology, creating a number of new businessareas. Our color filter repair equipments for liquid crystal
displays are a successful legacy NTN technology that wehave now repurposed for use in "Desktop Type High-speed
Microscopic Coating Applicator." This technology could
have a growing range of coating applications used to makebiochips that detect various illnesses. If successful, it will
enable a single chip to process blood or urine samples fordiagnoses and drug design at medical sites. Microscopic
Coating Applicators are also being used in the field of
regenerative medicine, and are the subject of a joint
research project we have started with Osaka University.

New areas for the automotive market
Our Business Model

New areas for the industrial
machinery market

With as many as 100 to 150 bearings used in an averagevehicle, bearing performance has played a key supportingrole in vehicle evolution. EVs (electric vehicles) are expected
to gain a larger market share as global population growthincreases new vehicle production volumes worldwide, but
hybrids and other vehicles with engines and transmissions
are also expected to see growing production volumes.
Reducing CO2 emissions from vehicle engines has
recently been a key concern for combating environmental
issues such as global warming. Carmakers have beenreleasing more environmentally friendly vehicles in the
expectation of countries around the world creating stricter
fuel efficiency regulations in the coming years. We will
provide high value-added products for theseenvironmentally friendly vehicles through our core businesssuch as hub bearings and driveshafts.
Currently ranked as the world's No. 1 market share, ourhub bearings play an important role in supporting vehicle tires
to keep them turning smoothly. We have developed a model
called "Low-Friction Hub Bearing II" that reduces friction by
50% relative to bearings released in 2000. It helps improvevehicle fuel/electric power efficiency. We have also improved
our driveshafts with the development of our Ultra high-angle
and High-efficiency Fixed Constant Velocity Joint "CFJ-W."
This new product improves fuel efficiency by reducing thetorque loss ratio by 50%. It also increases the maximum
operating angle from 50 to 55 degrees, enabling a smaller
minimum turning radius and improving handling for vehicles
with relatively large bodies. To meet demand for today’s
increasingly popular SUVs and four-wheel drive vehicles, wewill also provide a range of other vital automotive products as
we strengthen core technologies and products.

About Us

Strengthening our core technologies
and products for the automotive market

Our Business ModelManagement Commitment

39

NTN REPORT 2018

Image of Wakayama Works

Growing alongside our stakeholders

Radial ball bearings*“Nameraka” means “smooth” in Japanese.

NTN began operations in 1918 by researching anddeveloping ball bearings, a key technology for industrial
growth at the time. “Frontier Spirit” and “Coexistence andCo-prosperity Spirit” were the two defining values of NTN
co-founders Noboru Niwa and Jiro Nishizono. With thesupport of our stakeholders, these values have helped us
overcome various obstacles and grow our business throughthe years. “We shall contribute to international society

NTN REPORT 201840

Financial/Company Data

Our Medium-term Management Plan "DRIVE NTN100" istargeting sales of 800.0 billion yen, operating income of
57.0 billion yen, an operating margin of 7.1% and net
income attributable to shareholders (parent company) of
30.0 billion yen in the fiscal year ending March 31, 2021.
The plan calls for two major initiatives: (1) Variable Cost
Reformation, and (2) Structural Reform of Man-Hours andResources.
In Variable Cost Reformation, we will step up ourglobal procurement activities to promote global businessgrowth. We will focus on local procurement while ensuring
the locations of procurement sources are optimized fromregion to region. These reforms are designed to help cut
costs and reduce foreign exchange rate risk. We will
accelerate centralized purchasing to consolidate suppliers
and manage prices more robustly. We will also work on
documenting rules and creating a system forcomprehensive evaluation of suppliers on the basis offactors such as quality, cost, delivery time and compliance.

Our global workforce training activities include yearly
events designed to pass on technical skills and improve
quality such as the Global QC Circle Convention and NTN
Technical Skills Competition.
In 2015, the NTN Group endorsed the United Nations
Global Compact, an international initiative that outlines ten
principles in the four areas of human rights, labour, theenvironment and anti-corruption. We have also documented
a list of Global Risks as a way to enable more robust
responses to risks that could prevent our sustainablegrowth.
We will continue to work on ESG issues by putting ourcorporate philosophy into practice and helping ensure asustainable world.

Resource Strategies

Strengthen management bases that
support our businesses

Bear Kids Land Kuwana

through creating new technologies and developing new
products” is the corporate philosophy we have created toreflect the values of our founders.
Industry and the world at large are currently
undergoing radical changes. And since NTN’s growth would
be meaningless without a properly functioning world togrow in, we are working on transforming our identity to help
ensure a sustainable world over the next 100 years. I mean
"Transformation" not "Change." We will emerge with acompletely new identity without changing the resources that
fuel us today. We are committed to maximizing our potential
and bringing greater benefits to the world under our new
identity.
“Make the World Nameraka*” is the slogan we use todescribe our 100 years in business as a company that
supplies the world with bearings and other products
designed to keep machinery operating smoothly. We arecommitted to our mission of making everyday life andmaking the world smooth.
I look forward to seeing NTN continue to move ahead,transform and grow together with our stakeholders in our
mission to keep the world smooth. We hope to keep
enjoying the same generous patronage and support you
have provided over the years.

Governance Strategies

To hold stock efficiently and reduce lead times, we areworking on renewing our core IT system and enhancing our
supply chain management system. Investments will bedirected to restructuring our domestic ball bearing
production bases starting with the Wakayama Works. The
Wakayama Works will make active use of outsourcing forstandard products, while installing cutting-edge equipment
to consolidate production of high added-value products for
EVs and other applications.

Ensuring diversity to accommodate Japan’s decreasing
birthrate, aging population and increasingly diverse needs
has become an important issue for ensuring the sustainablegrowth of the Company. We have provided a number ofprograms and facilities to create pleasant working
environments for employees. Examples include ourseminars on encouraging women in the workplace, and our
intra-company child daycare center "Bear Kids Land."
These efforts have been successful in increasing thepercentage of female managerial-level employees at theCompany. We also have programs for the disabled. We
have created in-house workshops for disabled employees
called Dream Workshops, and make active efforts to hiredisabled em ployees through collaborative efforts withspecial education facilities and similar institutions. We
engage in a variety of initiatives in this area, but still have alarge number of issues to contend with.

Business Strategies

Enhance supply chain management
and concentrated investment

Ensuring sustainable growththrough work on ESG issues

Our Business ModelNTN has partnered with Osaka University to research anddevelop a groundbreaking type of artificial 3D cellular tissue
for use in drug design and regenerative medicine
applications. The tissue is being created using NTN’s
microscopic coating applications and Osaka University’s cell
layering technology with iPS-derived cells. In September
2017, we created the NTN Next Generation Research
Alliance Laboratories at Osaka University’s Graduate Schoolof Engineering. The lab is using AI (artificial intelligence) to
identify deterioration states of bearings and grease used inapplications such as automobile, rolling stock and machinetool. Along with bearing residual life prediction technology,
the lab also plans to start developing sensorized bearing
technology. Multifunctional sensors will be added to thebearings themselves to enable trend management anddamage prevention for machinery bearings during operation.
The lab is also working with high-precision analysis
technology to enable faster calculation of load and stressvalues by simulating actual equipment evaluations. This typeof research will help reduce customer development time.
Osaka University is a center of cutting-edge
technology. The lab’s activities are designed to create astronger partnership between the Company and university,
strengthen our core technologies by acquiring pioneering
technologies, and enable R&D work for creating nextgeneration business areas.

The Procurement Headquarters is a business unit wecreated in April 2018 to help with the system-based aspectsof these efforts.
We are targeting cost-cutting benefits of 3.0 billion yen
in 3 years, and 30.0 billion yen in 10 years from theseprocurement reform efforts.
Our manufacturing departments will work on Structural
Reform of Man-Hours and Resources by continuing theirwork on robotics applications while drawing on the IoT and
AI. Back-office departments will work on enabling fullautomation by adopting RPA (robotics process automation)as an alternative to human labor for standard operations.
The Wakayama Works is planning to start mass-producingball bearings in June 2019, and will work on becoming asmart factory through both these initiatives. We are targeting
to reduce personal expense of 1.5 billion yen in 3 years
from these efforts.

About Us

Accelerate creation of new businessand technological innovation bystrengthening industry-university
collaboration

Our Business ModelNTN 100
Plan for the fiscal year ended
March 31, 2018
800.0 billion yen

744.4 billion yen

800.0 billion yen

Operating Income

70.0 billion yen

39.6 billion yen

57.0 billion yen

Operating Margin

8.8%

5.3%

7.1%

42.0 billion yen

20.4 billion yen

30.0 billion yen

Capital Expenditures

135.0 billion yen (3 years)

109.3 billion yen (3 years)

170.0 billion yen (3 years)(Including 20.0 billion yen of
intangible capital expenditures)Free Cash Flow

67.0 billion yen (3 years)

47.1 billion yen (3 years)

45.0 billion yen (3 years)

Inventory Turnover Ratio

4.5 times

4.1 times

4.5 times

Net D/E Ratio

1.0 or less

0.9

1.0 or less

30.0% or more

30.2%

30% or more.

Above 14%8.4%

10.0% or more

9.2%

5.7%

7.5% or more

30% (average)

49% (average)

15.0 yen or moreUSD

JPY 110.0

JPY 110.8

JPY 110.0

EUR

JPY 130.0

JPY 129.6

JPY 115.0

Net Income Attributable to
Shareholders (parent company)

ROE
NTN-ROI*Dividend Payout Ratio/Dividends
Foreignexchange rates

Business Strategies

Net Sales

Equity to Capital Ratio

Managing Director, Director in charge of Finance Headquarters

Achievements for the fiscal Plan for the fiscal year ending
year ended March 31, 2018
March 31, 2021

Our Business Model

Looking to Our Next 100 Years:
Ensuring a Well-Balanced Financial
Structure and Stable Investor Returns

DRIVE NTN100
About Us

A Message From
Director in charge ofFinance Headquarters* NTN-ROI: Net operating income after tax ÷ (tangible fixed assets + inventories)"Revival 2014" was a course correction that moved theCompany away from its previous expansionary path andtoward a profit-oriented one. We worked on structuralreforms to strengthen earnings, while gradually moving
toward recovery assisted by a drop in the yen. But our
financial structure was weakened by extraordinary losses
from expenses such as fines and settlements paid for thecompetition law violations mentioned above. As a result, ourequity ratio fell from 31.6% in the fiscal year ended March
31, 2011 to 28.6% in the fiscal year ended March 31, 2015,
and our interest-bearing debt increased by 135.8 billion yen
over the same period (from 223.3 to 359.1 billion yen).

41

NTN REPORT 2018

years. But instead of forcibly cutting fixed costs and R&D
expenditures, we will continue to work on raising efficiency,
strengthening management and making additional
improvements that we hope will improve our operating
margin.
Financial highlights for the fiscal year ended March 31,2018 include a 27.8 billion yen reduction in interest-bearing
debt relative to the fiscal year ended March 31, 2015
(excluding exchange rate effects), and a recovery in ourequity ratio to over 30%. But our failure to meet our 60.0
billion yen target for interest-bearing debt reduction will bean ongoing challenge carried over to our New Medium-termManagement Plan. It was the result of our missed operating
income target, high extraordinary losses, and poor
showings from our aftermarket and industrial machinery
applications.

Achieving the aims of New
Medium-term Management Plan
"DRIVE NTN100"
We will need to further improve our financial structure to
support future growth as we look toward creating new
business areas and further expanding our existing businessareas in emerging markets and elsewhere. Our immediatechallenge is making further gains in profitability and asset
efficiency. The financial departments are looking to create
financial structure improvements that will help in achieving
the targets of the Medium-term Management Plan "DRIVE
NTN100" begun in April 2018. Specific targets for the fiscal
year ending March 31, 2021 include an equity ratio of at

30% or more, a net D/E ratio 1.0 or less and an NTN-ROI of
7.5% or more as a way to provide well-balanced
improvements in profitability and asset efficiency whileraising our ability to generate free cash flow. Through thesefinancial structure improvements, we are targeting net salesof 800.0 billion yen, operating income of 57.0 billion yen,and net income attributable to shareholders (parent
company) of 30.0 billion yen.

Financial outlook to Support the Next
100 Years and Sustainable Growth
Our financial departments will need to strengthening
financial functions worldwide. We want to attain this goal byproviding educational programs designed to help
managerial-level employees in technology, production andsales departments approach their work from a financial
mindset. These programs should be approached with three
activities in mind:(1) Tailoring the training of financial managers to the needsof global management,(2) Strengthening global tax and funding service functions,and(3) Strengthening global auditing functions.
While increasing free cash flow will be a requirement
for investing activities, we will also need to makeinvestments that help increase medium-term operating cash
flow. We will make stable dividend payments to return
profits to shareholders, while working on finance-based
methods of improving our corporate value.

NTN REPORT 201842

Financial/Company Data

The three years of "NTN 100"

A number of financial issues remained to be solved, such as
cutting back our rising borrowings and creating a business
management structure impervious to exchange rate
fluctuations.
We began our three-year Medium-term Management
Plan "NTN 100" in April 2015 as a way to tackle theseremaining issues. It involved selling off nonessential assets,
reducing total borrowings such as by using surplus cash forinternal loans, strengthening support systems forunprofitable Group companies, increasing exchange rate
hedges (expanding hedges for emerging nation currencies)
and procuring capital from low-interest markets.
"NTN 100" targeted an operating margin of 8.8%. But
despite initially increasing to 6.7%, the operating margin
repeatedly failed to meet the target as it fell to 5.2% and5.3% thereafter. Unfortunately there were two major causes
for the decline. One was missed sales targets mainly fromour high profit-ratio aftermarket applications segment. The
other was a rapid rise in customer demand in the plan’s final
year that resulted in production improvements being
postponed. Without these improvements, our fixed costs
became higher than expected, making it impossible toadequately reap scale benefits. This poor performance wasa major setback, but we are looking toward a rapid
recovery. We are now working on a number of initiatives
designed to sustainably increase our corporate value. In
order to generate Free Cash Flow, we are focusing on
efficient capital investment, harnessing next-generation
technologies to enable innovative manufacturing that will
make us more cost-competitive, and expanding sales ofhigh value-added new products. Selling and administrative
expenses have been about 13% of sales for the past few

Resource Strategies

With the term of our Medium-term Management Plan"NTN 100" now over, I’d like to summarize the recent major
events that have affected the Company at the dawn of its
second century. In April 2011, we started a Medium-termManagement Plan "Global Advance 2013" as a first step inrecovering from the global recession brought on by the2008 financial crisis. But major changes in the economic
environment throughout the world created poor earnings
that resulted in the withdrawal of Global "Advance 2013"
after 18 months and its replacement with a new plan called"Revival 2014." These changes included events such as
bearing transactions suspected of violating foreign anddomestic anti-monopoly act (competition laws), theaftermath of the Great East Japan Earthquake, flooding in
Thailand and other natural disasters, prolonged yen strength
in the foreign exchange market, the European financial crisisand the Chinese credit squeeze.

Governance Strategies

Our recent history

Special Feature

1

World's No.1 market share

When used to support tire rotation, hub bearings perform the key
functions of holding the vehicle body weight and turning thetires. NTN’s hub bearings are packaged as units to reduce theirsize, weight and number of components. They help improve fuelefficiency and improve safety.

World's No.2 market share

Driveshafts are components that transfer engine power to thetires. NTN was the first Japanese manufacturer to releasedriveshafts. The high technical expertise of NTN driveshafts has
made them market leaders since their debut. We develop andsupply lightweight, compact driveshafts featuring long operating
life and advanced functionality. Besides automotive applications,they are also used in industrial machinery applications such as
steelmaking machinery and food processing machinery.

43

NTN REPORT 2018

Low-Friction Hub Bearing II
Reduces rotational friction by 50%
Friction reduction helps improve fuelefficiency since less friction enables
smoother operation when the engine
is running. A new grease used insidebearings has been developed alongwith a low friction seal. By combining
these two components, we havedeveloped a hub bearing model that reduces friction by
50% relative to conventional products.

Tapered roller bearings

Gearbox used in robots
and other industrial
machinery

Machine tool applications
Bearings for main spindles of machine tools need to accommodate higher operation
speeds and provide high rigidity and precision. They also need to help reduce equipment
size and environmental impact to satisfy energy and space-saving demands.
Improvements in machine tool functions are
creating a greater need for main spindle bearings
with higher rigidity and the ability to support ultra
high-speed rotation. Looking for ways to reduceheat generation, NTN has developed bearings withworld-class high-speed rotational performance byusing air-cooling spacers with proprietary air
cooling technology. We also develop and propose
angular contact ball bearings supporting lowvibration operation and long operating life for small
spindles. Small spindles are used for small productmachining and precision micromachining
applications, which are becoming increasingly
common industry trends.

Machine Tool Main
Spindle Bearing with
Air-cooling Spacers

Compact High-speed
Angular Contact Ball
Bearings for Machine
Tool Spindles

Financial/Company Data

Driveshafts

Developing high added-value products meeting market needs

Hub bearings

Industrial robots are used for applications such asassembly processes. Parts carried by robots arealways picked by the same method and moved
along the same track to the set position, so
positioning always needs to be accurate. Welding
and coating processes also require stable
movement to accurate positions. NTN develops
bearings satisfying the need for compact, highrigidity and precision.

Resource Strategies

Hub bearings and driveshafts account for about 80% of our sales of core products for automotive applications. Our hub bearings have the
top share of the global market, and our driveshafts the second-largest share. Hub bearings and driveshafts are used in vehicle axles/
drivetrains and will continue to be indispensable products in the EV era. Global population growth is increasing vehicle production in
emerging nations and other world markets, creating growth opportunities for NTN. For the other bearing types that account for the remaining
20% of our sales, we are working on proposing products designed for new needs such as the higher rigidity demanded in the EV era.

Industrial robots come in various sizes and series lineups with varying demand. Bearing designs needto accommodate these conditions by keeping costs affordable while addressing the need for moreadvanced robotic arms and for operation improvements for human operators.

Governance Strategies

Core business areas for automotive applications

Robotics applications

Business Strategies

NTN are working on core products for automotive applications by reducing bearing and driveshaft size, weight and torque, anddeveloping modular and system products. Europe and other areas of the world are starting to enact stricter fuel efficiency regulations.
We have responded with worldwide releases of new products that accommodate these changing needs, helping increase vehicle fuelefficiency and improve ride comfort.
Our core products for industrial machinery applications includes work on adapting bearings to higher power outputs and harshinstallation environments for use in larger onshore and offshore wind turbines. For rolling stocks, aircrafts and robotics applications, we
are working on reducing size, weight and torque, while finding ways in which bearings can reduce environmental impact. To meet market
needs such as higher levels of precision and speed, we will continue to develop elemental bearing technologies while working todevelop high value-added products in the form of units and systems that combine bearings with peripheral components.
Along with standard bearings, NTN also develops, manufactures and sells sliding bearings (made of sintered and plastic materials)
and magnetic products (made of magnetic materials). We are working to harness and apply our strengths in these areas to develop
in-house modular and system products that will give us a competitive edge.

Bearings can be found in any equipment that moves or turns. We develop and supply products designed to enable use that
optimizes sophisticated requirements in areas such as safety, security, comfort, durability and precision. Our products for industrial
machinery applications support the harsh usage environments encountered in applications such as rocket engines (with ultra-low
temperature fuel), food processing machinery (requiring corrosion resistance for the large amounts of water used), and large windturbines (over 2 meters in diameter and 2 metric tons in weight).

Our Business Model

Major Opportunities in Core Business Areas
From Stricter Global Environmental Regulations andChanging Market Needs

Core business areas for industrial machinery applications

About UsCORETECHNOLOGIESBusiness Strategies

Wind turbine applications
Ultra High-angle and High-efficiency
Fixed Constant Velocity Joint “CFJ-W”
World’s highest maximum operating angle (55°)
improves handling of SUVs and 4WD vehicles
We began mass-producing ahigh-angle fixed constant velocity
joint with a maximum operating
angle of 50° in 2012. We have
now increased the angle to 55°
with the development of CFJ-W.
Increasing the operating angle decreases the vehicle’s
minimum turning radius, improves handling and reduces
the torque loss ratio by 50%. These improvements help
improve fuel efficiency.

The main shaft bearings of wind turbines are often spherical roller
bearings, which have high load capacity enabling outstanding
installation tolerances.
The main shaft bearings have the mostdemanding operating conditions of any windturbine component. We have developed aproprietary, world-first bearing for use in turbine
main shafts. It uses two rows of asymmetricalrollers placed at the front and rear (as viewed
from the front of the turbine). The front row
supports the load of the turbine blades, while
the rear row mainly supports the load generated
by the wind. This design has enabled us todevelop a bearing able to distribute the load asneeded. It enables long operating life andimproves wear resistance.

“Asymmetrical Spherical
Roller Bearing” for Wind
Turbine Main Shafts

Wind turbine nacelle

NTN REPORT 201844

Special Feature

2

New Areas

Products applicable to electrification of automobilessHUB

Hub bearings with steering assist function

Actuators are products that convert
rotary motion into linear motion.
NTN’s “Electric Motors andActuators” are electrically powered,
reducing environmental impact byeliminating the use of oil. They
combine NTN’s core bearing and ballscrew product technologies withmotor design technology andelectrical control technology used forvehicle control. They also reduceweight by eliminating the need for ahydraulic pump, helping improve fuelefficiency.

45

NTN REPORT 2018

Mounted on non-driven vehicle wheels, “eHUB”
uses a motor to provide drive assistance that
reduces engine load. When the vehicle
decelerates, eHUB acts as a generator byregenerating kinetic energy into electric power.
When used with a 48V mild HV system, eHUB
improves fuel efficiency by 25% relative to aconventional engine-only vehicle. A hub bearing
and motor combined into a single unit is anindustry-first, high added-value product requiring
motor control and modularization technologies.

Mass-production of world’s firstin-wheel motor EV to start in 2019
With their highly environmentally friendly performance, EVs are
expected to become widespread as the next generation of vehicles in
the coming years. NTN has been researching in-wheel motor drive
systems for EVs. These systems provide outstanding vehicle roadperformance by driving each wheel independently, and also enableroomier vehicle interiors. We have developed “In-wheel Motor System”
composed of an in-wheel motor with a motor reducer on each wheel,along with a control system
controlled by sensor information.
We have licensed technology to
Changchun Fawsn Auto Tech Co.,
Ltd. (FSAT), an EV developer basedin China’s Jilin Province. FSAT isplanning to start mass-producing an
in-wheel motor EV with a 450
kilometer range in 2019.

Constant velocity joint
with an operating angleof 90 deg

At present

Grease application

Appearance
inspection

In the future

Robot wrist modules

AI-controlled robotic hand systems

Service/solution business
From monitoring service to AI and web service
By refining bearing condition monitoring technologies and integrating sensing technologies with bearings, detection of defects inmachines and robots will be possible in a variety of settings. NTN has conducted research in collaboration with Osaka University tomake major advances in using AI to predict bearing residual life. Realizing this technology will enable monitoring of all bearings used forautomotive, industrial machinery and other applications, contributing greatly to reliability and safety. We are hoping to pioneer thistechnology through this industry-academia partnership.

Develop latest algorithm

Bearing condition
monitoring system(CMS)

Sensorize bearings

AI-based bearing residual life prediction

Green energy

Medical applications

Creating a green energy product sales/
service network

Use of microscopic
coating technology

NTN Hybrid Street Light

NTN Micro Hydro Turbine“NTN Hybrid Street Lights” are lights with self-contained
power sources. They generate power from sunlightduring the day and from wind at night, when they also
provide LED street illumination. Since “NTN Hybrid Street
Lights” are unaffected by power failures during
earthquakes, typhoons or other natural disasters, we areworking on creating demand by marketing them as
durable infrastructure for crime prevention and disaster
preparedness “NTN Micro Hybrid Turbine” can generateenergy from the running water of an agricultural water
channel, sewer or water supply line, industrial water
channel without falling water construction.

Financial/Company Data

Electric Motors and Actuators

Hub bearings with motor generator function

Early 2000s

Resource Strategies“sHUB” is a system product that provides vehicle
steering assistance, improving fuel efficiency byminimizing course deviation.
By calculating the travel conditions from the vehicle
speed and steering wheel angle, sHUB enables
drivers to correct steering angle at wheel rapidly tothe optimum angle. Besides improving fuelefficiency, sHUB can also improve vehicle handlingby reducing the steering wheel angle needed tochange lanes. sHUB is a world-first technology thatlooks promising for use in collision avoidance in theautonomous vehicles of the future.

eHUB

While working on constant velocity joints for automotive applications, we developed a constant velocity joint with a 90° operating range.
The jjoints could not be used in automotive applications due to their rigidity. But we found the same technology could be repurposed for robotics,
resulting in the development of “i-WRIST.” Existing robots require ample space to move, and need a new location whenever there is a change inthe various products they support. “i-WRIST” addresses these issues by saving space and enabling easy setup. It can perform the same
movements as the human wrist joint, requires little space even for a large range of movement, and can support a wide range of needs with justsoftware changes. By enabling the human wrist movements that today’s robots have previously been unable to recreate, “i-WRIST” has opened
the door to operations previously only possible with human workers.

Governance Strategies

The automotive market is currently facing changes encapsulated by the acronym CASE (for ‘connected’, ‘autonomous’,‘shared’ and ‘electric’). CASE is used to signify the rise of connectivity, autonomous driving, ridesharing/carpooling and EVs.
But other new changes are also occurring that we view as business opportunities rather than risks.
By harnessing our core technologies, we are working on combining modularization with control systems while stepping up
development of products for the EV era.

“i-WRIST” Wrist Joint Module (Parallel-link High-speed Angular Control Equipment)

Business Strategies

NTN is expanding its businesses in new areas that contribute to development of a recycling-based societythat keeps circulating smoothly with its core tribology technologies developed through bearing works NTN
will develop businesses in new areas addressing natural energy, electrification of automobiles, safety
innovations, robots working and living with people, and services/solutions driven by big data.

Robot-related business
Our Business Modelwith Proprietary Technologies
Developed from Core BusinessWork on new business areas in industrial machinery sector

About Us

NEW
AREAS

Business Strategies

We have beenstrengthening our portfolioof microscopic coating
technologies since the1980s, and now can apply
coatings more rapidly andon a more miniature scalethan is possible with standard dispensers.
Our microscopic coating technology is being used for
applications such as helping treat cancer by applying
coatings to biomarker plates. It is helping shift sales
from the produced goods to the consumer goods,
making it a promising area for the future.

NTN REPORT 201846

Business Strategies

Global R&D

Research & Development

Our Business Model

Our R&D approach: Activities divided among four regions throughout the worldJapan

Robot-related
business

Construction
machinery

TOPICS

Precisionequipment

NTN wins award in automotive component category of “CHO”
MONOZUKURI Innovative Parts and Components Awards

Machinetool"Elemental technologies,""Design and development,""Production technologies,""Assessment technologies,""Intellectual property"Basetechnologies

Lubricants

Seals

Diagnosis

Evaluation

Materials

Analysis

Monozukuri
Forging
Injection molding

NTN Automotive Center

Medicalequipment

Customer needs

Surface finish

China

Aircraft

EV related
business

Tribology

Americas

Share database information
Technical Center

Energybusiness

Service,solutionbusiness

Automobiles

EuropeFinancial/Company Data

Rolling
stock

Design data, Testing data, Experimental data,
Production technology data, Customer project, etc.

NTN-SNR R&D Center

Creating the technologiesof the future

NTN Next Generation
Research Alliance Laboratories

Resource Strategies

WindturbineIndustrial Technical Center

Share database information

AgriculturalSpace rockets,
machinery artiﬁcial satelite

Robots/gearbox

New Product Development
R&D Center

Governance Strategies

desire to strenghthen its industry alliances, leading to thecreation of the NTN Next Generation Research Alliance
Laboratories. It represents the beginning of a new venture in our
history designed to help us acquire cutting-edge technologies
as we look to growing our business 5 or 10 years in the future.
The lab is working on research that will enable artificial
intelligence (AI)based bearing residual life prediction, and trend
management or breakdown prevention during bearing
operation. Osaka University is a center of cutting-edge
technology. The lab’s activities are designed to create a stronger
partnership between the Company and university, strengthen
our core technologies by acquiring cutting-edge technologies,
and enable R&D work for creating new business areas.
We have the Patent Management Rule as well as the
Patent Reward Rule in place to reward our employees for theirinventions. Foreign patents and know-how are also covered as
inventions to be rewarded, and there is no upper limit on the
reward payments. We continue to encourage our employees intheir creative efforts at developing new inventions.

Utilizing core technologies that include tribology, material/heat
treatment, precision processing, precision measurement,
rotation control, precision positioning technology and analysis,
we are developing technologies that meet market needs forlong service life, low weight, compact design and low friction.
We are also commercializing products in new areas. Our R&D
work also incorporates cutting-edge technologies such as the
IoT and AI. It is designed to sustain us over our next 100 years
in business, letting us augment our core business areas while
expanding into new areas.
We are working on strengthening our R&D framework to
enable these activities to produce results as rapidly as possible.
In September 2017, we created the "NTN Next Generation
Research Alliance Laboratories" in the Graduate School ofEngineering at Osaka University. Seeking to be the first national
university in Japan to augment its alliances with industry, Osaka
University created a joint research course and collaborative labon its campus while calling for corporate participation. Our
desire to help our research and technical divisions flourish over
our next 100 years in business aligned with Osaka University’s

Advanced Technology
R&D Center

Turning

Grinding

Powder compression molding

Joining
Surface improvement

NTN’s "ULTAGE Tapered Roller Bearings for Automotive Applications" won an award in theautomotive component category of the 2017 “CHO” MONOZUKURI Innovative Parts andComponents Awards.
This product has optimized roller shape, achieving the world's highest standard ofhigh-load capacity and rotational performance. Achieving the optimized roller shape has
conventionally been a difficult task. It was achieved by using optimized design technology
along with proprietary machining technology to bring the design to life. The design technology
enables creation of the ideal tapered roller shape that enables longer operating life byminimizing roller contact surface pressure and internal stress. This product can be used under
the harsh conditions created by downsizing and weight saving of automotive transmissions
and differentials, helping improve fuel efficiency and enable a low-carbon society.

ULTAGE Tapered Roller Bearings for
Automotive Applications

Outside technology and expertise47

NTN REPORT 2018

Business Strategies

Production Engineering
R&D Center

Strengthening our R&D System

About Us

We will promote R&D activities to find solutions tosocial issues with an awareness of roles that we as acorporation should play in achieving the common worldwide
goals, the "Sustainable Development Goals (SDGs)."

We have been established an R&D system that is designed
to enable acceleration of creating new technologies andproducts on a global basis, address worldwide market
needs and stimulate exchanges of technologies and humanresources among R&D bases in Japan, the Americas,
Europe, China and elsewhere around the world.

NTN REPORT 201848

Business Strategies

Business environment and issues
In the aftermarket business, ongoing and steady efforts are
required as the outcome, and promotion activities will notlead to an increase in sales immediately. We will work on
improving our market presence and brand value in theaftermarket through MRO sales growth, while continuing theactivities of our former Medium-term Management Plan“NTN 100” such as establishing a prompt delivery structureand strengthening our technical services. With the demandfor industrial machinery bearings currently growing
worldwide, we will respond by strengthening our supply
chain and expanding our product lineup so as not to lose
sales opportunities, and focus on growing our market sharethrough steady sales promotion activities.

116.7

Up 11.7%
from previous
yearbillion yen

15.0

Up 7.3%from previous
yearbillion yen

With regard to the turnover of the aftermarket business, a goodmarket environment resulted in higher sales globally for the industrial
aftermarket. The sales for the automotive aftermarket also remainedsolid in Europe and the ASEAN region.
Sales for this segment were 116.7 billion yen as a result (up11.7% from the previous year). The sales growth and along withexchange rate effects resulted in an operating income of 15.0 billion
yen (up 7.3%) and an operating margin of 12.9%.

Operating income (right axis)

Operating margin(Billionsof yen)17.1% 17.1%

150(Billionsof yen)15.6%
13.4% 12.9% 13.0%

103.8

112.4 113.6

45

Net sales

116.7 117.5
104.5

100

Forecast for the fiscal year ending March 31, 2019

30

117.5

Operating income
Up 0.7%from previous
yearbillion yen

17.7

19.2

17.7

50

0

2014

2015

2016

14.0

15.0

2017

2018

15.3

15

0
(Fiscal years ended/2019 ending March 31)(Forecast)

15.3

Up 1.9%billion yen

Eiichi Ukai
Director*MRO: Maintenance, repair and overhaul

49

NTN REPORT 2018

Sales and Operating Margin (actual and planed figures)(Billionsof yen)12.9 %

150

116.7

16.0 %
125.0

100

50

0

2018

2021

2028 (Fiscal years ended/ending March 31)

OUR VISION
Transform our business from products to services, or fromselling bearings to providing selling services

from previous
year

We expect sales growth in the industrial aftermarket mainly due to
steady efforts on MRO* projects in overseas markets and sales
expansion to major distributors. For the automotive aftermarket, we
will promote sales by expanding automotive parts lineup and our
distributor network mainly in the Americas and Europe.
Under these business conditions, we expect to result in sales of
117.5 billion yen, an operating income of 15.3 billion yen, and an
operating margin increase of 0.1 percentage point.

overseas markets, we will try to increase our sales by
establishing strong partnerships with major distributors,
ensuring steady work on MRO projects, and expanding ourdistributor network. With regard to the automotive
aftermarket, we will focus on sales growth by expanding our
automotive parts lineup and our distributor channel.

Financial/Company Data

Sales (left axis)

Operating income

To enable sustainable growth for the aftermarket business,
we will promote sales activities led by engineering andstrengthen our technical services. We will take advantage ofthe sales growth in the MRO business to improve ourmarket presence and brand value. In the medium- andlong-term perspective, we aim to transform our businessstructure from a bearing supplier into a service provider thatmanages maintenance as well as other engineering
services. We will also look into new areas such as using
sensing technologies.
In order not to miss sales opportunities in theaftermarket, it is essential to have top-selling products instock at the appropriate level. We will expand the lineup to
support prompt supply and establish a stable supply
structure that is unaffected by OEM demand, and also
efficiently utilize overseas production facilities as well as theglobal stock.
In Japan, in order to strengthen our marketing power
for the industrial aftermarket, we have changed our salesorganization and established a new sales company, NTN
Sales Japan. Under the new organization, we will focus on
improving customer services and sales activities. In

Resource Strategies

116.7

DeliveryGovernance Strategies

Net salesbillion yen

Organizational
strength

Business Strategies

Result for the fiscal year ended March 31, 2018

16%

NTN
brand
power

"DRIVE NTN100" plans and initiatives

NTN provides various products for industrial machinery and automotive
maintenance needs. For the industrial aftermarket, we provide bearingsfor general machinery and equipment used in industries such as mining,
paper, and steel. For the automotive aftermarket, we satisfy customer
needs with a product lineup of service parts (auto parts) composed ofbearings and peripheral components. We also provide after-sales
services, such as holding engineering seminars with a technical service
units, to help our customers improve their production efficiency andensure their stable operation.

Percentage of
total sales

ServiceOur Business Model

Aftermarket

Product
appealAbout Us

Business
Overview

The business environment such as demographic shifts, environmental issues, and the rapid
development of AI, IoT, and other digital technologies, has been changing continually andcompanies are required to be flexible in accommodating new market needs to ensure sustained
growth. In the aftermarket business, suppliers are faced with new expectations in addition to
traditional requirements, including high-quality products, extensive product lineups and prompt
delivery. The role of suppliers, particularly those in the equipment aftermarket such as steel andpaper industries, is gradually changing from a bearing supplier into a provider of comprehensive
maintenance services for equipment and peripheral components. In order to meet these newmarket needs, we aim to realize new business models, such as the monitoring of bearing
operations and the provision of a new service that predicts the bearing life by utilizing our
expertise in sensing and digital technologies such as AI and IoT. We are working ontransformation from a bearing supplier into a service provider while continuing the activities andprojects that we have been managing so far. By making this transformation, we aim to enhance
our brand value and get the best customer satisfaction in the aftermarket.

NTN REPORT 201850

Business Strategies

Business environment and issues

Industrial machinery market

119.1

Up 20.8%
from previous
year

2.8

Up 72.4%
from previous
yearbillion yen

Sales for our industrial machinery market were supported on a global
basis by robust demand for construction machinery, agricultural
machinery and gearbox applications. They also increased as a resultof wind turbine applications in Europe and machines tool applicationsin Asia and other regions.
Sales for this segment were 119.1 billion yen as a result (up20.8% from the previous year). The sales growth along with exchange
rate effects and other factors resulted in an operating income of 2.8
billion yen (up 72.4%) and an operating margin of 2.4%.

Operating income (right axis)

Operating margin(Billionsof yen)150

5.7% 5.4%
3.2%

1.6% 2.4%

3.9%(Billionsof yen)15

119.1 121.0
100

101.2

109.0

104.1

98.6

5.6

4.7

50
3.3

5

2.8
1.6

2014

2015

121.0

Operating income

Up 1.6%from previous
yearbillion yen

6.3

0

Forecast for the fiscal year ending March 31, 2019
Net sales

10

2016

2017

2018

0
(Fiscal years ended/2019 ending March 31)(Forecast)

Miningmachinery

4.7

To respond to market needs and make our industrial
business grow, we are always seeking more advanced coretechnologies and deploying highly functional, value-added
products. For example, compact and high-rigidity bearings
are needed for gearboxes for robotic applications. Apartfrom bearings, in robot-related business, we are finding newmarkets for NTN i-WRIST, a wrist joint module, and we are
currently developing collaborative-robot system products
using our original control technology.
Wind turbine applications for large scale and off-shore
operations need products that can be used for a long
period of time and NTN is introducing such new products.
For aerospace applications, NTN offers products with newmaterials, heat treatments and metal-surface treatments tomeet the demand for lighter weight and long-life operations.
NTN is improving heat treatments and processing
techniques of bearings, which are used in various
applications, daily and reinforcing productions globally toensure a steady supply of products. In the business ofservice and solutions, researches are conducted for AI-

Net sales and Operating Margin (actual and planed figures)(Billionsof yen)

2.3 %

150

119.1

5.6 %
New business
areas

125.0

Core business
areas

100

50

0

2018

2021

2028

(Fiscal years ended/ending March 31)

OUR VISIONNTN will become a company that customers in the industrial machinery
market can rely on most for its exceptional technological competence

Up 68.1%
from previous
yearbillion yen

We continue to anticipate steady demands are anticipated in markets
of gearboxes for robotic applications, construction and agricultural
machineries. By region, sales growths are expected in Europe for new
aircraft engine applications and in China for wind turbine applications.
Under these business conditions, we expect to result in sales of
121.0 billion yen, an operating income of 4.7 billion yen and an
operating margin increase of 1.5 percentage points.

driven bearing life expectancy prediction, as well as sensing
for early-stage anomaly detection to help ensure stable andefficient machine operations.

Financial/Company Data

Sales (left axis)

Machinetools

Resource Strategies

119.1

Operating income

billion yen

billion yen

Agricultural
machinery

Governance Strategies

Net sales

16%

Construction
machinery

Failure detection"DRIVE NTN100" plans and initiatives

Result for the fiscal year ended March 31, 2018
Percentage of
total sales

Monitoring

Kazuki Kawashima

In the industrial market, NTN widely covers various segments and machines of customers, andsupplies bearings from miniature sizes used in electronic devices to extra-large sizes used inwind turbines and large mining machines. Our products are also extremely reliable in aircraft
and high-speed trains, which are directly linked to human life. NTN has always met various
market needs, with accumulated technologies on products and productions. Recently, thebusiness environment of the industry is rapidly changing, with increasing awareness of global
environmental issues and demographic shifts. The industrial structure itself is also changing asa result of the fast evolution of information technology, such as IoT and AI. By utilizing digitaltechnologies along with the flexible intelligence and creativeness of mankind, we aretransforming ourselves and will remain vital to the industrial world for the next 100 years.

Director

51

NTN REPORT 2018

NTN REPORT 2018

Business Strategies

NTN ULTAGE Series, the world’s highest class new generation
bearings, is expanding its lineup to address the needs for higher
precision and speed. In response to various industrial market
needs, NTN’s products provide solutions that contribute to low
torque and reduction in size, weight and environmental burdens.
Going forward, NTN continue to develop elemental technologies
of bearings, as well as highly value-added products by unitizing or
systemizing peripheral components.

used at an accelerated speed, which bring major changes
to the industry.

Our Business Model

The industrial machinery markets expect growth supported
by an increase in gearbox demands for robotic applications
for labor-saving, and of wind turbine applications forrenewable energy needs. The aerospace market is
expected to grow due to replacement of old airframes andan increasing number of commercial airliner services. The
railway market is also expected to grow supported by new
constructions of urban transport infrastructures in China
and Asian regions.
Industrial core markets, such as construction, mining,
and agricultural are indispensable to our daily lives andemerging technologies such as unmanned operations are
now required in those markets. Furthermore, monitoring
technologies are important to ensure the safe and efficient
operations of machineries and prevent accidental stops andthe resulting loss. IoT and AI are also becoming more widely

About Us

Business
Overview

52

Business Strategies

Business environment and issues

Automotive market* An acronym for ‘Connected’, ‘Autonomous’, ‘Shared’and ‘Electric’—four words representing developmentsthat are currently on the verge of creating majorchanges in the automotive industry.

508.6

Up 5.9%from previous
year

21.8

Up 9.0%from previous
yearbillion yen

Despite sluggish demand for sedans and compact vehicles in North
America, sales for the automotive segment were solid due to thelaunch of new models in Japan and elsewhere in Asia, solid demandin Europe, and good results from Japanese carmakers in China.
Sales for this segment were 508.6 billion yen (up 5.9% from theprevious year). The sales growth along with exchange rate effects andother factors resulted in an operating income of 21.8 billion yen (up9.0%) and an operating margin of 4.3%.

600

4.9% 4.2% 4.3%
3.8%

2.8%

480.5

499.3

480.2

4.5%

(Billionsof yen)60

508.6 511.5

40

400

Forecast for the fiscal year ending March 31, 2019
Net sales

433.9

511.5

Operating income
Up 0.6%from previous
yearbillion yen

24.4
20.0

18.4

200

21.8

23.0
20

12.0

0

2014

2015

2016

2017

2018

0
(Fiscal years ended/2019 ending March 31)(Forecast)

23.0

We are focusing on steadily increasing the profitability of coreproducts such as our hub bearings and driveshafts (currently
world’s No. 1 and No. 2 market share), while sowing the seedsof future growth by developing new products and segmentsthat will meet the needs of the coming EV era. These efforts
represent the first step in ensuring sustained growth over our
next 100 years. We can foresee orders for core products overthe next 2 to 3 years. Order volume appears to be making
some progress alongside our efforts to transform ourselves intoa stably profitable organization. This goal will be achieved byincreasing manufacturing efficiency through streamlined capital
investment and optimized resource allocation, and bystrengthening global procurement functions to shrink
proportional costs. Profits from our core business areas will be
used to invest in new product and segment development. We
will release module product versions of existing products,
combine mechanical modules and control systems, and step
up releases of products for electrified applications such as“Electric Motor and Actuators,” “eHUB” and “sHUB.” Through a

NTN REPORT 2018

Tier 1
Systemsuppliers

Automotive
OEM
Communication
infrastructure
providersTier 2Module andproduct suppliers
Tier 3 and below
Suppliers of materials,
raw materials and small parts

Up 5.5%from previous
yearbillion yen

We expect sales to grow from continued solid results for Japanesemanufacturers, growing demand from local manufacturers in China,
and the launch of new models in Japan. In the Americas, we expect
additional sales from the start of new models at our Mexico plant. In
Europe, we expect sales to European manufacturers to be strong.
We anticipate that these demand trends will result in sales of
511.5 billion yen, an operating income of 23.0 billion yen and an
operating margin increase of 0.2 percentage point.

technology licensing agreement with a Chinese EV
manufacturer, we will provide technical support for the world’s
first mass-produced EV with in-wheel motors (IWMs).
We want to maximize the scale benefits of our coreproducts that have high market shares, creating a selfperpetuating cycle of benefits that uses the earnings from theseproducts to fuel reinvestment in new products and segments.

Net sales and Operating Margin (actual and planed figures)

4.3 %(Billionsof yen)

500

0

508.6

2018

5.5 %
550.0

2021

New businessareas
Core businessareas

years ended/
2028 (Fiscal
ending March 31)

OUR VISIONAs an indispensable presence for the automotive market, NTN will become
a company that offers products and services for vehicles all over the world

Hideaki Miyazawa
Managing Director

53

Battery
suppliers

Automotive
OEM

Financial/Company Data

Operating income (right axis)

Operating margin(Billionsof yen)Semiconductor
AI

Resource Strategies

Sales (left axis)

Operating income

billion yen

508.6 billion yen

Suppliers ofmechanical andelectrical parts

The rise of electrified vehicles throughout the world’s automotive markets calls for functional automotive
components with different characteristics or more rigorous performance requirements than are required forconventional internal combustion engine vehicles. We will accommodate these needs by offering different
technical expertise and lineups of advanced products providing features such as size/weight reduction,higher speed rotation, lower torques and less noise/vibrations in order to secure a competitive advantage
over the competitors.
Ride-sharing and autonomous driving are two other major trends that are expected to change thelandscape of the automotive market. Providing these functions will require absolute reliability from thedrivetrains responsible for vehicle driving, turning and stopping performance. Carmakers are shifting the
focus of their development work from the tangible (vehicle performance) to the intangible (services),
creating an expanding range of areas in which NTN can contribute to vehicle safety, reliability and comfort.
We view these dynamic changes in the market environment as opportunities. We will work to provide
values that exceed customer expectations through product development and advanced technical services
that incorporate future market needs. We aim to become a leading manufacturer in the automotive
market’s crucial drivetrain component segment.
NTN REPORT 2018

Governance Strategies

Net sales

68%

Serviceproviders"DRIVE NTN100" plans and initiatives

Result for the fiscal year ended March 31, 2018
Percentage of
total sales

Vertical integration

Business Strategies

Our work in the automotive segment includes developing more advanced
bearings, hub bearings and driveshafts to create higher added value. We
are also combining these core products with core technologies todevelop module products. To prepare for the coming era of electrification
and autonomous driving, we have released a series of “Electric Motorand Actuators” composed of ball screws, motors and controllers. We areworking on expanding their range of applications and proposing them tocustomers. Marketing these products globally will allow us to meetdemands for better fuel efficiency and ride comfort in conventional
vehicles, while also meeting rapidly growing needs for electrification.

Horizontal organization

Our Business Model

The automotive industry is entering an era of revolution marked
by the rise of electrification/EV-shift, autonomous driving and theother trends represented by the CASE* acronym. New names areentering the industry, cross-sector partnerships and alliances are
forming, and the industry is transforming from vertically integrated
topped by OEM to a horizontally organized structure. The
success or failure of companies in this new ecosystem will be
determined by their ability to establish an advantageous position.
With automobile production volumes expected to rise alongwith population growth and rising income levels in the developingworld, product commoditization and falling costs should
continue.
For suppliers, this business environment will likely present
chances for advancement as well as risks to survival.

About Us

Business
Overview

54

Governance Strategies

Foundation Supporting NTN Business
About Us

The foundation that supports our business over the medium to long term is viewed in strategic
terms through the lenses of “Governance” and “Resource.” We work actively on tackling ESG
Our Business Model(Environmental,Social and Governance) issues through various initiatives.
Governance Strategies
In 2015, the NTN Group endorsed the United Nations Global

Officers ............................................................................ P.61

Compact (an international initiative for developing a global framework

Outside Director Dialog ................................................... P.64
Internal Control ................................................................ P.67

Business Strategies

Corporate Governance .................................................... P.57

for sustainable worldwide growth). We continue to promote ourbusiness initiatives while also remaining aware of the United Nation’s
Sustainable Development Goals (SDGs).

Risk Management ........................................................... P.68

Governance Strategies

Compliance ..................................................................... P.69
CSR Management ........................................................... P.71
Resource Strategies

Resource Strategies

Special Feature 3“HITOZUKURI” behind our “MONOZUKURI” ................. P.73
Human Resources ........................................................... P.75
Procurement .................................................................... P.77
Production ....................................................................... P.79

Financial/Company Data

Quality ............................................................................. P.81
Environment .................................................................... P.83
Contribution to Local Communities ................................ P.89
Non-Financial Data (ESG factors) ................................... P.93

55

NTN REPORT 2018

NTN REPORT 201856

Governance Strategies

Corporate Governance
About Us

Basic Approach and Implementation System

Main Activities

Strengthening and enhancing our corporate governance is one of our top management priorities. We take steps to makemanagement more efficient and robust while securing responsiveness to the purport of the Corporate Governance Code.

Governance-strengthening transition
Our Business Model

Communicating with shareholders, investors, and other stakeholders is another priority. We work to increase
management transparency by disclosing information in a prompt and accurate manner.

Corporate governance structure
General Meeting of Shareholders
Appointment/removal

Coordination

Auditing

Accounting auditors(audit firm)

Audit & Supervisory Board

Appointment/removal

Board of Directors
Business Strategy
Committee
Executive Committee
Divisions/subsidiaries

Committees
Compensation
Advisory Committee
CSR Committee* Numbers in brackets above indicate the number of meetings held in thefiscal year ended March31, 2018.

57

NTN REPORT 2018

CSR Committee isestablished

Risk Management
Committee isestablishedThe number ofoutside directors
is increased from
1 to 2.

The Board ofManaging
Directors isreviewed andrenamed theBusiness Strategy
Committee.

An outside
director isappointed forthe first time.

2015

Fair Trade
Monitoring
Committee isestablishedCompliance
Committee isestablishedTheeffectiveness of
the Board of
Directors is
assessed.

2016

2018

Compensation
Advisory
Committee isestablishedNew corporate
philosophy
system isestablishedCompliance Committee

Compensation Advisory Committee [5]Responds to questions from the Board of Directors by discussing
the compensation particulars of individual directors and executive
officers, giving back advice and recommendations to the Board.
The majority of the Committee’s members are outside officers.
CSR Committee [2]Deliberates and implements various measures intended toeffectively promote CSR activities. Chaired by the head of the
Corporate Value Promotion Department and composed mainly of
related department heads.
Risk Management Committee [3]Discusses important issues related to the various risks facing the
NTN Group. Also formulates Business Continuity Planning (BCP)
and implements Business Continuity Management (BCM).
Compliance Committee [4]Handles compliance risks not related to Japan’s Act on
Prohibition of Private Monopolization and Maintenance of Fair
Trade (‘Antimonopoly Act’) or Act Against Delay in Payment of
Subcontract Proceeds, Etc., to Subcontractors (‘SubcontractingAct’). Applies a preventive approach to oversee and guide thecreation of in-house rules and activities for education, awarenessraising and monitoring.
Fair Trade Monitoring Committee [2]Chaired by the President and focused on full compliance with the
Antimonopoly Act and Subcontracting Act. Provides supervisionand guidance on effective controls for fair trade practices alongwith education and awareness-raising activities.

Compensation Advisory Committee
To increase the transparency and objectivity of director andexecutive officer compensation, we have a Compensation
Advisory Committee that responds to questions from the Boardand has a majority of outside officers.
The items discussed at the meetings of the Compensation
Advisory Committee in the fiscal year ended March 31, 2018
are listed at right. They focused on compensation standards,
assessments and amounts for directors and executive officers.
Attendance record of outside directors/
outside Audit & Supervisory Board
Members at meetings of Compensation
Advisory Committee

5 out of 5 meetings

100%

Items discussed at the meetings ofCompensation Advisory Committee
1 s t : Points to award under stock compensation plan
2nd: Director/executive officer summer bonus amounts
Director monthly compensation amounts
Investigation of stock compensation plan for following term
3rd: Executive officer winter bonus amounts
Investigation of stock compensation plan for following term
4th: Director monthly compensation amounts
5th: Executive officer monthly compensation
Investigation of stock compensation plan for following term

Strengthening management auditing functions
To ensure robust management auditing functions, we usean Audit & Supervisory Board Members system with four
Audit & Supervisory Board Members including three comingfrom outside the company. Drawing on specialized
knowledge in areas such as finance, management and law,
the outside Audit & Supervisory Board Members conduct
audits in collaboration with the in-house standing Audit &Supervisory Board Member and the Internal Audit
Department.
The Board of Directors, which includes two outside
directors, decides on important issues and oversees theexecution of director duties. The Audit & Supervisory Board
Members provide input at meetings of the Board of
Directors and other important meetings that they attend.
They work to maintain and improve the transparency andfairness of the company's management supervision system.
All the outside officers (five total; two directors andthree Audit & Supervisory Board Members) are designatedas independent officers as defined by the provisions of theTokyo Stock Exchange, Inc. (TSE). The outside officers
submit filings to the TSE.
To ensure transparency and fairness, the Board of
Directors selects candidates recommended by thecompany, and appointments are finalized by submission
and approval at the General Meeting of Shareholders. Under
the provisions of the Regulations of the Board of Directors,
votes of the Board are used to appoint and remove
representative directors and directors with special titles, andto assign and remove director duties.
Under the provisions of the Management Rules for
Subsidiaries, a management control system is implemented
by having subsidiaries report issues related to the executionof their duties and having them apply for the headquarters’
approval for certain issues.

NTN REPORT 2018

58

Financial/Company Data

Executive Committee [12]An executive officer system has been introduced to enable swift
decision-making and business execution. The Executive
Committee reviews the execution of monthly operations. It is
composed of directors, Audit & Supervisory Board Members andexecutive officers.

Start of Executive
Officer System

2012

Resource Strategies

Business Strategy Committee [28]Meets at least twice per month to discuss basic management
policies and important management strategies.

2011

Governance Strategies

Audit & Supervisory Board [15]Consists of two standing and two non-standing Audit &Supervisory Board Members. To ensure that business audits arecarried out from an independent and objective standpoint, threeof the four Audit & Supervisory Board Members are from outside
the company. Audit & Supervisory Board audits the execution of
director duties, and work to maintain and improve thetransparency and fairness of the company’s management
supervision system by providing input at meetings of the Boardof Directors and other important meetings that they attend.

2008

Risk Management
Committee

Fair Trade Monitoring
Committee

Board of Directors [18]Supervises the execution of director duties and decides on basic
management policies, legally mandated areas and importantmanagement issues. The Board holds regular meetings at least
once per month, along with extraordinary meetings wheneverneeded. It is evaluated to enable improvements to its
effectiveness.

2006

Business Strategies

Appointment/removal

2004

Governance Strategies

Corporate Governance

We try to make it as easy as possible for shareholders toattend the General Meeting of Shareholders, and takevarious other measures to ensure that shareholder voting isa smooth process.

Roles required of outside directors•Taking part in and overseeing the important decisionmaking processes done by the Board of Directors•Drawing on a broad range of knowledge gained•

Outside Directors

Number of Board of Directors
meetings attended (out of 18)

Outside Audit & Supervisory
Board Members

Number of Board of
Directors meetings
attended (out of 18)

Number of Audit &Supervisory Board
meetings attended(out of 15)

18 100%Kouji Kawahara 18 100% 15 100%

Noboru Tsuda

18 100%

Tadao Kagono

18 100% 15 100%

Ryo Kawakami 18 100% 15 100%

Provision of detailed information in the general
meeting notice
To assist shareholder understanding, the officer
appointment-related agenda items are accompanied by alist of the candidate names, photos of the candidates,
attendance rates at Board meetings and similar information.

Online voting
Advance voting is made possible both by post and online.
For the convenience of institutional investors, NTN is also on
the Electronic Voting Platform run by Investor
Communications Japan (ICJ).
Other
The Chairman’s discussion at the General Meeting of
Shareholders is supplemented by summaries of business
reports and earnings information presented on a screen withvisual aids such as graphs and photos.
The 119th Annual General Meeting of Shareholders(June 26, 2018)
Number of shareholders
attended

213

Percentage of votes cast

82.6

%

Information Disclosure Policy
We disclose information based on our Information Disclosure Policy and in compliance with various laws such as the Financial
Instruments and Exchange Act and the Rules on Timely Disclosure of Corporate Information by Issuers of Listed Securities
stipulated by the Tokyo Stock Exchange. Moreover, we respect the Corporate Governance Code and disclose information in afair manner according to the Fair Disclosure Rules.
We also strive to disclose, as actively and fairly as possible, information deemed useful for investors even if laws andregulations do not apply to that information.
Information Disclosure Policy can be viewed on our website.
https://www.ntnglobal.com/en/csr/sc/investor.html

Outside Assessment

Financial/Company Data

Akira Wada

Website posting of general meeting notice
Our early disclosure efforts include providing notice of theGeneral Meeting of Shareholders on our website one month
before the meeting date. We also work to improve foreign
shareholder convenience by providing an English translation(summarized) of the notice.

We have been assessed as an active practitioner of ESG (Environmental, Social and Governance), and have been included in
multiple SRI (Socially Responsible Investing) funds and SRI indexes*1.
FTSE4Good Index

Morningstar Socially Responsible Investing Index

SNAM Sustainability Index

FTSE Blossom
Japan Index

MSCIJapan ESG Select Leaders Index*2

MSCI
Japan Empowering Women Index (WIN)*2

Securing Responsiveness to Corporate Governance CodeWe take active measures to strengthen our corporate governance while securing responsiveness to the purport of the
Corporate Governance Code. We have implemented all of the general principles of the Corporate Governance Code that werein place prior to the revision of June 1, 2018. We will continue to work on strengthening our corporate governance while
adapting to changes in our business environment.

*1 Inclusion status as of the end of June 2018.
*2 The inclusion of NTN Corporation in any MSCI index, and the use of MSCI logos, trademarks, service
marks or index names herein, do not constitute a sponsorship, endorsement or promotion of NTN
Corporation by MSCI or any of its affiliates. The MSCI indexes are the exclusive property of MSCI. MSCI
and the MSCI index names and logos are trademarks or service marks of MSCI or its affiliates.

59

NTN REPORT 2018

The details of each index can be viewed on our website.
https://www.ntnglobal.com/en/csr/sc/investor.html

NTN REPORT 2018

Resource Strategies

Attendance record of outside directors/outside Audit & Supervisory Board Members at meetings of theBoard of Directors/Audit & Supervisory Board

Earlier advance notice of the General Meeting of
Shareholders
Three weeks’ advance notice of the general meeting isprovided (7 days earlier than the legally mandated deadlineof 2 weeks before the meeting date).

Selection of date and venue of the General Meeting of
Shareholders
To maximize shareholder attendance, traditionally busy
dates are avoided and account closing/auditing schedules
are considered when setting the meeting date. The venue
was changed from our headquarters building to an outside
venue for 2018. We feel this change improves shareholder
convenience through easier access and better facilities, andwe plan to continue using outside venues in future.

Governance Strategies

through extensive personal experience to provide
appropriate advice and suggestions on agenda/report
items at meetings of the Board of Directors
Overseeing management from an independent
standpoint to improve the common interests of theshareholders

Three of four Audit & Supervisory Board Members areoutside Audit & Supervisory Board Members. They draw on
a broad range of knowledge acquired from a wealth ofexperience and long track record as expert financial
practitioners, specialist management practitioners or
attorneys. They provide appropriate auditing of thecompany’s business execution from independent
standpoints to help ensure ongoing compliance enforcement
and improve management robustness and transparency.
As stated previously, five (about 28%) of the total of 18
directors/Audit & Supervisory Board Members are outside
officers, helping increase the objectivity and fairness ofmanagement oversight.
We send materials related to the Board of Directors'
agenda items to the outside directors and outside Audit &Supervisory Board Members in advance and provide
explanations as needed. Especially, for the outside directors,
we hold advance briefings on agenda items before theBoard meets. At each meeting of the Board, there are lively
discussions because the outside directors actively interact
with the Audit & Supervisory Board Members and share
information.
Audit & Supervisory Board was convened 15 times in
the fiscal year ended March31,2018, and its members met
with the Internal Audit Department every month to share andexchange information.

Business Strategies

We have established standards for independent outside
directors and independent outside Audit & Supervisory
Board Members that must be satisfied by all outside
directors and outside Audit & Supervisory Board Members.
Two of our 14 directors are outside directors. They draw
on a broad range of knowledge acquired from extensive
experience as managers of other business firms to oversee
the company’s management from independent standpoints
and provide appropriate advice and suggestions. Input fromthe outside directors helps ensure management suitability
and legal compliance, strengthening the Board’s
management decision-making functions.

Our Business Model

Accessible General Meeting of Shareholders

About Us

Outside directors and outside Audit & Supervisory Board Members

60

Governance Strategies

Officers(As of June 26, 2018)
About Us
Our Business Model
Business Strategies
Governance Strategies
Resource Strategies(Back row from left to right)
Director

Director

Outside Director

Outside Director

Director

Director

Director

Kazuki Kawashima

Takehiko Umemoto

Hiroshi Nakano

Akira Wada

Noboru Tsuda

Hidefumi Tsuji

Toshinori Shiratori

Eiichi Ukai

Corporate General Manager,
Industrial Business Headquarters
Green Energy Products Division

General Manager, EV Module Division
Deputy Corporate General Manager,
Automotive Business Headquarters

Corporate General Manager,
CSR Headquarters
Internal Audit Department

Production
Procurement Headquarters

Corporate General Manager,
Corporate Strategy Headquarters

Aftermarket Business Headquarters
Quality Assurance HeadquartersNTN Korea Co., Ltd.
ASEAN & Oceania, India &West Asia Regions(Front row from left to right)
Managing Director

Managing Director

President
Representative Director

Executive Vice President
Representative Director

Managing Director

Managing Director

Hideaki Miyazawa

Yoshinori Terasaka

Hiroshi Ohkubo

Hironori Inoue

Keiji Ohashi

Itsuji Goto

Finance Headquarters
General Affairs, Environmental
Management Department
CSR Headquarters

Human Resources
Cost Planning Department
China Region

Corporate General Manager,
Automotive Business Headquarters
Europe & Africa Region
Electric Module Products Division
EV Module Division

61

NTN REPORT 2018

Research, Engineering
Quality Assurance Headquarters
Americas Region

Composite Material Product Division
Human Resources
Project Director, Axle Unit Business
Strengthening Project

NTN REPORT 2018

62

Financial/Company Data

DirectorGovernance Strategies

Officers

Outside Director Dialog(As of June 26, 2018)

About Us

This forthright and critical exchange of honest opinions isbeing presented in the context of corporate governanceissues and NTN’s efforts to achieve ongoing sustainablegrowth and improve our corporate value.

Audit &
Supervisory Board Member

Audit &
Supervisory Board Member

Kouji Kawahara

Yusuke Iyama

Tadao Kagono

Ryo Kawakami

OutsideOutsideOutsideJune 2005: Managing Director at Hitachi Zosen Corporation
June 2006: Standing Corporate Auditor at NICHIZO TECH INC.
June 2011: Outside Director at NTN (current position)

TOPIC

1

Executive Officers
Senior Executive Officer

Senior Executive Officer

Natsuhiko Mori

Tetsuya Sogo

Isao Ozako

Koji Kametaka

New Product and Business Strategic Planning
Headquarters
Composite Material Product Division
Chairman, NTN Advanced Materials
Corporation

Corporate General Manager, Finance
Headquarters

General Manager, China Region
President, NTN (China) Investment Corp.
President, Guangzhou NTN-Yulon Drivetrain
Co., Ltd.

General Manager, Electric Module Products Division
Deputy Corporate General Manager, Automotive
Business Headquarters
Deputy Corporate General Manager,
EV Module Division

Senior Executive Officer

Senior Executive Officer

Executive Officer

Executive Officer

Masaki Egami

Takayuki Matsuo

Etsu Harima

Pete Eich

Advanced Technology R&D Center
General Manager, New Product Development
R&D Center

Corporate Strategy Headquarters

Deputy Corporate General Manager, Industrial
Business Headquarters

Director and President, NTN Bearing Corp.
of America

Executive Officer

Executive Officer

Executive Officer

Executive Officer

Makoto Okasaka

Alain ChauvinEiichi Nakamizo

Kazuki Hagihara

Deputy Corporate General Manager,
Automotive Business Headquarters

General Manager, Europe & Africa Region
President, NTN-SNR ROULEMENTS

Corporate General Manager, Aftermarket
Business Headquarters

Deputy General Manager, Americas Region
Director and Vice Chairman, NTN Bearing
Corp. of America

Executive Officer

Executive Officer

Executive Officer

Executive Officer

Katsuaki Miyake

Koji Ishikawa

Kenji Nono

Satoshi Ueda

General Manager, Americas Region
President, NTN USA Corp.
Director and Chairman, NTN Bearing Corp.
of America

Green Energy Products Division
Industrial Business Headquarters

General Manager, Human Resources Department
Global Human Resources Development
Department
General Affairs, Environmental Management
Department

Deputy Corporate General Manager,
Automotive Business Headquarters
General Manager, Iwata Works

Executive Officer

Executive Officer

Executive Officer

Executive Officer

Masaaki Yamamoto

Herve Brelaud

Ikuo Watanabe

Masayuki Nishiguchi

Deputy Corporate General Manager, Corporate
Strategy Headquarters

Deputy General Manager, Europe & Africa
RegionVice President, NTN-SNR ROULEMENTS

Deputy Corporate General Manager, Automotive
Business Headquarters
General Manager, Business Planning Department

Deputy Corporate General Manager,
Aftermarket Business Headquarters

Executive Officer

Executive Officer

Executive Officer

Executive Officer

Masayuki Kaimi

Shigefumi Komori

Takashi Fujii

Nobuyoshi Ozawa

General Manager, Production Strategy
Department
Production Engineering R&D Center

Deputy Corporate General Manager, Industrial
Business Headquarters
General Manager, Business Planning Department

Corporate General Manager, Quality Assurance
Headquarters

General Manager, ASEAN & Oceania Region
General Manager, India & West Asia Region

63

NTN REPORT 2018

What is a weakness in NTN’s governance?

Tsuda: A weakness is the widely dispersed nature of NTN’s
business units. This geographic separation prevents any
real benefits of scale from being generated when sales
increase. Even when the business units are busy, the profits
do not follow. It is clearly a difficult industry to be in.
A company would normally consider centralization to
reduce the number of operations or make stock
management easier. But instead of centralization, NTN isusing systemization to make its widely dispersed business
units more efficient. It is very difficult to maintain high quality
consistently as scale expands, which could bring about
governance issues in future. NTN needs to check whether
quality and cost competitiveness are being properly
monitored. NTN has a large number of business units,
including several from acquired companies. So it is difficult
to keep track of them all and solve problems as they arise.
Optimizing business units and business partners requires a
lot of effort.
Wada: I think the head office should have the mindset thatour business is developed “globally.” Head office has several
functions such as human resources, legal affairs, etc.,
however, they apparently focus on domestic issues mainly
in NTN itself and its subsidiaries. NTN needs to consider
more than just Japan when approaching various problems.
NTN is working on globalizing head office functions, but we
do not yet know if this globalization will be possible. We are
currently in a transition period. When I attend the Board of
Directors meetings these days, I feel that a lot of weight isgiven to discussion of domestic issues.

Tsuda: We do have a global perspective, but it is true thatmost agenda items at the Board of Directors are about
domestic issues. So I suppose in that sense, it is a bit
lacking in global perspective. The head office needs tofunction as a global holding company, so I think it will beforced to transform into a globally oriented organization.
I also think establishing a responsible profit control
organization is a key requirement. The system of
responsibility areas has already been established in Japan.
But corporate general managers are mainly focused on
domestic business units, and responsibility areas are unclear
in overseas global management organizations. Bearings areused by either the industrial machinery or automotive
industry, so the same product can have different applications.
While I understand the difficulty, the responsibility areas ofcorporate general managers need to be global and not justdomestic. In that sense, the current situation of the company
is still unclear. Matrix management organizations seem towork well upon superficial examination, but their complex
structures prevent unification and make governance difficult
to apply.
Wada: Yes, it is a difficult problem. NTN makes bearings at
multiple business units for use in industrial machinery as
well as automobiles. So although the overseas and otherbusiness units have organized the breakdown of
responsibility areas for each region, it is not always clear
who is responsible for handling particular problems when
they arise. That is a weakness that NTN has.

NTN REPORT 2018

64

Financial/Company Data

Senior Executive Officer

June 2005: Executive Officer at Mitsubishi Chemical Industries Limited(currently Mitsubishi Chemical Corporation)
April 2014: Member of the Board (Representative Director), Vice President
Executive Officer at Mitsubishi Chemical Holdings Corporation
June 2016: Outside Director at NTN (current position)

Resource Strategies

Senior Executive Officer

Noboru Tsuda

Governance Strategies

Standing Audit &Supervisory Board Member

Akira Wada

Business Strategies

Standing Audit &Supervisory Board Member

Outside Director

Our Business Model

Audit & Supervisory Board Members

Outside Director

Governance Strategies

2

TOPIC

3

What aspects of Monozukuri (manufacturing) and Hitozukuri (human resources
development) could NTN gain a competitive edge in, and what obstacles to futuresustainable growth do you foresee?

65

NTN REPORT 2018

Tsuda: We are now required to collaborate with several
different industries. There is a limit to what a single company
can do by itself. The selection of collaboration partners willbe the key. Collaboration will be difficult if NTN does notpartner with companies having a close presence to end
users early on. There are companies close to end users inseveral different industries. As a member of a conglomerate,
the chemical company I was previously with had many
points of contact with a wide range of industries.

Wada: I think NTN is a good company that implements
above-average human resources education. It is an
outstanding company that generates both sales and profits.
That is why I would like to see this company attract
applicants with a bit more ambition and drive. I think its
brand image still has not achieved nationwide penetration in
Japan, so I think the TV commercials which have started
since last fiscal year play a great role to improve brandimage. But I feel some things are lacking. Its recognition levelin Osaka prefecture, Japan, is not very high despite it being
an Osaka company. Tokyo, the capital of Japan, has a wealthof human resources, and raising the recognition level there
will be an important issue. NTN should appeal a point that
we can provide our employees with the attractive job
opportunities.

TOPIC

5

Tsuda: While location and TV commercials are both
important considerations, I think it is also important toconsider new employee training methods and to set training
plans when new employees are hired.
There is currently no room for the sort of flexibility that
employee placements require. But to meet future employee
training needs, I think NTN will need to establish systems
for handling employees flexibly and enabling overseas
postings. The head office organizations will need to draw ontheir expertise to devise and implement these systems.
Factories will also need to reduce their workforces at thesame time. I also think employees with international
experience will need to be placed in the head officeorganizations themselves.

As an outside director, what message do you have for NTN?

Wada: There are a lot of very sober and serious people
among NTN’s top management. That’s a very good thing,but it is also a shortcoming. I would like to see some more
spirited people in management. I would also like theemployees who are in contact with customers to incorporate
an awareness of the company’s brand image into theirdealings with them. Although it will be important to get input
from all the employees on the question of how to improve thecompany’s brand image. NTN produced some TV
commercials in Japan when it marked its centennial year. The
ads have introduced NTN to people with no prior connection
to the company, so I would like to see the company use thisopportunity to work on improving its brand image.

is to find out how much we can help that growth.
Wada/Tsuda: Since bearings are an industry staple, there
will always be a need for them. That may be why NTN has
not needed a sense of crisis, resulting in a lot of areas for
improvement. I see our role as finding out where and how
much to develop these areas, and what sort of changes tomake.

Tsuda: Since I came to NTN from a different industry, I see
a lot of things that the insiders miss. NTN is a company witha long history in a small industry, but does not know muchabout things outside its area. As an outside director, I am
struck by how open an environment NTN has. I enjoy being
able to speak my mind in this company. We outside
directors often speak our minds at Board of Directors
meetings, and there are long and unrestrained exchangesof opinions. NTN has a lot of growth potential. Our mission

NTN REPORT 2018

66

Financial/Company Data

Wada: Bearings are products that form the base technology
for many different items. It is important to develop the
products that current customers demand and only NTN canprovide. These products are not special items that candistinguish themselves from other products on the basis ofquality. NTN does not have any points of direct contact withend users—finished items containing our products areassembled and sold by manufacturers of automobiles andindustrial machinery. That is NTN’s business model. Should
bearing manufacturers just continue providing bearing
technologies, or do they need to start approaching end
users? I do not think any bearing manufactures have properly
answered this question at the present time. If NTN does notstay sharp, it runs the risk of having the uniqueness anddominance of the manufacturing expertise it has accumulated
over a century deprived of by emerging nations.
Over the next hundred years, NTN may need toadvance to business areas more closely resemblingcustomer solutions business. I think NTN may need to startsolution business areas with direct connections to thesystems demanded by customers, and made possible bynon-interchangeable products that cannot be replaced bycompetitor models after being mounted in systems.

What issues related to human resources education is NTN facing?

Resource Strategies

Tsuda: In general, the selection of the product tomanufacture is usually a very important factor in gaining atechnological edge in the manufacturing industry.
The technology team will examine their technology closely,
asking themselves if the quality is high enough and the
product good enough. But the most important thing is how
the market will assess the product. However it is quitedifficult to compete for a technological edge in this industry.
Successful manufacturers usually produce good productsthat sell well and get positive feedback from the market. But
for this industry, the emphasis seems to be more on justblindly creating more competitively priced high-quality
products for delivery by the set delivery date.
As an outside director, I think NTN’s technologicaledge needs to be precisely assessed to provide a clearer
understanding of what the market needs and what
technologies NTN excels at.

4

Governance Strategies

Wada: This year will be my seventh year as an NTN outside
director. When I started in this position, the Board of
Directors lacked energy. It was a Board that just went
through the motions, following along with what had alreadybeen discussed by the Executive Committee. For example,
the seating order called for outside directors to sit at theend, and our role was more to receive a report than to ask
questions and influence the meeting. But the Board is now
seeing quite lively opinions being shared. The seats in front

TOPIC

Wada: When providing dependable products for the
automotive and industrial machinery industries, NTN has noproblems with technology expertise. But it relies too muchon business from the automotive industry. It still has notworked enough on collaborations with different industries todevelop new business areas, or on providing solutions forthe needs of different industries. The initial requirement forproviding these solutions will be training employees to havethe ability to selectively screen through market needs
identified by marketing departments.

Business Strategies

How does the Board of Directors work?
Does it discuss collaborations withdifferent industries?

question to ask will be whether collaborations with otherindustries are possible.

Our Business Model

TOPIC

Tsuda: The Board discussed how to handle new businessareas when creating the Medium-term Management Plan.
But although NTN is working on applications like wind
power and hydroelectric, these businesses are not going as
specified in the initial plan. The employees who develop
technology are proficient at developing new products, but
NTN has a hard time when it comes to marketing. NTN may
be able to provide new products to current customers, but
it has difficulty getting new products into other areas
through marketing. Employees’ motivation is aided bypainting a clear picture—such as by showing how products
for environmental applications can help solve major issuesof public concern, for example. So for that reason, NTN
needs to boost its marketing ability. But it is a case of easier
said than done. As an outside director, I feel I should beasking the Board whether enough human resources havebeen allocated to marketing. The Board is currently focusedon business for the automotive industry. I want to continue
providing my input to get it to move away from that focus.

I do not think manufacturers of automobiles would be
able to suggest any approaches for starting the sort ofsolution business as Mr. Wada has mentioned. I think weneed to work with non-automotive industries to findapplications for friction-reducing technologies. The
automotive and bearing industries are both controlled by asmall number of players, so NTN needs to find out what its
unique abilities are in this type of market. When producing
bearings for the usual applications, the important questions
to ask have always been how to increase production
efficiency, how to increase cost competitiveness and how to
improve quality, delivery time and overall efficiency. But
when developing new business areas, another important

About Usof the chairman have been assigned to outside directors
since last year. I feel that it has changed to an atmosphereto be more conducive to speaking than ever.
But there is almost no concrete discussion of areas
such as collaboration with other industries. A lot of the
discussion is just an extension of past discussions of thedirection NTN should take in future as a bearing company.
There is not much discussion that approaches the end
user’s perspective.

Governance Strategies

Internal Control

Risk Management

We have established the Internal Control Policy in compliance with the basic framework for internal control set forth in theBusiness Accounting Council’s Standards and Practice Standards for Management Assessment and Audit concerning
Internal Control Over Financial Reporting (Council Opinions). As specified by this policy, we have made designing andimplementing an internal control system and handle risk management and compliance work one of the company’s toppriority areas.
The system’s operation is led by the Internal Audit Department, which serves as an independent audit organization toaudit business execution throughout the NTN Group.
Outside Japan, an Office of the General Manager has been established at each of our various regions outside Japanto oversee and monitor operations. Each has an Internal Control Section within it. The Internal Control Sections work with
the Internal Audit Department and CSR (Corporate Social Responsibility) Headquarters (described on P. 71) to implement
policies for the local region or country tailored to local needs and characteristics. The CSR Global Meeting is also held
periodically to exchange information on local policies and discuss issues. The purpose of the meeting is to strengthen
global group-wide internal control and promote CSR activities.

To guide our work on managing risks, we have developed the Risk Management Policy that outlines our basic approach torisk prevention and handling, and the Risk Management Regulations that set forth areas such as risk management
organizations and roles.
We convene the Risk Management Committee twice a year to discuss issues such as groupwide risk management
policy proposals and measures.
We also work on improving response to risk events by implementing BCP (Business Continuity Planning) and BCM(Business Continuity Management).

Implementation Divisions

CSR
Headquarters

Divisions

Subsidiaries

North America

China
ASEAN
Internal Control Section,
Office of General Manager,
ASEAN & Oceania Region

Risk: Failure of new business/
capital investment
Risk: Insider stock trading
Risk: Accident at maintenance/
relocation of production equipment

Risk: Inadequate response to customers

Main Activities

Internal Control Section,
Office of General Manager,
China Region
Subsidiaries

Subsidiaries

Strengthening internal control worldwide
The list of group business units subjected to our company-level control assessments has grown by 2 since the fiscal year ended
march 31, 2017, expanding the total to 51 worldwide (including the headquarters).10 of the business units for assessment are
ranked as significant, and we have assessed Process-level control for these 10.
The audits on regular operations had been conducted in the fiscal year ended March 31, 2017 by the Internal Audit
Department for subsidiaries in the ASEAN region and South Korea. Also the same audits were conducted for 3 subsidiaries in
the China region in the fiscal year ended March 31, 2018. These audits have prevented risks posed by local accounting fraud
and legal violations.
In addition to these audits, 1,500 employees in 46 group subsidiaries throughout the world evaluated their president’s
attitude to compliance through a questionnaire survey conducted in 2017. The findings will be used in audits for purposes suchas quantifying the corporate cultures or environments that might lead to misconduct or legal violations at companies in the fiscal
year ended march 31, 2018.

We selected nine risks for Global Risks that are common to both domestic and overseas subsidiaries and expected to cause
major impacts on management if they occurr. To enable comprehensive world wide risk management for the whole NTN Group,
we monitor the management of Global Risks in our domestic and overseas subsidiaries. The Risk Management Committee
makes periodic revisions in response to changes in the external environment.

Information security measures
In response to the rise of cyberattacks targeting corporations, the nine Global Risks we have selected include “Leakage ofconfidential information,” “Computer virus/cyberterrorism.”
To teach and enforce appropriate information management methods, we have created an Information Security Policy andin-house information security rules, and we provide all our employees with information on our website and e-learning-based
educational programs. We have created systems for protecting all business activity-related information from threats such astheft, falsification, destruction, usage interference and leakage.
Our worldwide subsidiaries periodically report on operation conditions related to information security management, letting
us stay up-to-date on current conditions throughout the NTN Group and respond as needed.

Ongoing implementation of BCP/BCM systems
We continually implement BCP (Business Continuity Planning) and BCM (Business Continuity Management) designed to handle
a major earthquake in Japan.
In the fiscal year ended March 31, 2018, we worked on identifying impeding factors and responding to issues for domestic
subsidiaries and other business units. A system of organizations for rapid business recovery was created along with specificaction plans. We have progressively earthquake-proofed our production equipment to minimize damage (such as by adding
protections against toppling/falling). Our BCP/BCM Subcommittee (staffed by members of promoting divisions at headquarters)
has checked the progress and done follow-up work.
We plan to provide training on assessing the effectiveness of established action plans in each subsidiary in the fiscal year
ending March 31, 2019.
NTN REPORT 2018

68

Financial/Company Data

Main Activities

Global Risk selection

Resource Strategies

India

NTN REPORT 2018

Global Risks
1. Leakage of confidential information
2. Computer virus/cyberterrorism
3. Violation of Anti-Monopoly Act
4. Natural disaster5. Fire disaster/explosion
6. Issue of human rights
7. Industrial accident
8. Complaint about product quality
9. Violation of bribery-related laws

Internal Control Section,
Office of General Manager,
Americas Region

Information Exchanges
Human Resources Interaction

Subsidiaries

Subsidiaries

Subsidiaries

Subsidiaries

Internal Control Section,
Office of General Manager,
India & West Asia Region

BCP/BCM Subcommittee

Departments in charge

Governance Strategies

Internal Control Section,
Office of General Manager,
Europe & Africa Region

Internal Audit
Department

Business Strategies

Board of Directors

Japan
Europe/South America

Risk Management Policy can be viewed on our website.
https://www.ntnglobal.com/en/corporate/idea/policy/index.html

Risk Management Structure

Risk Management
Committee

Collaboration System with Internal Control Sections

Our Business Model

Basic Approach and Implementation System

Detailed information on the CSR Global Meetingcan be viewed on our website.
https://www.ntnglobal.com/en/csr/governance/internalcontrol.html

67

About Us

Basic Approach and Implementation System

Governance Strategies

Compliance

Compliance database “NTN’s Compliance”
NTN’s Compliance is a database for sharing compliancerelated information. It is used to present compliance-related
incidents arising within our group.

Compliance divisions ofoverseas subsidiaries

Training in overseas regions
In the overseas regions, the Internal Control Sections
oversee the creation and administration of training activities
tailored to local characteristics and needs while ensuringconsistency with the company’s policies. One area of focus
is corruption prevention, for which training is provided online
and through a number of other training activities. The
overseas regions have made varying degrees of progress increating rules, so the training is tailored to the amount ofprogress attained in each case.

Officers and employees ofoverseas subsidiaries

Helpline (whistle-blower system) and educational activities

A whistle-blower system called Helpline has also beencreated to reduce compliance risks.

Compliance enforcement structure
Board of Directors

Compliance Committee
Compliance promotion
activities supervisors of
NTN business units/
domestic subsidiaries

Officers and employees of NTN/
domestic subsidiaries

Internal Control Section of Officeof the General Manager
for each of five overseas regions

Corruption prevention efforts

Compliance education and awareness-raising activities
Compliance training
Rank-based training
Separate training programs covering all areas of complianceare provided to employees of different ranks such as recentgraduate new employees, mid-career new employees andnew managerial-level employees. Training for new manageriallevel employees is designed for application to compliance
enforcement in the workplace. Employees are provided withtexts and study independently, taking e-learning-based
comprehension tests. They are required to retake these tests
until they pass, helping solidify their knowledge.

69

NTN REPORT 2018

Business unit-specific training
Priority topics are set for each business unit, and the unit’s
compliance promotion activities supervisor provides separate
training for each. Supervisors and staff take part in a mass
training meeting held at the headquarters once a year. The
event helps shape activities by providing opportunities todiscuss and share information about issues in our groupcompliance work, and training activity topics and content.

Compliance
Committee

Director in charge ofLegal Department

Helpline
Management
Department,
Legal Department

Internal Helpline

ChiefManagement
OfficerPresident

Fair Trade
Monitoring
Committee

External Helpline

NTN Group company officers, employees,
trading partners, etc.

Antimonopoly Act compliance activities
To ensure compliance with the Antimonopoly Act and Subcontracting Act, the Fair Trade Promoting Department undertakes
most activities under the guidance of the Fair Trade Monitoring Committee. The Committee is chaired by the President andreports directly to the Board of Directors.
The Fair Trade Promoting Department organizes awareness-raising activities such as internal training and e-learning
programs. It also creates a system for keeping abreast of all contact with competitors through measures such as self-audits for
Antimonopoly Act compliance and prior applications for preventing and monitoring competitor contact. The Department’s mainawareness-raising activities in the fiscal year ended March 31, 2018 were (1) an Antimonopoly Act compliance training course(August, 379 trainees), (2) a compliance training course for sales staff (January, 585 trainees), and (3) an Antimonopoly Act
e-learning program (November to December, 1,430 trainees). We have held a Compliance Day on July 26 every year since2016. A special message from the President on this day gives employees the chance to reaffirm the importance of compliance.
Working with the Internal Control Section for each overseas region, the overseas business units have also created systems
for activities such as locally led training, prior applications and self-audits. They have created legal compliance systems adapted
to local laws on competition.
Our other compliance activities can be viewed on our website.
https://www.ntnglobal.com/en/csr/governance/compliance.html
NTN REPORT 201870

Financial/Company Data

Overseas regions
Our subsidiaries in the China region enforce in-house
regulations created to reflect China’s anti-corruption laws andgenerally accepted standards and practices. They set forth therules and in-house procedures to use when property or profit
are given to or received from public officials or trading partners.
Audits are also being done to check enforcement.
ASEAN region subsidiaries have started to enforce
in-house regulations localized for each country and created
to reflect the applicable local laws and generally accepted
standards and practices. Regulations for Thailand went into
effect in June 2017, followed by regulations for Singapore
and India.
Subsidiaries in the regions of Europe and the Americas
are also progressively creating rules reflecting applicable
local laws and generally accepted standards and practices.

Director in charge ofLegal Department

ChiefManagement
Officer

Resource Strategies

Japan
We enforce in-house regulations created to reflect domestic
and overseas anti-corruption laws and generally accepted
standards and practices. They prohibit bribery, and set forth
the rules and procedures to use when officers or employees
are to provide property or profit to domestic or overseas
public officials or trading partners. We also carry out rulebased audits, and are creating rules for preventing
corruption among business partners.
Our domestic subsidiaries are each creating their own
regulations while maintaining consistency with company
policies.

Chief
Management
Officer

Governance Strategies

Main Activities

Our domestic business units have created a whistle-blower
system called Helpline with both in-house and outside contact
points. Employees can use the system to voice various concerns
related to infractions of laws, Business Code of Conduct or
in-house regulations. The discussion topics cover harassment,
corruption and breaches of the Antimonopoly Act. Issues raised at
Helpline contact points are reported to company committees
while upholding the company’s duty to maintain confidentiality.
Compliance-related issues are reported to the Compliance
Committee. Issues related to laws on competition (Antimonopoly
Act and Subcontracting Act) are reported to the Fair Trade
Monitoring Committee. A report on the system’s operation is also
provided to the Board of Directors (once a year). Whistle-blower
information is used in the activities of the two committees andhelps improve the our group-wide compliance work. To encourage
employees to use the system, information on the Helpline contact
points is provided in compliance training information and CSR
guidebooks, and posted on our intranet. Whistle-blower systems
are being progressively created and operated also in overseas
regions, where they are tailored to local needs and circumstances.

Business Strategies

Compliance enforcement is a top priority for the company.
Our definition of compliance extends to conforming withgenerally accepted standards and practices, obeying all
applicable laws and following in-house regulations. We havecreated a system for enforcing compliance on a global scale.
In April 2015, we created a set of rules for compliancepromotion activities along with a Compliance Committee thathas subsequently met periodically to work on compliance
enforcement and improvement. Among the Global Risks
selected by the Risk Management Committee, theCompliance Committee handles compliance risks that could
lead to legal violations.
Committee members propose and implement policies
for risk mitigation in collaboration with compliance promotion
activities supervisors at domestic business units and theInternal Control Sections within each Office of the General
Manager in five overseas regions. The nature and progress ofthese activities are reported to the Board of Directors.

Our Business Model

Compliance awareness survey
We conduct an ongoing compliance awareness survey once
every year to assess how effective education andawareness-raising activities have been and how well theBusiness Code of Conduct has been absorbed. The surveys
let us identify issues to work on, and are used to enhance
the compliance activities for the following year.

About Us

Topic-specific training
Applicable departments are periodically given individual
training on specific topics such as Antimonopoly Act
compliance, corruption prevention, security trade control
and harassment prevention. We also create and administertraining programs whenever needed, such as compliancetraining for CEOs of domestic and overseas subsidiaries.

Basic Approach and Implementation System

Governance Strategies

CSR Management
To incorporate stakeholder input into our corporate activities, we have annually held our Stakeholder Dialog since 2015 withexperts representing a number of CSR-related fields. The fourth dialog was held in June 2018, and provided some valuable input.
Experts

Katsuhiko Kokubu

TOPIC 1

In 2015, we endorsed the United Nations Global Compact (an international initiative for developing a
global framework for sustainable worldwide growth). Our aim is to become a truly global company trusted
on the world stage as we support ten principles in the areas of human rights, labour, the environment andanti-corruption. Our CSR Committee is convened periodically to discuss issues and policies affecting theeffective implementation of CSR activities in the areas of greatest worldwide significance today, such as
supply chain CSR, human rights and diversity.

Eriko Nashioka (Facilitator)

Certified Public Accountant andRepresentative Director at Institute forEnvironmental Management Accounting

Corporate General Manager of Procurement Headquarters ...Kunio Kamo
General Affairs & Environmental Management
Department Manager................................................. Masahiro Kusunose
Corporate Value Promotion Department Manager................Kouhei Iguchi

Corporate philosophy

TOPIC 2NTN engages in a comprehensive set of CSR activities, but these activities could be improved by deciding on their materiality toindicate which way the company is heading. It is important to hold ample discussions with units such as business divisions andtechnical divisions in addition to head office divisions. It is also important for management to make decisions on the issues discussed.
Materiality selection procedures are something the company decides on autonomously. Materiality should be determined by scoringand mapping analysis, consistently ensured to adhere to the Medium-term Management Plan. The company should ultimately
consider SDGs and other issues of public concern while keeping strategic assessments of materiality in mind.
TOPIC 3

Awards in each category

Field of Creation“Development of High-speed Parts
Inspection Robots to Replace Human Eyes”

Field of Service Solution“Enhancing NTN Brand Awareness throughCollaboration with Professional BaseballTeam by using Hand Spinner”
Grand

Prix

“Support Integration of Young People in State
Welfare Institutions” (described on P.90)

Field of Globalization“Improving Communication Skills by
Learning Japanese Language and Culture”

Materiality

Environmental issues

Producing environmentally friendly products is a very good thing. But quantifying the amount of CO2 reductions of certain
products may cause a risk of greenwashing*1 in overseas business sites, so enough care is needed when disseminating
information from Japan and overseas. Even for quantification done in conformance with the SBT (Science Based Target)*2
initiative, measurement accuracy and improvement levels should be prioritized instead of just releasing indicators. Scope 3 work
also needs to cover approaches to improvements as well as just measurements. If possible, the ideal procedure would be tofocus on key processes for CO2 reductions, and to include disclosure of reduction effects.
*1: Fraudulently making a product appear to be environmentally friendly

TOPIC 4

*2: Setting targets for companies that are consistent with scientific findings

Supply chain CSR, human rights and governanceKey suppliers should be designated and managed instead of just setting the same standards for all suppliers, and werecommend gathering a wide range of information.
Considering global management, local areas should generally be handled by the head office, and ideally not left completely
up to local business sites. It is also important to strengthen internal control functions and improve awareness among employees.
Especially, in the area of human rights, human rights should be addressed on a global level even when no human rights issues
exist in relation to local domestic laws. We recommend working on making human rights effective in overseas locations withdifferent laws and cultures.

NTN REPORT 2018

72

Financial/Company Dataconsists of MISSION (Reason for being) and VALUES (fourbasic values), and we set four categories corresponding tothese basic values. 1,711 employees took part in 164
teams from domestic and overseas business sites. Bothachievements and activity processes were considered whenselecting the award winner.
We will continuously implement various activities for
instilling the corporate philosophy.

Resource Strategies

Creating methods of concretization such as the award system and the creation of a continuous project structure which
employees voluntarily participate in, will be an important requirement for raising corporate philosophy awareness. It will benecessary for employees to think about the corporate philosophy code of conduct (NTN Spirit) and work on their own initiative
to encourage actions inspired by the corporate philosophy. Continuing ongoing activities will also be effective, such as by having
top management make personal visits to domestic and overseas business sites and convey the dialogs on the spirit of thecorporate philosophy. In addition to organizing the NTN PROUD AWARD, we also recommend activities designed to make thecorporate philosophy more relatable. For example, the results or processes of implementing the NTN PROUD AWARD could be
illustrated in videos shown to all employees.

Corporate philosophy awareness raising

Field of Contribution to the Society

Masaru Kaizaki

General Manager of Planning
Department, Sustainability Office
OMRON Corporation

Governance Strategies

UN Global Compact

NTN REPORT 2018

Yoko Hiyama

Lawyer admitted in Japan
and New York,
Hiyama & Kubota Law Offices

Business Strategies

Professor, Graduate School ofBusiness Administration
Kobe University

NTN
Corporate General Manager of CSR Headquarters .....Hiroshi Nakano
Personnel Department Manager ....................................... Kenji Nono
Corporate Planning Department Manager............... Takanobu Ozawa

Main Activities

71

Our Business Model

We have established the CSR (Corporate Social Responsibility) policy in the spirit of our corporate philosophy. We define CSR as:• Engaging in corporate activities that incorporate concern for the environment and initiatives to ensure fairness andcontribute to the community• Fulfilling the duty of accountability to stakeholders (such as customers, business partners, shareholders, employees, theenvironment, local communities, etc.)• Working to improve corporate activities so that they go beyond economic activities and encompass the environment andcommunity
In 2014, we established the CSR Headquarters to strengthen our group-wide CSR activities. Also, in May 2018, CSR Headquarters
was re-organized and comprises four departments: Global Risk Management Department (handling risk management), Legal
Department (handling compliance), Fair Trade Promoting Department (handling Antimonopoly Act), and Corporate Value Promotion
Department (handling activities designed to help improve corporate value). The departments work with each other to implement avariety of CSR activities, while managers and other CSR staff in charge
CSR policy can be viewed on our website.
of CSR are appointed at domestic and overseas subsidiaries to plan
https://www.ntnglobal.com/en/corporate/idea/policy/csr.html
and perform activities tailored to local needs and characteristics.

Under “Our Vision” -the company’s long-term vision- our goal
is to establish “a company where its corporate philosophy isunderstood by all employees around the world and where all
employees think and act for themselves.” We intend to forge
ahead with initiatives to raise awareness of the corporate
philosophy. The three main initiatives carried out for the fiscal
year ended March 31, 2018 are described below.
1. To improve the sympathy and understanding for the contentsof the corporate philosophy, we held the Corporate
Philosophy Dialog for the management and division heads
who play leading roles in practicing the corporate philosophy.
2. We reviewed the framework of our corporate philosophy,
and established “NTN Spirit” (described on P.4) byincorporating some of the language, principles and mottorelied on by local business units and subsidiaries. NTN
Spirit is our corporate philosophy code of conduct thatspecifies the attitudes and actions all group employees
should emulate. These activities were designed to give
employees a better understanding of the corporate
philosophy and help them implement it by relating it totheir own work as they carry out their routine work.
3. We carried out the “NTN PROUD AWARD” to promote
implementation of the corporate philosophy. This
challenging project called for employees to set and work on
achieving topics and targets linking the corporate
philosophy to their routine work. Our corporate philosophy

About Us

Stakeholder Dialog

Basic Approach and Implementation System

Special Feature

3“HITOZUKURI”behind our “MONOZUKURI”

To produce the workforce needed to make us more competitive in the marketplace, we provide training designed to produce
globally oriented employees who can work in countries and regions throughout the world. Our Monozukuri workforce is theprime driver of our value-creation activities. This special feature looks at how we train this workforce to reliably replicate NTN’s
original skills and technologies at manufacturing bases throughout the world.

The three pillars of NTN’s production technology training
Production Engineering
R&D Center

Our training policy is based on theconcept of using local sites, local materials
and local personnel. Based on this policy,
in addition to promote our efforts toincrease the overseas production ratio, we
provide training designed to develop
employees who can play an active role indifferent countries or regions.

Researches high-precision/higherefficiency production, and works oncreating more advanced andintelligent NTN machine tools. Also
works on training young productionengineers.

Main production bases
Serve as venues for learning all theelements required for production
activities, such as quality, safety, theenvironment, 5S/3D* andtransparency. Provide skills training
and teaching in a systematic andefficient manner.

Programs and initiatives for human resources development
NTN production engineer
training course

Every year since 2014, the NTN
Technical Skills Competition has given
young technicians around the world
an opportunity to pit their outstanding
skills against each other and learn theimportance and necessity of theseskills. By spreading NTN’s original
skills and technologies, the event
helps make our technologies moreadvanced while raising their standard.

A program providing planned training
schemes for employees in their firstyear at the company. The program isdesigned to produce productionengineers and project leaders who canwork throughout the world. Production
technology specialists are trained bygaining experience at manufacturing
sites and the Production Engineering
R&D Center starting early in their career.

Meister candidate employees recognized ashaving the capacity for acquiring advanced
knowledge and skills.

Employees receiving guidance from a Meister

Designated skill areas
Forging/pressing
Bonding technology/
weldingHigh-frequency heat
treatment
Grinding

Turning

Assembly

Controlled atmosphereheat treatment

Inspection/measurement

Electrical control
Production technology
Facility maintenance
Injection molding
Mechanical drawing

NTN’s strategies for human resources:
A department head’s view

A program that teaches bearing
production knowledge and basic
manufacturing skills to young
engineers to prepare them for futureroles as workplace leaders. The
program started in 2012, and iscurrently offered at our Kuwana, Iwata
and Okayama business sites.

Global Human Resource
Development Department Manager* 5S: A workplace methodology used in the Japanese manufacturing and service industries. An initialism for the words seiri, seiton, seiketsu, seiso and shitsuke (oftentranslated as sorting, setting in order, shining, standardizing and sustaining/discipline). The words describe how to organize a work space for efficiency andeffectiveness by identifying and storing the items used, maintaining the area and items, and sustaining the new order.
3D: An extension of the 5S methodology. The three Ds are teichi,teihin and teiryo (define area, define product and determine quantities).

NTN REPORT 2018

Junior Meisters

NTN technical workshop

Tomoko Tanaka

73

Employees with extensive practical experienceand advanced knowledge and skills recognizedthroughout the company. Their work ethic andthe guidance they provide to subordinates make
Meisters a model for other employees.

We are making business areas increasingly global, expanding manufacturing bases throughout
the world. Because of this business expansion, it is becoming increasingly important to instill
the NTN's mindset in Monozukuri to employees working all over the world and to build thesystem to pass on skills and technologies we have developed so far to the next generation.
Moreover, in Japan, as the role of mother function of Monozukuri is more demanded, we are
striving to strengthen the role through various activities such as NTN Technical Skills
Competition, Global QC Circle Convention, etc.
We have hired a diverse range of employees, who differ by gender, race, nation and work
style. We therefore believe it is necessary to foster a workplace environment where all our
employees can deepen mutual understanding and fully demonstrate their abilities. In Japan,
we also make efforts to build the system for child and elder’s care as well as introduction of
telecommuting.
We contribute to development of a smooth society by implementing various activities incollaboration among the entire NTN Group based on the recognition of “the human resources
are the most important asset driving our business.”

Information on careers and training at NTN can be viewed on our website.

https://www.ntnglobal.com/en/csr/sc/employee.html
NTN REPORT 2018

74

Financial/Company DataNTN Technical Skills
Competition

Meisters

Resource Strategies

Our Meister program began in 2005 as a way toraise the standard of manufacturing skills andtechniques and ensure they are passed on to thenext generation of employees.
Worker skill has a direct effect on productquality for manufacturing processes such as heat
treatment and forging, making ongoing worker skill
training crucial for these processes. Meisters
specialize in heat treatment, forging/pressing,facility maintenance and other skill areas that need
to be taught to the next generation. Meisters forthese areas are certified by the Meister
Certification Committee that is held once per year
to make the final selection from among candidates
meeting a demanding set of requirements. Meistercandidates are selected from among the highskill-level employees at each business site bycertifying Junior Meisters. There are 5 Meisters
and 77 Junior Meisters working at our businesssites as of April 2018.
Meisters leave their line work to train junioremployees in the knowledge, skills and techniques
they possess. They also work actively on solving
technical issues facing manufacturing departments
such as by advising on technical assistance foroverseas business areas and on new productdevelopment.

Governance Strategies

Global Human Resource
Development Department

Meister program

Business Strategies

Training our Monozukuri workforce

Meisters with advanced special abilities are the key to pass on skills at NTN

Our Business Model-Developing the Human Resources behind our Manufacturing-

About UsHUMAN
RESOURCES
Resource Strategies

Resource Strategies

Human Resources
About Us

Relationship to SDGs

Basic Approach

Activities: Key Points and Achievements

We feel that a diverse workforce is a crucial requirement for remaining competitive and producing innovation, so promoting
diversity* is one of our management strategies.
We aim to create a workplace environment that lets all employees reach their full potential while maintaining a goodwork-life balance. To do so, we implement a range of different policies and work to ensure a safe work environment that
protects employees from health or other concerns.

Number of women in management positions

1 2 ............................................................... 1

Number of workplace incidents causing lost work time
5 1 ............................................................... 6* NTN’s diversity objectives:
To create a work environment that lets everyone reach their full potential, and to grow our organization by harnessing the personal growth achieved by our
employees through job fulfillment. These objectives will be attained by understanding and recognizing the various differences among all our employees inattributes such as gender, age, career and work style.

Post-retirement rehiring rate
62% ................................................................. 2

Rate of workplace incidents causing lost work time
0.41 0.08 ................................................ 6▲1(FY ended March 31, 2008)

32 (FY ended March 31, 2018) ... 1

We make ongoing and proactive efforts to hire women. We are also
active in awareness-raising to encourage women in the workplacesuch as holding seminars for executive and managerial-level
positions. As shown below, the number of female managerial-level
employees has been steadily increasing in recent years.

30
20
10

3

1

0

2008

2009

5
2010

10

11

2011

2012

16

2013

20

2014

22

2015

31

32

2017

2018

(Fiscal year
ended March 31)

6
Exterior of Bear Kids Land Kuwana
and some of the children in its care (inset)

Hiring persons with disabilities and seniors

3

Employees with intellectual disabilities in a Dream Workshop

Initiatives for a fulfilling working life

We promote several different initiatives to accommodate a diverse range of work styles. (Example)
NTN Job Return scheme

75

A rehiring system for employees who left theirjobs due to life events. Covers employees
who leave work for reasons of marriage,
childbirth, childcare and even long-term care.

Maternity leave system

Leave for partner’s childbirthChildcare leave system

Shortened working hours forchildcare

Telecommuting system

Long-term care leave system

Shortened working hours forlong-term care

NTN REPORT 2018

Occupational safety and health

We are working on improving danger sensitivity by providing ongoingsafety education using 3D virtual hazard simulators and education fromworkplace safety consultants. We also succeeded in reducing thenumber of workplace incidents causing lost work time in the fiscal year
ended March 31, 2018 by using past workplace incidents at businesssites to set fixed standards and subjecting them to external audits byother business sites.
Nine business sites have acquired Occupational Safety and HealthManagement System (OSHMS) certifications. The Kuwana Works
acquired certification for the ISO 45001 international occupational safety
and health standard in January 2018. We are working on establishingsafety management systems that meet global standards, and will
progressively increase the number of certified business sites in the years
ahead.
Occupational safety and health also has been a priority for ouroverseas business sites, where hazard simulation centers called "SAFETY
DOJO" have been set up. We have started working on worldwide efforts
to spread awareness for the importance of occupational safety and health.
For example, the NTN PROUD AWARD (described on P.71) gave theemployees of NTN DRIVESHAFT ANDERSON, INC. (NDA) an opportunity
to voluntarily present their work on raising workplace safety awareness.
Improving occupational safety and health awareness will continue tobe a focus in the years ahead.
Detailed information on initiatives for a fulfilling working life andother HR development initiatives can be viewed on our website.
https://www.ntnglobal.com/en/csr/sc/employee.html

Financial/Company Data

Regarding the employment of persons with disabilities, we haveestablished three “Dream Workshops” at Kuwana, Iwata andOkayama Works. This initiative, implemented in cooperation withspecial needs schools, provides a work environment in which
persons with intellectual disabilities can fill an important role. We
have achieved an employment rate of persons with disabilities of
2.06% in the fiscal year ended March 31, 2018.
To help experienced workers teach young employees theirknowledge and skills, we actively encourage the rehiring of
retired seniors, attaining a 62% rehiring rate in the fiscal year
ended March 31, 2018.

Employee healthResource Strategies* Includes three consolidated subsidiaries to be merged in October 2018: NTN KONGO
CORP., NTN MIKUMO COMPANY LTD. and NTN ENGINEERING PLASTICS CORP.

2

5

We provide 100% of the designated health checks for employees engaged in work applicable to the provisions of Article 13-1-2
of Japan’s Ordinance on Industrial Safety and Health. (In our case, the applicable work types include work in significantly hot
locations and late-night work.) We also provide a wide range of mental health accommodations at opportunities such as
induction training for new employees or when promoting managerial-level employees. These accommodations include mental
health training, and occupational medical referrals for high-stress individuals identified by stress checks.

25

2016

Supporting and respecting the protection of internationally proclaimed human rights, and ensuring non-complicity in humanrights abuses are the two human rights principles contained in the United Nations Global Compact that we have endorsed since2015. We provide group employees with training in these principles to improve their awareness of them. We also use reporting
systems such as our Helpline (whistle-blower system) to check on human rights violations.

Governance Strategies

Rise in women in management positions at NTN*
(persons)40

We are also working on expanding our Bear Kids Land
intra-company child daycare centers to enable employees tobalance their work and childcare needs. We opened the first one at
our Iwata (Shizuoka Prefecture) business site in April 2009, andfollowed it with a second one at our Kuwana (Mie Prefecture)business site in April 2018.

Respect for human rights

Business Strategies

4

Encouraging women in the workplace▲

Creating a secure workplace environment

1

▲

▲

Diversity

Our Business Model

Number of intra-company child daycare centers

Employment rate of persons with disabilities
2.06% ............................................................. 2

3D virtual hazard simulator

Working on occupational safety and health at NDA

NDA employees who participated in the NTN PROUD AWARDNTN REPORT 201876

Resource Strategies

Procurement
About Us

Relationship to SDGs

Basic Approach

Activities: Key Points and Achievements

1

Supplier Meeting ................................................ 2
Business partner response rate

for conflict minerals survey 92% ....................... 3

Questionnaire survey for business partners

3

Survey results
Done

On the way to accomplish

020

Compliance

Need more time for it

40

60

64

80

100(%)

23

81

Environment

65

Quality/safety

Socialcontributions

36

1

9

27

4 1

41

Supplier Meeting

Conflict minerals survey

We conduct a survey periodically, to ensure that certain
materials and our finished products do not contain particularmaterials that could be a source of funds for armed groups
in conflict zones, or misused for immoral issues such as
human rights violations, illegal mining and smuggling. We
respond to customer’s inquiries concerning conflict materials
based on the results of this survey.
In the fiscal year ended March 31, 2018, we traced
back through the supply chain to identify material refiners
through a survey, requested to 293 business partners. Morethan 90% of partners responded with answers indicatingthat they do not use any conflict minerals.

We will continue to conduct the survey periodically. We
will take appropriate countermeasures when any risk isfound, to avoid mineral resource purchase from actual
conflict zones or high-risk zones.
No response:

Business partner
response rate

Response:

8%

92%

1

4

Subcontracting self-auditor system

Subcontracting self-audits

In the fiscal year ended March 31, 2018, we organized a new
subcontracting self-auditor system to facilitate business sites toautonomously comply with Subcontracting Act.
The Procurement Headquarters holds a Subcontracting
self-auditor training course once a year to provide education forcandidates who have basic knowledge of the Subcontracting
Act and at least one year of practical experience. The course
certified 42 new self-auditors who passed the certification testin the fiscal year ended March 31, 2018.

The subcontracting self-audits are conducted at domestic
bases. They were generally conducted in the presence of
the Procurement Headquarters. In the fiscal year ended
March 31, 2018, we switched to a system of self-audits led
by subcontracting self-auditors. Subcontracting self-audits
were done at 21 domestic bases (20 production bases andone research base). They were done in the presence of the
Procurement Headquarters at seven of these bases toenable checks of the self-audit processes.

5

Calling on business partners to step up their CSR procurement activities

Subcontracting Act compliance work

1

Procurement locally and from the most appropriate regions

Both in Japan and overseas, our worldwide production
bases work to ensure that supplies are procured locally orfrom optimal suppliers in any location.
We work under the bases to maximize local
procurement even under different business customs andother difficulties. Along with economic factors, the benefit to
the local job market will be considered when making
procurement decisions, as well.
Ratio of Local Procurement (by region)
0

10

70

80

90

Total

100(%)

88

Europe94

Americas84

Asia
and Others

84

Exchanging opinions between Japan and overseas

77

NTN REPORT 2018

NTN REPORT 2018

78

Financial/Company Data

We held “Supplier Meeting” for the first time this year. The
purpose of this event was to share a better understandingfor our business activities with business partners, and tobuild up a teamwork. Representatives from 71 business
partners attended. Summary of our business circumstancesand our global business promotion were presented, and alecture was given by outside instructor. The officers incharge of the Procurement requested the attendees to stepup their CSR procurement activities on their activities. This
event also included a social meeting between business
partners and NTN, at top management level to get closer
each other.
We will continue to hold the Supplier Meeting in thefiscal year ended March 31, 2019, the first year of our new
Midterm Management Plan (DRIVE NTN 100). We willcontinue to reinforce the partnership between business
partners with mutual trust.

Procurement locally and from the mostappropriate regions............................................. 5

4 1
20

46

22

1

95%.............. 4

Resource Strategies

33

18

18

68

Business continuity
management

1

25

77

Information security

12

Subcontracting self-auditing rate

Governance Strategies

Human rights/
labor

No response

Establishing new subcontracting
self-auditor system ............................................. 4

Business Strategies

To raise recognition for the NTN CSR Procurement
Guidelines and check compliance with them, we conducteda survey for our 293 business partners.
The questionnaire consisted of seven topics on thework being done by business partners for various issues.
More than 87% of the respondents answered ‘completed’or ‘on the way to accomplish’ for five topics such as theenvironment, the human rights and the labor issues, while
fewer than 80% gave positive responses for the questions
about business continuity management and social
contributions.
The result of the survey is being used to provide theagenda for discussions to tackle problems for CSR
activities. Through discussion and sharing examples ofsuccessful work, we support our business partner activities
and ensure our supply chain management is robust.

2

Promoting supply chain management ................. 1

Our Business Model

The Basic Procurement Policy clarifies our direction with the concept of: globalization, fairness/impartiality, and environmental preservation.
These principles are intended to build up relationships of trust with business partners and NTN Procurement Departments, as well as its
related departments.
We work to conserve the environment through our activities as defined in the NTN Group Green Procurement Standards, giving priority
to our business partners with outstanding performance for environmental conservation and environmental quality. We also encourage ourpartners to take proactive CSR actions positively and proclaim that in the NTN CSR
Basic Procurement Policy, NTN Group Green
Procurement Standards and NTN CSR Procurement
Procurement Guidelines. Our domestic and overseas production bases work to
Guidelines can be viewed on our website.
ensure that supplies are procured locally or from the optimal locations.
https://www.ntnglobal.com/en/csr/sc/client.html

Resource Strategies

Production
About Us

Relationship to SDGs

Basic Approach1

Production in the customer regions/the optimal regions ... 1
In-house manufacturing pre-processes......................... 2

Hub bearing

Driveshaft

Global production network

Next-generation production equipment development.... 3
Meeting to discuss productivity improvement

2

Production shares by region* Values shown are percentages of worldwide production for the fiscal year ended March 31, 2018.

AmericasAsia
and Others

develop cutting-edge heat treatment technologies such as
induction hardening. These efforts will help improve bearing
performance and make us more competitive. The rolling elements(balls and rollers) used in bearings are also being produced
in-house.

Main manufacturing processes of bearings

Cutting-edge technology in use at NTN NOTO CORP.’s heat treatment plant

Manufacturing pre-processes

Japan

48%

Outer
ring

3

52%
Americas19%

Europe17%

Asia
and Others

16%

Fiscal year ended
March 31, 2008

79

NTN REPORT 2018

Fiscal year ended
March 31, 2018

Heat treatment

Width grinding

Outer diameter
grinding

Groove grinding

Groovesuper-finishing

Forging

TurningHeat treatment

Width grinding

Groove grinding

Inner diameter
grinding

Groovesuper-finishing

New driveshaft plant in U.S.A (2018)

Washing

Inspection

Rustproofing

Packaging/shipping

Assembly

Developing manufacturing technology/equipment

Our manufacturing equipment has been produced (designed/
manufactured) in-house since our founding. Our in-house
Production Engineering R&D Center researches and develops
manufacturing technologies, and designs and manufactures
manufacturing equipment. It is now also working on developing
next-generation equipment incorporating IoT and AI functions.
Examples include our Grow Up series of line equipment* enablinglabor-saving adapted to the economic growth of emerging
nations, and electron-beam welding (EBW) equipment helping
driveshaft component standardization. We are also augmenting
our overseas facility maintenance departments, creating a system
for local equipment overhauls and renovations.

Growth of overseas production rate

34%

Turning

Financial/Company Data

Inner
ring

Forging

Grow Up line equipment
BEFORE
Human
Operator

Resource Strategies

19%

16%

We are actively working on having the manufacturing pre-processesof forging, turning and heat treatment done in-house. Since theyusually require large capital investments, manufacturing preprocesses are often outsourced to suppliers. But by handling key
manufacturing pre-processes in-house, our domestic and overseas
bases will be able to generate benefits unmatched by competitors.
In our forging processes, we are working on improving “Nearnet shape” which is a shaping technique that produces initial
shapes closely resembling the finished product. The techniqueincreases post-processing efficiency and environmental benefits by
reducing the amount of material discarded and processing time
during the subsequent turning process. Heat treatment process
greatly affects product performance and life, and it is done inhouse. We are accumulating a portfolio of in-house material
composition research and production technologies, working toGovernance Strategies

EuropeIn-house manufacturing pre-processes and rolling element production
Business Strategies

Our production bases in Japan, the Americas, Europe and Asia proactively locate their production activities in the customer
regions or the optimal region as required to meet customer needs. Demand is expected to continue increasing overseas, and wewill continue expanding our local production activities overseas to meet them.
Our bases also take active steps to ensure that supplies are procured locally or from the optimal location.

17%

Our Business Model

In addition to producing worldwide, we provide our products to customers withthe same outstanding quality, cost and delivery time regardless of their place oforigin. We have the top share of the hub bearing market and second-highest
share of the driveshaft market worldwide.
"On local sites with local materials by local personnel" is a cornerstone of
our production approach. We have used this approach to establish and maintaina global production system composed of local production bases managed by
local employees and using local materials and equipment.

Activities: Key Points and Achievements

AFTER
Robot

* Grow Up line equipment:
A series of semiautomatic equipment supporting later addition of robots
and conveyor units to adapt to the labor cost structure of emerging nations.

NTN REPORT 201880

Resource Strategies

Quality
About Us

Relationship to SDGs

Basic Approach1

Basic Quality Policy

Pursuing right quality to meet functions and specifications requested
by our customers.
• Applicable quality
Our quality should immediately respond to the change of our customer’s requirements.
• Competitive quality
We have to win quality competition.
• Quality for economy
Quality should benefit our company.

Quality Slogan

Quality is our future—Quality paves the way for our future.—Strengthening our global quality assurance system

Personnel training to improve Quality skills

Technical Service Units throughout the world .......... 6

4

IATF 16949 certification

We are proactively acquiring ISO 9001 certification(international standard for quality management systems) atdomestic and overseas production bases, as well as IATF
16949 certification (additional standard for the automobile
industry). The main certification acquisition in the fiscal year
ended March 31, 2018 is as shown on the right.
In addition, JIS Q9100 and Nadcap which arestandards for the aerospace industry, and certification for
the railway industry standards IRIS (Europe) and CRCC
(China) are also obtained.

5

Sales TQM activities

Major certification achievements (Fiscal year ended March 31, 2018)
ISO 9001: 39 production bases certified
Japan

ELECTRIC MODULE PRODUCTS DIVISION

Fiscal year ended March 31, 2018

Germany NTN Mettman (Deutschland) G.m.b.H.

Fiscal year ended March 31, 2018

Japan

Fiscal year ending March 31, 2019(achieved)

GREEN ENERGY PRODUCTS DIVISION

IATF 16949: 36 production bases certifiedJapan

NTN ENGINEERING PLASTICS CORP.

Fiscal year ended March 31, 2018Japan

NTN ADVANCED MATERIALS CORP.
(Kanie Plant)
NTN ADVANCED MATERIALS CORP.
(Kameyama Plant)
ELECTRIC MODULE PRODUCTS DIVISION

Fiscal year ended March 31, 2018

Fiscal year ended March 31, 2018

MexicoNTN MANUFACTURING DE MEXICO.S.A.DE.C.V.

Fiscal year ended March 31, 2018

U.S.A

NTN DRIVESHAFT ANDERSON, INC.

Japan
Japan

Fiscal year ended March 31, 2018

Fiscal year ending March 31, 2019
(anticipated)• Includes bases for which switch from ISO/TS 16949 is under review.
• Applies to domestic and overseas consolidated manufacturing subsidiaries (excludingbases that have not started mass production)* Cross-SWOT analysis:
A methodology that classifies elements of business activities across the four categories of strengths, weaknesses, opportunities and threats, and evaluates and analyzes each category. Its
aim is to derive strategies and tactics by crossing these categories with each other.

6

A presentation being given at the Global QC Circle Convention
NTN REPORT 2018

Global QC Circle Convention .............................. 3

Technical Service Units

NTN’s technical service units are completely custom-mademultifunctional vans being operated throughout the world.
They contain teaching and presentation materials
showcasing our products, and are used to hold bearing
technology workshops for customers. Since bearings aredelicate products, the workshops cover the techniques andprocedures needed when customers perform mounting or
replacing work themselves.
Interacting with customers around the world in person
gives us direct insights into their individual problems andneeds.

A technical service unit and bearing
technology workshop (inset)
Our other quality activities can be viewed on our website.
https://www.ntnglobal.com/en/csr/sc/customer.html

NTN REPORT 201882

Financial/Company Data

Global QC Circle Convention

Our Global QC Circle Convention has been held annually
since 2011 as a way to let representatives from domestic
and overseas QC Circles share and present their activity
results and improvement examples. The event was designed
to help improve worldwide safety, quality and productivity.
Features such as a space for international interaction set up
during the event gave the employees in attendance thechance to interact with each other while learning andappreciating the variety of different approaches andmindsets they possess.

81

Sales TQM activities ........................................... 5

We are working on improving customer satisfaction through on-the-job training and a number of other education and training
programs at domestic sales bases.
One program held during the fiscal year ended March 31, 2018 was a customer strategy training program designed toinvestigate whether customer-oriented strategic approaches have been implemented by using Cross-SWOT analysis* to identify
each customer’s strategies and tactics.
We also have a Sales TQM (Total Quality Management) program consisting of meetings and educational seminars held toreview weekly activities. The program is a platform for business education, and is designed to foster the ability to think and act
from the customer’s perspective. Our group training is designed to produce sales reps who can think and act with initiative.
The Change Leader Training program was created to produce leaders in improving negotiation skills and reforming attitudes andactions. The Basic Training for Creating Better Strategy Pitches is a program for young employees.
We will continue to focus on training programs designed to accommodate changing customer needs.
Group work at QC Basic Course

3

Specialized quality education program ................ 2

Resource Strategies

To improve employee quality awareness and knowledge, we
provided a specialized quality education program to 112
employees during the fiscal year ended March 31, 2018,
including topics such as “QC Basic Course,” “QC
Management Course” and “QC Advanced Course.” Quality
education courses were also incorporated into training forassistants and leaders of QC Circle activities for the firsttime.
By reviewing recent quality issues and understanding
the importance of quality, we are improving quality at eachplant through QC Circle activities to increase quality level.

100% ............................................................. 4

Governance Strategies

2

Quality management system certification rate

Business Strategies

To meet global market demand, we promote local production and have created a global production network. The smooth andreliable transfer of mother plant production systems is a key requirement for ensuring uniform worldwide quality and providing aquality assurance system. Creating more robust rules for production transfers and process changes is one area of focus.
By comparing the quality standards from different production plants, we defined higher-level requirements to ensure stable
quality from the very start of production, and we are working to ensure compliance with these rules.
To strengthen the quality of steel material worldwide, we created a Material Management Group, within the Quality
Assurance Division, to strictly control the inspection method and acceptance criteria of steel materials used worldwide andcentralize management. We are grasping variations of quality and change points of the steel manufacturer at an early stage toprevent market defects caused by materials.
In addition, by using G–QUICK, which centrally manages quality survey requests from customers around the world andquality information such as product investigation and complaints, we can promptly deploy the information to relevant
departments and solve problems in early stages.

Quality information acquired using G-QUICK ...... 1

Our Business Model

NTN’s Basic Quality Policy specifies all the basic principles that shape
our manufacturing approach. We use it to work on maintaining andimproving product quality throughout the world, aiming for high qualitythat satisfies all our customers.
To help increase customer satisfaction, our domestic and overseas
sales bases have a representative for each customer and sales
distributor. The use of dedicated representatives lets us suggest the bestsolutions in the minimum response time when customer issues arise.

Activities: Key Points and Achievements

Resource Strategies

Environment
About Us

Relationship to SDGs

Activities: Key Points and Achievements

NTN Environment Policy has been created by the Group to reduce environmental impact and help ensure the sustainable
development of society.
To implement the Policy, we have established a Company-wide Environmental Management Committee that governsGroup members and subsidiaries in Japan. The Committee sets environmental targets for CO2 emissions and waste
reduction at individual business sites and for the Company as a whole. We are strengthening our environmental
management system at individual workplaces, creating committees at our manufacturing divisions, head office and sales
divisions to work on issues such as saving energy, saving resources and improving office environments.

Targets for 8 goals of Environment Policy: 14 of 16 achieved

NTN Environment Policy

1. Technologies to help prevent global warming
The NTN Group will help prevent global warming by developing
and releasing new technologies and products that help save andcreate energy worldwide.

4. Sustainable resource use
The NTN Group will adhere closely to the three Rs approach(Reduce, Reuse, Recycle) as we work on reducing waste andresource inputs such as water and raw materials and otherresources.

Compliance

Ongoing rigorous management of hazardous materials

Reducing environmental
impact from businessactivities

Reducing CO2 emissions

Chief of Secretariat: General Manager ofEnvironmental Management Department
at Head Office
Energy-saving/Resource-saving Sectional Meeting
Environmentally Hazardous Substances
Management Sectional Meeting
Pollution Control Sectional Meeting
Logistics Environment Sectional Meeting

Reducing water
consumption

Sustainable resource use

Cross Audit Team

Chief Management Officer
of Environmental Managementof Business Sites(Head of Business Site)

Reducing paper andStyrofoam(For Head Office, Officer in Charge of General Affairs
Department)
On-site Audit Teams
Business Site Environmental
Management Committee

Management Manager ofEnvironment Management of
Business Sites:
General Manager ofManagement Department orGeneral Manager
of General Affairs Department
at Head Office

Chief of Secretariat: Head of Management
Department or General Manager of General Affairs
Department in the case of Head Office
Energy-Efficiency andResource-Conservation Committee
Environmentally Hazardous Substances Manufacturing
Management Committee
business sites
Pollution Control Staff Committee

Japan
Overseas
Japan
Overseas

Raising recycling rates

Japan
Overseas

Reducing waste intensity

Japan

Reducing paper purchaseintensity

Japan

Reducing Styrofoam

Japan

Logistics Environmental Committee

Head Office,Sales
Departments

Rigorously managing
environmentally hazardous Managing and reducing PRTR substancesubstances

6% decrease compared to fiscal year
ended March 31, 2017
Japan
Overseas

Protecting biodiversity”Kigyo no Mori" and other biodiversity protection
activities

Continually improving
environmental management
systemAcquiring revised ISO 14001 (ISO 14001:2015) certification

16 or more participating business sites
7 or more participating business sites

19 participating business sites
11 participating business sites
Certified in November 2017

*1: Calculated using a fixed CO2 emissions factor of 0.381 for electricity.
*2: Includes 5 additional business sites (NTN-AT, NDB, NTPT, NNMI Chennai and Nanjing NTN).
*3: Includes 4 additional business sites (NDB, NTPT, NNMI Chennai and Nanjing NTN).

Company-wide environmental targets for the fiscal year ending March 31, 2019NTN Environmental Policy

Division Head

Environmental Targets

Technologies to help prevent global warming

Developing and releasing new technologies and products that help save and create energy

Compliance

Ongoing rigorous management of hazardous materials(Such as plants,sites, departments
and centers)

Reducing CO2 emissions
Reducing CO2 emissions
Reducing environmental impact frombusiness activities

Environmental staff

7. Communication
The NTN Group will inform all NTN Group employees about the
NTN Environment Policy to raise environmental awareness.
We will disseminate information on environmental initiatives
widely to the general public to promote active communication
with the general public.

Sustainable resource use

A list of our ISO 14001 certified business sites can be viewed
on our website.
https://www.ntnglobal.com/en/csr/environment/sitereport/iso14001.html

Rigorously managing environmentallyhazardous substances
Protecting biodiversity

Japan
Overseas
Japan

Reducing CO2 emissions intensity
Overseas
Awareness-raising and compliance
enforcement for revised version of Green
Procurement Standards

Green Procurement Standards
form collection rate

Reducing water consumption

Reducing water consumption
intensity

Reducing waste, maintaining highrecycling rates

Reducing paper and Styrofoam

8. Continually improving environmental management system
The NTN Group will improve our environmental performance byimplementing and continually improving our environmental
management system.

282,000 metric tons/year max.*1
372,000 metric tons/year max.*2
21.2% reduction compared to fiscal
year ended March 31, 1998*1
5.0% reduction compared to fiscal
year ended March 31, 2007*2
16.8% reduction compared to fiscal
year ended March 31, 2011
1.2% reduction compared to fiscal
year ended March 31, 2015*3
99.8% min.
97% min.
1.6% reduction compared to fiscal
year ended March 31, 2011
14.0% increase compared to fiscal
year ended March 31, 2011
Maintaining 99% reduction comparedto fiscal year ended March 31, 2000

eHUB development
NTN Micro Hydro Turbine development
Rigorous storage accessmanagement, monthly self-auditing
286,000 metric tons/year
355,000 metric tons/year
23.6% reduction compared to fiscal
year ended March 31, 1998
10.4% reduction compared to fiscal
year ended March 31, 2007
21.6% reduction compared to fiscal
year ended March 31, 201112.5% reduction compared to fiscal
year ended March 31, 2015
99.9%
96.7%
3.2% reduction compared to fiscal
year ended March 31, 201110.2% increase compared to fiscal
year ended March 31, 2011
99.7% decrease compared to fiscal
year ended March 31, 2000

Environmental Staff Meeting(Secretariat)
Environmental Management Section(Or General Affairs Department for Head Office)Division

Reducing water
consumption intensity

Reducing waste,maintaining high recycling
rates

Business sites (including Head Office)Reducing CO2 emissions
intensity

Japan
Overseas

Selfevaluation

Managing and reducing PRTR substance

Japan
Japan
Overseas

Raising recycling rates

Japan
Overseas

Reducing waste intensity

Japan

Reducing paper purchaseintensity

Japan

Reducing Styrofoam

Japan

PRTR substance intensities

Japan

Preventing phthalate ester contamination and rigorously managing old stock"Kigyo no Mor" and other biodiversity protection activities

Financial/Company Data

6. Protecting biodiversity
The NTN Group will work on protecting biodiversity, playing anactive role in forest preservation and other environmental
protection projects in partnership with local communities.

Developing and releasing new technologies and products that help save and create energy

Company-wide Environmental Management Committee
Management Manager
of Corporate Environmental Management
General Manager
of Environmental Management
Department at Head Office

Results

Technologies to help
prevent global warming

Reducing CO2 emissions

Chief Management Officer
of Enterprise-wide
Environment Management
Director in charge of Environment
Management Department

Office Environmental Committee

5. Rigorously managing environmentally hazardous substances
The NTN Group will practice green procurement, rigorously
manage environmentally hazardous substances used in products
and manufacturing processes, and work actively to replacehighly hazardous substances with alternatives.

Environmental Targets

296,000 metric tons/year
370,000 metric tons/year max.*1
26.4% decrease compared to fiscal
year ended March 31, 1998
10.9% decrease compared to fiscal
year ended March 31, 2007*1
100% collection rate
24.1% decrease compared to fiscal
year ended March 31, 2011
13.9% decrease compared to fiscal
year ended March 31, 2015*2
99.8% min.
97% min.*1
3.8% decrease compared to fiscal
year ended March 31, 2011
5.4% increase compared to fiscal
year ended March 31, 2011
Maintaining 99% reduction comparedto fiscal year ended March 31, 2000
1% decrease compared to fiscal year
ended March 31, 2018

Increase in number of participating business sites*1: Includes one additional business site (Xiangyang NTN).
*2: Includes two additional business sites (NTN-AT and Xiangyang NTN).

83

NTN REPORT 2018

Resource Strategies

3. Reducing environmental impact from business activities
The NTN Group will minimize environmental impacts such as
emissions of CO2 and regulated substances from all NTN Groupbusiness operations, while working to identify and reduce
environmental impact from both upstream and downstream
supply chain processes (from suppliers to customers).

NTN Environment
PolicyNot achieved

Governance Strategies

2. Compliance
The NTN Group will comply with all applicable environmental
laws and regulations, while proactively addressing concerns
expressed by customers, local communities and otherstakeholders.

Achieved

Business Strategies

Coexistence with the global environment is a top priority for the
NTN Group. Our business activities are designed to prevent
environmental pollution and preserve natural capital, while ourtechnologies reflect our unwavering efforts to help ensure thesustainable development of society.

Environmental management organization chart

Company-wide environmental performance for the fiscal year ended March 31, 2018

Our Business Model

Environment Policy and Implementation System

NTN REPORT 201884

Resource Strategies

Environment
About Us

Resource protection

The NTN Group works on reducing environmental impact in all processes ranging from design and development to logistics.
Part of these efforts involves quantifying and working to reduce all of the inputs to manufacturing processes (raw materials,
energy, chemical (PRTR) substances and water) and outputs from manufacturing processes (atmospheric emissions, waste
products, chemical (PRTR) substances and wastewater).

As well as continuing ongoing efforts to reduce water consumption and improve water consumption intensity, the NTN Group
responded to the recent rise in concern over water risks by using Aqueduct*1 to assess these risks for individual business sites
in 2017. Current and forecast quantity and quality were assessed. We will continue working to reduce water consumption andrecycle water, with activities tailored to water risks and production volumes at each business site.

Environmental impact from production activities in Japan (Fiscal year ended March 31, 2018)

Water stress (2030 projection) and current water consumption

The NTN Group in Japan

INPUT
Raw materials

ktons

Scrap metal

380
10

Non-steelmaterials
Oils, other

City gas

Fuel oil A
Kerosene
DieselGasoline

Manufacturing processes

tons

Japan

1,940,000 m

3

Low (10% or less)ktons

Low to medium (10-20%)

Asia

170,000 m

Medium to high (20-40%)

Generated waste quantity

Forging/
Turning

67,636

Thermalrecycling*3

ton
kL
kL

Recycling
quantity

Waste oilHeat
treatment

4,575 tons

67,56373

Final disposal quantity

tons

530,000 m

3

tons
tons

kL

tons

PRTR substance release/transfer quantity

24.6

Use ofrecycled water

20,000m3

Assembly

1,850,000
1,800,000
50,000

Sewersm3

m3

Water Consumption (Japan/Overseas)

Waste Quantities and Recycling Rates (Japan/Overseas)

OverseasJapan
m3

Generated waste (Japan)(10,000 m³)(10,000 metric tons)

400

20

m3

110

Our environmental accounting data can be viewed
on our website.
https://www.ntnglobal.com/en/csr/environment/operation.html

327

312

300

Logistics*2 Material recycling: Recycling into raw materials.
*3 Thermal recycling: Recycling into fuel.

DMF water treatment tank and RO treatment facility*1 RO: Reverse osmosis*2 DMF: Dual-media filtration

Wastewater quantity

Rivers

m3

m3

m3

tons

Using Aqueduct to assess water risks, we found that the
Bawal plant and Chennai plant of NTN NEI Manufacturing
India had the highest water risks among all the NTN
business sites worldwide. The Chennai plant experiences
water shortages in summer, and buys water shipped bytanker trucks as needed to handle water intake restrictions
and tap water supply cuts. Since tap water quality is poor,
the plant combats water risks by making planned purchasesof RO*1 and DMF*2 treated water. As a way to reduce water
consumption, the plant has installed fixed-quantity shutoff
valves on all water taps.

323

320

322

320

124

128

128

196

196

195

194

0
2014

2015

2016

2017

2018

98.3%

98.1%

8.8

8.8

9.3

10.0

6.2

6.5

6.6

6.3

Recycling rate

97.9%

98.3%

17.6

17.9

16.3

15.9

15.3

132

10

202

98.2%

15.0

15
131

200

100

97.9%

Generated waste (Overseas)

10.8

11.1

6.8

6.8

5

188

(Fiscal years ended/2019 ending March 31)(Forecast)

0
2014

2015

2016

2017

2018

(Fiscal years ended/2019 ending March 31)(Forecast)

NTN REPORT 2018

86

Financial/Company Data

Grinding/
Polishing*1 Aqueduct: A tool released by the World Resources Institute (WRI) that provides free maps and information showing global water risks.
*2 Includes 4 additional business sites (NDB, NTPT, NNMI Chennai and Nanjing NTN).

Combating water risks in IndiakL

1,010,000
790,000
140,000

NTN REPORT 2018

Americas3High (40-80%)
Highest (80% or more)

m3*1 PRTR substances: Substances regulated underJapan’s PRTR (Pollutant Release and Transfer
Register) Act.

85

3

GWh

1,940,000
Industrial water

380,000 m

Anticipated water stress changes(estimates for 2030)

25.0 tons
57.8 tons

NOx

Water

Tap water

Droplet symbol ( ) size indicateswater input quantity (consumption).

China

Water shortage

PRTR substances*1

Groundwater

286

SOx

ktons

Development/
Design

621
8,598
7,836
0
917
701
189
81
93.8

CO2
emissions

3

Resource Strategies

Coal, coke

tons

200,000 m

Governance Strategies

LPG

16,597ktons

EnergyElectricity

Atmosphericemissions

Material recycling*2

EuropeBusiness Strategies

390

Steel
materials

Water consumption in
the fiscal year ended
March 31, 2018*2

OUTPUT

Our Business Model

Business activities and environmental impact

Resource Strategies

Environment

Energy-saving ”Warashibe” budget for reducing environmental impact

Power monitoring/management equipment and inverter-controlled air compressors at NTN-Antriebstechnik

NTN Noto Corporation has succeeded in saving energy by installing cutting-edge heat treatment equipment in October 2017.
The equipment was installed to accommodate the creation of a comprehensive production system for the Hokuriku area alongwith an increase in the volume of spherical bearings currently being produced. The equipment reduces heating energy by using
a high-performance insulation material and a heating furnace with a built-in atmosphere gas generator. Design features such asa timer-controlled pilot burner igniter reduce annual power consumption by about 1.1 million kWh/year relative to previous
equipment (equivalent to an annual CO2 emissions reduction of 421 metric tons/year). The equipment improves product quality
by having a structure that keeps air away from the products during each process from heating through cooling. It also uses a
new heat treatment process technology to double productivity.

The NTN Group is working on cutting power consumption
worldwide. German subsidiary NTN-Antriebstechnik (NTNAT) installed inverter-controlled air compressors in the fiscal
year ended March 31, 2018, succeeding in reducing its
power consumption by about 380,000 kWh/year (equivalent
to a CO2 emissions reduction of about 180 metric tons/year).
The planning and implementation of this power-reduction
initiative was assisted by a system installed in 2015 thatprovides constant monitoring and management of eachprocess specific power consumption quantities.
This system was also utilized in planing and implementing

initiatives to reduce power consumption as well as verifying
the effects thereof.

CO2 Emissions/Emissions Intensities (Japan)

CO2 Emissions/Emissions Intensities(Overseas)

NTN Kongo Corporation recycles water-soluble coolant

The Okayama Works uses butane, kerosene and fuel oil A
for heat treatment and boiler fuel, but is now switching tocity gas under a 5 year plan begun in 2017.
The many benefits of using city gas include lower fuelcosts, simplified fuel management enabled by pipeline
supply, improved safety and lower CO2 emissions (annual
reduction of 2,384 metric tons).

The water soluble coolant NTN Kongo Corporation uses for
its grinders previously needed a full replacement about twice
per year. The company has now installed a coolant recycling
system that recycles all used coolant. Although new coolant
still needs to be added to make up for natural depletion from
evaporation and other losses, the company has reduced its
coolant consumption by 70% and completely eliminated thedisposal of 10,000 liters of used coolant per year.

Kuwana Works installs VPF* tankIntensity(metric tons of CO2 per million yen)

0.87

0.70

0.69

0.69

28.4

27.2

Scope 2 (Asia)

27.7

27.5

0.66

0.64

28.6

29.6

0

Scope 1 (Europe)

Scope 2 (Europe)

Emissions intensity (right axis)
Intensity(metric tons of CO2 per million yen)

0.95

0.94

33.3

33.1

0.98
0.92

0.91

35.5

37.0

22.4

22.8

23.7

30.8

34.2

0.6

27.1
Scope 2

20

24.5

26.3

20.0

0.2

5.5

0.6

5.4

5.1

4.9

4.9

2

2016

2017

2018

28.4

28.5

29.4

30.1

0.4

31.5

0.2

5.1

0

(Fiscal years ended/

0.8

5.1

2007*
2014
(Benchmarks)

2019 ending March 31)(Targets)*1: Japan figures are calculated using a fixed emissions factor of 0.381 for electricity.
*2: The first year of production is used as the benchmark for business sites establishedafter the fiscal year ended March 31, 1998.

4.9

2015

4.6

2016

4.8

2017

5.4

2018

5.5

Scope 1

0
(Fiscal years ended/2019 ending March 31)(Targets)*3: The first year of production is used as the benchmark for business sites establishedafter the fiscal year ended March 31, 2007.

Protecting biodiversity
Osaka Prefecture recognizes NTN for "Kigyo no Mori" activities

Solar panels installed in the Cevennes plant parking lot

NTN Kongo Corporation and the NTN head office received
a certificate of appreciation from Osaka’s Deputy Governor
in a presentation ceremony held at the Osaka Prefectural
Government Building in December 2017. The certificate waspresented in recognition of the 5th year of the NTN
Okukawachi Lakeside Forest conservation activities. These
activities have been held through Osaka Prefecture’s Adopta-Forest program that brings together companies and forest
owners. The ceremony gave us the opportunity to reaffirm
our commitment to forest conservation while presenting ourpast achievements and policies for the future along with theother companies recognized.

Forest conservation activities will continue to be an areaof focus as we work on protecting the global environmentand raising employee environmental awareness.

Certificate of appreciation for taking part in Adopt-a-Forest
activities; presentation ceremony
NTN REPORT 201888

Financial/Company Data

2015

25.7

10

0

1998*
2014
(Benchmarks)

0.8

40

0.6

0.4
23.0

1.0

Resource Strategies

10

0.99

50

30

21.7

Grinding sludge conveyor

Scope 2 (Americas)

Scope 1 (Asia)(10,000 metric tons per year)

0.8

0.73
0.73

Power consumption transition chart

Scope 1 (Americas)

1.02

40

20

The NTN-SNR Cevennes plant in France has renovated its
parking lot with the addition of a 5,000 m2 solar paneled roof
containing 3,049 solar panels. The parking lot holds 360
four-wheel and 22 two-wheel vehicles. The panels went into
operation in October 2017. They have a rated output of
842 kW, and are expected to generate about 1.01 million
kWh/year of electricity. The panels should be able to provide
about 3.5% of the plant’s power demand, reducing annual
CO2 emissions by about 500 metric tons. The plant has also
added charging stations for EVs in the parking lot and isplanning to add more to accommodate the coming EV era.

NTN REPORT 2018

(10,000 metric tons per year)

20.6

NTN-SNR Cevennes plant installs solar panels

87

Scope 2: Indirect emissions*1

Emissions intensity (right axis)

30

By installing a suction filter coolant tank, the Kuwana Works
has succeeded in extending its coolant replacement
frequency from 6 months to 1 year. The new tank reduces
the quantity of disposed waste fluid by 40 metric tons per
year. The tank’s cellulose filter aid enables grinding sludge tobe remelted in an electric furnace. It can reused as ironwithout the need for a separation process. The equipment
uses an energy-saving pump and chiller compressor withinverter control.
*VPF: Vacuum precoat filter

Scope 1: Direct emissions

Power monitoring/
management equipment

Governance Strategies

Okayama Works switches to city gas

Business Strategies

NTN Noto Corporation installs energy-saving heat treatment equipment

Our Business Model

The NTN Group works on reducing CO2 emissions throughout all business activities. To guarantee its reliability, our emissions
data is subjected to third-party verification by inspection and certification authority SGS Japan. We plan to increase the range ofbusiness activities certified under the Scope 3 (supply chain emissions) category.

About Us

Preventing global warming

The NTN Group has created an original ”Warashibe” budgeting method for promoting investment in energy-saving initiatives to reduce
environmental impact. A special budget has been created to account energy costs saved by energy-saving initiatives. The costs
accrued in the budget are added to the following year’s budget. This budgeting method is being used at all business sites in Japan.
The Iwata Works Needle Roller Bearing Plant has reduced power consumption by installing energy saving system whichconnected to 80 air conditioning outside units. The system is composed of a master unit and slave units and P.C. and centrally
controls air conditioning power. Six business sites (Kuwana Works, Okayama Works, Nagano Works, NTN Mie Corporation, NTN
Kinan Corporation and NTN Noto Corporation) have saved energy by upgrading about 540 fluorescent, mercury and otherconventional lights to LED models. These activities reduced power consumption by 990,000 kWh in the fiscal year ended March 31,2018 (equivalent to a CO2 emissions reduction of 377 metric tons/year). We are making further energy-saving efforts, and expect the
new energy-saving budget for the fiscal year ending March 31, 2019 to grow 80% from the previous year.

Resource Strategies

Contribution to Local Communities
About Us

Relationship to SDGs

Basic Approach

NTN Rotating School

Support Integration of Young People inState Welfare Institutions

Kyoto

3 InabeMinami Shinshu

5

The children painting themes offriendship and their future ambitions

Tokyo

8
The employees who planned the activities

6
Mount Fuji

The plant tour

Resource Strategies

4

The children who participated inGovernance Strategies

Mino

The workshop teaching children about bearings through original stories

NTN-SNR ROULMENTI S.R.L (Romanian subsidiary)
teamed with volunteer organizations to hold an event for
local children in specialized care facilities. The children
painted pictures on a large canvas depicting the themes offriendship and their future ambitions. It also provided
support for renovation work on the children’s living spaces.
Other activities closely tied to the community were held,
including a plant tour and giveaway of NTN goods for thechildren.

Asia 57

Business Strategies

EuropeAmericas 109

Europe 43
Our Business Model

685 (Fiscal year ended March 31, 2017) 705 (Fiscal year ended March 31, 2018)

Japan
As one of our centennial activities, we assumed title
sponsorship of “Tour of Japan (TOJ),” Japan’s largest bicycle
road race. We also organized the “NTN Rotating School,” anevent designed to provide hands-on experience of ourtechnologies at each TOJ stage.
It was organized to promote harmonious coexistencewith local communities. The contents of NTN Rotating School
are a workshop during which children enjoy learning what
bearings are, hands-on instruction in bearing assembly, etc.
The events were also a way to let our employees interact with
community members and teach the children who will shape
the next generation. About 3,000 visitors came to our activity
booth during the eight days of the race in 2018.

Japan 496

Number of social contribution activities▲

Our Group’s CSR policy states that, in addition to developing a variety of initiatives around the world, “We shall make every
effort to interact meaningfully with society on a local level and to engage in activities that contribute to society.” We benefit
the world through more than just our business activities. We also work on achieving the UN’s Sustainable Development
Goals (SDGs) through various activities tied closely to local communities around the world.

Main Activities

7 Izu

2
1 Sakai
TOJ stages held from May 20 to 27, 2018

Hands-on instruction in bearing assembly

Asia

Americas

The employees in the ASEAN/India region took part in oneof our centennial events with NTN distributors by donning
matching polo shirts to plant 100 mangroves. The event
served to express our gratitude for past service received,
and as a symbol of collaboration for the next 100 years.

Sensory boards donation
NTN-Bower Corporation (Macomb Plant) in west central in
Illinois, U.S.A has designed and created original sensory
boards that let students experience the function of various
parts including bearings. The boards were donated asteaching materials to five elementary, junior high and highschools in the local school district. Devised to assist thefunctional rehabilitation of students with mental or physicalimpairments, the boards are being used effectively inclasses at the schools.

89

NTN REPORT 2018

Financial/Company Data

Mangrove planting

The employees and distributors who participated in

The donated sensory board

Planting mangroves

Other social contribution activities can be viewed on our website.
https://www.ntnglobal.com/en/csr/sc/community.html

NTN REPORT 201890

Financial/Company Data

Consolidated Financial Indicators (Past 11 Years)
Thousands of US dollars*1(Excluding per-share values)

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2018

About Us

Fiscal years ended March 31

For THE YEAR DATA
533,985

527,100

452,746

530,056

543,468

539,595

638,971

701,900

716,997

683,329744,373

6,990,402

Operating Income(Millions of yen)

49,612

9,479

1,399

24,56020,724

7,278

33,00443,85147,77035,62339,609371,968

Operating Margin

(%)

9.3

1.8

0.3

4.6

3.8

1.3

5.2

6.2

6.7

5.2

5.3

5.3

Income (loss) before Income Taxes(Millions of yen)

44,313(10,104)(1,838)22,855

16,357(13,898)(2,451)37,063

26,943

14,89026,906

252,674

Net Income (loss) attributable to Shareholders(parent company)(Millions of yen)

27,431(8,985)(2,015)

14,3995,993(14,196)(14,648)

23,353

15,037

2,831

20,374

191,332

Capital Expenditures(Millions of yen)

59,504

49,59421,50429,70054,44048,97933,162

31,26636,30035,39837,589352,998

Depreciation and Amortization(Millions of yen)

39,54745,75940,70235,93634,17534,841

39,31540,392

38,27836,62937,506352,219

R&D Expenditures(Millions of yen)

15,006

17,402

14,687

15,697

17,157

16,174

17,821

18,08818,481

19,19621,007

197,277

Total Assets(Millions of yen)

629,464

627,613618,802632,001

693,258

768,462

848,037

856,277

794,651

798,891

840,052

7,888,923

Net Assets(Millions of yen)

216,401

192,223

214,551

210,353

212,126

211,743

213,369

262,559

248,505

245,050

269,760

2,533,315

Inventories(Millions of yen)

109,969

140,466

126,663

136,985

155,107163,287

166,484

184,128

178,220

171,482

179,738

1,687,918

Interest-bearing Debt

(Millions of yen)

212,874

275,996

231,638

223,284

271,978

360,802381,767

359,105

325,174

320,170

320,832

3,012,932

18,96020,67917,95919,172

20,78921,39822,15623,36024,10924,66525,49325,493(Yen)

445.98376.77374.19376.05370.19375.84374.68461.21436.97431.66477.17

4.48

Basic

(Yen)

58.43

(19.14)(4.00)

27.08

11.27

(26.69)(27.54)

43.91

28.28

5.33

38.36

0.36

Diluted

(Yen)

54.59

—

—

—

—

—

—

—

—

—

—

—

(Yen)

19.00

13.00

8.00

10.00

10.00

0

2.00

6.00

10.00

10.00

15.00

0.14

Inventory Turnover Ratio(times)

4.9

3.8

3.6

3.9

3.5

3.3

3.8

3.8

4.0

4.0

4.1

Net D/E Ratio(times)

0.86

1.38

1.00

0.92

1.11

1.37

1.27

1.11

1.11

1.05

0.93

Net Income (loss)/Average Total Assets (ROA)

(%)

4.4

(1.3)

(0.3)

2.3

0.9

(1.9)

(1.8)

2.7

1.8

0.4

2.5

Net Income (loss)/
Average Shareholders’ Equity (ROE)

(%)

13.1

(4.3)

(1.1)

7.2

3.0

(7.2)

(7.3)

10.5

6.3

1.2

8.4

NTN-ROI*

(%)

8.6

1.5

0.2

4.2

3.4

1.1

4.6

6.3

6.5

5.1

5.7

Shareholders’ Equity Ratio

(%)

33.3

28.2

32.2

31.6

28.4

26.0

23.5

28.6

29.2

28.7

30.2

Business Strategies(Millions of yen)

Our Business Model

Net Sales

YEAR-END DATANet Assets
Net Income (loss):

OTHER INFORMATION

2*1: The translation of yen amounts into U.S. dollar amounts is included solely for the convenience of readers outside Japan and has been made at ¥106.485 = U.S. $1.00, the exchange rate
prevailing on March 31, 2018. This translation should not be construed as a representation that yen can be converted into U.S. dollars at the above or any other rate.
*2: NTN-ROI = Net operating income after tax/(inventories + tangible fixed assets)

91

NTN REPORT 2018

NTN REPORT 201892

Financial/Company Data

Cash Dividends

Resource Strategies

PER-SHARE DATA

Governance Strategies

Number of Employees

Financial/Company Data

Non-Financial Data (ESG Factors)
Social (S) Factors● NTN only ● Domestic subsidiaries ● Overseas subsidiaries

Item

Applicable Scope

Number of directors Total

●

Male

●

Fiscal year ended
March 31, 2017
Achievements
14
14

Fiscal year ended
March 31, 2018
Achievements
14

See
page:
61

14

61

●

0

0

61

●

14

14

—

Number of outside directors

●

2

2

59

Percentage of outside directors

●

14%

14%

—

Number of outside Audit & Supervisory Board Members

●

3

3

57

Board of Directors

Number of meetings per year

●

17

18

57

●

97%

100%

59

●

99%

99%

—

Audit & Supervisory Board Members (outside) attendance rate

●

96%

100%

59

Audit & Supervisory Board Members (inside) attendance rate

●

100%

100%

—

Number of meetings per year

●

14

15

57

Audit & Supervisory Board Members (outside) attendance rate

●

95%

100%

59

Audit & Supervisory Board Members (inside) attendance rate

●

100%

100%

—

3

5

57

●

Compensation Advisory Committee Number of meetings per year●●

Director (outside) attendance rate

●

100%

100%

58

Director (inside) attendance rate

●

83%

100%

—

Audit & Supervisory Board Members (outside) attendance rate

●

100%

100%

58

49

51

67

●

●

Number of SRI indexes included in

●

6*

6*

60

Number of shareholders at the General Meeting of Shareholders

●

133

213

60

Percentage of votes cast

●

84.2%

82.6%

60

Total annual cash dividends per share●

10 yen15 yen91

Number of Stakeholder Dialog held with CSR experts

●

1

1

72

Number of CSR Committee held per year

●

2

2

57

Number of Risk Management Committee held per year

●

2

3

57

Number of Compliance Committee meetings held per year

●

4

4

57

Number of Fair Trade Monitoring Committee meetings held per year●

Compliance awareness survey response rate

●

●

●

●

2

2

57

●

78%

76%

70

●

79%

81%

70

●

●

15

17

70

Report response rate

●

●

100%

100%

70

* As of June 30

R&D expenditures

●

●

●

Ratio of R&D expenditures to sales

●

●

●

Number of outside awards received for product development●●

Number of patents reward being paid●●●

Ratio of local procurement (Total)

Item

Domestic
Overseas
Water usage●●

Scope 1●●49,000 metric tons

49,000 metric tons

88

Scope 2●●228,000 metric tons

237,000 metric tons

88

Total

●

48,000 metric tons

54,000 metric tons

88

Scope 2●

294,000 metric tons

301,000 metric tons

88

●

3

3

●

●

Domestic●●

Overseas
●

●

●

●

Total

●

●

Domestic●●

Domestic
Overseas
Recycling rate

Overseas

88

Scope 1

Total

Generated waste Total●

3.23 million m

3.22 million m

86

1.95 million m3

1.94 million m3

86

3

3

1.28 million m

86●

1.28 million m●

163,000 metric tons

176,000 metric tons

86

63,000 metric tons

68,000 metric tons

86●

100,000 metric tons

108,000 metric tons

86

●

98.1%

97.9%

86

99.9%

99.9%

84

96.9%

96.7%

84

●

3

3

48

191

129

47

88%

88%

78
78

84%

84%

94%

94%

78

(Asia and Others)

●

85%

84%

78

Subcontracting self-auditing rate●

Conflict minerals survey response rate from business partners

●

●

100%

95%

78

—

92%

78

●

51%

52%

79

(Americas)

●

22%

19%

79

(Europe)

●

14%

17%

79

(Asia and Others)

●

14%

16%

79

145

112

81

●

100%

100%

82

228

205

82
82

Overseas production rate (Total)

Number of participants in specialized quality education courses●●

Quality management system certification rate*1●●

Number of Sales TQM (Total Quality Management) activities●

Number of customer visits by Technical Service Units

●

●

●

858

727

Number of employees

●

●

●

24,66525,493—

Percentage of female employees

●

●

11%

11%

—

●

●

Overseas employee ratio

●

66%

67%

16

Total

●

40

41

—

Male

●

41

41

—

Female

●

38

39

—

Average years of continuous employment Total

●

17

19

—

Male

●

18

19

—

Female

●

16

17

—

●

19%

14%

16

Employment rate of persons with disabilities

●

2.08%

2.06%

75

Number of women in management positions (NTN only)*2

●

31

32

75

Percentage of women in management positions (NTN + domestic subsidiaries)*2

●

●

●

●

Average age

Percentage of hired female graduates(NTN Group)*2●●

Post-retirement rehiring rate (NTN only)

●

●

3.7%

3.6%

75

10.9%

12.2%

75

63%

62%

75

81%

81%

75

●

55

178

75

Total

●

40

44

75

Male

●

2

3

75

Female

●

38

41

75

Total

●

20

18

75

Male

●

1

3

75

Female

●

19

15

75

Percentage of employees returning after childcare leave

●

100%

100%

75

Number of employees on shortened working hours for childcare Total

●

29

31

75

Male

●

0

0

75

Female

●

29

31

75

Number of employees taking long-term care leave

●

1

1

75

Number of employees using NTN Job Return scheme

●

—

2

75

Number of employees using intra-company child daycare center (Bear Kids Land)

●

23

34

75

Number of employees using the facility supporting persons with intellectual disabilities (Dream Workshop)

●

14

15

75

Number of employees taking mental health leave

●

23

26

76

Percentage of returning employees taking mental health leave

●

56%

50%

76

Number of counseling service consultations per month

●

76

69

76

Percentage of high-stress employees*3

●

8%

8%

76

Rate of workplace incidents causing lost work time●

0.41*40.08*576

Number of workplace incidents causing lost work time

●

5*4

1*5

76

Number of law-related training sessions held by safety and health consultants

●

7

8

76

Percentage of designated health checks provided

●

100%

100%

76

Number of OSHMS-certified sites

●

●

9

9

76

Number of hazard simulation classes provided

●

●

60

95

76

Number of social contribution activities

●

●

685

705

89

Number of employees returning after childcare leave●*1: ISO 9001, IATF 16949 (and other standards for which switching is under review)
Applies to domestic and overseas consolidated manufacturing subsidiaries (excluding bases that have not started mass production).
*2: Includes three consolidated subsidiaries to be merged in October 2018: NTN KONGO CORP., NTN MIKUMO COMPANY LTD. and NTN ENGINEERING PLASTICS CORP.
*3: As determined by NTN stress check program.
*4: From December 16, 2015 to December 15, 2016
*5: From December 16, 2016 to December 15, 201793

NTN REPORT 2018

NTN REPORT 201894

Financial/Company Data

CO2 emissions

See
page:

47

●

● NTN only ● Domestic subsidiaries ● Overseas subsidiaries

Applicable Scope

47

2.8%

●

Number of employees taking leave for partner’s childbirthFiscal year ended
March 31, 2018
Achievements
641,000 metric tons

2.8%

See
page:

(Americas)

Number of employees taking childcare leave

Fiscal year ended
March 31, 2017
Achievements
619,000 metric tons

Fiscal year ended
March 31, 2018
Achievements
21.0 billion yen(Europe)(NTN + domestic subsidiaries)

Environment (E) Factors

Fiscal year ended
March 31, 2017
Achievements
19.2 billion yen

Resource Strategies●

Number of reports from whistle-blower

Helpline Recognition level

Applicable Scope

Governance Strategies

Number of sites subject to internal control assessments

Item

Business Strategies

Audit & Supervisory Board

Director (outside) attendance rate
Director (inside) attendance rate

● NTN only ● Domestic subsidiaries ● Overseas subsidiaries

Our Business Model

FemaleNumber of directors not serving as executive officers

About Us

Governance (G) Factors

Other non-financial data can be viewed on our website.
https://www.ntnglobal.com/en/csr/nonfinance.html

Financial/Company DataManagement Performance/Financial Analysis

Sales Performance

R&D and Capital Expenditures
Groupwide R&D expenditures for the year were 21,007 million
yen (up 1,811 million yen from the previous year), accounting for2.8% of sales.
In the three-year Medium-term Management Plan “NTN100” from April 2015 to March 2018, it outlined three basic
policies “Manage Growth,” “Manage Profitability” and “Manage
Foundation” . We continued to work on bringing these policies
to life by augmenting our core business areas and creating new
business areas. Our efforts resulted in the creation of new
business structures and the release of advanced bearings
attaining higher levels of customer satisfaction and we havesucceeded in creating a technology and business foundationthat will support the Company over the next hundred years.
In September 2017, we established the NTN Next
Generation Research Alliance Laboratory at Osaka University as
a way to develop new cutting-edge technologies and augment
the elemental technology development expertise that supports
our core and new business areas. The Laboratory is a new
initiative that should result in business expansion 5 or 10 years
in the future. To create a more global R&D organization, weorganized exchanges of technology and human resourcesamong R&D bases in Japan, Europe and U.S. These efforts are

Financial Position and Cash Flows
Interest-bearing debt increased by 0.7 billion yen comparedwith the preceding fiscal year. Free cash flow came to 13.4
billion yen.
Total current assets at March 31, 2018 amounted to460,102 million yen, a year-on year increase of 25,173 million
yen (or 5.8%). Major factors included 8,256 million yen increase
in inventories, 6,804 million yen increase in cash and cash
equivalents, 5,386 million yen increase in accounts receivable.
Total fixed assets at the fiscal year-end amounted to 288,059
million yen, an increase of 3,447 million yen (or 1.2%) against
the end of the previous fiscal year. Investments and otherassets amounted to 91,891 million yen, an increase of 12,541
million yen (or 15.8%) against the result for the previous fiscal
year. Major factors included 8,715 million yen increase in otherassets, 4,104 million yen increase in investment securities. As a

NTN REPORT 201896

Financial/Company Data

NTN REPORT 2018

For NTN Corporation and its consolidated subsidiaries, themain focus of capital expenditures was on increasing
production capacity, labor savings, and rationalization,
maintaining and upgrading existing facilities, improving safety,
and conducting R&D for new products.
In Japan, capital expenditures totaled 15,751 million yen
for capital projects that included the expansion of bearing
production equipment and expansion of buildings at NTN Noto
Corporation. as well as additions to bearing production
equipment at Okayama Works.
In the Americas, capital expenditures totaled 10,270 million
yen on projects that included the expansion of buildings andexpansion of CVJ production equipment at NTK PRECISION
AXLE CORP. and the expansion of production equipment for
CVJ parts at NTN-Bower Corporation.
In Europe, capital expenditures were 7,638 million yen,with projects including the expansion of bearing production
equipment at NTN-SNR ROULEMENTS and expansion of CVJ
production equipment at NTN TRANSMISSIONS EUROPE.
In Asia and other areas, capital expenditures amounted to
4,129 million yen on projects that included expansion of CVJ
production equipment at NTN Manufacturing (Thailand) Co.,
Ltd. and NTPT Co., Ltd.
After adjusting for -200 million yen in equipment transfers
between segments, total capital expenditures for the fiscal year
were 37,589 million yen.
All expenditures were funded from internal funds and shortterm loans. Depreciation and amortization for the fiscal year
under review amounted to 37,506 million yen (up 877 million
yen from the previous fiscal year).

Resource Strategies

95

Capital Expenditures

Regarding profit for the fiscal year under review, factors
contributing to increased earnings included the effects of scale
and the exchange-rates effects. Meanwhile, factors contributing
to decreased earnings included increased personal expenses
and lower sales price level, increase valuable cost. As a result,the operating income for the term was 39,609 million yen, up
3,986 million yen from the previous fiscal year.
Other expenses amounted to a net expense of 12,703
million yen. The major contributing factors were income of
2,154 million yen, including interest and dividend income of
1,698 million yen, and expenses of 14,857 million yen, includinginterest expenses of 3,884 million yen and loss related toAnti-Monopoly Act 3,710 million yen, product compensation
expense of 2,312 million yen.
As a result, net income before income taxes and equity inearnings was 26,906 million yen for the fiscal year under review,
an increase of 12,016 million yen compared with the preceding
fiscal year. Net income per share was 38.36 yen for the year
under review.
Regarding annual dividends for the fiscal year under review,
we plan to pay a year-end dividend of 7.5 yen per share, which,when added to our interim dividend of 7.5 yen per share, totals
15 yen per share for the full year.

Governance Strategies

Net Sales and Incomes by Region
In terms of sales in Japan, looking at aftermarket applications,
there was an increase in industrial machinery aftermarket
applications. As for sales of industrial machinery applications,construction machinery and gearbox, other applications
increased. In automotive applications grew thanks to expandedcustomers’ demands. As a whole, net sales were 204,325
million yen (up 6.7% from the previous fiscal year).
In terms of sales in Americas, looking at aftermarket
applications, there was an increase in industrial machinery
aftermarket applications. In industrial machinery applications,sales increased in construction machinery applications andothers. Sales of automotive applications decreased due to thedecreased customer demands and other factors. As a whole,
net sales were 201,677 million yen (up 3.5% from the previous
fiscal year).
In terms of sales in Europe, looking at aftermarket
applications, there was an increase in both industrial machinery
aftermarket applications and automotive aftermarket
applications. In industrial machinery applications, sales
increased in agricultural machinery and gearbox, otherapplications. In automotive applications grew thanks toexpanded customers’ demands. As a whole, net sales were
175,599 million yen (up 13.3% from the previous fiscal year)
In terms of sales in Asia and other areas, a looking ataftermarket applications, there was an increase in industrial
machinery aftermarket applications. For industrial machinery
applications, sales increased in construction machinery andmachine tool, other applications. In automotive applications

IncomeBusiness Strategies

Net Sales and Incomes by Business Sector
In aftermarket applications, sales were 116,695 million yen due
to an increase in sales from both industrial machinery
aftermarket and automotive aftermarket, and the effects of
exchange-rates. Operating income was 15,009 million yen, due
to the increased sales and the effects of exchange-rates andother factors.
In industrial machinery applications, net sales were
119,085 million yen due to the increased sales for construction
machinery and gearboxes and other applications, and the effectof exchange-rates and other factors. Operating income were2,796 million yen, due to the increased sales and the effects of
exchange-rates and other factors.
In automotive applications, net sales were 508,593 million
yen due to the increased customer demand and the effect of
exchange-rates and other factors. Operating income was
21,804 million yen, due to the increased sales and the effects of
exchange-rates and other factors.

The cost of sales was 603,613 million yen, down 0.2
percentage points and representing 81.1% of consolidated net
sales. This was mainly effects of increased sales.
Selling, general and administrative expenses were 101,151
million yen, representing 13.6% of consolidated net sales, or up
0.1 percentage points compared to the previous fiscal year.

Cost of Sales and Selling, General and
Administrative Expenses

result, total assets amounted to 840,052 million yen, a year-onyear increase of 41,161 million yen (or 5.2%).
Current liabilities were 316,512 million yen, a year-on-yearincrease of 1,484 million yen (or 0.5%). This was due mainly to
10,519 million yen increase in accounts payable and 5,980
million yen increase in electronically-recorded monetary claims,
8,653 million yen decrease in short-term loans, 5,822 million
yen decrease in current portion of long-term debt and leaseobligations. Total long-term liabilities amounted to 253,780
million yen, a year-on-year increase of 14,967 million yen (or6.3%). This is mainly due to 14,919 million yen increase inlong-term debt and lease obligations. As a result, total liabilities
amounted to 570,292 million yen, a year-on-year increase of
16,451 million yen (or 3.0%).
Total net assets were 269,760 million yen, a year-on-yearincrease of 24,710 million yen (or 10.1%). This was mainly due
to 13,729 million yen increase in retained earnings, 5,325 million
yen increase in translation adjustments, 2,873 million yen
increase in net unrealized holding gain on other securities.
The equity to capital ratio was 30.2%, up 1.5 percentage
points. Total net assets per share, based on the number ofshares outstanding over the end of the previous fiscal year,
were 477.17 yen per share (an increase of 45.51 yen per shareover the previous fiscal year). Interest-bearing debt amounted
to 320,832 million yen, a increase of 662 million yen (0.2%)
from the end of the previous fiscal year. Factoring in the 525
million yen increase from effects of exchange-rates, the actual
increase was 137 million yen. The ratio of interest-bearing debt
to total assets was 38.2% (down 1.9 percentage points
compared to the end of the previous fiscal year).
Net working capital was 143,590 million yen, a increase of
23,689 million yen from the end of the previous fiscal year. The
current ratio was 145.4% (up 7.3 percentage points over theend of the previous fiscal year).
The inventory turnover ratio was 4.14 times (up 0.16 times
compared with the end of the previous fiscal year), the turnoverratio of total assets was 0.89 times (up 0.03 times).
Net cash from operating activities was 61,799 million yen(a year-on-year decrease of 589 million yen, or 0.9%). This was
mainly due to proceeds of 37,506 million yen from depreciation
and amortization, 26,906 million yen from net income before
taxes and equity in earnings of affiliated companies.
Net cash from investing activities was 48,359 million yen (ayear-on-year increase of 7,140 million yen, or 17.3%). This was
mainly due to expenditures of 36,458 million yen for thepurchase of property, plant, and equipment, and 9,645 million
yen for the purchase of other assets.
Net cash from financing activities was 7,521 million yen (ayear-on-year decrease of 697 million yen, or 8.5%). This was
mainly due to expenditures of 68,858 million yen for repaymentof long-term loans, 10,030 million yen in decrease in short-termbank loans, net, 6,645 million yen in dividend payment.
proceeds from 68,998 million yen in long-term debt, 10,000
million yen in issuance of corporate bonds.
After including an increase of 885 million yen in translation
adjustments, cash and cash equivalents as of the end of the
fiscal year under review totaled 86,088 million yen, representing
an increase of 6,804 million yen (8.6%) compared with theprevious consolidated fiscal year end.
Free cash flow, the difference between net cash provided
by operating activities and net cash used in investing activities,
amounted to 13,440 million yen. The proportion of net cash
provided by operating activities to net sales was 8.3%.

Our Business Model

Consolidated net sales for the fiscal year ended March 31,
2018, were 774,373 million yen, an increase of 61,044 million
yen (8.9%) from the previous fiscal year. Due to the effects of
exchange-rates, a decrease of 27,585 million yen represented
an increase of 33,459 million yen. Overseas sales were 540,048
million yen, an increase of 48,185 million yen (9.8%) from theprevious fiscal year. Overseas sales accounted for 72.6% of net
sales overall (Americas 27.1%, Europe 23.6%, Asia and others
21.9%), an increase of 0.6 percentage points from the previous
fiscal year.

helping speed up the creation of new technologies andproducts. We are working on creating manufacturingorganizations worthy of a global manufacturer and able to meetthe needs of customers in countries around the world.
Having recently celebrated 100th year, we are now looking
at the research and technology development that will fuel our
success over the next hundred years. We are focusing on two
approaches positioned to produce sustainable growth basedon the corporate philosophy behind our business activities.
One is augmenting the core business areas that leverage
our unique advantages; the other is utilizing our corecompetencies to create new business areas.

grew thanks to expanded customers’ demands. As a whole,
net sales were 162,772 million yen (up 14.5% from the previous
fiscal year)

About UsNet Sales and IncomesFinancial/Company Data

Risk Factors6) Dependence on Specific Industries
The NTN Group’s Bearings Division derives approximately half of its
sales revenues from the automotive industry, which also accounts
for more than half of sales of components that the Constant-velocity
Joints Division produces for automotive power transmission to thedrive axle. Dependence on the automotive industry is therefore high.
Although the NTN Group works to increase sales of bearings andprecision equipment products to the industrial machinery sector and97

NTN REPORT 2018

2018

2017

2018

¥ 58,080¥ 66,733$ 545,429

61,12566,947574,025

Notes

1,368

1,433

12,847

Accounts

68,34857,829641,856

Electronically recorded
obligations

64,112

58,132602,075

133,828

117,394

1,256,778

AssetsLiabilities and net assets

Current assets:

Current liabilities:

Cash and cash
equivalents (Note 13)¥ 86,088¥ 79,284$ 808,452

Short-term
investments (Note 13)

2,595

718

24,370Trade payables (Note 13):

Trade receivables (Note 13):Notes

13,308

11,850124,975

Accounts

130,384

124,998

1,224,436

5,745

5,495

53,951

Electronicallyrecorded monetary claims
Allowance for doubtful
accounts(1,008)148,429(877)
141,466

Accrued income taxes(Notes 13 and 19)

3,888

3,057

36,512

1,393,896

Deferred income taxes (Note 19)

86

1

808

Provision for loss on support
to a related company

–

2,173

–

59,50558,723558,810

316,512315,028

2,972,362

Long-term debt and leaseobligations (Notes 8 and 13)
Liability for retirement
benefits (Note 9)
Provision for product defectcompensation

204,029

189,110

1,916,035

40,39342,149379,330

1,492

401

14,011

Deferred income taxes (Note 19)

746

2,272

7,006

(9,466)Inventories (Note 5)

179,738

171,482

1,687,918

Deferred income taxes(Note 19)

8,377

8,405

78,668Other current assets (Note 13)

34,87533,574

327,511460,102434,929

4,320,815

Total current assets

Short-term bank loans(Notes 8 and 13)
Current portion of long-term
debt and lease obligations(Notes 8 and 13)

Other current liabilities
Total current liabilities (Note 21)

Long-term liabilities:

Property, plant and equipment,
at cost (Note 6):
Land (Note 2(g))

32,65633,142306,672

Buildings and structures(Note 2(g))

Other long-term liabilities

7,120

4,881

66,864205,405

199,673

1,928,957

Total long-term liabilities(Note 21)

253,780

238,813

2,383,246

Machinery, equipment andvehicles (Note 2(g))

795,942

782,738

7,474,686

Contingent liabilities (Note 11)

Shareholders’ equity (Note 10):
Common stock:
Authorized – 1,800,000,000
sharesIssued – 532,463,527 shares in2018 and 2017

54,34754,347510,372

Capital surplus

67,97066,943

638,306

Retained earnings

127,887

114,158

1,200,986

(816)

(807)

(7,663)

Construction in progress

Less accumulated
depreciation
Property, plant and equipment,net (Note 21)

21,58016,720202,658

1,055,583

1,032,273

9,912,973(767,524)(747,661)(7,207,813)

288,059

284,6122,705,160

Net assets:

Investments and other assets:
Investment securities(Notes 7 and 13)

40,49936,395

380,326

Investments inunconsolidated subsidiaries
and affiliates (Note 13)

18,735

17,992

175,940

Deferred income taxes(Note 19)

4,129

5,150

38,775

Other assets

28,52819,813267,907

91,891

79,350862,948

Total investments andother assets

Treasury stock, at cost:
1,405,959 shares in 2018 and
1,388,394 shares in 2017 (Note 4)
Total shareholders’ equity

249,388234,641

2,342,001

Accumulated othercomprehensive income (loss):
Net unrealized holding gain
on securities (Note 7)

16,38013,507

153,824

Translation adjustments(4,681)(10,006)(43,959)

Retirement benefit liability
adjustments (Note 9)
Total accumulated othercomprehensive income (loss), net(7,683)(8,899)(72,151)

4,016(5,398)37,714Non-controlling interests

16,35615,807

153,600

Total net assets
Total assets (Note 21)¥ 840,052¥ 798,891$ 7,888,923

Total liabilities and net assets

269,760

245,050

2,533,315¥ 840,052¥ 798,891$ 7,888,923

See accompanying notes to the consolidated financial statements.

NTN REPORT 201898

Financial/Company Data

5) Disasters and Accidents
Production plants and facilities of the NTN Group and its transaction
counterparts are exposed to the risk of damage from natural disasters
such as earthquakes, floods, and fires. Although the NTN Group has
put into place crisis management systems and stands ready to engage
in measures to contain damage as much as possible, risks cannot
be completely eliminated. Business performance and the financial
status of the NTN Group may be affected by a natural disaster or by
accidents.

10) Statutory Regulations
The NTN Group is subject to the various laws and regulations (taxlaws, environmental laws, occupational safety and health laws,
economic statutes such as antimonopoly laws and anti-dumping
laws, trade and exchange laws, and securities trading regulations)of the countries and regions in which it does business. The NTNGroup strives to abide by these laws and regulations and conduct
fair business activities. However, if the NTN Group is ever be subject
to litigation or involved in legal proceedings because of a violationof a law or regulation, and if the decision of such litigation or legal
proceedings goes against the Group, this may have an effect on
the business performance or the financial state of the Group. As
well, if these laws or regulations change, or if new unforeseen laws
or regulations are enacted, these also may have an effect on thebusiness performance or the financial state of the Group. Some of
NTN Group companies are subject to the following actions.
[1] There are ongoing investigations by the competition authorities
into our consolidated subsidiaries in Brazil and elsewhere in relation
to overseas sale of bearings, etc.
[2] The Company and its subsidiaries in the U.S. and Canada, etc. aredefendants in a number of class action suits for suspected price-fixing
of bearing sales with other businesses.
[3] The NTN Group may be subject to claims for compensation fordamages in connection with the violation of competition laws andcontinue to address these claims. However, it is currently difficult
to make reasonable estimates of the future possible effects on the
results of operations and financial position of the NTN Group.

2018

Resource Strategies

4) Rise in Raw Materials Prices
The NTN Group procures a wide range of raw materials from outside
sources. To deal with cost increases, especially of steel materials,
which pose a high weighting in materials costs, measures have beentaken such as mark-ups on selling prices to reflect higher materials
cost. In addition, the Group is targeting cost reductions throughenhanced production yields and VA/VE methods. Nevertheless,business results and the NTN Group’s financial position may beaffected by stronger than expected increases in raw materials costs.

9) Global Operations
The NTN Group develops its business operations worldwide withoverseas sales exceeding 50% of consolidated sales. Overseas
business development is associated with the following risks:a. Risks from unforeseen change in tax systems of or between
individual countries
b. Risks from unforeseen change in laws of individual countries
c. Difficulty in hiring and retaining appropriate staff
d. Evolving technology levels and unstable labor relations in emerging
economiese. Political instability in emerging economies

2017

Governance Strategies3) Declines in Market Prices
The competitive environment surrounding production and sales
activities of the NTN Group is becoming harsher worldwide. As
products from China and other emerging countries are gaining
ground, bearings have been partially affected by falling market prices.
At the same time, against a backdrop of global price competition,
calls for price reductions are mounting in the automotive industry,
which accounts for over half of the NTN Group sales. Although the
NTN Group works continuously to reduce costs while developing new
products of high quality and high added value, business results andthe NTN Group’s financial position may be affected by downward
pressure on market prices.

8) Intellectual Property
The NTN Group generates a wealth of innovative technologies andknow-how in the process of new product development, representing
valuable intellectual property for which the NTN Group files patentapplications to protect its rights. However, business performanceand the financial position of the NTN Group may be affected if alegal challenge is initiated against its intellectual property or if its
intellectual property is infringed by a third party.

2018

Thousands of
U.S. dollars(Note 1)Millions of yen

Business Strategies

2) Foreign Exchange Fluctuations
Overseas sales of the NTN Group account for over 50% ofconsolidated sales. This percentage is expected to increase further
due to continued acceleration in the global business development of
the NTN Group. Overseas subsidiaries’ foreign currency-denominatedbusiness results and financial positions are converted to yen for the
preparation of consolidated financial statements. Moreover, many
export transactions with overseas customers of the Company are
conducted in foreign currencies. Although the NTN Group hedges
risks through forward foreign exchange contracts and expansion of
local procurement, effects of exchange rate fluctuations on businessresults and financial positions cannot be fully eliminated.

7) Product Defects
To ensure product quality, the NTN Group works to satisfy customers’
requirements concerning product functions and specifications, andstrives to provide appropriate quality and product safety by enforcing
quality assurance globally. However, a substantial product defectleading to a serious accident, claim for damages, or product recall
could entail huge product warranty costs and potentially affectbusiness performance and the financial position of the NTN Group.
Although the NTN Group has taken out global product liability
insurance, complete coverage for loss is not possible.

Thousands of
U.S. dollars(Note 1)Millions of yen

Our Business Model

1) Economy
The NTN Group operates global production and sales networks, andsupplies customers in various industrial sectors. Business results andthe financial position of the NTN Group operations may be affectedby the economic conditions in specific countries and businessconditions in industries to which our customers belong.

implements policies to achieve a balanced sales structure, a rapid
shift in demand in the automotive industry could potentially affect
the NTN Group’s business results and financial position.

March 31, 2018

About Us

Business results and the financial position of the NTN Group are
subject to the following risks.

Consolidated Balance SheetFinancial/Company Data

Consolidated Statement of Income
2018¥ 683,329

603,613555,722

5,668,526

Gross profit

140,760

127,607

1,321,876

101,151

91,984

949,908

39,60935,623371,968

Operating income (Note 21)

1,698

1,420

15,946

Interest expense(3,884)(4,192)(36,475)

456

213

4,282

–

695

–

Equity in earnings of affiliates
Gain on valuation of derivatives, net

590–(2,312)(1,190)(21,712)

Foreign exchange loss, net(1,642)(1,341)(15,420)

Litigation expenses(1,492)(1,956)(14,011)

–

2,147

–

(3,710)(12,129)(34,841)(635)(4,562)(5,963)

–

(171)

–

(1,182)(257)(11,100)(12,703)(20,733)(119,294)

26,906

14,890252,674

Loss on surcharge payments under the Anti-Monopoly Act (Note 17)
Loss on impairment of fixed assets (Notes 6 and 21)
Loss on sales of property, plant and equipment
Other, net
Profit before income taxes
Income taxes (Note 19):

8,056

5,590

75,654(3,439)4,835(32,296)

4,617

10,42543,358

Profit22,2894,465

209,316(1,915)(1,634)(17,984)¥ 20,374¥ 2,831$ 191,332

Owners of parent

532,463,527¥54,347¥67,351¥116,644¥(616)¥8,554¥(1,537)¥(12,421)¥16,183¥248,505

Cash dividends paid

–

–

–

(5,317)

–

–

–

–

–

(5,317)

Profit attributable toowners of parent

–

–

–

2,831

–

–

–

–

–

2,831

Purchases of treasury
stock

–

–

–

–

(191)

–

–

–

–

(191)

Change in equity resulting
from transactions with
non-controlling interests

–

–

(408)

–

–

–

–

–

–

(408)

Other changes

–

–

–

–

–

4,953

(8,469)

3,522

(376)

(370)

532,463,527

54,347

66,943

114,158(807)

13,507(10,006)(8,899)15,807

245,050

Cash dividends paid

–

–

–

(6,645)

–

–

–

–

–

(6,645)

Profit attributable toowners of parent

–

–

–

20,374

–

–

–

–

–

20,374Purchases of treasury
stock

–

–

–

–

(9)

–

–

–

–

(9)

Sales of treasury stock

–

–

–

–

0

–

–

–

–

0

Change in equity resulting
from transactions with
non-controlling interests

–

–

1,027

–

–

–

–

–

–

1,027

Other changes

–

–

–

–

–

2,873

5,325

1,216

549

9,963

532,463,527¥54,347¥67,970¥127,887¥(816)¥16,380¥(4,681)¥(7,683)¥16,356¥269,760

Balance at April 1, 2016

Balance at April 1, 2017

Balance at March 31, 2018

Thousands of U.S. dollars (Note 1)
Noncontrollinginterests

Total net
assets$(93,966)$(83,570)$148,443$2,301,262

–

–

–

–

(62,403)

–

–

–

–

–

191,332

–

(84)

–

–

–

–

(84)

–

–

0

–

–

–

–

0

–

9,645

–

–

–

–

–

–

9,645

–

–

–

–

26,98050,007

11,4195,157

93,563$510,372$638,306$1,200,986$(7,663)$153,824$(43,959)$(72,151)$153,600$2,533,315

CapitalsurplusRetainedearnings$510,372$628,661$1,072,057$(7,579)$126,844

Cash dividends paid––

(62,403)–

Profit attributable toowners of parent––

191,332

Purchases of treasury
stock

–

–

Sales of treasury stock–

Change in equity resulting
from transactions with
non-controlling interests

Balance at April 1, 2017

Thousands of U.S. dollars(Note 1)Millions of yen

2018ProfitYear ended March 31, 2018

2018

2017

¥ 22,289¥ 4,465$ 209,316

Net unrealized holding gain on securities (Note 7)

2,873

4,953

26,980Translation adjustments

5,269(8,682)49,481Retirement benefit liability adjustments

1,238

3,624

11,626

Other changes

546

(768)

5,128

Balance at March 31, 2018

Other comprehensive income (loss) (Note 18):

Share of other comprehensive income (loss) of affiliates accounted for by
the equity method
Other comprehensive income (loss), net

9,926

(873)

93,215¥ 32,215¥ 3,592$ 302,531

Owners of parent¥ 29,787¥ 2,836$ 279,730

Non-controlling interests

¥

¥

$

Comprehensive income

See accompanying notes to the consolidated financial statements.

Total comprehensive income attributable to:
2,428

756

22,801

See accompanying notes to the consolidated financial statements.

99

NTN REPORT 2018

NTN REPORT 2018100

Financial/Company Data

Retirement
benefitliability
adjustments

Net unrealized Translation
Treasury stock, holding
gain on adjustments
at costsecurities

Commonstock

See accompanying notes to the consolidated financial statements.

Consolidated Statement of Comprehensive Income

Total net
assetsResource Strategies

Current
DeferredProfit attributable to: Non-controlling interests

Retainedearnings

Governance Strategies–

Product compensation expense

Gain on reversal of loss on arbitration ruling (Note 16)

Capitalsurplus

Business Strategies

Interest and dividend income

Gain on reversal of prior year customs duties

Commonstock$ 6,990,402

Other income (expenses):

Net
Retirement
NonTreasury
unrealized Translation
benefitcontrollingstock, at cost holding gain adjustments
liability
on securities
adjustments interests

Number ofshares in issue

Our Business Model¥ 744,373

Cost of sales (Note 15)

Selling, general and administrative expenses (Note 15)

Millions of yen

2018

2017

Year ended March 31, 2018

About Us

Thousands of U.S. dollars(Note 1)Millions of yen

Net sales (Note 21)

Consolidated Statement of Changes in Net Assets

Year ended March 31, 2018

Financial/Company Data

Consolidated Statement of Cash Flows

March 31, 2018

2018

2017

Cash flows from operating activities:
Profit before income taxes¥ 14,890$ 252,674

Depreciation and amortization

37,506

36,629352,219

Loss on impairment of fixed assets

635

4,562

5,963

–

47

–

(Decrease) increase in provision for loss on support to a related company(2,154)667(20,228)

Loss on surcharge payments under the Anti-Monopoly Act

3,710

12,12934,841

64

89

601

Amortization of goodwill

Increase in allowance for doubtful accounts
Increase (decrease) in provision for directors’ and audit & supervisory board
members’ bonuses

(4)

244

1,109

93

10,415Decrease in liability for retirement benefits(1,045)(655)(9,814)

–

1,114

–

Interest and dividend income(1,698)(1,420)(15,946)

Interest expense

3,884

4,192

36,475

Payments for loss on arbitration rulingTranslation adjustments and foreign exchange loss, net
Equity in earnings of affiliates
Loss on sales of property, plant and equipment, net

834

263

(213)

(4,282)–171–(4,459)(9,282)(41,874)(Increase) decrease in inventories(5,791)

2,468(54,383)

Increase in trade payables

14,8407,243

139,362

1,399

52,73874,953

739,268

Interest and dividend income received

2,079

1,988

19,524

Interest paid

(3,969)(4,314)(37,273)–(1,114)–(10,237)(1,112)(96,135)

Subtotal

Payment for loss on arbitration ruling
Surcharge payments under the Anti-Monopoly Act(8,013)(45,030)¥ 62,388$ 580,354(Increase) decrease in short-term investments, net(1,874)200(17,599)

Purchases of property, plant and equipment(36,458)(35,273)(342,377)

–

472

–

(9,645)(6,627)(90,576)(382)

9(3,587)(48,359)(41,219)(454,139)

Net cash provided by operating activities

Cash flows from investing activities:

Proceeds from sales of property, plant and equipment
Purchases of other assets
Other
Net cash used in investing activities

Cash flows from financing activities:(Decrease) increase in short-term bank loans, net(10,030)

13,679(94,192)

Proceeds from long-term debt

68,99839,481

647,960

Repayment of long-term debt, including current portion(68,858)(75,060)(646,645)

Proceeds from issuance of corporate bonds

10,00020,00093,910Cash dividends paid

(6,645)(5,317)(62,403)

Repayment of lease obligations

(348)

(325)

(3,268)

Other

(638)

(676)

(5,992)(7,521)(8,218)(70,630)

Net cash used in financing activities

Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year

101

NTN REPORT 2018

885

(978)

8,311

6,804

11,97363,896

79,28467,311

744,556¥ 86,088¥ 79,284$ 808,452(a) Principles of consolidation
The accompanying consolidated financial statements include theaccounts of the Company and the significant companies which it
controls directly or indirectly. Companies over which the Company
exercises significant influence in terms of their operating and financial
policies have been included in the accompanying consolidated
financial statements on an equity basis.
The financial statements of certain consolidated subsidiaries
whose fiscal year end is December 31 have been included inconsolidation on the basis of a full fiscal year closing on March 31 forconsolidation purposes.
(b) Foreign currency translation
Monetary assets and liabilities denominated in foreign currencies aretranslated into yen at the rates of exchange in effect at the balance
sheet date. Revenues and expenses are translated at the rates of
exchange prevailing when the transactions were made.
Assets and liabilities of overseas consolidated subsidiaries aretranslated into yen at the exchange rates in effect at the respectivebalance sheet dates, except for the components of net assets
excluding non-controlling interests which are translated at therespective historical rates. Revenue and expenses are translated at
the average rates of exchange for the respective years. Differences
arising from translation are reflected in “Translation adjustments”
and “Non-controlling interests” in the accompanying consolidatedbalance sheets and statements of changes in net assets.
(c) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits withbanks withdrawable on demand, and short-term investments which
are readily convertible to cash subject to an insignificant risk of any
change in their value and which were purchased with an original
maturity of three months or less.

The principal estimated useful lives are as follows:
Buildings and structures
10 to 50 years
Machinery, equipment and vehicles 5 to 12 years
Contributions granted by national and municipal governments are
deducted directly from the acquisition costs of the related fixed assets
as stipulated in the Corporation Tax Law of Japan. The property,
plant and equipment accounts on the consolidated balance sheets at
March 31, 2018 and 2017 were reduced by the following amounts:
Thousands of
U.S. dollars

Millions of yen

2018

2017

2018

¥ 799

¥ 799

$ 7,503

Buildings and structures

372

402

3,493

Machinery, equipment andvehicles

119

155

1,118

¥ 1,290¥ 1,356$ 12,114Land(h) Liability for retirement benefits
Liability for retirement benefits has been provided principally at an
amount calculated based on the retirement benefit obligation after
the fair value of the pension plan assets are deducted. The estimatedbenefit is attributed to each period by the benefit formula method
over the estimated years of service of the eligible employees.
Past service cost is amortized as incurred primarily by the straightline method over a period of principally 15 years, which is within
the estimated average remaining years of service of the eligible
employees.

NTN REPORT 2018

102

Financial/Company Data

(4,795)¥ 61,799

Income taxes paid

2. Summary of Significant Accounting Policies(g) Property, plant and equipment (other than leased assets)
Property, plant and equipment are stated at cost. The Company andits domestic consolidated subsidiaries calculate depreciation by thestraight-line method over the estimated useful lives of the respective
assets. The foreign consolidated subsidiaries principally calculated
depreciation by the straight-line method over the estimated useful
lives of the respective assets.

Resource Strategies

5,616
78,721Other(f) Inventories
Inventories are principally stated at lower of cost, determined by theaverage method, or net selling value.

Governance Strategies

Increase in trade receivables

28
(456)

(e) Short-term investments and investment securities
The accounting standard for financial instruments requires that
securities be classified into three categories: trading, held-tomaturity or other securities. Trading securities are carried at fairvalue and held-to-maturity debt securities are carried at amortizedcost. Marketable securities classified as other securities are carried atfair value with any changes in unrealized holding gain or loss, net ofthe applicable income taxes, included directly in net assets. Cost of
securities sold is determined by the moving average method. Nonmarketable securities classified as other securities are carried at costbased on the moving average method.

Business Strategies

26

Increase in provision for product defect compensation

The accompanying consolidated financial statements of NTN
Corporation (the “Company”) and consolidated subsidiaries areprepared on the basis of accounting principles generally accepted inJapan, which are different in certain respects as to the applicationand disclosure requirements of International Financial ReportingStandards, and are compiled from the consolidated financial
statements prepared by the Company as required by the Financial
Instruments and Exchange Act of Japan.
In preparing the accompanying consolidated financial statements,
certain reclassifications have been made to the consolidated financial
statements issued domestically in order to present them in a format
which is more familiar to readers outside Japan. In addition,certain notes included herein are not required under accounting
principles generally accepted in Japan but are presented as additional
information.
Certain amounts in the prior year’s financial statements havebeen reclassified to conform to the current year’s presentation. Such
reclassification had no effect on consolidated profit or net assets.
The translation of yen amounts into U.S. dollar amounts is
included solely for the convenience of readers outside Japan and has
been made at ¥106.485 = U.S. $1.00, the exchange rate prevailingon March 31, 2018. This translation should not be construed asa representation that yen can be converted into U.S. dollars at theabove or any other rate.

(d) Allowance for doubtful accounts
The allowance for doubtful accounts is computed based on the actual
historical percentage of bad debts and an estimate of uncollectible
amounts determined after an analysis of specific individual
receivables.

Our Business Model¥ 26,906

Adjustments for:1. Basis of Preparation

About Us

Thousands of U.S. dollars(Note 1)Millions of yen
2018

Notes to Consolidated Financial Statements

Year ended March 31, 2018

(i) Provision for product defect compensation
Provision for product defect compensation is provided at an estimatedamount in order to cover the anticipated compensation.

(o) Consolidated taxation system
The Company and certain domestic consolidated subsidiaries adopted
the consolidated taxation system, which allows companies to file
tax returns based on the combined profits or losses of the parent
company and its wholly owned domestic subsidiaries.

103

NTN REPORT 2018

Performance-linked stock compensation scheme
The Company introduced a performance-linked stock compensation
scheme (hereinafter referred to as the “Scheme”) for its directors(excluding directors who do not reside in Japan and outside directors;
the same applies hereinafter), which serves as an officer remuneration
system that is closely linked to corporate performance targets in the
mid-term management plan and which is highly transparent andobjective in nature.

(ii) The Company’s shares remaining in the trust
The Company’s shares remaining in the trust are recorded astreasury stock in the net asset section, based on their book value(excluding the amount of incidental expenses) recorded in theaccounts of the trust. The book value and number of sharesof such treasury stock at March 31, 2018 totaled ¥180 million($1,690 thousand) and 566,826 shares, and at March 31, 2017
totaled ¥180 million and 568,000 shares, respectively.

5. Inventories
Inventories at March 31, 2018 and 2017 consisted of the following:(ii) Scheduled date of adoption
The Company expects to adopt the revised implementation
guidance from the beginning of the fiscal year ending March 31,2019.
(iii) Impact of the adoption of implementation guidance
The Company is currently evaluating the effect of the adoption of
the revised implementation guidance on its consolidated financial
statements.
(b) Accounting Standard and Implementation Guidance for
Revenue Recognition(i) Overview
On March 30, 2018, the ASBJ issued “Accounting Standard
for Revenue Recognition” (ASBJ Statement No.29) and“Implementation Guidance on Accounting Standard for Revenue
Recognition” (ASBJ Guidance No.30). The International
Accounting Standards Board (hereinafter referred to as the “IASB”)
and the Financial Accounting Standards Board (hereinafterreferred to as the “FASB”) in the United States co-developed
comprehensive accounting standards for revenue recognition
and issued “Revenue from Contracts with Customers” (issued
as IFRS 15 by the IASB and Topic 606 by the FASB) in May 2014.
The ASBJ developed comprehensive accounting standards onrevenue recognition and issued them in conjunction with theimplementation guidance based on the fact that IFRS 15 will beapplied from fiscal years starting on or after January 1, 2018 andTopic 606 will be applied from fiscal years starting after December
15, 2017.
As the basic policy in developing accounting standards forrevenue recognition, the ASBJ defined the accounting standard
starting with incorporating the basic principle of IFRS 15 from astandpoint of comparability between financial statements, which
is one benefit of ensuring consistency with IFRS 15. Furthermore,
the ASBJ added alternative accounting treatment without
impairing comparability when there are matters to be consideredrelated to accounting practices, etc. common in Japan.

Thousands of
U.S. dollars

Millions of yen

2018

2017

Finished goods¥ 96,468¥ 97,406

Work in process

49,47943,629Raw materials and supplies

2018$

905,930
464,657

33,79130,447317,331¥ 179,738¥ 171,482$ 1,687,918

6. Impairment of Fixed Assets
The Company and its consolidated subsidiaries group fixed assets used for manufacturing by management segment into minimum units which
generate identifiable cash flows (e.g., a factory). They also group fixed assets used at the head office or used for sales activities as shared assets,
and group fixed assets on an individual basis when they do not expect any future use.
The Company and its consolidated subsidiaries wrote down the following assets to their respective net recoverable values because theCompany and its consolidated subsidiaries do not expect them to be recoverable. Consequently, the Company and its consolidated subsidiaries
recorded related losses on impairment of fixed assets of ¥635 million ($5,963 thousand) and ¥4,562 million in the accompanying consolidated
statement of income for the years ended March 31, 2018 and 2017, respectively:
Thousands of
U.S. dollars

Millions of yen

Location

Usage

Classification

Japan

Production equipment and otherMachinery and equipment

Welfare facilities
EuropeAsia and other areas–

Production equipment and other
Production equipment
–

2018

2018

2017

¥ 15

¥ 24

$

Financial/Company Data(n) Distribution of retained earnings
Under the Corporation Law of Japan and the Company’s Articles ofIncorporation, the distribution of retained earnings with respect to agiven financial period is made by resolution of the shareholders at a
general meeting held subsequent to the close of the financial period.
The distribution of retained earnings with respect to the interim
financial period is made by resolution of the Board of Directors. The
accounts for the period do not reflect such distributions.

4. Additional Information

Resource Strategies(m) Derivative financial instruments and hedging activities
All derivatives are stated at fair value with any changes in fair value
included in profit for the period in which they arise, except forderivatives which meet the criteria for deferral hedge accounting
under which unrealized gain or loss, net of the applicable income
taxes, is deferred as a component of net assets. Receivables andpayables hedged by forward foreign exchange contracts whichmeet certain conditions are translated at the corresponding foreignexchange contract rates. Interest-rate swaps which meet certain
conditions are accounted for as if the interest rates applied to theinterest-rate swaps had originally applied to the underlying debt.
Interest-rate and cross currency swaps which meet certain
conditions are accounted for as if the interest rates and currencies
applied to the interest-rate and cross currency swaps had originallyapplied to the underlying debt.

(Major revised accounting treatments)• Accounting treatment of taxable temporary differences related toinvestments in subsidiaries, etc. when an entity prepares separate
financial statements• Accounting treatment related to the recoverability of deferred
tax assets in entities that qualify as (Category 1)(iii) Impact of the adoption of accounting standard andimplementation guidance
The Company is currently evaluating the effect of the adoption of
the accounting standard and the implementation guidance on its
consolidated financial statements.

(i) Overview of transactions
The Scheme adopts a mechanism known as an officer
remuneration BIP (Board Incentive Plan) trust (hereinafterreferred to as the “BIP Trust”). The BIP Trust is an incentive planfor officers based on the performance share scheme and therestricted stock scheme in the U.S., and has a system in which theCompany’s shares acquired by the BIP Trust and funds equivalent
to the proceeds received when converting into cash or disposingof such shares are distributed and paid according to the officers’
positions and the degree of achievement of performance targets
disclosed in the mid-term management plan, and other factors.

Governance Strategies(l) Deferred income taxes
Deferred income taxes are provided for temporary differences
between the balances of assets and liabilities reported for financial
reporting purposes and the corresponding balances for tax reporting
purposes.

(i) Overview
On February 16, 2018, the Accounting Standards Board ofJapan (hereinafter referred to as the “ASBJ”) issued “Revised
Implementation Guidance on Tax Effect Accounting” (ASBJ
Guidance No.28) and “Revised Implementation Guidance on
Recoverability of Deferred Tax Assets” (ASBJ Guidance No.26).
The ASBJ made the following necessary revisions while adhering
fundamentally to the framework outlined in “Practical Guidelines
on Accounting Standards for Tax Effect Accounting.”
The authority for providing related accounting guidance has
been transferred from the Japanese Institute of Certified Public
Accountants to the ASBJ.

(ii) Scheduled date of adoption
The Company expects to adopt the accounting standard andimplementation guidance from the beginning of the fiscal year
ending March 31, 2022.

Business Strategies(k) Research and development costs and computer software
Research and development costs are charged to income as incurred.
Expenditures relating to computer software developed for internal
use are charged to income when incurred, except if the software
is expected to contribute to the generation of income or to future
cost savings. Such expenditures are capitalized as assets and areamortized by the straight-line method over their respective estimateduseful lives, generally a 5-year period.

(a) Implementation Guidance on Tax Effect Accounting and
Implementation Guidance on Recoverability of Deferred Tax
AssetsOur Business Model(j) Leases
For lease transactions involving the transfer of ownership, the leased
assets are depreciated by the same methods used for owned fixed
assets.
For lease transactions not involving the transfer of ownership,leased assets are depreciated over the lease period using the straightline method with a nil residual value.

3. Standards Issued but Not Yet Effective

About Us

Net unrecognized actuarial gain or loss is amortized commencing
in the year following the year in which the gain or loss wasrecognized primarily by the straight-line method over a period of
principally 15 years, which is within the estimated average remaining
years of service of the eligible employees.

141

Land

448

–

4,207

Construction in progress

65

100

610

Other

–

432

–

Buildings and structures

107

–

1,005

Machinery and equipment

0

–

0

Machinery and equipment

–

85

–

Other

–

79

–

Buildings and structures

–

1,319

–

Machinery and equipment

–

2,441

–

Goodwill

–

82

–

¥ 635

¥ 4,562$ 5,963

The recoverable value of the fixed assets presented in the above table has been measured primarily at net realizable value or value in use. If a
fixed asset is unlikely to be sold or diverted to other usage, such asset is valued at nil.

NTN REPORT 2018104

9. Retirement Benefits(a) Information regarding marketable securities classified as other securities at March 31, 2018 and 2017 is summarized as follows:

1. Outline of retirement benefits for employees
The Company and certain domestic consolidated subsidiaries have defined benefit pension plans (i.e., corporate pension fund plans andlump-sum payment plans), covering substantially all employees who are entitled to lump-sum or annuity payments, the amounts of which
are determined by reference to their basic rates of pay, length of service, and the conditions under which termination occurs. They also havedefined contribution pension plans and advance payment plans. Certain overseas consolidated subsidiaries have defined benefit pension plans
and/or defined contribution pension plans. The Company has also established an employees’ retirement benefit trust.

Millions of yen

2018

2017

Carrying
value

Acquisition
costs

Unrealized gain
(loss)

Carrying
value

Acquisition
costs

Unrealized gain
(loss)¥ 36,636¥ 13,038¥ 23,598¥ 31,758¥ 12,025¥ 19,733

Securities whose carrying value
exceeds their acquisition costs:
Equity securities

2. Defined benefit pension plans(1)The changes in the retirement benefit obligation for the years ended March 31, 2018 and 2017 are as follows:

Total¥ 40,210

3,759

(185)

¥ 16,797¥ 23,413

4,347

4,772

¥ 36,105¥ 16,797¥ 19,308

2018
Carrying
value

Acquisition
costs

2018

2017

2018

¥ 103,637¥ 104,978$ 973,254

Service cost

3,439

3,432

32,296

Interest cost

1,838

1,870

17,261(425)

Thousands of U.S.dollars

Unrealized gain
(loss)

Retirement benefit obligation at the beginning of the year

(538)

(612)

(5,052)(5,809)(5,859)(54,552)

272

(172)

2,553

¥ 102,839¥ 103,637$ 965,760

Retirement benefit obligation at the end of the year
$ 344,048$ 122,440$ 221,608

Equity securities

33,56435,301(1,737)

Total$ 377,612$ 157,741$ 219,871* Certain domestic consolidated subsidiaries calculate the liability for retirement benefits based on the simplified method.

Securities whose carrying value does
not exceed their acquisition costs:(2) The changes in plan assets for the years ended March 31, 2018 and 2017 are as follows:

2017

2018

¥ 57,841$ 577,433

Expected return on plan assets

1,676

1,834

15,739Actuarial gain

1,122

3,240

10,537

Short-term bank loans principally represent short-term notes with average annual interest rates of 1.12% and 0.84% at March 31, 2018 and2017, respectively.
Long-term debt and lease obligations at March 31, 2018 and 2017 consisted of the following:

2018

2018

2017

2,687

2,586

25,234

Benefits paid

(3,775)(3,710)(35,451)

(752)

(303)

(7,062)¥ 62,446¥ 61,488$ 586,430

Other
Plan assets at fair value at the end of the year

(3) The balance of retirement benefit obligation and plan assets at fair value, liabilities and assets recognized in consolidated balance sheets as ofMarch 31, 2018 and 2017 are as follows:
Thousands ofMillions of yen

U.S. dollars

2018

2017

2018

Funded retirement benefit obligation¥ 93,915¥ 95,273$ 881,955

Plan assets at fair value(62,446)(61,488)(586,430)

31,46933,785295,525¥ 233,437$ 2,185,782

0.405% unsecured bonds due 2025

10,00010,00093,9100.490% unsecured bonds due 2027

10,00010,00093,9100.430% unsecured bonds due 2028

10,000—93,910Unfunded retirement benefit obligation

8,924

8,364

83,805

Lease obligations due through 2046

2,401

2,620

22,548

Net amount of liabilities and assets recognized in the consolidated balance sheet

40,39342,149379,330

265,154

256,057

2,490,060(61,125)(66,947)(574,025)¥ 204,029¥ 189,110$ 1,916,035

The aggregate annual maturities of long-term debt and lease obligations subsequent to March 31, 2018 are summarized as follows:
Millions of yen

Thousands of
U.S. dollars

2019¥ 61,125$2020

24,602231,0372021

37,273350,0312022

43,839411,6922023

33,115

310,9832024 and thereafter

65,200612,292¥ 265,154$ 2,490,060

NTN REPORT 2018

40,39342,149379,330¥ 40,393¥ 42,149$ 379,330(4) The components of retirement benefit expenses for the years ended March 31, 2018 and 2017 are as follows:Year ending March 31,

105

Liability for retirement benefits
Net amount of liabilities and assets recognized in the consolidated balance sheet

Financial/Company Data

¥ 232,753

574,025

Thousands of
U.S. dollars

Millions of yen

Service cost

2018

2017

2018

¥ 3,439¥ 3,432$ 32,296Interest cost

1,838

1,870

17,261

Expected return on plan assets(1,676)(1,834)(15,739)

1,710

2,254

16,0598(9)74¥ 5,319¥ 5,713$ 49,951

Amortization:
Actuarial loss
Past service cost
Retirement benefit expenses

NTN REPORT 2018

Resource Strategies

Thousands of
U.S. dollars

Millions of yen

Contributions by the employers

Governance Strategies

2018¥ 61,488

Plan assets at fair value at the beginning of the year

8. Short-Term Bank Loans, Long-Term Debt and Lease Obligations

Loans from banks and other financial institutions, due through 2026, at an averageannual interest rate of 1.12%

Thousands of
U.S. dollars

Millions of yen(b) Sales and aggregate gain on investment securities are summarized as follows:
There were no sales of investment securities for the years ended March 31, 2018 and 2017.

Less current portion

Business Strategies

Actuarial gain
Benefits paid
Other

Securities whose carrying value
exceeds their acquisition costs:
Equity securities

Thousands of
U.S. dollars

Millions of yen

3,574

Our Business Model

Securities whose carrying value does
not exceed their acquisition costs:
Equity securities

About Us

7. Securities

106

(5) The components of retirement benefit liability adjustments included in other comprehensive income (before tax effect) for the years ended
March 31, 2018 and 2017 are as follows:
Thousands ofMillions of yen

2018

2017

2018

¥ 3,370¥ 6,106$ 31,648

23

17

216

¥ 3,393¥ 6,123$ 31,864

Past service cost
Total

Number of shares

U.S. dollars

2018
April 1, 2017

Increase

Decrease

March 31, 2018

Shares issued: Common stock

532,463,527——

532,463,527

Treasury stock: Common stock

1,388,394

18,7671,202

1,405,959

About Us

Actuarial loss(b) Movements in shares issued and treasury stock during the years ended March 31, 2018 and 2017 are summarized as follows:

2017

Millions of yen

Unrecognized actuarial loss
Unrecognized past service cost
Total

U.S. dollars

2018

2017

2018

¥ (8,117)¥ (11,487)$ (76,227)

(257)

(280)

(2,413)¥ (8,374)¥ (11,767)$ (78,640)

Equities

2018

2017

45.2%

50.5%

Bonds

29.2

23.6

General accounts at life insurance companies

15.2

16.0

Other

10.4

9.9

Total

100.0%

100.0%(8) The assumptions used in accounting for the defined benefit plans are as follows:
2018

2017

Discount rate

Principally 1.2%

Principally 1.2%

Expected long-term rate of return on plan assets

Principally 2.5%

Principally 2.5%

Thousands of
U.S. dollars

Millions of yen

Contributions to defined contribution pension plans

2018

2017

2018

¥ 1,622¥ 1,545$ 15,232

532,463,527

Treasury stock: Common stock

795,969

592,425—

1,388,394

The increase in treasury stock of 18,767 shares was due to purchases of shares of less than one voting unit and the decrease in treasury stock of
1,202 shares was mainly due to disposal of shares by the “Officer Remuneration BIP Trust” for the year ended March 31, 2018 (Please refer toNote 4). Additionally, the Company included 566,826 shares held by the “Officer Remuneration BIP Trust” in the number of treasury stock at
March 31, 2018.
The increase in treasury stock of 592,425 shares was due to purchases of 24,425 shares of less than one voting unit and purchases of
568,000 shares by the “Officer Remuneration BIP Trust” as the trust asset of the new stock compensation scheme for directors for the year
ended March 31, 2017. Additionally, the Company included 568,000 shares held by the “Officer Remuneration BIP Trust” in the number oftreasury stock at March 31, 2017.

11. Contingent Liabilities
Lawsuits, etc.
(1) In June 2012, the Company and its former executives received
an indictment filed by the Tokyo District Prosecutors Office(hereinafter referred to as the “TDPO”) on suspicion of having
violated the Anti-Monopoly Act of Japan in connection with thesales of bearings in Japan. In March 2013, the Company received
a cease and desist order and surcharge payment order for ¥7,231
million ($67,906 thousand) from the Japan Fair Trade Commission(hereinafter referred to as the “JFTC”). Because the assertions
by the JFTC and the TDPO are different from the Company’s viewof the facts, in April 2013, the Company requested the JFTC toinitiate a hearing. As a result, hearing proceedings for the JFTC
orders were commenced in September 2013. In a criminal trial,
the Supreme Court of Japan dismissed the Company’s final appeal
in December 2017; therefore the conviction judged by the Tokyo
District Court in February 2015 became final and binding. In lightof the ruling by the Supreme Court, the Company decided towithdraw the hearing request regarding the cease and desist orderfrom the JFTC in December 2017. With regard to the surcharge
payment order, the Company will carry on with the hearing
proceedings in which the Company will continue its argument on
the basis for calculation of the surcharge while the Company will
not continue its argument on any violation or non-violation of theAnti-Monopoly Act of Japan.
In June 2017, a consolidated subsidiary in South Korea received
from the Korea Fair Trade Commission the notice that it hadfinished the investigation with its conclusion that the subsidiary
was not guilty of any wrongdoing with regard to automotive
bearings sales in the South Korean market.
There are ongoing investigations by the authorities into
consolidated subsidiaries in Brazil and elsewhere.
(2) In the U.S. and Canada, a number of class action suits was
filed against the Company and its consolidated subsidiaries for
suspected price-fixing of bearing sales with business competitors.
(3) In February 2016, a lawsuit was filed against eight bearing
manufacturers, including the Company, in The United Kingdom
Competition Appeal Tribunal. The suit sought the joint paymentof damages of €507.8 million (provisional amount) to Peugeot
S.A. and its total 19 group companies (hereinafter referred to as
the “PSA group”). However, the PSA group withdrew the claim
against the Company in April 2018.
(4) The Company and its related companies may be subject tolawsuits similar to the above mentioned lawsuits, etc. andcontinue to address these claims. Depending on the results of
the above lawsuits, etc., the results of operations of the Company
and its consolidated subsidiaries could be affected. However, it
is currently difficult to make reasonable estimates of the future
possible effects on the results of operations and financial positionof the Company and its consolidated subsidiaries.

12. Operating Leases
Future minimum lease payments subsequent to March 31, 2018 for non-cancelable operating leases were as follows:Year ending March 31,

20192020 and thereafter
Total

107

NTN REPORT 2018

Millions of yen

Thousands of
U.S. dollars¥ 1,218$ 11,438

4,236

39,780¥ 5,454$ 51,218

NTN REPORT 2018

108

Financial/Company Data

10. Shareholders’ Equity(a) The Corporation Law of Japan (the “Law”) provides that an amount equal to 10% of the amount to be disbursed as distributions of capitalsurplus (other than the capital reserve) and retained earnings (other than the legal reserve) be transferred to the capital reserve and the legal
reserve, respectively, until the sum of the capital reserve and the legal reserve equals 25% of the capital stock account. Such distributions canbe made at any time by resolution of the shareholders or by the Board of Directors if certain conditions are met.
Retained earnings include the legal reserve provided in accordance with the provisions of the Law. The legal reserve of the Company
included in retained earnings amounted to ¥8,639 million ($81,129 thousand) at March 31, 2018 and 2017, respectively.

March 31, 2017—

Resource Strategies

3. Defined contribution pension plans

Decrease—

Governance Strategies

The expected long-term rate of return on plan assets is determined as a result of consideration of both the portfolio allocation at present andanticipated in the future, and long-term expected rate of return from multiple plan assets.

Increase

532,463,527

Business Strategies(7) The fair value of plan assets, by major category, as a percentage of total plan assets as of March 31, 2018 and 2017 are as follows:

April 1, 2016
Shares issued: Common stock

Our Business Model(6) The components of retirement benefit liability adjustments included in accumulated other comprehensive income (before tax effect) as ofMarch 31, 2018 and 2017 are as follows:
Thousands of

13. Financial Instruments(d) Supplementary explanation of the fair value of financial
instruments
The fair value of financial instruments is based on their quoted market
price, if available. When there is no quoted market price available,
fair value is reasonably estimated. Since various assumptions andfactors are reflected in estimating the fair value, different assumptions
and factors could result in different fair value. In addition, thenotional amounts of derivatives in Note 14 “Derivative Financial
Instruments and Hedging Activities’’ are not necessarily indicative of
the actual market risk involved in the derivative transactions.

Difference

Fair value

Difference¥ 86,088¥ 86,088¥—¥ 79,284¥ 79,284¥—(2) Short-term investments

2,595

2,595

—

718

718

—

(3) Notes and accounts –trade receivables

143,692

143,692—

136,848

136,848—(4) Electronically recorded monetaryclaims

5,745

5,745

—

5,495

5,495

—

(5) Investment securities

40,21040,213

3

36,105

36,109

4

77

77

—

94

94

—

¥ 278,407¥ 278,410¥3¥ 258,544¥ 258,548¥4(1) Cash and cash equivalents(6) Short-term loans receivable included
in other current assets
Total assets(7) Short-term bank loans

58,08058,080—66,733

66,733—(8) Current portion of long-term debt

60,85360,853—

66,61566,615—(9) Notes and accounts –trade payables

69,71669,716—59,26259,262—(10) Electronically recorded obligations

64,11264,112—

58,132

58,132—(11) Accrued income taxes

3,888

3,888

—

3,057

3,057

—

201,900

202,080180

186,822

187,600

778¥ 458,549¥ 458,729¥ 180¥ 440,621¥ 441,399

¥ 778

¥

¥

¥ —

¥

¥

¥ —

(12) Long-term debt
Total liabilities
Derivative transactions (*)

636

636

1,070

1,070

Thousands of U.S.dollars

2018
Carryingvalue(1) Cash and cash equivalents$

808,452$

Fair value

Difference

808,452$—(2) Short-term investments

24,37024,370—(3) Notes and accounts –trade receivables

1,349,411

1,349,411—(4) Electronically recorded monetaryclaims53,951

53,951—(5) Investment securities

377,612377,640

28

723

723

—

(6) Short-term loans receivable included
in other current assets$ 2,614,519$ 2,614,547(7) Short-term bank loans

545,429545,429—(8) Current portion of long-term debt

571,470

571,470—(9) Notes and accounts –trade payables

654,703654,703—(10) Electronically recorded obligations

602,075

602,075—(11) Accrued income taxes

36,51236,512—

Total assets

Derivative transactions (*)

28

1,896,042

1,897,732

1,690$ 4,306,231$ 4,307,921$ 1,690$$$(12) Long-term debt
Total liabilities

$

5,973

5,973

Financial/Company Data(iii) Monitoring of liquidity risk (the risk that the Group may not beable to meet its obligations on scheduled due dates)
The Group manages liquidity risk with the responsible section
preparing and updating cash flow plans and keeping necessary funds
based on reports of each section.

Fair value

Carryingvalue

Resource Strategies

The Group has established policies which include maximum
upper limits and reporting obligations for derivative transactions
and complies fully with these guidelines. Derivative transactions
are entered into by the Company’s Accounting Department
and certain consolidated subsidiaries. The Company carries out
mutual supervision and monitoring of the derivative transactionsin accordance with management policies and its consolidated
subsidiaries apply the same approach. Each derivative transaction of
the Company is reported to the responsible director when enteredinto. The consolidated subsidiaries are required to report the statusof their derivatives transactions to the Company on a monthly basis
and are also required to consult with the Company when they enter
into derivative transactions other than forward foreign currency
exchange contracts.

2017

Carrying
value

Governance Strategies(ii) Monitoring of market risks (the risks arising from fluctuations inforeign currency exchange rates, interest rates and others)
The Group mainly utilizes forward foreign currency exchange
contracts for hedging of fluctuation risk which is identified by eachcurrency. Depending on the market conditions of foreign currencies,
the Group utilizes forward foreign currency exchange contracts forforecasted export transactions with a maximum period of 6 months.
The Group utilizes interest rate swap agreements and interestrate and cross currency swap agreements to mitigate fluctuation riskof interest rates and fluctuation risk of loan principal due to floatingexchange rates.
The Group continuously reviews securities holdings by monitoring
periodically the market value and financial condition of securities’issuers (companies with business relationships with the Group) andby evaluating those relationships.

Millions of yen

2018

Business Strategies(b) Types of financial instruments and related risks
Trade receivables, notes, accounts receivable and electronicallyrecorded monetary claims, are exposed to credit risk of customers.
In addition, as a result of the business of the Group, which operates
globally, foreign currency trade receivables are exposed to currency
rate fluctuation risk, which is mitigated by utilizing forward foreign
currency exchange contracts. Securities are mainly composedof stocks of the companies with which the Group has business
relationships and they are exposed to fluctuation risk of market
prices.
Trade payables, notes, accounts payable and electronicallyrecorded obligations, are due within one year. Certain trade payables
resulting from the import of raw materials are denominated inforeign currencies. These are exposed to fluctuation risk of foreign
currencies. However, the risk is mitigated because the trade payables,
notes and accounts payable denominated in foreign currencies arewithin persistently the range of accounts receivable denominated in
the same currencies.
Loans are mainly utilized for business operations of the Group.
Short-term loans are mainly utilized for financing of operating
activities. Long-term loans are mainly utilized for capital investments
and financing. These have maturity dates of 8 years or less, at thelongest, subsequent to March 31, 2018. Certain loans are exposed
to fluctuation risk of interest rates and fluctuation risk of exchange
rates and this risk is hedged by derivative transactions of interest
rate swap agreements and interest-rate and cross currency swap
agreements.
The Group has a policy to utilize derivative transactions involving
forward foreign currency exchange contracts, currency option
agreements, currency swap agreements, interest rate option
agreements and interest rate swap agreements for the purpose of
avoiding future fluctuation risk of foreign currencies trade receivables
and payables and mitigating future fluctuation risk of interest rateof loans and corporate bonds. The Group utilized forward foreign
currency exchange contracts, interest rate swap agreements andinterest-rate and cross currency swap agreements for the year ended
March 31, 2018. Refer to “(m) Derivative financial instruments andhedging activities” in Note 2. “Summary of Significant Accounting
Policies.”

Fair Value of Financial Instruments
The carrying value of financial instruments on the consolidated balance sheets, fair value and the difference as of March 31, 2018 and 2017,
are shown in the following table. The table does not include financial instruments for which it is extremely difficult to determine the fair value.
(Please refer to Note 2 below).

Our Business Model(c) Risk management for financial instruments(i) Monitoring of credit risk (the risk that customers or counterparties
may default)
In accordance with internal rules and manual, the credit management
section periodically monitors financial conditions of major customers,
manages collection due dates and balances of each customer andtries to identify credit risk of customers with worsening financial
conditions at the early stage and mitigate the risk. Credit riskof securities is quite low because the Group utilizes certificate ofdeposits with high credit ratings, up to a limited amount, which
is approved by the Company. The Group believes credit risk ofderivative transactions is almost nil because counterparties arefinancial institutions with high credit ratings.

—* Assets and liabilities arising from derivative transactions are shown at net value with the amount in parentheses representing net liability position.

Note 1: Methods to determine the fair value of financial instruments and other matters related to securities and derivative transactions(1) Cash and cash equivalents, (2) Short-term investments, (3) Notes and accounts-trade receivables, (4) Electronically recorded monetaryclaims and (6) Short-term loans receivable included in other current assets
Since these items are settled in a short time period, their carrying value approximates fair value.
(5) Investment securities
The fair value of equity securities is based on quoted market prices.

109

NTN REPORT 2018

About Us

Overview(a) Policy for financial instruments
The Company and its subsidiaries (collectively, the “Group”) raisenecessary funds in accordance with management plans mainly
by bank borrowings and issuance of corporate bonds in supportof operations related to the manufacture and sales of bearings,
constant-velocity joints (CVJs) and precision equipments. The Grouputilizes bank borrowings for short-term operating funds, and bankborrowings and issuance of corporate bonds for long-term capital
investments and finances. Temporary surplus funds are managed by
low-risk financial assets. The Group utilizes derivatives to avoid or
mitigate risks as described in the later part of this note and does nothold them for speculative purposes.

NTN REPORT 2018110

(7) Short-term bank loans, (9) Notes and accounts-trade payables (10) Electronically recorded obligations and (11) Accrued income taxes
Since these items are settled in a short time period, their carrying value approximates fair value.

2018
Within one year

More than ten
years

Cash and cash equivalents$ 808,452

$ —

$ —

$ —

Short-term investments

24,370———Trade receivables
Electronically recorded monetary claims

1,349,411———

53,951

—

—

—

—

—

—

$ —

$ —

$ —

Our Business Model723$ 2,236,907

Short-term loans receivable included in other current assets
Total

Derivative Transactions
Please refer to Note 14 “Derivative Financial Instruments and Hedging Activities” section of these Notes to Consolidated Financial
Statements.

More than one More than five
year and within years and within
five years
ten years

Note 4: The redemption schedule for long-term debt is disclosed in Note 8 “Short-Term Bank Loans, Long-Term Debt and Lease Obligations”
section of these Notes to Consolidated Financial Statements.

Note 2: Financial instruments for which it is extremely difficult to determine the fair value are as follows:
Thousands of
U.S. dollars

Millions of yen

14. Derivative Financial Instruments and Hedging Activities

2018

2017

Unlisted stocks
Stocks of subsidiaries and affiliates
Other
Total

¥ 18,735¥ 17,992$ 175,940

289

290

2,714

¥ 19,024¥ 18,282$ 178,654

Business Strategies

2018(a) Derivative transactions to which hedge accounting is not applied
The estimated fair value of the derivatives positions outstanding which do not qualify for deferral hedge accounting at March 31, 2018 and2017 is summarized as follows:
Currency-related transactions
Millions of yen

2018Classification

Transaction

Electronically recorded monetary claims
Short-term loans receivable included in other current assets
Total

¥—

¥ 6,343

—

¥ 131

¥ 131

13,135

¥—

¥—

2,595

—

—

—

143,692

—

—

—

5,745

—

—

—

77

—

—

—

¥ 238,197

¥—

¥—

¥—

Over-the-countertransactions

¥

—

272

272

Other

2,277

—

10

10

1,774

—

64

64

Buying:Other
Interest-rate and cross currency swaps
Receive/fixed yen and pay / fixed Euro
Total

14,067159

159¥ 14,067

¥ 636

¥ 636

Fair value

Valuation
gain

Millions of yen

2017

Cash and cash equivalents
Short-term investments
Trade receivables
Electronically recorded monetary claims
Short-term loans receivable included in other current assets
Total

2017

More than one More than five
year and within years and within
five years
ten years

More than ten
years¥ 79,284

¥—

¥—

¥—

718

—

—

—

136,848

—

—

—

5,495

—

—

—

94

—

—

—

¥ 222,439

¥—

¥—

¥—

Classification

Transaction

Notional
amountMore than one
year

Forward foreign currency exchange contracts
Selling:Euro

Over-the-countertransactions¥ 6,975¥ 1,338

¥ 220

¥ 220

U.S. dollars

13,781

—

(8)

(8)

Other

2,241

—

(71)

(71)

204

—

(4)

(4)

10,05810,058933

933¥ 33,259¥ 11,396¥ 1,070¥ 1,070

Buying:Other
Interest-rate and cross currency swaps
Receive/fixed yen and pay / fixed Euro
Total

111

NTN REPORT 2018

NTN REPORT 2018

112

Financial/Company Data

14,067¥ 37,596

Millions of yen

Within one year

Resource Strategies

Short-term investments
Trade receivables¥ 86,088

Valuation
gain

U.S. dollars

Euro

2018

Cash and cash equivalents

Fair value

Selling:

Millions of yen

More than ten
years

More than one
year

Forward foreign currency exchange contracts

Note 3: Redemption schedules for cash and cash equivalents, receivables and marketable securities with maturities at March 31, 2018 and 2017
are as follows:More than one More than five
year and within years and within
five years
ten years

Notional
amountGovernance Strategies

Because no quoted market price is available and it is extremely difficult to determine the fair value, the above financial instruments are notincluded in the preceding table.

Within one year

About Us

(8) Current portion of long-term debt and (12) Long-term debt
Long-term debt is composed of corporate bonds and long-term loans. The fair market value of corporate bonds is based on quoted
market prices. The fair value of long-term loans is based on the present value of the total of principal and interest discounted by theinterest rate to be applied assuming new loans under the similar conditions to existing loans are made.
Certain long-term loans with floating interest rates have been hedged by interest rate swap agreements and interest-rate and crosscurrency swap agreements. These have been accounted for as loans with fixed interest rates. The fair value of those long-term loans isbased on the present value of the total of the principals, interest payments and net cash flows of the swap agreements discounted by
the interest rates to be applied assuming new loans under similar conditions are made.

Thousands of U.S. dollars

Thousands of U.S. dollars

Thousands of U.S. dollars

2018TransactionMore than one
year

2018
Fair value

Valuationgain

Forward foreign currency exchange contracts
Selling:
1,230$ 1,230

U.S. dollars$ 59,567
123,351

—

2,554

2,554

Other

21,384

—

95

95

Euro

—

$

More than one
year

Receive / floating and pay / fixed$ 131,474$ 56,346(*1)$ 14,086

—

(*2)

$

—

(*3)

Method of hedge accounting
Swap rates applied to underlying
long-term debt

Interest rate swaps

Swap rates and currency applied tounderlying long-term debt

Interest-rate and cross currency swaps

Forward foreign currency exchange
contracts applied to underlying
accounts-trade receivable

Forward foreign currency exchange contract

Receive / floating U.S. dollars and pay / fixed yen
Selling:
U.S. dollars

Buying:16,659

Other

—

601

601

Interest-rate and cross currency swaps
132,103

132,103

1,493

1,493

$ 353,064$ 132,103$ 5,973$ 5,973

Receive/fixed yen and pay / fixed Euro
Total

Fair value

808*1 Because interest rate swap agreements are accounted for applying swap rates to underlying long-term debt, their fair value is included in that of long-term debt disclosed in Note 13 “Financial
Instruments.”*2 Because interest-rate and cross currency swaps agreements are accounted for applying swap rates to underlying long-term debt, their fair value is included in that of long-term debt disclosed
in Note 13 “Financial Instruments.”*3 Because forward foreign currency exchange contracts are accounted for applying forward foreign exchange rate to underlying accounts-trade receivable, and underlying accounts-tradereceivable and other current liabilities, for the years ended March 31, 2018 and 2017, respectively, their fair value is included in that of accounts-trade receivable and other current liabilities.

Business Strategies

15. Research and Development Costs

The fair value of forward foreign currency exchange contracts is computed using prices provided by counterparty financial institutions.
(b) Derivative transactions to which hedge accounting is applied
The estimated fair value of the derivatives positions outstanding which qualify for deferral hedge accounting at March 31, 2018 and 2017 issummarized as follows.

Our Business Model

Over-the-countertransactions$

Transaction

Notional
amountAbout UsClassification

Notional
amountResearch and development costs included in cost of sales and selling, general and administrative expenses totaled ¥21,007 million ($197,277
thousand) and ¥19,196 million for the years ended March 31, 2018 and 2017, respectively.

Millions of yen

16. Gain on Reversal of Loss on Arbitration Ruling

2018

Receive / floating and pay / fixed¥ 14,000¥ 6,000(*1)¥ 1,500

—

(*2)

¥

—

(*3)

Method of hedge accounting
Swap rates applied to underlying
long-term debt

Interest rate swaps

Swap rates and currency applied tounderlying long-term debt

Interest-rate and cross currency swaps

Forward foreign currency exchange
contracts applied to underlying
accounts-trade receivable

Forward foreign currency exchange contract

Receive / floating U.S. dollars and pay / fixed yen

Fair value

In relation to arbitration proceedings for allegedly defective products with Volvo Powertrain AB in Europe, NTN-SNR ROULEMENTS (hereinafterreferred to as “NTN-SNR”) received the final ruling from the Arbitration Institute of the Stockholm Chamber of Commerce (Sweden) that ordered
NTN-SNR to provide compensation for damages in November 2015. Accordingly, the Company and NTN-SNR recorded loss on arbitration rulingfor the year ended March 31, 2016. The Company and NTN-SNR thoroughly examined the ruling and decided that there was a flaw in such
arbitration proceedings. Therefore, the Company and NTN-SNR challenged the ruling in the Stockholm District Court in February 2016. In
January 2017, NTN-SNR has reached an agreement to settle with Volvo Powertrain AB. As a result, the Company and NTN-SNR recorded gain
on reversal of loss on arbitration ruling in the amount of ¥2,147 million for the year ended March 31, 2017.

17. Loss on Surcharge Payments under the Anti-Monopoly Act

Resource Strategies

More than one
year

Governance Strategies

Transaction

Notional
amountSelling:
U.S. dollars

86

Millions of yen

2017
Notional
amountMore than one
year

Receive / floating and pay / fixed¥ 18,500¥ 14,000(*1)¥ 1,500¥ 1,500

(*2)

79

—

(*3)

¥ 3,003—(*3)

Swap rates applied to underlying
long-term debt

Interest rate swaps

Swap rates and currency applied tounderlying long-term debt

Interest-rate and cross currency swaps

Forward foreign currency exchange
contracts applied to underlying
other current liabilities

Forward foreign currency exchange contract

Receive / floating U.S. dollars and pay / fixed yen

Fair value

Selling:
U.S. dollars¥

Buying:
Euro

113

NTN REPORT 2018

NTN REPORT 2018

114

Financial/Company Data

Transaction

Method of hedge accounting

In relation to a number of class action suits for suspected price-fixing of bearing sales with other business competitors, the Company andits consolidated subsidiary in the U.S. have reached an agreement to settle with indirect purchasers, parts of the certain plaintiffs in the U.S.
in November 2016. In addition, the Company has negotiated the compensation of damages with a part of customers in association withinvestigations by the authorities about the competition laws. Nevertheless, in overall consideration of the effects to operations of the Company
and its consolidated subsidiaries due to extended negotiations, the Company reached the conclusion to pay the settlement amount because theCompany considered that an amicable and early resolution would accord with the overall benefits for both parties.
As a result, the Company and its consolidated subsidiaries recorded loss on surcharge payments under the Anti-Monopoly Act in the amountof ¥3,710 million ($34,841 thousand) and ¥12,129 million for the years ended March 31, 2018 and 2017, respectively.

18. Other Comprehensive Income (Loss)

The tax effects of temporary differences which gave rise to significant portions of the deferred tax assets and liabilities at March 31, 2018 and2017 are presented below:

The following table presents the analysis of other comprehensive income (loss) for the years ended March 31, 2018 and 2017.

2018

2018

2017

Net unrealized holding gain on securities:
Amount arising during the year
Reclassification adjustments for gains included in profit

Thousands of
U.S. dollars

Millions of yen

2018

2017

2018

Deferred tax assets:¥ 4,104¥ 7,210$ 38,541

—

(134)

—

¥ 15,090¥ 16,390$ 141,710

Inventories

2,147

1,167

20,162

Liability for retirement benefits

4,104

7,076

38,541

Tax loss carryforwards

7,965

9,443

74,799(1,231)(2,123)(11,561)

Accrued expenses

4,403

5,339

41,349

Total

2,873

4,953

26,980

Valuation loss on investment securities

898

898

8,433

5,269

(8,768)49,481

Translation adjustments:

Impairment loss

1,026

863

9,635

Other

4,103

4,901

38,532
334,62086—

35,63239,001(8,682)49,481

Less: valuation allowance(5,843)(5,969)(54,872)

Tax effect

—

—

—

Total deferred tax assets

29,78933,032279,748

Total

5,269

(8,682)49,481

Before tax effectGross deferred tax assets

Deferred tax liabilities:

Retirement benefit liability adjustments:
Amount arising during the year

1,069

3,451

10,039Depreciation and amortization(8,879)(13,373)(83,383)

Reclassification adjustments for losses included in profit

1,911

2,305

17,946

Unrealized holding gain on securities(7,020)(5,789)(65,925)

Before tax effect

2,980

5,756

27,985Reserve for deferred gain on property included in retained earnings(1,192)(1,233)(11,194)

Tax effect(1,742)(2,132)(16,359)Retained earnings of overseas consolidated subsidiaries

(169)

(184)

(1,587)

Total

1,238

3,624

11,626

Other

(855)

(1,171)(8,030)

Amount arising during the year
Reclassification adjustments for gains included in profit
Total
Other comprehensive income (loss), net

553

(768)

5,194

(7)

—

(66)

546

(768)

5,128

¥ 9,926¥ (873)$ 93,215

Total deferred tax liabilities(18,115)(21,750)(170,119)Net deferred tax assets¥ 11,674¥ 11,282$ 109,629

20. Amounts per Share
Amounts per share at March 31, 2018 and 2017 and for the years then ended were as follows:
U.S. dollars

Yen

Income taxes applicable to the Company and its domestic subsidiaries comprise corporate taxes, inhabitants’ taxes and enterprise taxes which, inthe aggregate, resulted in a statutory tax rate of 30.2% for the years ended March 31, 2018 and 2017. Overseas subsidiaries are subject to theincome taxes of the respective countries in which they operate.
The effective tax rates for the years ended March 31, 2018 and 2017 differ from the Company’s statutory tax rate for the following reasons:Statutory tax rates

2018

2017

30.2%

30.2%

1.5

0.8

Permanent non-taxable income

(6.5)

(9.3)
11.8

Elimination of dividend income

8.0

Equity in earnings of affiliates

(0.5)

(0.4)

Difference in overseas consolidated subsidiaries’ applicable tax rates

(7.7)

(2.9)

Increase in valuation allowance

5.3

34.7

Decrease in deferred tax assets due to change in statutory tax rates

(2.5)

0.1
(0.5)

Tax credit for research and development expenses

(2.1)

Other

(8.5)

5.5

Effective tax rates

17.2%

70.0%

115

NTN REPORT 2018

¥ 477.17¥ 431.66$ 4.48

Basic

38.36

5.33

0.36

Cash dividends

15.00

10.00

0.14

Net assets

2018

Profit attributable to owners of parent:

Amounts per share of net assets are computed based on the number of shares of common stock outstanding at the year end.
Basic profit attributable to owners of parent per share is computed based on the profit attributable to owners of parent of common stockand the weighted-average number of shares of common stock outstanding during the year. Diluted profit attributable to owners of parent per
share has not been presented because there were no potentially dilutive shares of common stock for the years ended March 31, 2018 and 2017.
The Company recorded shares held by the “Officer Remuneration BIP Trust” (Please refer to Note 4) as treasury stock in the consolidated
financial statements as of March 31, 2018 and 2017. Accordingly, to compute “net assets per share,” the Company’s shares held by thetrust (566,826 shares and 568,000 shares at March 31, 2018 and 2017, respectively) are included in treasury stock that is excluded from thenumber of shares outstanding as of March 31, 2018 and 2017. In addition, to compute “profit attributable to owners of parent per share,”the Company’s shares held by the trust (567,097 and 349,538 average number of shares for the years ended March 31, 2018 and 2017,
respectively) are included in treasury stock that is excluded from the computation of the average number of shares for the years ended March
31, 2018 and 2017.
Cash dividends per share represent the cash dividends proposed by the Board of Directors as applicable to the respective years together with
the interim cash dividends paid.

NTN REPORT 2018

116

Financial/Company Data

Permanent non-deductible expenses

2017

Resource Strategies

19. Income Taxes

2018

Governance Strategies

Share of other comprehensive income (loss) of affiliates accounted forby the equity method:

Business Strategies

—
5,269

Reclassification adjustments for losses included in profit

Our Business Model

Before tax effectTax effectAmount arising during the year

About Us

Thousands of
U.S. dollars

Millions of yen

21. Segment Information

Millions of yen

JapanAmericas

EuropeAsia and otherareas¥ 200,956¥ 187,788¥ 165,262¥ 129,323

Total

Adjustments

Consolidated

683,329¥¥ 683,329

Sales, profit and assets
or liabilities
by reporting segments:
Net sales:
Sales to third parties¥—

Inter-segment sales and transfers

119,879

3,605

3,755

12,980140,219(140,219)

—

Total

320,835

191,393

169,017

142,303

823,548(140,219)

683,329

Segment profit

¥

3,310

¥ 14,523¥

5,042¥ 35,623

Segment assets¥ 584,617

4,462¥ 169,057

¥

8,286

¥ 138,029¥¥ 157,234¥ 1,048,937

30,581¥¥ (250,046)¥ 798,891

Segment liabilities¥ 379,093¥ 115,146¥ 95,336¥ 53,954¥

643,529¥ (89,688)¥ 553,841

Depreciation and amortization¥ 13,168¥ 10,098

¥

6,390

¥

6,973

¥

36,629¥—¥ 36,629

Reportable segment information for the years ended March 31, 2018 and 2017 is summarized as follows:

Capital expenditures¥ 19,207¥ 11,699

¥

8,318

¥

3,749

¥

42,973¥(64)¥ 42,909

Total

Adjustments

Consolidated$$ 6,990,402

Millions of yen
Thousands of U.S. dollars

2018

2018

Reporting segments
Japan

Americas

EuropeReporting segments

Asia and other
areas

Total

Adjustments

Consolidated

Sales, profit and assets
or liabilities
by reporting segments:

Americas

Europe$ 2,009,457$ 1,824,454$ 1,767,620

Asia and otherareas

Sales, profit and assets
or liabilities
by reporting segments:

Net sales:¥ 213,977¥ 194,277¥ 188,225¥ 147,894

Inter-segment sales and transfers

133,346

4,269

4,292

14,058

Total

347,323

198,546

192,517

161,952

2,800¥ 19,601¥

Sales to third parties

Japan

8,015

¥

7,092

¥

¥

744,373—¥ 744,373

155,965(155,965)—

900,338(155,965)

744,373

2,101¥ 39,609

37,508¥¥¥Segment assets¥ 600,933¥ 163,009¥ 153,353¥ 172,959¥ 1,090,254¥ (250,202)¥ 840,052

Segment liabilities¥ 390,502¥ 104,868¥ 112,839¥ 52,309¥

660,518¥ (90,226)¥ 570,292

Depreciation and amortization¥ 13,482

¥

9,854

¥

7,236

¥

6,934

¥

37,506¥—¥ 37,506

Capital expenditures¥ 26,409¥ 10,287

¥

7,710

¥

4,267

¥

48,673¥(201)¥ 48,472

Other items:

Sales to third parties$ 1,388,871 $ 6,990,402—

Inter-segment sales and transfers

1,252,251

40,09040,306132,019

1,464,666(1,464,666)

—

Total

3,261,708

1,864,544

1,807,926

1,520,890

8,455,068(1,464,666)

6,990,402

Segment profit$

75,269$66,601$

26,295$

184,073 $352,238$

19,730$371,968

Segment assets$ 5,643,358$ 1,530,817$ 1,440,137$ 1,624,257 $ 10,238,569$ (2,349,646)$ 7,888,923

Segment liabilities$ 3,667,202$

984,815$ 1,059,670$

491,233 $ 6,202,920$(847,312)$ 5,355,608

Depreciation and amortization$

126,610$

92,539$67,953$

65,117 $352,219$—$352,219

Capital expenditures$

248,007$96,605$72,405$40,071 $457,088$(1,888)$455,200

Other items:

117

NTN REPORT 2018

NTN REPORT 2018

118

Financial/Company Data

The total amount of segment profit is adjusted to operating income of the consolidated statement of income.
Other than those corresponding to segment assets, adjustments relate to the elimination of inter-segment transactions, etc. The adjustments
for segment assets consist of inter-segment elimination, etc. of ¥290,727 million ($2,730,216 thousand) and ¥286,466 million and the corporate
assets of the Group of ¥40,525 million ($380,570 thousand) and ¥36,420 million for the years ended March 31, 2018 and 2017, respectively.
The corporate assets are mainly long-term investment funds (investment securities) for the years ended March 31, 2018 and 2017.

Resource Strategies

Segment profit

Net sales:

Governance Strategies

Other items:
Business Strategies

3. Information as to net sales, profit or loss, assets, liabilities, and other items for each reporting segment for the years ended
March 31, 2018 and 2017

Our Business Model

2. Calculation methods used for net sales, profit or loss, assets, liabilities and other items on each reporting segment
The accounting policies of the segments are substantially the same as those described in Note 2 “Summary of Significant Accounting Policies.”
Inter-segment sales and transfers are recorded at the same prices used in transactions with third parties.

2017
Reporting segments
About Us

1. Outline of reporting segments
The Group’s reporting segments are divisions of the Group for which separate financial information is available, and whose operating results
are reviewed regularly by the highest management decision-making body (the Board of Directors meeting of the Company) in order to allocate
management resources and assess performance of operations.
The Group’s main business lines consist of the manufacture and sales of bearings, CVJs and precision equipments for the aftermarket, generalindustrial machinery market, and automotive market. Business activities in Japan are controlled by the Company (the Head Office), and overseas
business activities are controlled by the General Manager responsible in each region. Business entities in each region prepare their own plans
and strategies to conduct business activities while analyzing profitability and the investment efficiency of operations.
Accordingly, the Group has four reporting segments based on geographic business segmentation controlled by the Head Office or the
General Managers: Japan, the Americas, Europe, and Asia and other areas. Each reporting segment engages in the manufacture and sale ofbearings, CVJs, and precision equipments and other products.

4. Related information(1) Sales by products and service
Sales by products and service classified by the similarity of the market for the years ended March 31, 2018 and 2017 are summarized as follows:(b) Property, plant and equipment
Property, plant and equipment categorized by country and region within the Group at March 31, 2018 and 2017 are summarized as follows:

2018

2018

Sales to third parties

Aftermarket

Industrial
machinery

Automotive

Total¥ 116,695¥ 119,085¥ 508,593¥ 744,373

Japan

Americas

EuropeAsia andother areas

Total¥ 113,587¥ 72,952¥ 49,544¥ 51,976¥ 288,059

Millions of yen

Millions of yen

Aftermarket

Industrial
machinery

Automotive

Total¥ 104,501¥ 98,611¥ 480,217¥ 683,329

Japan

Americas

EuropeAsia andother areas

Total¥ 110,920¥ 76,259¥ 44,964¥ 52,469¥ 284,612

Thousands of U.S. dollars

Thousands of U.S. dollars

2018

2018
Aftermarket

Industrial
machinery

Automotive

Total$ 1,095,882$ 1,118,327$ 4,776,193$ 6,990,402

Japan

Americas

EuropeAsia andother areas

Total$ 1,066,695$ 685,092$ 465,267$ 488,106$ 2,705,160

1. Property, plant and equipment in “Americas” in the amount of ¥64,293 million ($603,775 thousand) and ¥67,938 million is located in the
U.S.A. at March 31, 2018 and 2017, respectively.

Millions of yen

2. Property, plant and equipment in “Europe” in the amount of ¥34,724 million ($326,093 thousand) and ¥32,545 million is located in France at
March 31, 2018 and 2017, respectively.

Governance Strategies(2) Regional information(a) Sales
Sales categorized by country and region based on locations of customers within the Group for the years ended March 31, 2018 and 2017 aresummarized as follows:

3. Property, plant and equipment in “Asia and other areas” in the amount of ¥38,839 million ($364,737 thousand) and ¥39,440 million is
located in China at March 31, 2018 and 2017, respectively.

2018
Japan

Americas

EuropeAsia andother areas

Total¥ 204,325¥ 201,677¥ 175,599¥ 162,772¥ 744,373

5. Loss on impairment of fixed assets
Loss on impairment of fixed assets by reporting segment for the years ended March 31, 2018 and 2017 is summarized as follows:

Millions of yen

Millions of yen

2018

Japan

Americas

EuropeAsia andother areas

Total¥ 191,466¥ 194,765¥ 154,990¥ 142,108¥ 683,329

Japan
¥ 635

Americas¥—

Thousands of U.S. dollars

EuropeAsia andother areas

Adjustments¥—¥—

Asia andother areas

Adjustments¥ 3,760

¥ 82

¥—

Total
¥ 635

Millions of yen

2018

2017

Americas

EuropeAsia andother areas

Total$ 1,918,815$ 1,893,947$ 1,649,049$ 1,528,591$ 6,990,402“Americas” includes the U.S.A., Canada and Central and South America. “Europe” includes Germany, France, the U.K. and others. “Asia andother areas” include China, Thailand, India and others. The sales of the “Americas” segment above include the sales to customers in the U.S.A.
of ¥172,454 million ($1,619,514 thousand) and ¥168,383 million for the years ended March 31, 2018 and 2017, respectively. The sales of the“Asia and other areas” segment above include the sales to customers in China of ¥86,709 million ($814,284 thousand) and ¥74,223 million forthe years ended March 31, 2018 and 2017, respectively.

Japan
¥ 556

Americas¥—

Europe
¥ 164

Total

Financial/Company DataJapan

NTN REPORT 2018

Resource Strategies

2017

119

Business Strategies

Sales to third parties

Our Business Model

2017

2017

Sales to third parties

About Us

Millions of yen

Millions of yen¥ 4,562

Thousands of U.S. dollars

2018
Japan
$ 5,963

Americas$—

Europe$—Asia andother areas

Adjustments

$—

$—

Total
$ 5,963

NTN REPORT 2018120

22. Business Combination(2) Date of the business combination
December 12, 2017(4) Company name of combined company after business combination
There is no change.

3. Matters to be disclosed when additionally acquiring sharesof subsidiaries
Details on acquisition cost of acquired company and consideration for
acquisition by type
Consideration for the acquisition: Cash and cash equivalents(including accounts payable other) ¥223 million ($2,094 thousand)
4. Matters related to change in ownership interests held by
the Company due to transactions with non-controllingshareholders(1) Main reason for change in capital surplus
Additional acquisition of shares in a subsidiaryBusiness Strategies(5) Other matters related to overview of transaction
The Company acquired an additional 40% of ownershipinterests through the transaction. As a result, NTN BEARINGMALAYSIA SDN.BHD. became a wholly owned subsidiary of theCompany. The Company aims to enhance the consolidationgroup management and to expand the business in ASEAN by thetransaction.

Independent Auditor's Report

Our Business Model(3) Legal form of business combination
Additional acquisition of stock from non-controlling shareholders

2. Overview of accounting treatment applied
The transaction was treated as “transaction with non-controllingshareholders” which falls under the category of “common control
transactions, etc.” set forth in “Accounting Standard for Business
Combinations” and“Implementation Guidance on AccountingStandard for Business Combinations and Accounting Standard forBusiness Divestitures.”

About Us

Common Control Transaction, etc.
1. Overview of transaction(1) Company name and business description of combined company
Combined company : NTN BEARING-MALAYSIA SDN.BHD.
Business description : Sales of bearings, CVJs, precisionequipments and other products(2) Increase in capital surplus due to transaction with non-controllingshareholders¥1,052 million ($9,879 thousand)Governance Strategies

23. Subsequent Event
The following distribution of retained earnings of the Company, which has not been reflected in the accompanying consolidated financial
statements as of March 31, 2018 and for the year then ended, was approved at the annual general meeting of the shareholders held on June27, 2018:
Year ending March 31,

Year-end cash dividends (¥7.5 (U.S. $0.07) per share)

Millions of yen

Thousands of
U.S. dollars¥ 3,987$ 37,442
Resource Strategies
Financial/Company Data121

NTN REPORT 2018

NTN REPORT 2018122

Financial/Company Data

Third-Party Opinion

Investor Information (as of March 31, 2018)

Takeshi Mizuguchi
Professor, Faculty of Economics, Takasaki City University of Economics

Stock price range in the fiscal year
ended March 31, 2018
High: 600 yen
Low: 424 yen

Number of shareholders
34,604

Independent audit firm
Ernst & Young ShinNihon LLC

Breakdown of Shareholders

Breakdown of Number of Shares Held

Financial instruments firms

Between 5,000 and 9,999

3.14%

2.69%

5.20%

Other
corporations

Between 10,000
and 49,999

Less than
1,000

NTN REPORT 201846.81%

532,463,000

Foreign Owners

15.46%

5.55%

shares1,000,000
or more6.92%

19.96%

72.44%

Between 500,000
and 999,999

4.82%
RecentStock Price Range
Stock price (yen)Nikkei Stock Average (yen)800price (yen)Stock25,000
Nikkei Stock
Average (yen)800

25,000600
600

20,00020,000400
400

15,00015,000200
200

10,00010,000

High

0
0

4 5
4 5
2016
2016

6
6

7
7

8
8

9
9

10 11 12 1 210 11 12 2017
1 2
2017

3
3

4
4

5
5

6
6

7
7

8
8

9
9

10 11 12 1 210 11 12 2018
1 2
2018

3
3

5,000
5,000

Close

High

Close
Open
Open

Open
Open
Close

Low
Low

Close

NikkeiStock
Nikkei Average
Stock Average

Inquiries

Monthly Volume Traded

Corporate Communications Department
TEL. : +81-6-6449-3528
FAX : +81-6-6443-3226
E-mail : irmanager@ntn.co.jp

200of shares)(Millions
200
150
150

Director and Corporate
General Manager, CSR
Headquarters

532,463,000

Between 100,000
and 499,999(Millions of shares)

Hiroshi Nakano

0.57%

Between 50,000
and 99,999

1.81%

sharesIndividuals

NTN on the Internet
NTN’s website offers a variety of corporate
and product information, including the latest
NTN Report and financial results.
https://www.ntnglobal.com/en/index.html

100
100
50
50
0
0

123

Financial
institutions

14.63%

Between 1,000 and 4,999

4 5
4 5
2016
2016

6
6

7
7

8
8

9
9

10 11 12 1 210 11 12 2017
1 2
2017

3
3

4
4

5
5

6
6

7
7

8
8

9
9

10 11 12 1 210 11 12 2018
1 2
2018

3
3

NTN REPORT 2018

124

Financial/Company Data

I would like to express my heartfelt thanks to Professor Mizuguchi for his valuable opinion.
Creating corporate value by providing solutions to issues of public concern is an approach
we value that was made possible by feedback received from third-party opinions in previous
NTN Reports and from experts at Stakeholder Dialog.
Upon marking our 100th anniversary in March 2018, we reaffirmed the connection between
our Founder’s Spirit and corporate philosophy by defining the “NTN Spirit.” Grounded in our
corporate philosophy, this spirit embodies the mindsets and actions our employees need toemulate as they continue to work on sustained growth over the next 100 years.
The valuable opinion you have provided will be carefully considered as we work on finding
solutions to issues of public concern through our business activities. We are dedicated to
becoming a Monozukuri corporation, a manufacturer, able to help make the world a better placeover the next 100 years. We look forward to fulfilling our mission to develop a “smooth society.”

Stock Exchange Listings
First Section of Tokyo Stock Exchange(#6472)

Resource Strategies

Responding to the Third-Party Opinion

Common Stock
Authorized:
1,800,000,000
Issued and Outstanding: 532,463,527

Governance Strategies

moving into B to C product areas such as the NTN Micro
Hydro Turbine. These activities call for a grand vision for the
potential of NTN technologies to solve problems in wind
power and other applications. With enough motivation,
there’s no telling how effective these technologies could bein spreading wind power worldwide and reducing energy
consumption in 10 or 20 years’ time, for example. It’s also
important for NTN to curb its own CO2 emissions. While you
have presented environmental targets, I also look forward toseeing you becoming more involved in this area by taking
part in international initiatives such as SBT and RE100.
Declining birthrates, the aging population and theshrinking workforce are issues of public concern in Japanthat rival climate change in importance. I think your focus on
robotics business areas is the right approach for addressingthese issues. I also have high hopes for the growth policy
you have outlined that draws on your legacy technology
expertise to pioneer new areas and find solutions for various
challenges. I respect the unwavering efforts you continue tomake through the Global QC Circle Convention and similar
initiatives to work on issues such as quality, protecting
human rights and encouraging women in the workplace.
I’d like to make one last remark about your officer
profile page. While perhaps unremarkable for a traditionoriented Japanese company, the lack of female faces
among the officer photos reminded me of the importance ofdiversity. Both in the corporate world and among the private
lives of citizens, attitudes in Japan are perhaps different fromthose overseas. The inclusion of foreign names among theexecutive officers was a welcome sight, but I think it would
also be good to start seeing women’s faces among thephotos at some point.

General Meeting of Shareholders
The General Meeting of Shareholders
was held on June 26, 2018; Osaka

Business Strategies

Congratulations on your 100th year in business. I respect
the steady progress you have made through your work on
bearings. The section entitled ‘A Century in Business’ at the
beginning of this report was a valuable source of informationon the wide range of pioneering achievements you havemade over your long history. The pioneering spirit of yourfounders has certainly lived on through the years.
The ‘Value Creation Process’ pages have given me agood picture of NTN’s approaches to keeping the world
rolling. There was a clear presentation of your work on
issues of public concern such as global warming andJapan’s aging population. I learned how this work is being
done through reducing energy loss, providing safety andcomfort, and suggesting natural energy-based ideas for
ensuring sustainability. The basis for an integrated report isthe concept of integrated thinking, which means generating
corporate value from solutions to issues of public concern.
Therefore, it’s important to first gain a clear awareness ofwhat the current issues are.
For example, over 200 people died from heavy
downpours in western Japan in July 2018. This event was
followed by a large number of abnormally hot weather
patterns, heat waves and floods in the world. The World
Meteorological Organization (WMO) has said that these heatwaves and abnormally high temperatures are the predicted
outcome of climate change caused by greenhouse gases.
These weather events incur an enormous social cost.
So with climate change being one of the most pressing
issues of public concern, I was favorably impressed by how
you have responded by showcasing the eco-friendly natureof your mainstay bearing products (arising from their ability
to reduce energy consumption by reducing friction). Similarly
impressive is how you are using this technology to develop
proprietary products for wind turbine applications, andTransfer Agent for Common Stock
Mitsubishi UFJ Trust and Banking
Corporation
4-5, 1-chome, Marunouchi, Chiyoda-ku,
Tokyo 100-8212, Japan

Our Business Model

ProfileAfter working at a trading company and auditing firm, Mizuguchi became a lecturer in the Faculty of Economics at Takasaki City
University of Economics in 1997. He assumed his present role in 2008.
Mizuguchi specializes in responsible investment and non-financial information disclosure.
He has served as Chair of the Green Bonds Working Group (Ministry of the Environment), a member of the ESG Working Group(Ministry of the Environment) and Director of the Society for Environmental Economics and Policy Studies.
His major publications include Responsible Investment—Changing the Future through the Flow of Capital (Iwanami Shoten,
Publishers; winner of the SEEPS Commentary Award) and ESG Investment—Form of the New Capitalism (Nikkei Publishing).

Head Office
NTN Corporation
3-17, 1-chome, Kyomachibori, Nishi-ku,
Osaka 550-0003, Japan

About UsNTN Report 2018 Third-Party Opinion

Financial/Company Data

Global Network (As of March 31, 2018)

EuropeCompany Name

Paid-in capital

Holdings as percentage(%)

Company Name

EUR 14,500,000 100

32 NTN Kugellagerfabrik (Deutschland) G.m.b.H.

EUR 18,500,000 100

Ⅲ Iwata Works

33 NTN Mettmann (Deutschland) G.m.b.H.

EUR 25,000 100

Ⅳ Okayama Works

34 NTN Antriebstechnik G.m.b.H.

EUR 50,000 100

7 Ⅳ

15 10
Ⅰ3
8
13

11

6

1
9
Ⅲ A

B

Ⅱ 2 16 CD

2 NTN MIE CORP.

JPY 3,000,000,000 100

3 NTN KONGO CORP.

JPY 1,000,000,000 100

4 NTN HOUDATSU SHIMIZU CORP.

JPY 1,250,000,000 100

5 NTN NOTO CORP.

JPY 1,000,000,000 100

6 NTN FUKUROI CORP.

JPY 1,500,000,000 100

7 NTN AKAIWA CORP.

JPY 1,250,000,000 100

8 NTN MIKUMO COMPANY LTD.

JPY 450,000,000 100

9 NTN OMAEZAKI CORP.

JPY 266,000,000

10 NTN ENGINEERING PLASTICS CORP.

JPY 100,000,000 100

11 NTN ADVANCED MATERIALS CORP.

JPY 400,000,000

12 NTN CASTING CORP.

JPY 450,000,000 100

13 NTN KINAN CORP.

JPY 450,000,000 100

14 NTN KAMIINA CORP.

JPY 725,000,000

15 NTN Technical Service Corp.

JPY 200,000,000 100

16 NTN LOGISTICS CO., LTD.

JPY 10,000,000 100

35

33
32 31

34

35 NTN BEARINGS (UK) LTD.

GBP 2,600,000 100

36 NTN-SNR ROULEMENTS

EUR 123,599,542 100

37 NTN TRANSMISSIONS EUROPE

EUR 82,843,207 100

38

NTN TRANSMISSIONSEUROPE CREZANCY

EUR 11,500,000 100(0.04)(100)

F NTN-SNR R&D Center

38

Seven consolidated subsidiaries in addition to the Group companies above

37
36

F

Business Strategies

12

14
Ⅴ

JPY 480,000,000 100

(100)

97.4

99.34

80

(100)

B PRODUCTION ENGINEERING R&D CENTERC INDUSTRIAL TECHNICAL CENTERD ADVANCED TECHNOLOGY R&D CENTER

Company Name

30

27

Holdings as percentage(%)

18 NTN BEARING CORP. OF AMERICA

USD 24,700,000 100(100)

19 NTN DRIVESHAFT, INC.

USD 54,580,000 100(100)

20 NTN DRIVESHAFT ANDERSON, INC.

USD 16,000,000 100(100)

21 AMERICAN NTN BEARING MFG. CORP.

USD 24,330,000 100(100)

22 NTN-BOWER CORP.

USD 117,000,000 100(100)

23 NTK PRECISION AXLE CORP.

USD 15,000,000

60

(60)

24 NTA PRECISION AXLE CORP.

USD 20,000,000

62.5(62.5)

25 NTN BEARING CORP. OF CANADA LTD.

CAD 20,100,000 100

26 NTN-SUDAMERICANA, S.A.

USD 700,000 100

27

NTN MANUFACTURING DE
MEXICO, S.A.DE C.V.

MXN 431,805,719 100

28

NTN do Brasil Producão de
Semi-Eixos Ltda.

BRL 164,026,956

29 ASAHI FORGE OF AMERICA CORP.
30 Seohan-NTN Driveshaft USA CORP.

USD 10,100,000
USD 6,000,000

Company Name59

USD 197,120,000 100

49
54 53 G 48
61 50

46

52
51 55

40 NTN BEARING-MALAYSIA SDN.BHD.

MYR 10,000,000 100(100)

41 NTN BEARING-THAILAND CO., LTD.

THB 780,000,000 100(99.999)

THB 1,311,000,000 100(99.999)

THB 700,000,000 75(10.73)

USD 7,300,000 100(100)

42 NTN MANUFACTURING (THAILAND) CO., LTD.
43 NTPT CO., LTD.

56 57

45

41

44 PT. NTN BEARING INDONESIA

42
43

47 NTN KOREA CO., LTD.

KRW 500,000,000 100

48 NTN (CHINA) Investment Corp.

USD 256,545,000 100

49 Nanjing NTN Corp.

USD 180,000,000 100(86.67)50 Shanghai NTN Corp.

USD 166,500,000 95(15.72)51 Guangzhou NTN-Yulon Drivetrain Co., Ltd.

USD 12,500,000

60

(12)

52 Xiangyang NTN-Yulon Drivetrain Co., Ltd.

USD 34,000,000

60

(60)

53 NTN-RAB (Changzhou) Corp.

USD 28,440,000 100

54 NTN-LYC (Luoyang) Bearing Corp.

USD 73,800,000

55 NTN CHINA LTD.

HKD 2,500,000 100

39
44 62

E NTN Automotive CenterTwo consolidated subsidiaries in addition to the Group companies above

56 TUNG PEI INDUSTRIAL CO., LTD.

28

NOTES 1. The scope of consolidation as of March 31, 2018 consisted of NTN Corporation and 63 consolidated subsidiaries (16 domestic and 47 overseas subsidiaries). A total of 9 affiliates (all overseas
affiliates) were accounted for by the equity method.The following changes to the scope of consolidation and application of the equity method were made during the fiscal year under review.
Consolidated subsidiaries: No additions/removals
Affiliates: No additions/removals
2. Of the above subsidiaries, the following companies are specified subsidiaries: NTN USA CORP., NTN DRIVESHAFT, INC., NTN-BOWER CORP., NTN do Brasil Produção de Semi-Eixos
Ltda., NTN Wälzlager (Europa) G.m.b.H., NTN-SNR ROULEMENTS (‘NTN-SNR’), NTN TRANSMISSIONS EUROPE, NTN NEI Manufacturing India Private LTD., NTN (China) Investment
Corp., Nanjing NTN Corp., Shanghai NTN Corp., and NTN-LYC (Luoyang) Bearing Corp.

125

NTN REPORT 2018

Production

Production and sales

R&D base

Others50

27.35

TWD 160,000,000

36.25

58 UNIDRIVE PTY LTD.

AUD 5,000,000

40

59 Beijing NTN-Seohan Driveshaft Co., Ltd.

USD 6,000,000

40

KRW 75,780,330,000

49

60 Seohan-NTN Bearing CO., LTD.

58

97.4

TWD 1,257,232,620

57 TAIWAY Industry CO., LTD.

Sales

(0.1)

INR 4,808,000,000(19.8)

49

INR 300,000,000 100(0.97)

46 NTN NEI Manufacturing India Private LTD.

40

(5)

Holdings as percentage(%)

SGD 36,000,000 100

45 NTN BEARING INDIA PRIVATE LTD.

(6.48)
19.8

47 60

Paid-in capital

39 NTN BEARING-SINGAPORE (PTE) LTD.

(24.96)(50)(6.67)

61 NTN-DONGPAI (Shanghai) Bearing Sales Corp.

USD 1,460,000

25

(25)

62 PT. TPI MANUFACTURING INDONESIA

USD 55,415,050

28.8(0.002)NTN China Technical Center
One consolidated subsidiary in addition to the Group companies above

3. Figures in curved brackets under “Holding as percentage” indicate the percentage of indirectly owned holdings, and are included in the total holding.
4. None of the companies has submitted a securities registration statement or securities report.
5. Of the above subsidiaries, NTN BEARING CORP. OF AMERICA and NTN-SNR have sales (excluding internal sales between consolidated companies) accounting for more than 10% of consolidated
sales. Figures for NTN-SNR are consolidated figures encompassing nine NTN-SNR subsidiaries.
6. Of the above subsidiaries, Ⅰ to Ⅴ are NTN Corporation business units, 1 to 28 and 31 to 55 (in symbols) are consolidated subsidiaries,
and 29, 30 and 56 to 62 (in symbols) are affiliates subject to the equity method.

NTN REPORT 2018126

Financial/Company Data

26

Paid-in capital

17 NTN USA CORP.

Resource Strategies

25
17
E
22 18 21
24 23 19
20 29

Asia and Other Regions

Governance Strategies

A NTN R&D CENTER

Americas

Our Business Model

31 NTN Wälzlager (Europa) G.m.b.H.

Ⅱ Kuwana Works

1 NTN BEARING SERVICE CORPORATION

4

Holdings as percentage(%)

Ⅰ NTN Corporation (parent company)

Ⅴ Nagano Works

5

Paid-in capital

About UsJapan

NTN Corporation
1-3-17, Kyomachibori, Nishi-ku, Osaka 550-0003, Japan
https://www.ntnglobal.com/en/
2018.10.4500