TS TECH Report

2017

TS TECH Report 201701

CONTENTS
TS Philosophy/Conceptual Overview of TS TECH’s CSR

TS Philosophy
Beliefs

01

Contents/Corporate Message/Editorial Policy

02

Value Creation Process

04

Top Message

08

Business Model for the Americas
Research & Development/Sales/Purchasing/Manufacturing/		
Americas Segment Management“Due regard for human resources”
A “company welcomed with joy”

11

Special Feature: The Underlying Strength of TS TECH
12 Special Feature 1: The Enterprise Power of TS TECH			

Episode 1: The Source of Our Underlying Strength

Company Principle			

Episode 2: Unexpected Challenges

We will always provide comfortable,
high-quality products at a competitive pricefor customers all over the world,
pursuing our dreams
through creating products andchallenging infinite possibilities.

			

An Interview with the Supervisor of Global Operations

16 Special Feature 2: Stakeholder Dialogue			A “Never Give Up” Mentality: The Underlying Strength
behind TS TECH’s Value Creation Process
19

20 Making ESG a Priority Issue
22 Corporate Governance and Compliance
25 Directors and Auditors
26 Stakeholder Engagement

Management Policies

		
26 Stakeholder Voices• Create a bright working atmosphere, respecting harmony andcommunication among people.
• Work in a harmonious manner, making the most effective useof time and observing priorities.
• Challenge the creation of new value, using wisdom in an
enthusiastic manner.
• Strive constantly for the realizaton of individual visions.

CSR

Customers

TS Philosophy

Stakeholders

				

A Customer's Voice				

A Shareholder/Investor’s Voice				A Business Partner's Voice				An Employee's Voice

GeneralSocietyThe
Environment

EconomyEmployees

Corporate Risk

Providing Safe and Comfortable Products
Administration

Suppliers

ComplianceInternal Control

Corporate Governance
TSCG

Business activities pertaining to topics of importance to TS TECH
have been included in the printed report in an easy-to-read format.
In addition to this information, the online report offers moredetailed information and data.

Printed Report

Online Report
http://www.tstech.co.jp/english/csr/
Information Important to Stakeholders

Scope of the report
The TS TECH Report covers the entire TS TECH Group, which conducts
business in Japan and around the world. However, the scope of thereport may differ depending on business activities and CSR initiatives.
Period covered by the report
In principle, this report covers the period from April 1, 2016 to March 31,2017 (fiscal 2017), but it may include coverage of activities before orafter that period.
Guidelines
The ISO 26000 international guidelines for corporate social responsibility
and the International Integrated Reporting Framework issued by theInternational Integrated Reporting Council (IIRC) were consulted in
editing this report.

ISO 26000
Core Subjects

SectionP.26• A Shareholder/Investor’s Voice• Corporate Governance and ComplianceP.22-24

				

Dialogue on Harmony with the Community

Human Rights•A n Employee's Voice

P.27

Dialogue on Afforestation

Labour Practices• An Employee's Voice

P.27

The Environment• Dialogue on Afforestation

P.29

Fair Operating
Practices• Top Message• A Business Partner's Voice

P.04 - 07

Consumer Issues• Top Message• A Customer's Voice

P.04 - 07

Community
Involvement andCommunity
Development•D ialogue on Harmony with the Community

P.28

30

TS TECH’s Business

32

Financial and Non-Financial Highlights

33

Financial Report

77

Corporate Data and Stock Information

78

Third-Party Opinion

Society
A “Company
Welcomed with Joy”

About This Report's Formats

Organizational
GovernanceCorporate Message

Shareholders

In 2012 the TS TECH Group issued the TS TECH Report by integrating its annual reports and environmental reports. The TS TECH
Report was reorganized from the twin perspectives of financial
information and non-financial information (corporate social
responsibility (CSR)).
The Group is carrying out a variety of activities and initiatives
in terms of the economy, the environment, and society in order tobe a “Company Welcomed with Joy.” This report is issued with the
purpose of fulfilling the Group’s accountability in these regards.

		
28 Stakeholder Dialogue				Conceptual Overview of TS TECH’s CSR

Local
Communities

Working towards Management Focused on ESG

Editorial Policy

Information Important to TS TECHTS TECH Report 2017

In the manufacture of its products, TS TECH pursues safety, environmental
sustainability, and comfort. The pursuit of comfort in particular is multifaceted and deep, and over the course of time, this pursuit is subject to an
infinite process of evolution. When we approach our tasks as individual
members of the TS TECH Group, our actions are underpinned by the belief
that comfort leads to satisfaction, which in turn brings joy to the end usersof our products. Under the TS Philosophy, we are not bound to the present,
but rather we create products that go beyond the present in order to bringjoy to all our stakeholders. Our will and determination to take on thechallenges of a world whose future shape we cannot yet see are expressed
through the words “Beyond Comfort.”

P.27
P.26

Disclaimer
This report contains forward-looking statements from TS TECH Co., Ltd.
pertaining to plans, forecasts, strategies, and results. These forward-looking statements are based on currently available information, and actual
results may vary significantly from the forward-looking statements
contained in this report due to a range of variable factors.

For comments and inquiries regarding this report,
please contact us at the address below.
TS TECH Co., Ltd.
Public Relations Section, Administration Department
TEL:+81-48-462-1136
FAX:+81-48-465-0403
3-7-27 Sakae-cho, Asaka-shi, Saitama 351-0012, JapanTS TECH Report 201701

Value Creation Process

Value Creation Process
TS TECH’s business activities are based on the TS Philosophy and bring together a range of capitalsources in a fusion of financial and non-financial. In conducting these activities, we employ strategies
and resource allocation in line with factors such as the external environment, risks and opportunities.
This enables us to develop comfortable, high-quality products and create long-term value for our
stakeholders as we look to continuous growth.

Resources
Resourcesthat
that
supportsupportTSTSTECH
TECH

Value
Valuecreatedcreatedthroughthroughbusinessbusiness

SocialSocialIssues
IssuesFinancial
Financial
CapitalCapitalEnvironmental
Environmental
andandsafetysafetyissues,issues,fatiguefatiguefromfromdriving
driving
in an
in an
automobile
automobile
societysociety

Value
Valuewe
weofferoffer
stakeholders
stakeholders

Financial
Financial
CapitalCapital Astrong,
A strong,
sound
sound
financialfinancialbase
base
for capitalfor capital
investment
investment

Consolidated
Consolidated
capital:capital:Manufactured
Manufactured
CapitalCapital Competitive
 Competitive
patents
patents

NumberNumberof patentsof patents
held
held
domestically:
domestically:
NumberNumberof patentsof patents
held
held
overseas:
overseas:

770
770
441
441

Human
Human
CapitalCapital Global, Global,diversediversehuman
human
resources
resources
 Stratified
 Stratified
education
educationsystemsystem Horizontal
 Horizontal
deployment
deploymentof projectsof projects
acrossacrossthe theorganization
organization

NumberNumberof employeesof employees(consolidated):(consolidated):

1616
,335
,335

SocialSocialCapitalCapital60
60%%

 Approximately
 Approximatelyof Hondaof Honda
vehiclevehicleseats
seats
are are
made
made
byby
TS TS
TECH
TECH
 The
 The
searchsearchto discover
to discoveruseruser
needs
needs
 Regional
 Regional
contribution
contribution
activities
activities

Environmentally-friendly
Environmentally-friendly
technology
technology

A Shareholder/Investor's
A Shareholder/Investor's
Voice
Voice P.26P.26

IntellectualIntellectual
CapitalCapital Stand Standoutout
from
from
parts
parts
competitors
competitors
 Create Create
attractive
attractive
products
products

TSTSTECH
TECHs Technologicals TechnologicalPowerPower

Attractive
Attractive
product
producttechnology
technology

G o v er n an c e
G o v er n an c eIntellectualIntellectual
CapitalCapitalSafetySafetytechnology
technology

Creation
Creationof futureof futuretechnology
technology

elel
Mod
ness
nessMod
Busi
Busi
ResearchResearch
InIn
puptutandandSales
P. 32
P. 32 develop
development
ment Sales
P.08
P.08
P.08
P.08

r- rPuPu
asasingchching
P.09
P.09

s s
initiative
initiative
Quality
Quality

P. 22
P. 22
-

51
51

 Proactive
 Proactive
disclosure
disclosureof informationof information
stemming
stemmingfromfromhonest,honest,highlyhighlytransparent
transparent
corporate
corporate
management
management

 Global Global
supplysupplysystemsystem Create Create
revolutionary
revolutionary
manufacturing
manufacturing
technology
technology
 Tough Toughcomponent
component
competitivenesscompetitiveness Highly-efficient Highly-efficient
distribution
distribution

TSTSTECH
TECHs sBusinessBusinessActivities
Activities

C o r p o r a t e P h il o s o p h y
C o r p o r a t e P h il o s o p h y

70
70

Shareholders
Shareholders
andandInvestors
Investors

Resolution of Social Issues
Resolution of Social Issues

 Established Establishedin thein thefourfourregionsregionsof Japan,of Japan,the theAmericas,
Americas,
China,
China,
andandAsiaAsia
andandEuropeEuropeNumberNumberof sites:of sites:
NumberNumberof productionof production
sites:
sites:

P.26P.26

A Customer's
A Customer's
Voice
Voice

Manufactured
Manufactured
CapitalCapitaluf-ac-Ou
anac
Man
Muf
Ot0up-3t0u1p-3tu1 tP
g g . 3P. 3
turin
turin
P.09
P.09

2424

Human
Human
CapitalCapital Provide Providea workplacea workplaceenvironment
environment
in which
in which
employees
employees
can canfindfindevenevenmoremorevaluevalue
in intheirtheirworkwork
and andundergoundergopersonal
personal
growth
growth Conduct Conduct
stablestablehiringhiringthatthatalsoalso
takestakes
work-life
work-life
balancebalanceintointo
considerationconsideration
 Provide Provide
opportunities
opportunities
for active
for active
involvement
involvement
by diverse
by diverse
human
human
resources
resources

SocialSocialCapitalCapital))Customer
CustomerCompanies
Companies
and EndandUsers
End Users

 Create Create
attractive
attractive
products
products
thatthat
are aresafesafe
andandcomfortablecomfortable
andandprovideprovidehighhigh
qualityqualityproducts
products
globally
globallyat competitiveat competitive
pricesprices Improve Improve
capitalcapitalefficiency
efficiency
 Stable Stablereturnreturnof profit
of profit Fair Fairevaluation
evaluationof corporateof corporate
value
value

billionyenyen230
230.9.9billion

Customers
Customers( ( Provide Provide
attractive
attractive
products
products
to new
to new
customers
customers
 Share Sharetechnology
technology
thatthatis usefulis usefulfor forsocietysociety Co-existence Co-existence
withwith
local
local
communities
communities

Business
Business
Partners
Partners
 Fair, Fair,sound
soundtransactionstransactions
withwithprocurement
procurement
partners
partners
for mutual
for mutual
prosperity
prosperity
 Joint
 Joint
development
development
throughthroughcooperationcooperation
betweenbetweenacademiaacademia
andandindustryindustry

A Business
A Business
Partner'sPartner's
Voice
Voice

P.27P.27

Employees
Employees
 Global Global
human
human
resource
resource
development
development
andandself-fulfillment
self-fulfillment
to support
to support
sustainable
sustainablebusinessbusiness
growth
growth Foster Fostera corporatea corporate
culturecultureof proactivelyof proactively
accepting
acceptingindividual
individual
personalities
personalities
andanddifferences
differences
An An
Employee's
Employee's
Voice
Voice
P.27P.27

SocietySocietyandandCommunity
Community Contributing
 Contributing
to thetoeconomic
the economic
development
development
of ofvariousvariouscountries
countries
and andregionsregions
throughthroughglobalglobalbusinessbusiness
deployment
deployment
 Co-existence Co-existence
withwith
locallocal
communities
communities
by continuing
by continuing
to implement
to implement
contribution
contribution
activities
activities
in accordancein accordance
withwiththe society
the societyof eachof eachlocallocal
communitycommunity

Dialogue
Dialogueon Harmony
on Harmony
withwith
the Community
the CommunityP.28P.28

NaturalNaturalCapitalCapital Minimum
 Minimum
necessarynecessaryenergyenergyinput
input Reduction
 Reductionof scrapof scrap
materialmaterial
 Green Green
Ecosystem
Ecosystem
Conservation
Conservation
Activities
Activities

NaturalNaturalCapitalCapital Reduce Reduce
CO2CO
and
other
other
emissionsemissions2 and Improve Improve
fuelfuel
efficiency
efficiency
by by
reducing
reducing
product
product
weightweight Maintain Maintainbiodiversity
biodiversity

Environment
Environment Providing Providing
products
products
thatthat
reducereduceenvironmental
environmental
impactimpact Inhibit
 Inhibit
resource
resource
depletion
depletion
 Production
 Production
activities
activities
thatthattaketakethetheenvironment
environment
intointo
account
account

Dialogue
Dialogueon Afforestation
on Afforestation

02 TS TECH Report 2017

P.29P.29

TS TECH Report 201703

Top Message

Our aim is to be a “company
welcomed with joy,” whose
presence is appreciated by its
stakeholders. The key to this isproviding products that delightpeople around the world.
Looking at the 12th Medium-Term Management Plan as awhole, the objectives set out therein can be consideredlargely accomplished. Under our 13th Medium-Term
Management Plan, we will pursue ESG management at allof our global sites. Our aim is to be a company that is
welcomed with joy, whose presence is appreciated by all,through harmonious coexistence with society. That is how
we’ll ensure our sustainability as a corporation.

Michio Inoue
President and Representative Director
Michio Inoue joined Tokyo Seat (now TS TECH) in April 1977. He wasappointed to the Board of Directors and as Executive General
Manager of the Development and Engineering Division in 2002
and Director and Chairman of TS TECH NORTH AMERICA, INC. (nowTS TECH AMERICAS, INC.) in 2008. Mr. Inoue was named Executive
Vice President (Representative Director) of TS TECH in 2010 and has
served as President since April 2013.

Review of the 12th Medium-Term Management Plan
Under the 12th Medium-Term Management Plan, we worked toward the realization of our 2020 Vision to
be an “Innovative Quality Company.” Using the “establishment of a position as a global company” as aqualitative goal, we deployed four priority measures: expand sales beyond existing customers; bolster
QCDDM competitiveness; construct an infrastructure of people capable of competing worldwide; andconduct CSR activities. We also intensified our efforts to become Honda’s global growth partner.
Looking back on the results, with respect to our goal to become Honda’s global growth partner, I am
happy to report that we have now completed the preparations necessary for handling expanded production by Honda through the construction of new plants and building expansions at our sites worldwide.
We have also achieved a fair degree of success in terms of our push to expand sales beyond
existing customers, having acquired commercial rights to new products from European and American
OEMs (manufacturers of finished cars). Going forward, we will continue working hard to win new
customers and acquire new commercial rights.
With regard to our goal to bolster QCDDM competitiveness, we have expanded our measures
worldwide in each of the five domains. We have centralized production of seat and door components,
established a global supply system, transferred select development tasks to a new company in thePhilippines to boost development efficiency, and created a subsidiary for press tools. In terms of quality,
TS TECH was awarded the highest score in the in the J.D. POWER U.S. Seat Quality and Satisfaction
Survey, a top international consumer satisfaction survey, in both 2015 and 2016. Nevertheless, several
challenges remain, including some new quality issues and losses caused by the switch over to newmodels. These issues concern management in all processes from development to production, so we areworking to resolve them as quickly as possible.
In order to construct an infrastructure of people capable of competing worldwide, we have taken
steps to develop the human resources needed to drive our global competitiveness. We have revised our
HR policies, improved the work environment, and expanded TS Philosophy education to the different
regions in which we operate.
As for our measures to conduct CSR activities, we were able to advance efforts rooted in the local
communities where we do business at Group sites in all regions.
The various measures in the plan have thus been essentially accomplished. Still, at less than 3
million units sold, unit sales for the TS TECH Group substantially underperformed the plan’s forecast of 4
million units. Factors for this included a decline in orders for certain models due to economic slowdowns in developing countries and shortfalls in customers’ production volume compared to their
original plans. Together with the exchange rate impact, these factors caused us to miss our initial target
for revenue. Nevertheless, with the steady progress we made on our priority measures, it appears thatthe quality of our business has risen overall.

Beliefs

Due regard for human resources A company welcomed with joy2020 Vision

INNOVATIVE QUALITY COMPANY
Establishment of position as a global company

President and Representative Director

12thIntensified
efforts

Expand sales beyond
existing customers

2015-20162014-2015

Four priority
measuresMedium-Term
2016-2017

Honda s global growth partner

Bolster QCDDM competitivenessConstruct an infrastructure ofpeople capable of competing worldwide
Conduct CSR activities

04 TS TECH Report 2017

TS TECH Report 201705

Top Message

The 13th Medium-Term Management Plan
The 13th Medium-Term Management Plan, implemented in 2010 with the aim of bolstering our
reputation as a company, is a 10-year program to establish the foundations required to become
a top-ranking supplier of interior components. The final three years are the time to wrap up thisprocess as we look ahead to 2020. However, with major shifts afoot in the global economy andever-changing generational needs, these measures will need to be combined with additional
efforts designed to take us to 2030.
Beliefs—2020 Vision—Mid- to Long-Term Plan

Beliefs

Due regard for human resources A company welcomed with joy2020 Vision

INNOVATIVE QUALITY COMPANY

13th Medium-Term
Management Plan
Management Policy

Creation of a foundation for ESG management

11th

Medium-Term2013-20142012-20132011-2012

12th

13th

Medium-Term

Medium-Term
2016-20172015-20162014-20152019-20202018-20192017-2018

With the global climate changing at a dizzying pace, we expect to face a challenging
business environment in the future. To ensure further growth in these circumstances, the Group
must not only seek profits but also develop management based on ESG principles—addressing
environmental, social and governance factors. This is the key to ensuring that we truly fulfilsociety’s expectations and help meet global expectations for a sustainable society.
We are therefore shifting towards cutting-edge management that incorporates ESG
perspectives on a global scale. In drafting our long-term management plan from an ESG
management perspective, we worked out the challenges we face, broke down the policies weneed to tackle into specific elements, and then incorporated these into the plan. We have set
the “Creation of a foundation for ESG management” as our key management policy for the 13th
Medium-Term Management Plan and have committed to the following priority measures:
sustainable business growth, diversity management, and harmony with the social environment.

2020 Vision

INNOVATIVE QUALITY COMPANY

06 TS TECH Report 2017

Creation of a foundation
for ESG management

Due regard for human resources A company welcomed with joy

13th Medium-Term
Management Plan

Beliefs

Create a system for world-leading quality

1 Sustainablebusiness growth

Become a world leader in component competitivenessEstablish a base for new customer relations

2 Diversity

management
3 Harmony with thesocial environment

Use financial strategies to support business growth
Develop human resources to be promoted to management

The first priority measure, sustainable business growth, requires us to conductcutting-edge R&D and create original core technologies. This will not only expand our business,but also ensure that we deliver attractive, environmentally friendly products that not only offer
world-leading quality but also go beyond customer expectations. We will also create evenstronger measures to win new customers and acquire new commercial rights, taking advantageof the global sales structure developed under the 12th Medium-Term Management Plan.
Finally, in addition to the above, we will implement balanced financial strategies to support
company growth while bearing shareholder returns in mind. These strategies will be developed
from two angles: “offense,” which will take into account efficient investment and the possibilities
of M&A, and “defense,” which will offer the company resilience in the face of a rapidly changing
environment.
The second measure is diversity management. We plan to boost worker productivity bycreating work environments where each employee can thrive, regardless of their gender or
nationality, in order to ensure efficient and effective management suited for today’s increasingly
globalized society. In line with “Due regard for human resources,” a key component of our
Corporate Philosophy, we will achieve this by supporting the diverse work styles of our diverse
human resources. We are also promoting autonomy and encouraging further localization at ouroverseas subsidiaries by ensuring that all of our operations around the world embrace the TS
Philosophy (Beliefs, Company Principle and Management Policies). Our goal is to become a truly
global company.
Under the third measure, harmony with the social environment, we plan to forge deeper
connections with society. We will do this by continuing to both reduce our carbon footprint
and expand our Green Ecosystem Conservation Activities around the globe, as well as bypromoting happy, healthy local communities through athletic events and other activities.

Uniting as a Group to Keep Increasing Our“Enterprise Power”
We will continue pursuing these three priority measures around the globe and leverage ourbusiness strengths to deliver further growth for the TS TECH Group as we look ahead to 2030.
Now that we have formulated a range of individual measures that incorporate ESG perspectives, we will lay out the specifics and goals for each measure, and we will work hard to makeprogress. As we work to make cutting-edge management that incorporates ESG perspectives a
reality worldwide, we will unite as a Group to boost our “enterprise power.”

A Message to Our
Stakeholders
During these final three years in the run-up to 2020,
our fundamental goal is to boost TS TECH’s quality as
a company while pursuing ESG management underthe 13th Medium-Term Management Plan. To do this,we will be looking at how TS TECH is viewed bothoutside and inside the company, ascertaining theGroup’s position on a global level, and clarifying thechallenges we will face in the next growth phase.
As we expand our operations, we will strive tobuild a more sustainable world and become a company welcomed with joy, whose presence is appreciated by people around the world. I hope we cancount on your continued support in the years ahead.

Create measures to promote diversity
Practice environmentally conscious business activities
Conduct CSR activities

TS TECH Report 201707

Business Model for the Americas
TS TECH's business in the Americas, having achieved operational self-sufficiency, has now reached a level of autonomy that allows it to develop
its own strategies for growth. The business model for the Americas allows Group companies in the region to move forward by making the mostof their unique strengths while simultaneously working closely with Japan. This section explores the driving forces behind this business modelfrom the perspectives of the research & development, sales, purchasing, manufacturing and Americas segment management divisions.

Research & Development

Sales

Purchasing

Manufacturing

Steve Krantz

Scott Hepner

Paul Brumfield

Jeff Daniels

Creating Products That Meet Local Needs

Creating Business Opportunities with Team-Driven
Customer Strategies

Making the Most of Global Trends in Purchasing

Working to Increase Revenue Across the Group

Autonomy in purchasing in our Americas segment is about
embracing a “global cost” approach where suppliers are selectedbased on a comprehensive perspective with a global focus. Overthe past few years, we have shifted from a local emphasis to aworldwide outlook in terms of where we purchase components.
Today, we work out where we can get the most stable supply ofcomponents at the lowest price globally on a daily basis.
During the 12th Medium-Term Management Plan, together
with Japan, we implemented a global purchasing system thatallows us to see price information from around the world in realtime. The system assigns a number to each component to bepurchased and works out where the best supplier for it is at any
particular moment. For example, with labor-intensive production
components such as sewn items, the cost price will be higher if
we procure them in the U.S., where labor costs are high. Instead,
we optimize our purchasing by utilizing our site in Mexico, which
is more cost-competitive even when other factors like transportation costs and material costs are considered.

We believe that the key to establishing autonomy in productionin the Americas is to build an even more robust revenue base. We
use resiliency measures from Japan as a guide to help our plantdeliver stable profits despite production volumes that fluctuate
due to a variety of factors.
Under the 12th Medium-Term Management Plan, we
worked to simultaneously curb rising labor costs and address
labor shortages by introducing automated welding and automated inspection systems, cementing our role as a global
pioneer in automating production processes. The automatedwelding system we have implemented, known as “one packwelding,”2 allows three processes to take place at a single process,minimizing the movement of components, manpower.
By promoting optimized automation at our production sites
in the Americas through our own efforts, TS TECH USA CORPORTATION (TSUS) has become the production site that generates
the largest revenue not only in the Americas, but also in the TS
TECH Group as a whole.

Managing Risks and Building Flexible Purchasing
Strategies

A Great Place to Work for Years to Come

Vice President, Corporate R&D Division,
TS TECH AMERICAS, INC.

Research and Development at TS TECH AMERICAS, INC. (TSAM)
has been working hard to identify the needs of the North
American market. We have been conducting research in several
areas including, safety, performance, and styling. Our aim is to
identify the key technologies and features that the North American customer will be seeking in the future. With this information,
we will be developing a regional strategy that will drive and give
direction to our future research projects. In addition to this, wewill be collaborating with Japan to ensure that the needs of thiskey market are incorporated into the global strategy, ensuringthat TS TECH will be ready for the future.
TSAM has now reached the stage where it can independently carry out the necessary research and development forour powersports products, identifying key products to meet local
needs by taking inspiration from the American lifestyle. We are
currently working to acquire new commercial rights for the
rapidly growing market of utility vehicles and motorcycles.

Moving Toward Autonomous R&D in the Americas
We developed several products tailored to the North American
market during the span of the 12th Medium-Term. Autonomy
was a significant reason why we were able to expand ourcustomer base in new market segments, supplementing our coreautomobile seat business.
Under the 13th Medium-Term Management plan, TSAM will
engage in targeted activities to move toward a fully autonomous
R&D center. Of course, we will carry over Japanese development
methods, but we will also incorporate a North American sense ofstyle. Just as Japan learned to develop products for America—aforeign country from Japan’s perspective—TSAM is now developing products for China and Thailand. We aim to grow to the point
where we can provide support to these global entities to help
with their drive to become autonomous and ultimately shareideas from the Americas with the whole world.
1. QCDDM stands for quality, cost, delivery, development, and management.

08 TS TECH Report 2017

Executive Vice President, Corporate Commercial Relations,
TS TECH AMERICAS, INC.

Developing autonomy in sales is about building mechanisms
and relationships that will help us fulfil customer expectations bymastering the knowledge that will enable us to respond quickly
and accurately to our customers’ diverse needs.
To do this, we have mobilized all of our resources across theAmericas and formed teams made up of members familiar withthe production floor in all domains of QCDDM1, enabling us tocombine their respective knowledge about trends and technology in the industry. We can put together the best possible proposals based on this knowledge, meaning that we can quickly
deliver to customers proposals that have been refined throughcoordination among all relevant departments. It’s evident thatthe approach we cultivated during the 12th Medium-Term
Management Plan—combining all of our strengths when taking
on challenges—is now providing deeper customer discussions.

Bringing Together Various Departments to Achieve
Autonomy
Our company maintains a steady share of roughly 60% of theseats (finished products) and seat components for automobiles
supplied to American Honda, a very important customer. We
recently received Outstanding Supplier Performance awards
which recognize superior quality and delivery performance by
our manufacturing facilities. This recognition is a direct reflectionof the efforts made by our local staff to exceed our customer’s
expectations, and it helps drive our expansion in the Americas
market.
During the 13th Medium-Term Management Plan, we willfurther develop our capacity for teamwork across divisions while
also working to achieve autonomy. By enhancing our ability toquickly and accurately ascertain customers’ needs, we canbecome even more proactive in our sales efforts.

Vice President, Corporate Commercial Relations,
TS TECH AMERICAS, INC.

Recently, both TSAM and its customers have focused on whether
a supplier can ensure stable delivery of components at all times.
We carefully identify all possible risks, from economic instability
to natural disasters, and are always creating purchasing strategies
that incorporate flexible distribution networks.
Under the 13th Medium-Term Management Plan, we plan
to use QCDDM to boost our competitiveness and improve ourmechanisms for evaluating suppliers. This will ensure that we
continue to be our customers’ best supplier, regardless of theshifts we see going forward in growth areas like electric andself-driving vehicles.

Plant Manager, Vice President,
TS TECH USA CORPORATION

Yoshimasa Okada
President,
TS TECH USA CORPORATION

Under the 13th Medium-Term Management Plan, we will continue to move forward with automation and efforts to save manpower by expanding the automatic guided vehicle (AGV) zones
on our premises and working to reduce production takt times3
while simultaneously streamlining back-office services underannual targets. We hope to fulfill our responsibilities as the “mother plant” for the Americas as we work to deploy similar automation at all plants in the Americas that produce 1,000 or moreunits daily, including TS Alabama (TSAL)4 and TS Canada (TSCA).5
At the same time, as a company, we are determined to stayin step with social progress. For the past decade, we have been
engaged in various social contribution activities in our local
communities, including a toy drive.6 Going forward, we will makeevery possible effort to ensure that our company remains a greatplace to work.

2. One pack welding: a production robotics system that performs automatic welding and inspection. 3. Takt time refers to processing time for a product, taking the gaps between production
periods into account. 4. TS TECH ALABAMA, LLC. 5. TS TECH CANADA INC. 6. The toy drive is a community contribution project that began from an employee suggestion. Gifts for local children
are purchased around the holiday season using donations from employees. Employees then deliver those gifts together with members of the local fire department.

TS TECH Report 201709

Business Model for the Americas

Americas Segment Management

Jason J. Ma

Joe Downing

Executive Vice President
TS TECH AMERICAS, INC.

Vice President, Corporate Administration
TS TECH AMERICAS, INC.

For the Most Effective Autonomy in Each Division

What the Diversity of the Americas Fosters

Under the 12th Medium-Term Management Plan, we focused onfour topics in order for our research & development, sales,purchasing and manufacturing divisions to make the most of
their autonomy from the perspective of the Americas segment
management.
The first topic was to expand our purchasing network andstrengthen risk management.
The second was to consolidate management functions
under TSAM, the head office for North American operations, andclarify the roles and responsibilities of each group company inthe segment. We enhanced management efficiency by developing unified assessment standards for use at all companies in theAmericas, creating an environment where people could work
autonomously and with creativity.
The third topic was greater contributions to society. We, as
local residents, should take the initiative toward CSR activities.
This is just one facet of how we should operate with respect toautonomy. At TSAM, we support efforts by the American Association for Cancer Research, United Way and other nationwide
charities. We also take the approach of asking every employee tocontribute in some way, such as by teaching robotic engineering
at local schools. Our proactive approach as a corporation willcontribute to a high degree of employee satisfaction.
The fourth topic was the development of human resources
education and work-style reforms. TSAM prizes its uniquecorporate culture, which brings together the distinctive featuresof both Japanese and American business. We used this identity
to ensure that everyone embraced the TS Philosophy. We also
conduct TS TECH workshops for top management candidates
and regularly offer Leadership Styles and Skills Development7 forthose in management.
Additionally, here in the Americas, we have introduced adiverse range of options in our efforts to achieve work-lifebalance, including childcare and caregiving leave as well as asystem for working from home.

Today, 40 years after TS TECH established a presence in theAmericas, TSAM has strong roots in the local community where it
operates. Our people are socially engaged, offering the gifts of
their diverse cultures and languages. We act in unison, yet our
diversity makes us dynamic rather than homogenous. This
diversity in turn fosters the autonomy of our human resourcesand organizations. Our human resources and organizations show
their unique strengths through this autonomy, making it possible
to respond to various changes in the world.
Under the 13th Medium-Term Management Plan, we will
use these unique strengths to stabilize profits realized throughenhanced quality and more efficient development. Moreover,
the return of profits to society through expanded CSR efforts is a
key area of focus for our practice of ESG (environmental, socialand governance) management.
We established our 2020 vision of becoming an “Innovative
Quality Company” in the midst of the global financial crisis adecade ago in order to replace adversity with opportunity. We
are determined to make these three years fruitful ones in order toaccomplish our goal.

Special Feature

The Underlying Strengthof TS TECHTS TECH Co., Ltd. was founded in 1960 as Tokyo Seat Co., Ltd., and since its establishment, the company
has achieved steady growth as a partner of Honda Motor Co., Ltd. Throughout its history, TS TECH has
encountered numerous challenges, but it has never experienced financial deficit, paving the way forthe successful launch of its 13th Medium-Term Management Plan, which runs through March 2020.
This special feature looks back at the efforts to nurture the enterprise power (underlying strength) TS
TECH used to overcome the challenges it encountered and the trajectory of the company’s global
expansion. At the same time, the special feature will attempt to analyze the enterprise power necessary to attain sustainable development as a company that grows together with society.

7. Leadership Styles and Skills Development (LSSD): an educational program for management-level employees unique to TSAM.

10 TS TECH Report 2017

TS TECH Report 201711

Special Feature: The Underlying Strength of TS TECH

Special Feature 1: The Enterprise Power of TS TECH

1 The Enterprise Power of TS TECH

SpecialFeatureEpisodeSource of
1 The
Our Underlying Strength

The Power of TS TECH’s Female Employees
Around the time of its establishment, TS TECH was manufacturing seats for the Honda Super Cub. The Super Cub became
a top seller, so Honda built a new factory in Suzuka City, Mie
Prefecture, and TS TECH subsequently followed suit. For thelaunch of the newly established Suzuka Plant, TS TECH transferred about 30 employees, including 10 women, from its
plants in Saitama and Hamamatsu. At the time, relocation ofunmarried female employees to such a distant workplace was
highly unusual. Their cooperation and hard work contributed
to the smooth launch of operations at the Suzuka Plant, andtoday the company believes that the power of its female
employees is indispensable for corporate growth.

Unyielding Persistence
TS TECH made its first inroads overseas in 1977 with theestablishment of TRI-CON INDUSTRIES, LTD. in Lincoln, Nebraska, USA. It first produced seats for Honda and Kawasaki motorcycles and later began manufacturing seats for snowmobiles,
personal watercraft and golf carts as well. TRI-CON INDUSTRIES began production of seats for automobiles in 1983. Inorder to boost its in-house manufacturing capabilities, thecompany built the No. 2 Lincoln Plant as a press plant for seatframes in 1985. The following year, the company successfully
obtained a new order from an American OEM and relocatedits Colombia Plant to a new industrial complex as a result.
Also, in order to supplement the manufacturing capacities of

Episodeits sewing plant in Cape Girardeau, TS TECH established
INDUSTRIAS TRI-CON DE MEXICO, S.A. DE C.V. in Tamaulipas,
Mexico.
Using the aforementioned overseas expansion as aspringboard, in 1986, TS TECH established TS TRIM INDUSTRIES
INC. (TSTI) in Ohio, USA and began local production of interior
components for automobiles, including door trim for the
Accord. Additionally, in 1988, TS TECH opened its Athens Plant
in the same state and began sewing seat trim covers there.
At the same time, TS TECH was steadily building thefoundation of its current Asia and Europe segment, establishing its presence in Malaysia in 1981, the Philippines in 1994,
Thailand in 1995, India in 1997, and the United Kingdom
in 1999.
Following the establishment of Guangqi Honda Automobile Co., Ltd. (Guangqi Honda) in China, TS TECH set up
GUANGZHOU TS AUTOMOTIVE INTERIOR SYSTEMS CO., LTD.
(GZTS) through a joint venture with Guangzhou Automobile
Group Component Co., Ltd. in 2001. TS TECH founded TS TECH
(HONG KONG) CO., LTD. in Hong Kong in 2003 and WUHAN
TS-GSK AUTO PARTS CO., LTD. in Wuhan in 2005. The company
has continued its global expansion since then, growing into agroup with 47 companies in 14 countries around the globe asof the end of March 2017. This is the result of the company’s
unyielding dedication to advancing its core technology forthe manufacture of motorcycle seats, the starting point for TS
TECH’s development, while expanding it on a global scale.

Changes in the number of domestic and overseas affiliated companies
60

Domestic

Overseas

50
40
30
20
10
0

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

2 Unexpected Challenges

The Impact of the Global Financial Crisis
In the fall of 2008, a global financial crisis occurred, and theautomotive component industry fell into a dire state as the”Big Three” American automotive companies—Ford, Chrysler,
and General Motors—were successively forced into bankruptcy in 2009.
As an emergency recovery measure, TS TECH formulated
its Guidelines for Cost Reduction. These Guidelines were distributed to all companies in the Group as part of thorough, concerted efforts to slash costs. Furthermore, the Group built a
production system in line with trends in orders and curbed
capital investments. These actions kept the company fromfalling into the red despite a decline in consolidated sales from apeak of 479.1 billion yen recorded in the fiscal year ended
March 2008 to 404.7 billion yen (fiscal year ended March 2009)
and then to 317.9 billion yen (fiscal year ended March 2010). TS
TECH also managed to keep its operating income in the black,booking 26.2 billion yen in the fiscal year ended March 2008,
16.0 billion yen in the fiscal year ended March 2009, and 9.5
billion yen in the fiscal year ended March 2010.

Bold Implementation of Thorough Internal
Reforms in North America
Discussions were conducted at the head office for operationsin North America to formulate specific measures in order tofind a way out of the crisis and secure the survival of thecompany. The Group moved to implement these measures
immediately, starting with the most feasible ones. The global
Guidelines for Cost Reduction were faithfully observed but
deemed insufficient against the backdrop of the drastic 24.5%
year-on-year drop in sales for the fiscal year ended March
2009, so the company enacted internal reforms throughextreme streamlining. Although personnel layoffs and wage
cutbacks were implemented, the employees did not complain, and many of them expressed approval for the commitment shown by management in order to overcome the crisis.
The relationship of trust between the top management andemployees as well as the loyalty to the company that TS TECH
has nurtured over the years since its entry into North America

brought forth its underlying strength to overcome this crisis.
As a result of these efforts, the company managed tosignificantly slash its operating losses to 358 million yen,despite the fact that sales declined further by 19.2 billion yen(14.1%) in the fiscal year ended March 2011. Thanks to internal
reforms, in the following fiscal year, the company achieved anincrease in revenue, and its operating income shifted backinto the black.

Overcoming the Impact of the Great East Japan
Earthquake and Massive Flooding in Thailand
The Great East Japan Earthquake struck on March 11, 2011.
With a magnitude of 9.0, it remains the most powerful earthquake on record in Japan. The massive tsunami caused by theearthquake was an unparalleled disaster, causing enormous
damage to the coastal areas of the Tohoku region and triggering an accident at a nuclear plant in Fukushima Prefecture.
The earthquake damaged the Technical Center, thedevelopment hub of TS TECH, and seriously affected operations. Even in this grave situation, the staff at the Center
gathered in darkened meeting rooms to formulate recovery
measures in order to minimize the paralysis of development
operations, coming together as a team through efforts suchas the relocation of design computers and data servers.
The Group faced another major challenge in October ofthe same year, when massive floods that hit Thailand left TS
TECH (THAILAND) CO., LTD. (TSTH) underwater, resulting in a
temporary suspension of operations. After the water was
drained from the industrial complex, TSTH employees worked
together to implement full-fledged recovery efforts thatstarted on December 6. Thanks to their efforts, operations
were fully restarted on March 26, 2012.
These events are justsome of the many ways wecan be sure that TS TECH is acompany where all employees
have the underlying strength
to overcome difficulties for thesake of customers.

* The number of affiliated companies includes not only subsidiaries (companies in which TS TECH holds a share of 50% or more), but also affiliates (companies in which
TS TECH holds a share between 20% and 49%).

12 TS TECH Report 2017

TS TECH Report 201713

Special Feature: The Underlying Strength of TS TECH

Special Feature 1: The Enterprise Power of TS TECH

Our global growth strategy
An Interview with the Supervisor of Global Operations

Leveraging our underlying
strength at the global level topromote further growth

Worldwide initiatives ❶ Increase added value ❷ Cooperate on parts strategies ❸ Optimize regional functions ❹ Expand sales beyond existing customers

Europe❶ Restructure U.K. production❹ Expand new commercial
rights for European OEMs

North America

China❶ Reclaim commercial rights and recover market share❷ Automate and save manpower❷ Reorganization of sewing plants❸ Ensure self-reliant development at local sites❹ Acquire commercial rights to facilitate sales beyond existing customers

Japan
Asia
❶ Expand in-house manufacture of seat frames❷ Leverage new companies (in Bangladesh and the Philippines)❷ Further promote sewing-related strategies❸ Boost purchasing capabilities and strengthen local procurement❸ Enhance regional functions (development, sales and purchasing)❹ Strengthen sales approach to Japanese OEMs

❶ Automate and save manpower❷ Expand Mexican operations and leverage them to enhancecomponent competitiveness❷ Reorganization of sewing plants❸ Streamline regional functions❸❹ Strengthen sales approach to American OEMs

❶ Restructure production based on the evolution of manufacturing❷ Shift to ultra-lightweight technology (in specifications and manufacturing)❸ Develop “R-Development” (elemental technology development) and products that sell
❸ Ensure global control over sales/purchasing functions❹ Expand commercial rights for Japanese OEMs

South America❶ Leverage sewing plants in the region❹ Expand sales beyond existing
foreign-affiliated customers

Masanari Yasuda,

Senior Managing Director (Representative Director),
Global Operations Supervision/Quality Assurance
Supervision

Q Give us an example of when you
witnessed the underlying
strength of TS TECH.

1) TS Philosophy training	
We have created a uniform,
group-wide curriculum inJapanese as well as thelanguages of all the countries
where we operate. The goal is toensure that all TS TECH Group
employees understand the TS
Philosophy (Beliefs, Company
Principle and Management
Policies) and put it into practiceat all times. We have TS Philosophy “promoters” in each country,
and we conduct training at our
offices and local sites around theworld. See the inside front coverfor details on the TS Philosophy.

14 TS TECH Report 2017

When I was manager of the Design Department in 2007, we faced a major challenge inthe form of frequent design changes, which
had been on the rise since about 2003. Morechanges meant higher costs and an increased
workload. Not only that, losses at the design
stage were affecting all of the subsequent
processes, right up to the start of production.
The situation was directly affecting thecompany’s business as a whole.
To solve the problem, we set a target of
no more than 10 design changes per model
as our goal. We set a lofty goal, and, of course,
we didn’t always reach it. However, today, 10
years later, we have brought that target
number down to around five or six. Our
efforts have had a major positive impact on
the entire Group.

Perhaps by saying this, some may deem ourcompany serious to a fault (laughing).

Q Would you say that the sameunderlying strength is still there?

I think this mentality of never giving up is apart of our corporate DNA, so it gets passed
down to our younger employees. In responseto an increasingly global era, we conduct TS
Philosophy training1 programs in all 14
countries in which we operate to ensure thateveryone at all of our locations embraces thismentality.
This type of underlying strength, however, is something to be used when there is asense of crisis. Since we handle tasks systematically, we face fewer troubles and failures.
While this is a good thing, it also means that
we do not face as many situations where we
draw upon our underlying strength. However,the changing times continually present uswith new challenges.

Q What was the underlying

strength that helped you toachieve your goals?

It all comes down to a “never give up” mentality. Even when it seemed like there was noend in sight, we just kept going in a processof repeated trial-and-error. This gradually
produced results, and eventually our final
goal was within reach. In my view, the result
was the sum of every small achievement.

Q What sorts of new challenges doyou foresee?

We have risk prevention measures in place at
all locations around the world, so our plants
are running smoothly. This may perhaps leadmanagers and supervisors at local sites to losea degree of interest in the production floor.
They may tend to leave the bulk of the work

Increasing TS TECH’s social value as a company… ESG-focused managementthat is helping to build a more sustainable world
to the people on the floor. I believe this same
issue can be seen in administrative departments.

Q How can we improve this situation?

The solution is always found in what we callthe “three actuals” (the actual place, the actual
thing, and the actual situation). First of all,senior management at all of our global bases
and department managers based in Japanneed to go back to the basics of management, go out to the actual sites in person, andlook at and listen to what is going on there indetail. Leaders who make this a regular
practice will discover potential issues at an
early stage and be able to nip them in thebud before they become serious problems.
What’s more, when management has apresence on the production floor, employees
realize that what they are doing is importantto their management. This improves theirown mindset and boosts their motivation. I
am confident that this approach, combinedwith our TS Philosophy training, will lead tothe autonomous creation of foundations for
ESG-focused management in each region.

we need to increase revenues from ouroperations by carrying out initiatives in all
domains of QCDDM2 around the world. We
also need to increase our social value by
gaining recognition as a company that is
helping to build a more sustainable world.
As part of our 13th Medium-Term Management Plan, implemented in April 2017, weare expanding operations incorporating
ESG-focused management practices. We will
face new, difficult obstacles on the path to
making this vision a reality, yet I have no
doubt that as we do, we will encounter more
opportunities to utilize the underlying
strength of TS TECH once again. Drawing on
the TS Philosophy, we will display our “nevergive up” mindset―our underlying strength―
on a global scale and boldly overcome every
challenge we face.

2) QCDDM stands for quality, cost,development, delivery, andmanagement.

Q What does TS TECH need to do tocontinue growing globally?

In order to realize continued global growth,

TS TECH Report 201715

Special Feature: The Underlying Strength of TS TECH

Special Feature 2: Stakeholder Dialogue

2 Stakeholder Dialogue

SpecialFeatureTaihei Hayashiya
Rakugo performer
Born in Saitama Prefecture in 1964. Graduated from the College of Art and
Design at Musashino Art University and went on to study rakugo under
Konpei Hayashiya. Received an Outstanding Performance Award at the NHK
Newcomer Entertainment Contest in 1993 and a Silver Award for his
performance in a contest hosted by the National Engei Hall in 1999. Rose to
the rank of shin’uchi, the highest rank that a rakugo performer can attain, in
2000. Received the 58th Minister of Education Award for Fine Arts in the
newcomer’s division in 2008. Was appointed a visiting professor in the
Department of Arts Policy and Management at Musashino Art University in2010 and became the director of the Rakugo Kyokai, a society of rakugo
performers and professional storytellers, in 2014. Appears on multiple TV andradio programs, including the long-running TV comedy Shoten.

A “Never Give Up” Mentality: The Underlying Strength
behind TS TECH’s Value Creation Process
Taihei Hayashiya, a famous rakugo* performer, participated in the panel discussion at
Za Forum 2016, held in November 2016. We invited him back later to meet with members of
Za Lab, a group of young employees from TS TECH, who presented at Za Forum. Together they
discussed how we should approach our work and conduct ourselves to manufacture seatingof the future.

cupied with the task at hand, it’s easy topeople would welcome automatedKojima: I think the fact that I was notforget this and become discouraged. At

driving, whereas people like me enjoy

alone when preparing for Za Lab

Za Forum 2016, we gave a presentation

the experience of driving itself. But is it

sessions was a huge source of strength

on seats that create zero fatigue during

acceptable for you to offer your cus-for me. When our ideas were dismissed

travel as part of the theme of “seating

tomers products that you created whenagain and again for not being interest-

to extend healthy life expectancy.” How-

you were discouraged? When youring enough, and we almost gave up,

ever, there were many times when we

work is tough and you lose heart, theMr. Miyawaki, our group leader, cheered

felt discouraged while working on thepeople who rely upon you become

us on. It made me think, “He’s giving his

presentation. We found it difficult to

discouraged as well. You can’t give in toall, so I’m going to do my best as well.”

express fatigue, an invisible psychologi-

discouragement. Remember this, and it

Ikeda: In addition to the encourage-

cal state, in visual terms.

will help you find the strength to keep

ment we’ve received from each other, aTaihei: Grasping the psychological stateworking towards your dreams andmajor source of strength that hasof drivers is certainly no easy task. Somegoals.

helped us to overcome our own

Za Forum: Thinking about Seating of the Future
Za Forum is a unique event launchedzero fatigue during travel” by using

sion on the theme of “seating and aby TS TECH in 2011 with the aims of

sensors to detect driver fatigue, and thesuper-aging society” and featured

creating new products that make users

second was “seats that work to offset a

prominent individuals from a number

happy and sharing new ideas aboutlack of exercise,” which allow users toof different fields, including productseating with the general public. Duringobtain some of the effects ofdesigner Toshiyuki Kita, brain scientist

each Za Forum, the research group Za

core-strengthening training while they

Kikunori Shinohara, orthopedic special-

Lab gives presentations that use “thedrive.

ist/doctor of medicine and sports

philosophy and science of seating” astheir basic concept.

Kojima: We do our jobs with the desire

they get into the car for the first time,the “story” behind the customer’s

to create great seats. However, things

but five, ten years down the road as

experience in the car. Specifically, you

don’t always go as planned, creating an

well.

might ask yourselves, “Who will sit inarray of concerns and worries. How do

Ikeda: Mr. Hayashiya, your job as a

the seat, and how will they feel when

you overcome these kinds of obstacles

rakugo performer is to conjure up

they sit there?” or “What will happen

in your own work?

fantastic images in the minds of yourwhen a child seat is fitted in the back

Taihei: As a rakugo performer, whenaudience; our job is to make ourseat?”

this happens I try to kick-start thecustomers feel happy through seating.

Miyawaki: It’s about making a car into acreative process by asking myself,

Can you give us some examples ofspace that creates an enjoyable “story”“What is it that my audience is looking

methods you use to try to picture infor the customer. The seats we makefor?” In the case of car seats, I think you

your mind how the audience mem-are a key component of that story. We

have to give a lot of thought to what

ber—or customer—feels?

have to become even more mindful ofkind of seat you should create so that

Taihei: You could say that your job as athis in our work.

the customer will like it not only whenseat maker is basically thinking about

Kajihara: That said, when you’re preoc-* A traditional form of comedic storytelling

16 TS TECH Report 2017

Stakeholder
Dialogue

The second half of the event
centered on a fascinating panel discus-

doctor Kakuko Nakamura, and rakugo
performer Taihei Hayashiya.

During the first part of Za Forum2016, held on November 19, 2016 atSpiral Hall, Minami-Aoyama, Tokyo, themembers of Za Lab gave a presentationon the theme of “seating to extend
healthy life expectancy.” They laid out
the results of their research, which had
approached this central theme fromboth physical and psychological angles,
and presented two new ideas inseating. The first was “seats that create

From left: Taihei Hayashiya, Kakuko Nakamura, Kikunori Shinohara, and Toshiyuki Kita

TS TECH Report 201717

Special Feature: The Underlying Strength of TS TECH

Working towards Management Focused on ESG
TS TECH will pursue ESG management at all of its global sites under its 13th Medium-Term Management
Plan, aiming to become a company that not only seeks to earn profits through its business, but also tocoexist harmoniously with society and be a company welcomed with joy whose presence is appreciated by all. This section introduces some of TS TECH’s initiatives in the area of ESG management.

20 Making ESG a Priority Issue

P.
personal limits has been TS TECH’s

help us. They would say, “Come backI talked with the other members duringcorporate culture of never giving up. I

again after you have refined yoursuch times, it was clear that not a single

think the quality of our presentations

presentation, and we’ll be happy toperson intended to give up. I thought,

improved tremendously thanks to thelisten to it again.” When we all came

“Not one person on this team is about

tough yet valuable input that wetogether as a team, I felt myself gain

to give up, so if we all combine forces,

received from company management.

the strength to keep going.

we’re sure to break through this im-

They really hate to see anyone give up.

Miyawaki: I also felt the power of ourpasse,” and that is exactly what hap-

Kajihara: That’s right. The company

team. There were times when we justpened.

president and the directors never

couldn’t come up with any better ideas

seemed to mind giving up their time to

and were very close to defeat. Yet when

Our 13th Medium-Term Management Plan sets the creation of a foundation for ESG
management as its management policy. Our first priority measure within the plan is“sustainable business growth” (governance and economy). The second is “diversity
management” (society). The third is “harmony with the social environment”(environment and society).
All of our efforts will be developed based on these three priority measures.

22 Corporate Governance and ComplianceP.
Exceptional Craftsmanship Delivered through Teamwork and the Beliefs of Each Member
Taihei: I think that successful experienc-

performer?

OK!”—is a major source of strength.

es achieved through teamwork are

Taihei: My advice to them is this:Miyawaki: Thank you very much for

immensely valuable assets for all of you.

“There’s no joy in giving up.” A wholesharing your valuable thoughts with us

However, I don’t think that just being

new world will open up before you if

today. In closing, do you have a mes-

supported by others is enough in itself.

you just keep going. In August 2016, I

sage for everyone at TS TECH?

Each of you needs to realize that

did a fundraising run that involved

Taihei: Perhaps an idea we’ve used inyou yourself create the stories whererunning more than 100km in 24 hours.

the world of rakugo: “creative destruc-customers have enjoyable experiences

If I had given up at any point, I would

tion.” This means tearing down some-in cars through seating. That will be thenever have seen the wonderful sight ofthing that was created in the past inbiggest source of underlying strength

crowds of people lining the streets asorder to move forward into a new age. I

to keep you from giving up.

they cheered us on. I would also telllook forward to seeing all of you taking

Ikeda: Mr. Hayashiya, you have appren-them about the importance of believ-

up the challenge of going beyond

tices that you mentor in the art ofing in yourself. Cheering yourself on

conventional wisdom to design reallyrakugo. What advice do you give themwhen things are really tough—“Thisinteresting products—the kind ofwhen they are on the verge of giving

difficult bit will be over with soon so

products that will make me think, “I had

up on their quest to become a rakugo

hang in there! Everything will be

no idea that a seat could be this great!”

Participants (Members of TS TECH’s Za Lab)
1 	Business Development Section 1, Business Development Department• TS TECH is actively working to enhance its corporate governance in order to fulfil its social
responsibility, ensure sustainable growth and boost mid- to long-term corporate value.
• TS TECH has formulated the TS Guidelines for Conduct, which lay out the standards that
executive officers and employees must adhere to during their duties. Efforts are under way toensure that all employees have a thorough understanding of these guidelines and the TS
Philosophy.

26 Stakeholder EngagementP.

TS TECH is always striving to be “a company welcomed with joy, whose presence is appreciated byits stakeholders.” Going forward, we will continue to promote communication with all of our major
stakeholders through dialogue and exchanges of opinion.

Stakeholder Voices

Stakeholder Dialogue• A Customer's Voice• A Shareholder/Investor’s Voice• A Business Partner's Voice• An Employee's Voice•D ialogue on Harmony with
the Community• Dialogue on Afforestation

V oiceShiori Kojima

2 	Administration Section, Administration Department, Suzuka Plant

Stakeholder
Dialogue

Toshiyuki Ikeda

3 	System Section 1, System Department

Hisae Kajihara

4 	Collision Safety Section,
Development and Testing Department

1

2

3

4

Kazuya Miyawaki

18 TS TECH Report 2017

TS TECH Report 201719

Working towards Management Focused on ESG

Making ESG a Priority Issue

Making ESG a Priority Issue
The Sustainable Development Goals (SDGs) adopted by the United Nations Sustainable Development
Summit set out a comprehensive vision of what the world should look like by 2030 across a wide rangeof areas: the economy, the environment and society. TS TECH believes that working towards management focused on environmental, social, and governance (ESG) factors is essential to make this vision a
reality. The objective of TS TECH’s ESG-focused management is to contribute to a sustainable society
while working toward sustained growth as a company.

Beliefs“Due regard for human resources” A “company welcomed with joy”

2020 Vision

INNOVATIVE QUALITY COMPANY

Three Key Corporate Initiatives
TS TECH’s 13th Medium-Term Management Plan includes the “creation of a foundation for ESG management.” Our threepriority measures for assisting with this are “sustainable business growth,” “diversity management” and “harmony with thesocial environment.” TS TECH has established eight additional corporate initiatives in order to make these priority measuresa reality, and it is working to bring ESG-focused management to all of its sites worldwide.
Priority measures

Sustainablebusiness growth

Corporate initiatives

Create a system for world-leading quality

Establish independent auditing bodies at each location
Work to strengthen customers’ quality

Become a world leader in component competitivenessD evelop attractive products and create original technologies

13th

Economic value

2019-2020

Stakeholders

Medium-Term
2018-20192017-2018

Social value

Environment
SocialGovernance(develop sensing/control/manufacturing technologies)

Maximize global production efficiency

Establish a base for new customer relations

Take even stronger measures to expand sales beyond existing customers

Use financial strategies to support business growth
Invest optimal capital according to region
Progress to consolidated money management

Diversity
management

Develop human resources to be promoted to management
 onstruct an education system for next-generation management toCfurther localize management

Create measures to promote diversityR eform global HR measures to match regional characteristicsC arry out work-style reforms

Contributing to a sustainable society
while working toward sustained growth as a company
20 TS TECH Report 2017environmentally conscious business activities
Harmony with the PracticeContribute to a low-carbon societysocial environment Green Ecosystem Conservation Activities
Conduct CSR activitiesD evelop CSR activities tailored to each country/region

TS TECH Report 201721

Working towards Management Focused on ESG

Corporate Governance and ComplianceCorporate Governance and Compliance
Basic Policy on Corporate Governance

Governance System Diagram

Basic Policies(1) Securing the Rights and Equal Treatment of Shareholders
We respect the rights of all stockholders, who are important
shareholders, and shall maintain an environment that ensures thatall shareholders, including non-controlling interests, are treatedequally and can fully exercise their rights.
(2) Appropriate Cooperation with Shareholders
We shall cooperate appropriately with all shareholders whileworking to achieve sustainable growth and an increase in mid-tolong-term corporate value.
(3) Ensuring Appropriate Information Disclosure and Transparency
We shall actively disclose information in order to be viewed as a“Company Welcomed with Joy” by our shareholders, and we shallmanage our business with transparency and good faith.
(4) Responsibilities of the Board
The Board shall take appropriate responsibility for the establishment of mid-to-long-term management policies and oversight of
directors, and it shall work to build systems to enable transparent,
fair, and resolute decision-making.
(5) Dialogue with Shareholders
The company shall engage in constructive dialogue with shareholders and investors through the annual General Meeting of
Shareholders and other avenues with respect to management
principles and other issues as it works to achieve sustainablegrowth and an increase in mid-to-long-term corporate value.

Compliance with the Corporate Governance CodeTS TECH’s financial and commercial activities are based onJapan’s Corporate Governance Code. TS TECH has carefully
considered the content and spirit of each of the publishedprinciples of the Code in relation to the company’s goals ofachieving sustainable growth and increasing mid-to-longterm corporate value. TS TECH mandates a “comply” approachwith respect to each of these principles.
With regard to Supplementary Principle 1.2.4 (Thecreation of an infrastructure for electronic voting), for whichan “explain” approach was adopted last year, TS TECH is now incompliance with this principle, having introduced a systemfor electronic voting for the annual General Meeting of
Shareholders held in June 2017. Efforts were also made tofurther improve the voting environment for all shareholders.
In addition, with regard to Supplementary Principle
4.11.3 (Evaluation of the effectiveness of the board as awhole), for which an “explain” approach was also adopted lastyear, TS TECH has worked to strengthen governance in amanner suited to the company from a mid- to long-term
perspective based on changes in the required roles andfunctions of the Board.
We have simultaneously taken steps to review themethods by which the effectiveness of the Board is evaluated.
We will conduct dialogue with our shareholders as we continue to consider how best to implement the Code’s principles.

Group Governance System
The TS TECH Group has established a sound corporate governance system. It includes sharing the TS Philosophy, a policy
on corporate governance, and a three-year medium-term
management plan. Affiliated companies also have their own
effective, efficient corporate governance systems that are
based on the laws of their respective countries and businesses.
Important management issues at affiliated companies
must be reported to and approved by TS TECH in advancebased on the standards stipulated by TS TECH. Affiliatedcompanies must also report business plans, sales results, andfinancial status as well.

22 TS TECH Report 2017

Furthermore, affiliated companies participate in regularly
conducted compliance and risk verification known as the
TSCG self-verification system. This ensures that the entire TS
TECH Group acts as one in promoting compliance andreducing risk.
TS TECH’s internal audit department conducts audits ofaffiliated companies and works with internal audit departments set up at the head offices in each region to enhance
the internal audit structure of the entire TS TECH Group.

General Meeting of Shareholders
Election

Global Risk Management
Committee

Reports

Risk Management
Officer1

Directors
Responses
and reports

TSCG
OfficeEthics andCompliance
Committee

Board of Directors

Election

Executive Committee

Compliance
Officer

Audit

Board of Auditors

2

Representative Directors

Audit report

Accounting Auditor
Accounting audit
Internal control audit
Coordination

Responses
and reports

Executive General 3
Managers Committee

4

Regional
Management Committees

Executive General Managers, etc.

Regional General Managers/
Presidents of Affiliated Companies(Americas / China /Asia and Europe)
Reports

5

Auditors

Monitoring

Based on this philosophy, the TS TECH Group has established the TS TECH Corporate Governance (TSCG) System andis working to enhance compliance and risk management aswell as improve corporate ethics.
We endorse the Tokyo Stock Exchange’s Corporate
Governance Code and have set the following basic policies
accordingly.

Coordination

TS TECH’s corporate philosophy calls for a “Company Welcomed with Joy,” firstly by its customers and shareholders, aswell as its suppliers, employees, and the community. The
Company recognizes that establishing corporate governanceis an important step in fulfilling its social responsibility andbecoming a “Company Welcomed with Joy” by all its stakeholders and is actively working to promote it.

Reports

Business Audit Office

Reports
Responses
and reports

TS Corporate Ethics
Compliance
Officer Consultation Office

Corporate ethics hotlines
set up by each company

A Board of Directors
The Board of Directors comprises 14 directors,
including two outside directors. It convenes atleast once per month in principle. The Boardof Directors makes decisions regarding
management policies, important management issues and matters mandated by laws
and regulations. It also supervises theexecution of the company’s operations.
The outside directors are elected basedon their wealth of professional experience
because they will be consulted regarding
management policies and importantcompany decisions.

Consultations

Responses
and reports

Divisions and departments in Japan
Domestic affiliates

Consultations

B Executive Committee
It comprises the Company’s three representative directors. It conducts preliminary
deliberations on such matters as resolutions
to be put to the Board of Directors, and,within the scope of the authority assigned to
it by the Board of Directors, discusses
important matters relating to the execution of
the duties of the directors.

Business audits

Overseas affiliates

C Executive General Managers Committee
It comprises directors and other members. It
discusses matters relating to the policies,
planning, and control of each businessdivision’s overall operations to enhance
efficiency of management.
D Regional Management Committees
They comprise directors and other managers
in the Americas, China, and Asia and Europe,and deliberate on important matters affecting
management in their respective regions.

E Board of Auditors
It comprises four members (including two
outside corporate auditors). Each corporate
auditor audits the directors’ execution ofduties in accordance with the audit policy
determined by the Board of Auditors throughattendance at important meetings such as
meetings of the Board of Directors, various
examinations, and the regular exchange of
opinions with the directors.
Outside corporate auditors are elected
to utilize their professional experience outsideof TS TECH and to make audit functions evenmore objective and independent.

Operation of an Internal Control System
In accordance with provisions in the Companies Act, TS TECH
passed a resolution on the basic policies of its internal control
system at a Board of Directors’ meeting held in May 2006.
Since then, the Board of Directors has reviewed theimplementation of this system each fiscal year and passed
resolutions on changes to this policy as necessary.

Additionally, in accordance with the Financial Instruments and Exchange Act, the TS TECH Group has established
an internal control system to ensure the reliability of its
financial reporting. The effectiveness of this system is maintained by regularly evaluating improvements and operations
and taking corrective actions when necessary.

TS TECH Report 201723

Working towards Management Focused on ESG

Corporate Governance and ComplianceDirectors and Auditors (as of June 23, 2017)
Directors
Risk Management
Important management issues are carefully deliberated uponby TS TECH’s Executive Committee as well as various advisorycommittees. Through these discussions, TS TECH makes every
effort to avoid and mitigate business risks.
In addition, a Risk Management Officer is appointed fromamong the Representative Directors and placed in charge ofrisk management. The Global Risk Management Committee,
comprising directors and other officers, has been set up to
deliberate regularly on the results of TSCG self-verifications
and discuss responses to serious risks affecting management,
ensuring that efforts are continually made to mitigate potential risks.

Throughout the fiscal year ended March 2017, TS TECH
continued to work on mitigating the possibility of an interruption in the parts supply chain, a latent issue within the company’s supply chain that is considered to be high-risk for theGroup as a whole. We have also worked group-wide tooverhaul emergency contact framework and risk management manuals, aiming to ensure that damage can be minimized and operations normalized as early as possible in an
emergency situation.
Findings obtained through TSCG self-verifications areshared with internal auditors so that they can be applied inrisk approach auditing.

PRESIDENT(Representative Director)

SENIOR MANAGINGDIRECTOR(Representative Director)

SENIOR MANAGINGDIRECTOR(Representative Director)

Yoshiaki Yui

Masanari Yasuda

Joined TS TECH Co., Ltd. in 1980
Senior Managing Director (Representative
Director), TS TECH Co., Ltd.
Assistant to the President, TS TECH Co., Ltd.
Management Supervision, TS TECH Co., Ltd.
Sales Division General Executive Manager
Risk Management Officer

Joined TS TECH Co., Ltd. in 1982
Senior Managing Director (Representative
Director), TS TECH Co., Ltd.
Assistant to the President, TS TECH Co., Ltd.
Global Operations Supervision, TS TECH Co., Ltd.
Quality Assurance Supervision, TS TECH Co., Ltd.

MANAGING DIRECTORMANAGING DIRECTOR

Hitoshi Yoshida

Koichi Mase

Joined TS TECH Co., Ltd. in 1981
Managing Director, TS TECH Co., Ltd.
Asia and Europe Executive General
Manager
Chairman of TS TECH ASIAN CO., LTD.,TS TECH BANGLADESH LIMITED and
TS TECH UK LTD

Michio Inoue

SENIOR MANAGINGDIRECTOR

Minoru Maeda

MANAGING DIRECTOR

Yoshitaka Nakajima

Joined TS TECH Co., Ltd. in 1979
Senior Managing Director, TS TECH Co., Ltd.
Americas Executive General Manager,
Chairman and President of
TS TECH AMERICAS, INC.

Joined TS TECH Co., Ltd. in 1982
Managing Director, TS TECH Co., Ltd.
Corporate Administration Division
Executive General Manager,
Compliance Officer,
Officer in Charge of Public Relations

MANAGING DIRECTORMANAGING DIRECTOR

DIRECTOR

Akihiko Hayashi

Kenichi Hasegawa

Yutaka Arai

Joined TS TECH Co., Ltd. in 1979
Managing Director, TS TECH Co., Ltd.
China Executive General Manager
Chairman and President of
TS TECH (HONG KONG) CO., LTD.

Joined TS TECH Co., Ltd. in 1978
Managing Director, TS TECH Co., Ltd.
Manufacturing Division Executive General
ManagerJoined TS TECH Co., Ltd. in 1982
Managing Director, TS TECH Co., Ltd.
Officer in Charge of New Business
Development,
Chairman of TS TECH Deutschland GmbH

Joined TS TECH Co., Ltd. in 1982
Director, TS TECH Co., Ltd.
Development and Engineering Division
Executive General Manager

DIRECTORDIRECTORDIRECTOR (Outside Director)

DIRECTOR (Outside Director)

Atsushi Igaki

Yoshikazu Ariga

Shizuo Kitamura

Teruyasu Mutaguchi

General Manager of Regional Operations
Planning Office (Japan) at
Honda Motor Co., Ltd.
Joined TS TECH Co., Ltd. in 2016
Director, TS TECH Co., Ltd.
Corporate Business Administration
Division Executive General Manager

Joined TS TECH Co., Ltd. in 1990
Director, TS TECH Co., Ltd.
Corporate Purchasing Division Executive
General Manager

Senior Advisor at Resona Business Service
Co., Ltd.
Director, TS TECH Co., Ltd. (2015-present)

Technical Advisor at Biko, Inc.
Director, TS TECH Co., Ltd. (2016-present)

AUDITOR (Full-Time)

AUDITOR (Full-Time)

AUDITOR (Part-Time)*

AUDITOR (Part-Time)*

Akihiro Miyota

Senzo Yamazaki

Tatsuya Motoda

Akira Kawashita

Joined TS TECH Co., Ltd. in 1976
Auditor, TS TECH Co., Ltd.

Joined TS TECH Co., Ltd. in 1979
Auditor, TS TECH Co., Ltd.

President of Motoda Tax & Accounting
OfficeAuditor, TS TECH Co., Ltd. (2014-present)

Joined TS TECH Co., Ltd.
Auditor, TS TECH Co., Ltd. (2016-present)

Joined TS TECH Co., Ltd. in 1977
President (Representative Director),
TS TECH Co., Ltd.

影響度

Risk Map (Japanese only)

発生可能性

Auditors

Compliance Framework
TS TECH has formulated the TS Guidelines for Conduct, which
lay out the rules that executive officers and employees must
follow during their duties. Efforts are being made to instill inall employees a thorough understanding of these guidelines
and the TS Philosophy.
A director is appointed as a Compliance Officer in orderto promote compliance initiatives, and steps are continuallytaken to prevent legal violations before they occur throughregular TSCG self-verifications and deliberations of important
ethics and compliance issues by the Ethics and Compliance
Committee.

24 TS TECH Report 2017

We have established a whistleblower hotline called the
TS Corporate Ethics Compliance Consultation Office, whichenables employees to bring issues before compliance officers,
who respond with rapid, effective investigations and corrective guidance in the event of a problem. The office handles
approximately ten complaints per year, and its continuous
availability has been effective in resolving internal issues andmaintaining compliance.

*Outside Auditor

TS TECH Report 201725

Stakeholder Engagement Stakeholder

Working towards Management Focused on ESG

A Customer's V oice

Yoshinori Okita
Plant Manager,
Wako Central Dealership
Honda Cars Saitama

Our Relationship with Customers

A Business Partner’s V oice

Our Relationship with Business Partners

We can get hints for making better seats from
dialogue with customers

We want to make use of our areas of expertise to help
TS TECH create seating of the future

We often provide advice on seats when we talk tocustomers who come to our dealership to have theircars checked out, maintained, repaired or given an
official motor vehicle inspection.
For example, in terms of specifications orfunctions, customers who enjoy long distance drives
may say they want soft seats to prevent fatigue whensitting for long periods. I myself used to enjoy driving
sporty cars, and I loved the snug hold you get fromsports cars’ bucket seats, which cradle the passenger. I
think we can make customers even more comfortablethrough seats that match specific objectives, such as
softness or a snug hold.

We first started working with TS TECH around 30 years
ago, when we helped set up a CAD*2 system environment at TS TECH’s Technology Center. We recently
transferred the server for the Head Office’s System
Department to an IBM Japan cloud environment, andwe are managing that data.
When Za Lab members stayed at our training
facility several years ago, I sat in on a number of
meetings. They gave me a real sense of the uniqueways we at IBM Japan can contribute to creating seatsof the future. Seats are points of contact with passengers; as automated driving evolves and people spend
less time behind the wheel, we need seats that areOver a decade ago, there was a seat arrangement in a minivan called “restaurant mode,” where you
could turn the first row of seats around to face thethird row and fold the second row of seats down tomake a table. It is perfect for relaxation and socializing, so if it were brought back, we could propose new
ways to enjoy driving with family and friends. Nowadays, cars are closely intertwined with our lifestyles.
My dream is to further enrich customers’ lives throughcars fitted with easy-to-use seats that don’t make you
feel tired.

Response

Naoya Goto
Client Unit Executive
HONDA Business Development
IBM Japan Ltd.

V oicessafer and more comfortable than ever. One of Za Lab’s
research themes is sensing passengers’ biologicalinformation—blood pressure, heart rate, etc.—andsensing technology is one of our areas of expertise.
Moreover, we have a long history of global expansion
and a lengthy track record of diversity initiatives,
including those related to female management andLGBT employees.
We hope to contribute to TS TECH not only
through a cloud environment, but also by means ofhuman resources utilization and other areas closely
connected to manufacturing.

Response

We look at posture, body pressure, vibration, hold, heat and acoustics in
our R&D to create seats where users can sit for long periods without
fatigue. We create numerical values representing the ideal posture foreach person; to make a product that embodies these values, weincorporate them into underlying technologies like frame construction,
cushion material characteristics, surface materials, adjustment mecha-

nisms and electrical components. Based upon customer opinions fromonline surveys, we also propose attractive seating arrangement technology not offered by other companies. We will continue to create wonderful seats that make customers happy through “looking, touching, sitting,
driving and using.” (Development and Testing Department)

Please visit our website to learn more about our activities: http://www.tstech.co.jp/english/csr/customers.html

We have worked with IBM Japan for many years, and we are deeply
grateful for their helping our younger employees with Za Lab activities.
With efforts to develop self-driving vehicles already underway, it
will be necessary for the automotive industry to monitor drivers andpassengers in the future. As a department involved in seat development,
we place a high level of importance on biological information, and wework strategically on its technological development, through technology from Za Lab’s presentations at Za Forum and more.
Going forward, we will continue cutting-edge technologicaldevelopment in the domains of safety, the environment and comfort tocreate high-value products. (New Product Development Department)

Please visit our website to learn more about our activities: http://www.tstech.co.jp/english/csr/partners.html*2 CAD (Computer-Aided Design): Design processes assisted by computers. In the automotive field, CATIA (three-dimensional CAD software) is now mainstream.

A Shareholder/Investor’s V oice

Our Relationship with
Shareholders and Investors

An Employee’s V oiceAnalyzing the workplaces behind the results to predict
a company’s future

Shiro Sakamaki
Equity Analyst
Daiwa Securities Co. Ltd.

When analyzing a company’s results, financial data is
the most important of all disclosed information.
However, we must also examine what is going on
behind the scenes at workplaces when forecasting acompany’s future. When we are considering investments, we base decisions not only on routine discussions with management and plant tours inside andoutside Japan, but also on non-financial information
like technological development-related issues
described in the TS TECH Report, descriptions ofbusiness models and corporate governance.

There has been a lot of talk on the stock market
over the past few years about how “the structure of
the automaker market is approaching a tipping point”
with, for example, venture companies in Silicon Valley
directing funding towards efforts to promote thespread of “robo-taxis” with no steering wheels. I lookforward to what TS TECH will do going forward, and I
plan to keep following it to see what long-term strategies it will develop through technological developments that focus on “sitting.”

A “trade specialist” responsible for trade management
at all Chinese sites

Yasuko Nakao
Manager
TS TECH (HONG KONG) CO., LTD.

Response
We value communication with our shareholders/investors, and we
proactively disclose information to ensure that we are evaluated fairly bysociety.
In addition to the disclosure of financial information, we will alsopresent our competitive products and technologies to the automotive
industry of the next generation through avenues such as the TS TECH

Report, Za Forum and a booth at the Tokyo Motor Show.
We will work hard not only to boost our corporate value but also
to help build a sustainable global society from the perspective of ESG
investment*1, which is anticipated to become an even greater subject offocus going forward. (Administration Department)

Please visit our website to learn more about our activities: http://www.tstech.co.jp/english/csr/investors.html

Our Relationship with Employees

In April 2017, I was appointed to a post at TS TECH
(HONG KONG) CO., LTD., one of our regional control
companies, as the first female employee of the TS
TECH Group to be stationed overseas. My role as atrade specialist is to bolster trade management
operations at all Chinese sites. Up until March 2017, I
mainly handled overseas operations related toimports/exports at Japanese sites as a member of theForeign Trade Management Office at the Head Office.
Currently, the scope of my work is expanding, and I
am working on several new policies daily.
To date, I have worked only in trade-related
operations at a series of companies in various fields,

building up a track record in international businessthat includes overseas trips and deals with numerous
countries. I made use of this experience after joining
TS TECH and hoped to work at an overseas site.
Regardless of gender or years of service, I believe that
if you continually work hard to enhance your own
personal strengths, the skills you need to succeed on
the global stage are sure to come to you in the end.
The role I have been given, where I can use thewealth of international business experience that is
my personal asset, is just the opportunity I havedreamed of.

Response
Based on the TS Philosophy, we aim to be “a company that gives people
job satisfaction” and “a company that is easy to work for” by ensuring that
our human resources—our most valuable asset—can make the most of
their individual capabilities. Going forward, we will work to show

employees examples of success among their senior coworkers and topromote understanding among employees about diverse work styles soeveryone recognizes that TS TECH is supported by all kinds of people interms of gender, race and age. (Human Resources Department)

Please visit our website to learn more about our activities: http://www.tstech.co.jp/english/csr/employees.html*1 ESG investment: Investment that selects and focuses on companies that consider the environment, social issues and governance.

26 TS TECH Report 2017

TS TECH Report 201727

Working towards Management Focused on ESG

Stakeholder Engagement

Stakeholder
Dialogue

Dialogue on Harmony with the Community–Our Relationship with Society and the Community

Dialogue on Afforestation–Our Relationship with the Environment

Growing Together with the Community through Local Contribution Activities

Passing on the Idea of Planting, Cultivating and Using Trees through the “Forest of Healing”

Masaji Kudo (center)
Mayor of Gyoda
TS TECH Co., Ltd.

Yasushi Suzaki (left)
Plant Manager,
Manufacturing Division,
Saitama Plant
Shin'ichi Kawakami (right)
Administrative Manager,
Administration Section,
Administration Department,
Saitama Plant

In January 2017, TS TECH’s Saitama Plant received a certificate of appreciationfrom Gyoda City, Saitama Prefecture, where it is located. The certificate praised
the array of ongoing local contribution activities carried out by the plant, such as
plant tours and involvement with athletic events. We invited Masaji Kudo, Mayorof Gyoda City, to tell us about the importance of the unique ways that local
companies can contribute to their communities to help create cities with sustainable growth.
Kawakami: At the Saitama Plant, we
conduct a range of local contribution
activities that includes plant tours, basketball tournaments for elementary andjunior high school students, parent-andchild traffic safety workshops, and cleanup
activities around Hotaru no Kawa (Firefly
River), located in the city’s park with alotus pond, Kodaihasu no Sato. We
received this certificate of appreciation
thanks to recognition from the city’s
residents of the activities we have continued to conduct over the years.
Kudo: Gyoda is currently in the middle ofits 10-year 5th Gyoda City Comprehensive
Growth Plan, which started in April 2011.
Its basic concept is “invigorating thepeople, the community and the town,”
and it aims to bring sustainable growth tothe city. TS TECH’s various activities fit
perfectly with this concept and are amodel for other companies. Once again, I
would like to thank everyone at the
Saitama Plant.
Kawakami: This certificate will reallyencourage our employees. Going forward,
what kind of challenges and issues will
Gyoda face as it aims for further growth?
Kudo: We anticipate two challenges, bothof which are being dealt with acrossJapan. The first is “regional revitalization.”
Luckily, Gyoda is blessed with many
tourism-related highlights. Our attractions
include a group of ancient burial tombs

called Sakitama Kofun Park; “rice-paddy
art,” which is rice paddies planted withdifferent colors of rice to form giant
pictures or words; and the remains of Oshi
Castle, which was featured in the 2012
historical-drama film, The Floating Castle.
We want to let everyone know what awonderful town we live in.
Suzaki: We, too, are proud to keep manufacturing our products here. At the Saitama
Plant, all employees wear patches bearing
the slogan “Saitama Pride” as they carry out
production and quality control activities.
We want to make sure no one forgets how
we feel about this community.
Kudo: As mayor, I am delighted to hear
that. I would like to take this opportunity
to let you know how we are making themost of special local features to develop
the town. In addition to the tourism
highlights I already mentioned, Gyoda has
also been a traditional center for the
production of tabi (Japanese split-toe
socks) since the 17th century. On April 28,
2017, Gyoda was officially recognized by
Japan’s Agency for Cultural Affairs for its
heritage as a producer of tabi, a traditional
Japanese article of clothing. In addition,

Rikuo,* a novel by Jun Ikeido set in thisarea, is going to be turned into a television
drama.
Kawakami: Congratulations. The recognition of Gyoda’s traditional heritage and thecreation of this new TV drama will certainly bring the city lots of attention.
Kudo: It will be a great thing for Gyoda. If
we are to develop the town, we must do
this hand-in-hand with the companies
located here. Mr. Inoue, your company’s
president, always says that “Contributing
to our local communities is vital,” and I amvery encouraged by the way your company is moving forward side-by-side with
Gyoda. I hope we will continue to growtogether.
Suzaki: Our plant places a great emphasison harmonious coexistence with the local
community. What is the other challenge
you face?
Kudo: The second is the declining population, falling birthrate and aging society.
With local governments increasinglycompeting with each other, we need todevelop our own unique policies if we are
to maintain our city’s vitality.
Suzaki: We open up the Saitama Plant to
the public and have held factory tours forelementary school students since 2015.
We hope that a few years from now, every
elementary school student in the city will
have toured the plant. Starting in 2017, weplan to begin a work experience programfor junior high school students to let themexperience manufacturing.
Kudo: If some of the children who visit theplant come away thinking, “I’d like to work
here,” perhaps we can curb future population decreases and encourage more
people to put down roots here.
Suzaki: That’s a good point. In addition to“Saitama Pride,” we are thinking up new
ways to get Gyoda residents and employees working together to help our employees feel truly at home here.
Kawakami: At TS TECH, we will continue
to leverage our strengths to ensuresustainable growth alongside our community. We look forward to continuing towork with you.
Kudo: We look forward to working withyou, too.

Saki Suzuki (center)
Engineer, Forest Resources Division,
Environmental Protection Bureau, Communityand Environmental Affairs Department,
Shizuoka Prefecture
Yutaka Hirayama (right)

Manager, Guidance Division, Administration
Department, Tenryu Forestry Cooperative

Yukihiro Kawai (left)

Manager, Administration Section,
Administration Department, Hamamatsu
Plant, TS TECH Co., Ltd.

TS TECH takes part in the Shizuoka Future Forest Supporter program, run by
Shizuoka Prefecture, as part of its Green Ecosystem Conservation Activities. We
have conducted our TS TECH Forest of Healing project activities at Shizuoka
Prefectural Forest Park (Hamamatsu City) since March 2012, when we formed afive-year partnership with Shizuoka Prefecture. Following a Forest of Healing
event in February 2017, we spoke with representatives from Tenryu Forestry
Cooperative and Shizuoka’s prefectural government about the significance of the
project and their hopes for the future.
Kawai: The “Forest of Healing” project had
its beginnings in October 2011 when TS
TECH established a company-wide policy
to engage in its Green Ecosystem Conservation Activities. The policy’s objectives
were to create new green spaces on the
grounds of our facilities—space which,after all, we are only borrowing from theearth—and to give greenery back to theearth through environmental preservation
activities across our global business
operations. After discussing what to do at
the Hamamatsu Plant, we entered into a
supporter agreement with Shizuoka
Prefecture in March 2012 to help preserve
the region’s rich forests for the future,
which included tending to trees that had
been damaged or blown down in the No.
15 typhoon that struck the area in September 2011.
Suzuki: Shizuoka has a lot of satoyama(undeveloped woodlands near populatedareas) that are in a poor state, and we havebeen asking local people and companies
to help, so we were delighted when TS
TECH offered to take part. When choosing
where to plant trees, we choose sites thathave advantages for all three“partners”—thecompany, thecommunity
and theenvironment

itself. We hope that by selecting optimalsites, company employees involved inplanting and cultivating the trees will
come away thinking, “I’d love to come andsee the forest we helped to create.”
Kawai: We plan to renew the supporter
agreement in fiscal 2017 and continue
with afforestation activities. Planting trees
is just the first stage. After renewing theagreement, we will be cutting grass, too,as this is part of looking after the trees.
Currently, the volunteers are all employees, but I hope that soon employees’
families will also be able to experience thedelights of helping to take care of thisforestland.
Hirayama: Because saplings lie dormant,
February is a good time for afforestation,so we had our tree-planting event today.
Saplings start to grow as the weather
warms up, so planting them in warmer
weather damages the roots. Next, in July,
we will cut the grass and vines around thetrees that have grown out. We are always
impressed with how many people fromthe TS TECH Hamamatsu Plant volunteer
in these events.
Kawai: Over half of all Hamamatsu Plant
employees always participate.
Hirayama: A recent cause for concern isthe way people have lost touch with thewilderness. Even people who own mountainous land often say, “I never go into themountains.” Many Shizuoka companies

have become supporters and developed
an attachment to these mountains, so if
we can increase the scope of our efforts
and get landowners to participate, too,
this idea of raising trees with your own
hands will be a very meaningful experience for them.
Suzuki: That’s right. At the Forest Resources
Division, we keep track of Shizuoka’s various
forestry groups. It would be great to create
more events focused on trees and ask
people from these groups to join in.
Kawai: It would be good for TS TECH tohold some fairs or events focused on trees
while it continues to promote afforestation activities. I also think everyone would
enjoy workshops where the wood itself
could be used as a material, with theevent promotion handled by Ms. Suzuki
and Mr. Hirayama.

Suzuki: I do not know of any otherexamples in Shizuoka of a company being
involved in everything—planting, cultivating and using trees—in a single location. I
think the experience that TS TECH isproviding—first tending to fallen trees,
then planting and cultivating new trees,and finally inviting families to see them—embodies the concept of the forest
life-cycle: plant, cultivate and use. For
Shizuoka Prefecture, this life-cycle concept
is an idea we are very eager to convey
through afforestation, and we would bevery happy to see it put into practice. We
hope to continue working with both TS
TECH and the Tenryu Forestry Cooperative
going forward.
Hirayama: We are also working to protect
the forests and mountains owned bymany of our cooperative members, but
the most important thing is to make surethat we can keep these kinds of activities
going over the long term.
Kawai: We want to proceed steadily,
without rushing to take on too manythings, to make sure we can continue withthis project in the future. We look forward
to continuing to work with you.

On a trip to the lotus pond: Retired long-distance runner Akemi Masuda (center); Mayor Kudo (right); Directors of Gyoda Athletic Association (other)* Set in Gyoda, the novel Rikuo, published by author Jun Ikeido in 2016, tells of how a long-established manufacturer of tabi takes up the challenge of developing
running shoes. A TV drama based on the book is scheduled to begin airing on TBS in October 2017.

28 TS TECH Report 2017

TS TECH Report 201729

TS TECH’s Business

TS TECH’s Business

Automobiles (other) 3. 2

Under the 13th Medium-Term Management Plan, the Group will focus on
improving its financial structure and profitability by building long-term
financial strategies that will not only increase the number of orders received,
but also ensure continuous business growth.

Atsushi Igaki

Director,
Executive General Manager, Corporate Business Administration Division

Summary of Consolidated Results for the Fiscal Year Ended March 2017
The Group took a variety of steps to improve revenue in the final year of the 12th Medium-Term Management Plan. In the Americas,
despite lower revenue, the Group pursued streamlining and improved productivity to strengthen the foundations for higher revenue. In
China, the relocation of the Guangzhou production site is now complete; operations have started at the new plant and production
efficiency is up. Meanwhile, in the rest of Asia, the Group employed several tactics
Income attributable to owners of parent
Operating income
Operating income margin(100 millions of yen)(100 millions of yen)(%)
to boost component competitiveness with the aim of raising revenues, including
launching cutting and sewing operations at a subsidiary.
9.2%
In the fiscal year ended March 2017, the Group saw an increase in order
8
.
6
%
8.5%
volume from major customers and aggressively expanded cost-reduction measures; in spite of these factors, however, earnings and profits fell due to the impactof the strong yen and a temporary increase in labor costs caused by the switch to360.4
new models.
In addition to a further increase in the number of orders received, the Group’s
225.8
consolidated forecast for the fiscal year ending March 2018 is expected to include
higher profits and earnings due to the resolution of temporary expenses incurredin the previous fiscal year and the effects of steps being taken to improve revenue.

8.1%
392.7

400.0

345.5
235.2

Fiscal year ended Fiscal year ended
March 2015
March 2016

Revenueby Business

30 TS TECH Report 2017

Americas 46. 3

Results by Segment for the Fiscal Year Ended March 2017
Honda
Accord seat

Japan

Honda
CR-V seat

Americas

Despite no new model launches in theJapan segment, the Group worked toreduce costs through measures such as
the establishment of a high-efficiency
production structure dedicated to
minicars and other small models in the
Suzuka District; greater efficiency andself-sufficiency through automatedcomponent supply and transport systems
at domestic locations; and consolidationof welding lines.

In the Americas segment, the Group launched
production of seats and interior products for
Honda’s CR-V and NSX in North America.
To be even more competitive in the increasingly
fierce markets in the Americas, new high-efficiency
automated welding facilities were installed at eachlocation in a move to increase productivity. In
addition, the Group actively worked to obtaincommercial rights from new customers, resulting in the start of production of
3rd row seats for a European OEM’s new SUV at a recently expanded plant at TS
TECH ALABAMA, LLC., as well as the receipt of orders for trim cover for the same
OEM at a sewing subsidiary in Brazil.

 Revenue (Million yen)

 Revenue (Million yen)

 Operating Income (Million yen)

247,087

 Operating Income (Million yen)

213,008

91,830Year ended
Year ended
March 31, 2016 March 31, 2017

14,327
7,343

JPX-Nikkei Index 400

Morningstar Socially Responsible
Investment Index (MS-SRI)TS TECH is a constituent of the JPX-Nikkei
Index 400, which is comprised of listed
issues of companies with high appeal forinvestors. It has been selected in all four
years since the list began in 2014.
http://www.jpx.co.jp/english/markets/
indices/jpx-nikkei400/index.html

TS TECH was chosen for the third straightyear for the 2016 Morningstar Socially
Responsible Investment Index (MS-SRI),
comprised of 150 socially outstanding
firms selected by Morningstar from among
companies listed in Japan.

Year ended
Year ended
March 31, 2016 March 31, 2017

Honda
Avancier seat

China

Fiscal year ending
March 2018
(Forecast)

1,408 firms

TS TECH placed 127th in the CSR Ranking
based on the results of the CSR Survey
undertaken by Toyo Keizai, which covers
all listed Japanese companies and major
unlisted companies.

(%)

12,365

230.0

196.2

TS TECH has earned high praise from various outside organizations as a corporate group that actively pursues ESG-focused activities forsustainable social development.

among

Automobiles (seats) 85.0

9,152

Fiscal year ended
March 2017

Revenueby Region

China 20.7(%)

92,071

External Recognition

127th

Japan 20.0

Asia and Europe 13.0

Automobiles (doors)
9. 2

Improvements to the constitution of the TS TECH Groupin the fiscal year ended March 31, 2017 through various
steps to improve revenue as well as address declining
profits and earnings due to the impact of foreignexchange rates

Toyo Keizai CSR Ranking

Otherbusinesses 1. 3Motorcycles 1. 3

In the fiscal year under review, the Grouplaunched production of seats for models such as
Honda’s Avancier and Gienia in its China segment.
The relocation of GUANGZHOU TS AUTOMOTIVEINTERIOR SYSTEMS CO., LTD. in association with
an urban development project in the Zengcheng District of Guangzhou concluded, and thenew plant is now operational. The plant strove to
make itself even more competitive by improving
productivity through integrated production lines
and automated logistics for components, as wellas the installation of new integrated foammolding machines.

 Revenue (Million yen)

96,513

94,990Year ended
Year ended
March 31, 2016 March 31, 2017

Honda
Gienia seat

 Operating Income (Million yen)

16,171

16,425

Year ended
Year ended
March 31, 2016 March 31, 2017

Year ended
Year ended
March 31, 2016 March 31, 2017

Year ended
Year ended
March 31, 2016 March 31, 2017

Honda
Civic seat

Asia and Europe
In the Asia and Europe segment, the Grouplaunched production of seats for Honda’s Civic
in the U.K. and BR-V in India. Operationscommenced at cutting and sewing subsidiary
TS TECH BANGLADESH LIMITED, which wasestablished both as a supplementary global
base for the Group’s trim cover and with thegoal of making automobile seat components
even more cost competitive.

 Revenue (Million yen)

59,257

59,825

Year ended
Year ended
March 31, 2016 March 31, 2017

Honda
BR-V seat Operating Income (Million yen)

4,671

3,313

Year ended
Year ended
March 31, 2016 March 31, 2017

TS TECH Report 201731

TS TECH’s Business

Management’s Discussion and Analysis

Financial and Non-Financial Highlights
Financial capital
Research and development fees vs. net sales ratio Unit: million yen
Research and development fees

Net sales ratio

11,635

11,221

12,90012,382

3.1%

2. 5%

3.1%

13,1682.9%

2.9%Year ended
Year ended
Year ended
Year ended
Year ended
March 31, 2013 March 31, 2014 March 31, 2015 March 31, 2016 March 31, 2017
JGAAP

Capital investment

Tangible fixed assets

74,349Depreciation and amortization

19,754

19,96011,377
7,332

8,628

17,064

7,860

9,313

11,199
9,036

Year ended
Year ended
Year ended
Year ended
Year ended
March 31, 2013 March 31, 2014 March 31, 2015 March 31, 2017 March 31, 2017

IFRS

JGAAP

IFRS

Social capital (non-consolidated)

Manufactured capital
Unit: million yen

Capital investment/depreciation and amortization Unit: million yen

76,33876,57662,253

Amount of contribution to society
Unit: thousand yen
64,30348,86951,812

44,67950,29034,032

Year ended
Year ended
Year ended
Year ended
Year ended
March 31, 2013 March 31, 2014 March 31, 2015 March 31, 2016 March 31, 2017
JGAAP
IFRS

Year ended
Year ended
Year ended
Year ended
Year ended
March 31, 2013 March 31, 2014 March 31, 2015 March 31, 2016 March 31, 2017

Natural capitalIntellectual capital

Energy input Unit: GJ

Year ended
Year ended
Year ended
Year ended
Year ended
March 31, 2013 March 31, 2014 March 31, 2015 March 31, 2016 March 31, 2017

Year ended
Year ended
Year ended
Year ended
Year ended
March 31, 2013 March 31, 2014 March 31, 2015 March 31, 2016 March 31, 2017

Amount of iron materials purchased

Number of employees (consolidated)
15,155

15,181

214,869

199,561

195,543

Material input Unit: t

Human capital
15,067229,354

Amount of non-ferrous materials purchased

PRTR substances input volume15,601

16,335

16
3,986

5,515

9
4,552

5,430

40
4,886
71
6,011

4,065

69
2,899

2,558

1,857

Year ended
Year ended
Year ended
Year ended
Year ended
March 31, 2013 March 31, 2014 March 31, 2015 March 31, 2016 March 31, 2017

Year ended
Year ended
Year ended
Year ended
Year ended
March 31, 2013 March 31, 2014 March 31, 2015 March 31, 2016 March 31, 2017

Training expenses per employee (non-consolidated)

Water resources input Unit: m3

Training expenses Unit: million yen

Training expenses per employee Unit: yen

130,199

46,91328,94939,58768.6
50.0

39,93068.9

80.1

35,958
61.4

Year ended
Year ended
Year ended
Year ended
Year ended
March 31, 2013 March 31, 2014 March 31, 2015 March 31, 2016 March 31, 201732 TS TECH Report 2017

1. Analysis of Financial Condition
Assets at the end of FY2017 stood at 322,202 million yen,increasing 18,254 million yen from the end of FY2016. The
main factors for the rise were higher order volume from major
customers as well as an increase in trade and other receivables from the allocation of amounts estimated to be collected from business partners in conjunction with a recall by
a major customer.
Total liabilities at the end of FY2017 amounted to 91,212
million yen, up 6,357 million yen from the end of FY2016. Thisis due primarily to an increase in operating and other debts
on higher order volume from major customers as well as the
allocation of provisions related to a recall by a major customer.
Equity at the end of FY2017 totaled 230,989 million yen,rising 11,896 million yen from the end of FY2016. This was
mainly the result of an increase in retained earnings from theallocation of net income.

2. Analysis of Cash Flows

Changes in number of patents held (domestic/overseas patents)
Domestic
Overseas
770
757
724
672
580
501
474
462
441
403

208,640

The Group has switched from Japanese accounting standards(Japanese GAAP) to International Financial Reporting Standards (IFRS) effective the end of the fiscal year ended March2016. All financial information in the text is in accordance with
IFRS, except where it is specified that information is based onJapanese GAAP.

116,694
89,60871,001

76,502

Cash and cash equivalents (hereinafter “cash”) at the end of
FY2017 amounted to 96,008 million yen, up 5,571 million yen
from the end of the previous fiscal year.
Cash flows from operating activities amounted to 34,045
million yen, showing a year-on-year decrease of 13,486 million
yen. This is the result of a decrease of 4,974 million yen inincome before income tax; a change in trade and otherreceivables from a decrease of 5,236 million yen in the previous fiscal year to a decrease of 12,510 million yen in FY2017;and a change in trade and other payables from an increase of
11,731 million yen in the previous fiscal year to an increase of
4,962 million yen in FY2017.
Cash flows from investing activities came to 12,409 million
yen, a decrease of 12,890 million yen year on year. This primarily reflects a decrease of 6,683 million yen in payments fromthe purchase of property, plant and equipment as well as a
net change in both payments into and proceeds from thewithdrawal of time deposits from an outlay of 4,919 million
yen to an intake of 1,525 million yen in FY2017.
Cash flows from financial activities totaled 14,214 million
yen, an increase of 1,894 million yen year on year. This reflects
3,470 million yen in acquisition of equity interest of subsidiaryfrom non-controlling interests, offsetting a change in net
increase (decrease) in short-term loans payable from a decrease of 777 million yen to a decrease of 133 million yen in
FY2017.

3. Analysis of Operating Performance
Despite volatility stemming from growing concerns about the
Chinese economy as well as the Brexit vote, the global economy during the period under review stabilized thanks to a laterally by the Chinese economy and a moderate recovery by
the American economy. Although order volume was down in
the Americas and India, order volume for the TS TECH Groupremained steady overall, driven by higher order volume forseats for the full model change Honda Civic primarily in the
U.K. and Thailand as well as a boost from increased demandfor SUVs in China.
Against this backdrop, the Group pursued various measures
to improve revenue in the final year of its 12th Medium-Term
Management Plan. Despite lower revenue, the Group proceeded with production loss improvements and streamlining
in the Americas segment aimed at structural reforms. In China,
a plant relocation in association with an urban development
project in Guangzhou concluded, and the new plant, which
has improved its production efficiency, is now online. Additionally, in Asia the Group implemented various measures toimprove component competitiveness, such as launching
operations at a cutting and sewing subsidiary to further
improve profitability.
Revenue for the fiscal year under review amounted to425,794 million yen on a consolidated basis, down 32,937
million yen (7.2%) from the preceding fiscal year. The impact
of exchange rates driven by the stronger yen offset an increase in order volume from major customers. Looking at
profits, operating income stood at 34,557 million yen, adecrease of 4,722 million yen (12.0%) year on year. This
reflected a decline in revenue due mainly to exchange rates
as well as a temporary increase in labor costs related totransitions to new models, offsetting aggressive cost-cutting
measures. Income attributable to owners of parent totaled
19,622 million yen, a decrease of 3,905 million yen (16.6%)
year on year.
The Group’s consolidated forecasts for FY2018 are as follows:
Revenue
435.0 billion yen(Up 2.2% year on year)
Operating income
40.0 billion yen(Up 15.7% year on year)
Income before income tax
41.5 billion yen(Up 15.9% year on year)
Net income
29.0 billion yen(Up 15.6% year on year)
Income attributableto owners of parent
23.0 billion yen(Up 17.2% year on year)

Year ended
Year ended
Year ended
Year ended
Year ended
March 31, 2013 March 31, 2014 March 31, 2015 March 31, 2016 March 31, 2017

TS TECH Report 201733

Consolidated Statements of Financial Position(Unit: Million yen)
Note

FY2016FY2017(As of March 31, 2016)(As of March 31, 2017)(Unit: Million yen)

ASSETSLIABILITIES AND EQUITYCurrent assets

Current liabilities

Note

FY2016FY2017(As of March 31, 2016)(As of March 31, 2017)

Cash and cash equivalents

6¥ 90,437¥ 96,008

Trade and other payables

12¥ 66,224¥ 69,476

Trade and other receivables

7

56,84968,024Current borrowings

13

1,086

973

Other financial assets

8

8,948

7,307

Other financial liabilities

14

1,452

709

Inventories

927,76329,059

2,406

2,871

1,201

449

107

3,940

Income taxes receivable

Income taxes payable
Provisions

16

Other current assets

4,918

5,280

Other current liabilities

4,107

2,173

Total current assets

190,118

206,131

Total current liabilities

75,38480,143

Non-current liabilities
Non-current borrowings

13

21

315

Other financial liabilities

14

1,775

1,530

Net defined benefit liability

17

945

1,098

Provisions

16

78

101

Deferred tax liabilities

15

4,847

6,173

1,802

1,850

Other non-current liabilities

Non-current assets

Total non-current liabilities

9,470

11,068

Total liabilities

84,855

91,212EquityProperty, plant and equipment

10

76,33876,576

Common stock

18

4,700

4,700

Intangible assets

11

11,467

11,695

Capital surplus

18

4,949

5,257

Investments accounted for using the equity method

26

1,016

1,028

Treasury stock

18

(4)

(4)

Other financial assets

8

21,58022,019Retained earnings

18

179,851

194,847

Net defined benefit asset

17

598

1,896

Other components of equity

18

7,563

7,617

Deferred tax assets

15

1,897

1,906

Other non-current assets

931

948

Total non-current assets

113,829

116,070¥303,948¥322,202

Total assets

Total equity attributable to owners of parent

197,060

212,417

Non-controlling interests

22,031

18,572

Total equity

219,092

230,989¥303,948¥322,202

Total liabilities and equity

See notes to consolidated financial statements.

34 TS TECH Report 2017

TS TECH Report 201735

Consolidated Statements of Profit or Loss and Comprehensive Income

Consolidated Statements of Profit or Loss and Comprehensive Income

Consolidated statements of profit or loss

Consolidated statements of comprehensive income(Unit: Million yen)

(Unit: Million yen)

Note

FY2016FY2017(April 1, 2015–March 31, 2016)(April 1, 2016–March 31, 2017)

Revenue

5¥458,732¥425,794

Net income

Cost of sales

19(381,258)(355,176)

Other comprehensive income

77,47370,617(35,755)

Gross profit

FY2016FY2017(April 1, 2015–March 31, 2016)(April 1, 2016–March 31, 2017)¥29,413¥25,086

(196)

674

23

(196)

674

Note

Components that will not be reclassified subsequently
to net profit or loss
Remeasurements of net defined benefit plans

Selling, general and administrative expenses

19(39,414)

Other income

20

1,693

726

Other expenses

20

(472)

(1,032)

Operating income

539,27934,557

Finance income

21

1,593

1,699

Change in fair value of available-for-sale financial assets

23(2,314)912

Finance costs

21

(589)

(788)

Differences on translation from foreign operations

23(14,498)(2,248)482

324

Share of other comprehensive income of associates
accounted for using the equity method

23

(65)

(86)

40,76635,792(16,878)(1,422)

Share of profit of investments accounted for using
the equity method

26

Income before income tax
Income tax expense

15

Net income(11,352)
29,413(10,705)
25,086

Total components that will not be reclassified
subsequently to net profit or loss
Components that may be reclassified subsequently
to net profit or loss

Total components that may be reclassified
subsequently to net profit or loss

(17,074)(747)

12,33924,339Comprehensive income for the period attributableto owners of parent

9,520

19,676Comprehensive income for the period attributable
to non-controlling interests

2,818

4,662

¥12,339¥24,339

Other comprehensive income, net of tax
Comprehensive income for the period
Comprehensive income for the period attributable to:

Income attributable to:
Income attributable to owners of parent

23,528

19,622

Income attributable to non-controlling interests

5,885

5,463

¥ 29,413¥ 25,086

Net income

Comprehensive income for the period
Earnings per share
Basic earnings per share (yen)22¥ 346.01¥ 288.58

Diluted earnings per share (yen)

22

—

—

See notes to consolidated financial statements.

See notes to consolidated financial statements.

36 TS TECH Report 2017

TS TECH Report 201737

Consolidated Statements of Changes in Equity

Consolidated Statements of Cash Flows

For the year ended March 31, 2016 (April 1, 2015 to March 31, 2016)(Unit: Million yen)
(Unit: Million yen)

Equity attributable to owners of parent

Note

Balance at the end of
the previous fiscal year

Common Capitalstock
surplus¥4,700¥4,949Treasury
stock

¥(3)

Other comprehensive
income—24

Balance at the end of
the fiscal year

¥4,700—¥4,949(0)¥(4)

Balance at the end of
the previous fiscal year

¥4,700 ¥4,949

Treasury
stock

¥(4)

Other comprehensive
income

(482)

(324)
(12,510)Decrease (increase) in leased receivables and leased
investment property

3,072

2,809

Decrease (increase) in inventories(1,244)(1,491)

Increase (decrease) in trade and other payables

11,731

4,962

Increase (decrease) in net defined benefit asset andnet defined benefit liability

48(1,155)

Increase (decrease) in provisions

(78)

3,904

23,528(14,007)

9,520(4,283)(3,066)
2,818(5,170)(0)(4,575)¥179,851—¥ 7,563

12,339(9,454)
(0)

(291)

(1)

(293)

(4,576)(5,172)(9,748)¥197,060¥22,031¥219,092(Unit: Million yen)

Other
Retained components
earnings
of equity¥179,851¥7,56353——

Total equity
attributableto ownersof parent¥197,060

Noncontrollinginterests¥22,031

19,62253

Total
equity¥219,092

19,622

5,463

25,086

53

(801)

(747)

19,676

4,662

Impairment loss

Other

(554)

(1,269)Subtotal

56,752

40,213

Interest income received

1,115

1,060

Dividend income received

1,147

473

Interest expenses paid

(182)

(146)

Income taxes paid

(11,300)(7,555)

Net cash provided by operating activities

47,531

34,045(8,305)(3,336)24,339Payments into time deposits
Proceeds from withdrawal of time deposits

3,385

4,862

Purchase of property, plant and equipment(17,673)(10,990)

872

301

Purchase of intangible assets(2,633)(2,272)

Purchase of equity instruments

(59)

(57)

Proceeds from sales of property, plant and equipment

Proceeds from sales of equity instruments

102

129

Payment of loans receivable

(270)

(188)

Collection of loans receivable
Other(4,623)24

Acquisition of treasury
stock(4,623)(0)Changes in ownershipinterest in subsidiaries(3)

Others—(4,342)(0)307

Total transactions withowners, etc.
Balance at the end of
the fiscal year

Cash flows from operating activities

Cash flows from investing activities

Transactions with owners,
etc.
Dividends(1,890)(5,236)18—(1,452)

Decrease (increase) in trade and other receivables

19,622

Total comprehensive
incomeFinance costs (income)(17,074)(14,007)

Comprehensive income
Net income

500

Share of loss (profit) of investments accounted for using
the equity method

Equity attributable to owners of parent
Common Capitalstock
surplus(652)

29,413For the year ended March 31, 2017 (April 1, 2016 to March 31, 2017)

Note

Loss (gain) on disposal of non-current assets
5,885

(291)
—

284

23,528Changes in ownershipinterest in subsidiaries
Total transactions withowners, etc.

10,602

14¥216,502(0)

Others10,819¥24,385(4,283)Acquisition of treasury
stock

Depreciation and amortization¥192,116¥21,571

Transactions with owners,
etc.
Dividends¥ 35,792¥160,899(14,007)—¥ 40,766

Total
equity18—

Income before income tax

Noncontrollinginterests

23,528

Total comprehensive
incomeFY2017(April 1, 2016–March 31, 2017)

Other
Retained components
earnings
of equity

Comprehensive income
Net income

FY2016(April 1, 2015–March 31, 2016)

Note

Total equity
attributableto ownersof parent(8,966)

Net cash used in investing activities

287

171

(1,006)(1,028)¥(25,299)¥(12,409)

(0)

307

(3,778)(3,470)

(3)

(1)

(4)

307

(0)

(4,627)—(4,320)(8,122)(12,442)¥4,700 ¥5,257¥(4)¥194,847¥7,617¥212,417¥18,572¥230,989

See notes to consolidated financial statements.

38 TS TECH Report 2017

TS TECH Report 201739

Consolidated Statements of Cash Flows (Continued)

Notes to Consolidated Financial Statements(Unit: Million yen)
FY2016FY2017(April 1, 2015–March 31, 2016)(April 1, 2016–March 31, 2017)¥   (777)¥   (133)

Proceeds from long-term loans payable

27

300

Repayments of long-term loans payable

(59)

(5)

Repayments of finance lease obligations(2,073)(1,657)

Note

Cash flows from financing activities
Net increase (decrease) in short-term loans payable

Purchase of treasury stock
Cash dividends paid

24

Cash dividends paid to non-controlling interests
Acquisition of equity interest of subsidiaryfrom non-controlling interests

(0)

(0)

(4,283)(4,623)(5,151)(4,623)—(3,470)(12,319)(14,214)

Effects of exchange rate changes on cash
and cash equivalents(7,465)(1,850)Net increase (decrease) in cash and cash equivalents

2,446

5,571

6

87,88990,437101—

6¥ 90,437¥ 96,008

Net cash used in financing activities

Cash and cash equivalents at beginning of period
Increase in cash and cash equivalents from newly
consolidated subsidiaries
Cash and cash equivalents at end of period
See notes to consolidated financial statements.

1. REPORTING ENTITYTS TECH Co., Ltd. (hereinafter “the Company”) is a company domiciled in Japan.
The consolidated financial statements of the Company at and for the year ended March 31, 2017 comprise the Company,
its subsidiaries (hereinafter “the Group”) and the Group’s interests in its affiliates.

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS(1) Compliance with International Financial Reporting Standards (IFRS)The Company meets the requirements of a “specified company applying designated international accounting standards” setout under Article 1-2 of the “Ordinance on Terminology, Forms and Preparation Methods of Consolidated Financial Statements.”
Accordingly, the consolidated financial statements are prepared according to IFRS pursuant to the provisions of Article 93 of
said Ordinance.
The consolidated financial statements were approved by the Board of Directors on June 23, 2017.
(2) Basis for measurement
The consolidated financial statements, with the exception of the financial instruments, etc., measured at fair value stated in Note 3,“Important Accounting Policies,” have been prepared on a historical cost basis.
(3) Functional currency and presentation currency
The presentation currency used in the consolidated financial statements is Japanese yen, which is the Company’s functional
currency. Any fractions below one (1) million yen are discarded.
(4) Important accounting judgments, estimates and assumptions
In the preparation of the consolidated financial statements, management exercised certain judgments, estimates and assumptionsin the process of applying the accounting policies and in determining the reported amounts of assets, liabilities, income andexpenses. Actual results, as such, may differ from these estimates.
The estimates and the underlying assumptions are reviewed on an ongoing basis, and the impact of the review is recognized in
the period in which the review was conducted and future periods.
Among the items, which were subject to estimates and judgments, the following are considered to have significant impact on
the amounts of the consolidated financial statements for the fiscal year under review and the following fiscal years.
• Scope of consolidation:
Note 3, “Important Accounting Policies (1) Basis of consolidation”• Estimated useful lives of intangible assets:
Note 3, “Important Accounting Policies (8) Intangible assets”• Scope of contracts including leases:
Note 3, “Important Accounting Policies (9) Leases”• Impairment of non-financial assets:
Note 3, “Important Accounting Policies (10) Impairment of non-financial assets”• Measurement of defined benefit obligations: Note 3, “Important Accounting Policies (12) Employee benefits”• Recognition and measurement of provisions: Note 3, “Important Accounting Policies (13) Provisions”• Revenue recognition:
Note 3, “Important Accounting Policies (16) Revenues”• Recoverability of deferred tax assets:
Note 3, “Important Accounting Policies (18) Income taxes”

3. IMPORTANT ACCOUNTING POLICIES(1) Basis of consolidation(i) Subsidiaries
Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial
statements from the date that the Group gains control to the date that the Group loses control.
When the accounting policies applied by a subsidiary are different from those applied by the Group, the financial statements ofsaid subsidiary are revised as necessary.
The balance of accounts receivable and payable and transactions within the Group and the unrealized gain and loss on transactions within the Group are deducted under the consolidated financial statements.
Any change in the Company’s interest in subsidiaries not involving the loss of control is processed as a capital transaction.
The carrying amounts of the Group’s ownership interest and non-controlling interests are adjusted according to the changes
in the ownership interest, and any difference between the adjustment to the non-controlling interests and the fair value ofthe consideration transferred or received is recognized directly in equity and allocated to owners of parent.

40 TS TECH Report 2017

TS TECH Report 201741

(ii) Affiliates
Affiliates are entities over which the Group has significant influence but does not have control over the financial and operating
policies of such entities, and they are accounted for using the equity method from the date that significant influence commences
until the date the significant influence ceases.
Under the equity method, investments in affiliates are initially recorded at cost and subsequently increased (or decreased) toreflect the Group’s post-acquisition changes in ownership interest in the associate’s equity. In such cases, the amount of net profit
or loss of the affiliate equivalent to the ownership interest of the Group is recognized in net profit or loss, while the amount ofother comprehensive income of the associate equivalent to the ownership interest of the Group is recognized in other comprehensive income.
Profits from important internal transactions are eliminated proportionately to the ownership share in the affiliate.
(2) Business combinations
Business combinations are accounted for using the acquisition method.
Consideration for the acquisition is measured as the total fair value of the assets transferred, liabilities assumed and equity
instruments issued by the Group.
Costs related to the acquisition are recognized in net profit or loss when incurred.
The identifiable assets and liabilities acquired from the merged company are measured at fair values unless stipulated otherwise
by the IFRS.
Goodwill is recognized if the consideration for the acquisition exceeds the fair values of the identifiable assets and liabilities
acquired from the merged company; it is recognized in net profit or loss if the consideration for the acquisition is less.
(3) Foreign currency translations
The financial statements of each Group company are prepared in the currency of the primary economic environment in which
each Group company conducts business (hereinafter “functional currency”).
Additionally, the financial statements of foreign operations are translated into Japanese yen, the functional currency of theCompany, when preparing consolidated financial statements.
(i) Foreign currency transaction
Transactions in currencies other than the functional currency are translated into the functional currency using the spot exchange
rate at the date of the transaction or an exchange rate that approximates the spot exchange rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies at the end of the fiscal year are translated using the spot
exchange rate at the end of the fiscal year. Exchange differences arising from translation or settlement of foreign currencydenominated monetary assets and liabilities are recognized in net profit or loss.
(ii) Foreign operations
Assets and liabilities of foreign operations are translated into Japanese yen using the spot exchange rate at the end of the fiscal
year, while income and expenses are translated into Japanese yen at the average exchange rates for the period, provided, however,that there have been no significant fluctuations in the exchange rates.
Exchange differences arising from translation of financial statements of foreign operations are recognized in other comprehensive income, and cumulative exchange differences are presented in other components of equity.
(4) Financial instruments(i) Classification of financial instruments
Financial assets and financial liabilities are classified into “financial assets and liabilities measured at a fair value through net profit
or loss,” “held-to-maturity investments,” “loans and receivables,” “available-for-sale financial assets” and “financial liabilities measured
at amortized cost.” These classifications are determined at the time of initial recognition based on the nature and the holding
purpose of the financial instrument.
(ii) Initial recognition and measurement
Financial assets and financial liabilities are recognized at the point at which the Group becomes a contractual party to the provision of the financial asset or financial liability and are measured at fair value. Transaction costs directly attributable to the acquisition of a financial asset are added to the fair value of the financial asset, with the exception of transaction costs associated withfinancial assets at a fair value through net profit or loss.
Transaction costs directly attributable to the issue of a financial liability are deducted from the fair value of the financial liability,with the exception of transaction costs associated with financial liabilities at a fair value through net profit or loss.

42 TS TECH Report 2017(iii) Financial assets and liabilities measured at a fair value through net profit or loss
Financial instruments held for trading such as derivative transactions as well as those designated by the Group as measured at fairvalue through profit or loss at initial recognition are classified as financial assets and financial liabilities at a fair value through net
profit or loss.
Measurements after the initial recognition are made at fair value, and any changes in fair value are recognized in net profit orloss.
(iv) Held-to-maturity investments
Financial assets other than derivatives with a payment amount that is fixed or may be determined and maturity date that is fixed,
and for which the Group has the positive intent and ability to hold to maturity, are classified as held-to-maturity investments.
Measurements after the initial recognition are made at amortized cost using the effective interest method less any impairment
loss with interest income recognized in net profit or loss using the effective interest method.
(v) Loans and receivables
Financial assets other than derivatives with a payment amount that is fixed or may be determined that are not quoted in an active
market are classified as loans and receivables.
Measurements after the initial recognition are made at amortized cost using the effective interest method less any impairment
loss with interest income from the effective interest method recognized in net profit or loss.
(vi) Available-for-sale financial assets
Financial instruments designated by the Group as available-for-sale financial assets, and financial instruments not designated as
financial assets measured at a fair value through net profit or loss, held-to-maturity investments, or loans and receivables areclassified as available-for-sale financial assets.
Measurements after the initial recognition are made at fair value, and any changes in fair value are recognized in other comprehensive income.
(vii) Impairment of financial assets
If objective evidence of impairment of held-to-maturity investments and loans and receivables exists, the difference between theasset’s carrying amount and the present value of estimated cash flows, discounted at the financial asset’s original effective interest
rate, is recognized as impairment loss.
Impairment loss on held-to-maturity investments and loans and receivables is recognized as allowance for doubtful accounts. If,
after the recognition of impairment loss, it is considered uncollectible, it is written off against the allowance for doubtful accounts
and the carrying amount is directly reduced.
If objective evidence of impairment of available-for-sale financial assets exists, the cumulative losses recognized in othercomprehensive income are reclassified to net profit or loss.
(viii) Measurement of financial liabilities after initial recognition
Financial liabilities other than financial liabilities at fair value through net profit of loss are measured at amortized cost, with interest
expenses according to the effective interest method recognized in net profit or loss.
(ix) Derecognition
The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers
the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.
The Group derecognizes financial liabilities when the Group’s obligations are discharged, canceled or expire.
(x) Offsetting a financial asset and a financial liability
Financial assets and financial liabilities are presented in the consolidated statement of financial position as a net amount, if andonly if the Group has a legal right to offset financial assets with financial liabilities and the Group intends either to settle on a net
basis or to realize the asset and settle the liability simultaneously.
(5) Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits withdrawable as necessary and short-term investments which are easily
converted into cash, with original maturities of three months or less and minimal risk of changes in value.

TS TECH Report 201743

(6) Inventories
Inventories are measured at the lower of cost and net realizable value.
Cost of inventories includes purchase costs, processing costs and all other costs incurred in bringing them to their existing
location and condition.
Cost of inventories is calculated primarily using the first-in first-out method.
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion andselling expenses.
(7) Property, plant and equipment
The cost model has been applied, and all property, plant and equipment are measured at cost less any accumulated depreciation
and accumulated impairment losses.
Cost includes costs directly attributable to the acquisition of the assets, the cost of restoring the site and other costs.
Depreciation of assets other than land and construction in progress is calculated using the straight-line method based on theestimated useful life of each asset. The estimated useful lives of major assets are as follows:• Buildings and structures:
2 to 50 years• Machinery, equipment and vehicles: 2 to 20 years• Tools, furniture and fixtures:
2 to 20 years
The estimated useful lives, residual values and depreciation methods are reviewed each year and revised as necessary.
(8) Intangible assets
The cost model has been applied, and all intangible assets are measured at cost less any accumulated amortization and accumulated impairment losses.
Intangible assets comprise mainly development expenses, and expenses incurred in development activities are capitalized if
and only if they meet all of the requirements listed below.
• It is technically feasible to complete their developments to use or sell them;• The Group has the intent to complete their developments and to use or sell them;• The Group is capable of using or selling them;• It is highly probable that they will generate future economic benefits;• The Group has the adequate technical, financial and other resources to complete their developments and to use or sell them; and• The Group is capable of reliably measuring the expenditures associated with the intangible assets during the development
process.
Capitalized development expenses are amortized using the straight-line method over the estimated useful life (mainly 5 years)
commencing from the time the product subject to development commences mass production.
The estimated useful lives and amortization methods are reviewed each year and revised as necessary.
(9) Leases
Lease transactions are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards ofownership to the lessee, while all other leases are classified as operating leases.
Whether a contract is a lease or whether a contract contains a lease is determined based on the substance of the contract. If thefulfillment of the arrangement is dependent on the use of a specific asset or assets (the asset) and the arrangement conveys aright to use the asset, such assets are considered to be under a lease.
(i) Lease as lessee
Lease assets and lease liabilities under finance leases are recognized at the lower of the fair value of the leased property and thepresent value of the minimum lease payments in the consolidated statement of financial position at the inception of the lease.
Leased assets are amortized using the straight-line method in accordance with the accounting policies applied to the assets.
Payments under operating leases are recognized in net profit or loss throughout the lease term.
(ii) Lease as lessor
Amounts due from lessees under finance leases are recognized in the consolidated statement of financial position at the amountof net investment in the lease.
The difference between the amount of net investment in the lease and the cost of lease investment is recognized in net profit
or loss at the inception of the lease.

44 TS TECH Report 2017(10) Impairment of non-financial assets
During each reporting period, the Group assesses each asset or cash-generating unit for any indications of impairment, and if any
such indication exists, the Group estimates the recoverable amount of the asset.
The recoverable amount is calculated at the higher of the fair value of the asset or cash-generating unit less costs to sell and thevalue in use.
Value in use is calculated by discounting the estimated future cash flows to the present value using the pre-tax discount ratethat reflects the current market assessments of the time value of money.
If the recoverable amount is less than the carrying amount of the asset or cash-generating unit, the difference between the
carrying amount and the recoverable amount is recognized as impairment loss in net profit or loss.
In terms of impairment losses recognized in the past, assessment is conducted for any indications of the possibility of decreasein impairment, including cases in which the assumptions used to determine the recoverable amount have changed. If any such
indication exits, the recoverable amount of the asset or cash-generating unit is estimated, and if the recoverable amount exceeds
the carrying amount of the asset or cash-generating unit, impairment loss is reversed up to the lower of the recoverable amountdetermined and the carrying amount net of depreciation that would have been determined if no impairment loss had beenrecognized in prior years.
(11) Non-current assets held for saleAmong assets or asset groups whose carrying amounts are expected to be recovered through a sale transaction rather thancontinuing use, assets for which sale within one year is highly probable, assets which are available for immediate sale in theirpresent condition and assets for which the Group’s management is committed to a plan to sell the assets are classified as noncurrent assets held for sale.
Non-current assets held for sale are not depreciated or amortized and are measured at the lower of the carrying amount and fairvalue less costs to sell.
(12) Employee benefits(i) Post-employment benefits
The Group has adopted defined benefit plans and defined contribution plans.
Defined benefit plans are recognized in the consolidated statement of financial position in the amount of defined benefit plan
obligations, which has been calculated at the discounted present value of the amount of estimated future benefits earned by theemployee as consideration for services rendered in the past and in the current period under each plan, less the fair value of theplan assets.
The present value of defined benefit plan obligations and related service costs is calculated using the projected unit credit
method. The discount rate is determined by reference to market yields on high-quality corporate bonds with similar maturities tothe obligations under the plans.
Increases/decreases through remeasurements of defined benefit plan obligations and plan assets are recognized in othercomprehensive income.
Past service costs resulting from plan amendments or curtailment are recognized in net profit or loss at the earlier of the time ofamendment or the time at which the related restructuring costs or severance benefits are recognized.
The obligation to make contributions under the defined contribution plans is recognized in net profit or loss in the period inwhich the employee renders the related service.
(ii) Short-term employee benefits
Short-term employee benefits including wages are recognized in net profit or loss in the period in which the employee renders
the related service.
Bonus payments are recognized as liabilities if the Group has a legal or constructive obligation to pay and the obligation can be
estimated reliably.
The cost of paid leave is recognized as a liability in the period in which the employee renders the service which will increase theemployee’s entitlement to the future paid leave.
(iii) Other long-term employee benefits
Other long-term employee benefits including a long-service award system are recognized as liabilities by estimating the amountof future benefit that employees have earned in consideration for services rendered in the current and prior periods and discounting that amount to the present value.

TS TECH Report 201745

(13) Provisions
Provisions are recognized if a present legal or constructive obligation exists as a result of a past event that can be estimated reliably
and it is probable that an outflow of economic resources will be required to settle the obligation.
When the time value of money is material, a provision is measured at the present value to which estimated cash flows are
discounted using a pre-tax discount rate that reflects the risks specific to the obligation. Increases in the amount of provisions
associated with the passage of time are recognized in net profit or loss.
(14) Government-imposed levies
Government-imposed levies are recognized as a liability in the estimated amount to be paid when an event obligating payment to
the government has occurred.
(15) Equity(i) Common shares
The amount of equity instruments issued by the Company is recognized in common stock and capital surplus, and direct issue
costs (after consideration of tax effects) are deducted from capital surplus.
(ii) Treasury stock
When the Company acquires treasury stock, the consideration paid, including direct transaction costs (after consideration of tax
effects), is recognized as a deduction from equity. When the Company disposes of treasury stock, gains or losses on sales oftreasury stock are recognized in capital surplus.
(16) Revenues
Revenues are measured at fair value of the consideration received for sale of goods, etc., less discounts, rebates and taxes including
consumption taxes.
(i) Sale of goods
Revenue from the sale of goods is recognized when all of the following conditions are met:
• Significant risks and rewards of ownership of the goods have been transferred to the buyer;• Neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods
sold have been retained;• The amount revenue can be measured reliably;• It is probable that the economic benefits associated with the transaction will flow to the Group; and• The costs incurred or to be incurred in respect of the transaction can be measured reliably.
(ii) Interest income
Interest income is recognized based on the effective interest method.
(iii) Dividend income
Dividend income is recognized when the right to receive payment of the dividend is established.
(17) Government grants
Government grants are recognized at fair value when and only when there is reasonable assurance that the Group will comply
with the conditions attached to the grant and that the grant will be received.
Government grants relating to revenues are recognized in net profit or loss over the period the expenses, which the grant isintended to compensate, are recognized.
Government grants relating to assets are recognized as deferred revenue and reclassified to net profit or loss on a systematic
basis over the useful life of the asset.
(18) Income taxes
Income taxes comprise current taxes and deferred taxes, and they are recognized in net profit or loss, excluding items related tobusiness combinations, items that are directly recognized in equity and items recognized in other comprehensive income.
Current taxes are calculated based on the estimated payment to or refunds from the tax authorities. Current tax liabilities arecalculated based on tax rates and tax laws that have been enacted or substantively enacted by the end of the fiscal year.
Deferred taxes are recognized for temporary differences between the carrying amounts of assets and liabilities for accounting
purposes and their tax bases at the end of the fiscal year, unused tax losses and unused tax credits (hereinafter “temporary differences, etc.”).
Deferred tax liabilities are generally recognized for all taxable temporary differences, while deferred tax assets are recognized for

46 TS TECH Report 2017

deductible temporary differences, unused tax losses and unused tax credits only to the extent that it is probable that there will betaxable profits against which the temporary differences may be utilized.
Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the temporary
difference is reversed based on the tax rates and tax laws that have been enacted or substantively enacted by the end of the fiscal
year.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current
tax liabilities and when they relate to income taxes levied by the same tax authority.
(19) Basic earnings per share
Basic earnings per share is calculated by dividing profit or loss for the year attributable to ordinary shareholders of the parent by
the weighted-average number of ordinary shares outstanding during the year adjusted for the weighted-average number oftreasury shares purchased in the year.

4. NEW STANDARDS NOT YET ADOPTED BY THE GROUP
New or revised Standards and Interpretations that were issued by the date of approval of the consolidated financial statements
but were not adopted by the Group are as follows. The Company is currently assessing but cannot estimate at the present time thepossible impact of these new Standards and Interpretations on its consolidated financial statements.

Standards

Title

Date of mandatory adoption(Fiscal year of commencement thereafter)

IFRS 9Financial Instruments

January 1, 2018

Fiscal year ending
March 31, 2019

Revisions of the classification, measurement and impairment of financial
instruments; and hedge accounting

IFRS 15

Revenue from Contracts January 1, 2018with Customers

Fiscal year ending
March 31, 2019

Revision of accounting relating to therecognition of revenue

IFRS 16

LeasesFiscal year ending
March 31, 2020

Revision of accounting relating to leasearrangements

January 1, 2019

Fiscal year of
applicationby the Group

Overview of new/revised Standard

5. SEGMENT INFORMATION(1) Overview of reportable segments
The reportable segments are components of the Company for which separate financial information is available. These segments
file monthly reports which the Board of Directors uses for deciding the allocation of management recourse and evaluating results.
Positioning Japan as its global base, the Company has a control and management system for the three operating regions of theAmericas (the U.S., Canada, Mexico and Brazil), China (China and Hong Kong) and Asia and Europe (Thailand, the Philippines, India,
Indonesia, the U.K. and Hungary). The Company appoints an officer responsible for control and management in each region.
Policies, plans, controls and other matters concerning general operations are discussed at regional management meetings attended by directors and the like in these regions for executing business activities.
Accordingly, the Company positions Japan, the Americas, China and Asia and Europe as its four reporting segments.
In the reporting segments of Japan, the Americas and Asia and Europe, the Company manufactures and sells products thatmainly consist of automobile seats, automobile interiors, motorcycle seats and resin-based products for motorcycles. In the reporting segment of China, the Company engages primarily in the manufacture and sale of automobile seats and automobile interiors.
(2) Accounting method for revenue, profits or losses, assets, liabilities and other items by reportable segment
Accounting methods for reportable business segments are the same as those presented in Note 3, “Important Accounting Policies.”
The Company decides the price of transactions carried out among segments by considering market prices and gross costs, andthrough price negotiations.
Profits for reportable segments are operating income figures based on the consolidated statements of profit or loss and comprehensive income.

TS TECH Report 201747

(3) Information on revenue, profits or losses, assets, liabilities and other items according to reportable segment
FY2016 (April 1, 2015–March 31, 2016)

Other important items(Unit: Million yen)

(Unit: Million yen)

Reportable segments

Reportable segments
Japan

Americas

China

Asia
and Europe

External revenue¥64,936¥246,194¥88,975¥58,624¥458,732¥    —¥458,732

Inter-segment revenue

27,135

892

7,537

632

36,197(36,197)—¥92,071¥247,087¥96,513¥59,257¥494,929¥(36,197)¥458,732¥ 9,152¥ 14,327¥16,171¥ 4,671¥ 44,322¥ (5,043)¥ 39,279

—

—

—

—

—

—

1,004

Total

Adjustments

Consolidated

Revenue

Total
Segment profitsFinance income andfinance costs

Depreciation and amortization
Impairment lossReturn on investment using
the equity method

—

—

—

—

—

—

482

Income before tax

—

—

—

—

—

—

40,766

Note: Adjustments of -¥5,043 million for segment profits included an inter-segment elimination of ¥98 million and operating expenses of -¥5,141
million associated with the administration division of the headquarters of the parent, which could not be allocated.

Other important items(Unit: Million yen)

Capital expenditures

Japan

Americas

China

Asia
and Europe

Total

Adjustments

Consolidated¥2,701¥4,385¥1,687¥1,900¥10,675¥(72)¥10,602

—

—

64

220

284

—

284

2,804

3,733

3,495

1,165

11,199—

11,199Note: The adjustment for depreciation and amortization is an inter-segment elimination.

(4) Information related to products and services
FY2016 (April 1, 2015–March 31, 2016)
Segment information according to products and services is omitted as revenue from external customers in a single product/
service category accounts for the majority of revenue in the consolidated statement of profit or loss.
FY2017 (April 1, 2016–March 31, 2017)
Segment information according to products and services is omitted as revenue from external customers in a single product/
service category accounts for the majority of revenue in the consolidated statement of profit or loss.
(5) Information according to regions(i) Revenue

Reportable segments

Depreciation and amortization
Impairment loss
Capital expenditures(Unit: Million yen)Japan

Americas

China

Asia
and Europe¥2,696¥4,609¥1,473¥2,112¥10,890¥(71)¥10,819

—

—

14

—

14

—

14

2,233

7,026

6,153

1,650

17,064—

17,064

Total

Adjustments

Consolidated

Note: The adjustment for depreciation and amortization is an inter-segment elimination.

FY2017 (April 1, 2016–March 31, 2017)(Unit: Million yen)
Reportable segments
Japan

Americas

China

Asia
and Europe

Total

Adjustments

Consolidated

External revenue¥66,430¥211,849¥88,350¥59,162¥425,794¥    —¥425,794Inter-segment revenue

25,399

1,158

6,639

662

33,860(33,860)—

Revenue¥91,830¥213,008¥94,990¥59,825¥459,654¥(33,860)¥425,794¥ 7,343¥ 12,365¥16,425¥ 3,313¥ 39,447¥ (4,890)¥ 34,557

Finance income andfinance costs

—

—

—

—

—

—

910

Return on investment using
the equity method

—

—

—

—

—

—

324

Income before tax

—

—

—

—

—

—

35,792

Total
Segment profits

Note: Adjustments of -¥4,890 million for segment profits included an inter-segment elimination of ¥97 million and operating expenses of -¥4,987
million associated with the administration division of the headquarters of the parent, which could not be allocated.

FY2016FY2017(April 1, 2015–March 31, 2016)(April 1, 2016–March 31, 2017)

Japan¥ 63,160¥ 63,813

U.S.

176,996

150,879

Canada60,38851,890China

89,21988,800Other

68,96670,410Total¥458,732¥425,794

Note: Revenue is based on customers’ locations and is categorized into countries and regions.

(ii) N on-current assets (excluding financial instruments, deferred tax assets, net defined benefit asset and rights arising frominsurance contracts)(Unit: Million yen)
FY2016FY2017(As of March 31, 2016)(As of March 31, 2017)

Japan¥29,996¥30,463

U.S.

18,833

20,334

China

12,182

13,184

Other

26,792

24,288

Total¥87,805¥88,271(6) Information according to major customers(Unit: Million yen)
FY2016FY2017(April 1, 2015–March 31, 2016)(April 1, 2016–March 31, 2017)¥423,410¥385,753

Honda Motor Co., Ltd. Group
Note: Revenue is recorded for the Japan, Americas, China and Asia and Europe segments.

48 TS TECH Report 2017

TS TECH Report 201749

6. CASH AND CASH EQUIVALENTS
The breakdown of cash and cash equivalents is as follows.

9. INVENTORIESThe breakdown of inventories is as follows.
(Unit: Million yen)

Cash and cash equivalents

FY2017FY2016FY2017(As of March 31, 2016)(As of March 31, 2017)(As of March 31, 2016)(As of March 31, 2017)¥90,437¥96,008¥ 2,558¥ 2,161

Note: The balance of “Cash and cash equivalents” in the consolidated statement of financial position and the balance of “Cash and cash equivalents”
in the consolidated statement of cash flows coincide.

7. TRADE AND OTHER RECEIVABLES
The breakdown of trade and other receivables is as follows.
(Unit: Million yen)

Notes and accounts receivable–trade
OthersAllowance for doubtful accounts
Total(Unit: Million yen)

FY2016FY2016FY2017(As of March 31, 2016)(As of March 31, 2017)¥55,400¥63,335

1,467

4,699

(17)

(10)

¥56,849¥68,024

Merchandise and finished goods
Work in progress

3,690

2,526

Raw materials and supplies

21,51524,371

Total¥27,763¥29,059

10. PROPERTY, PLANT AND EQUIPMENT(1) Schedule of property, plant and equipment
The following are the changes in the cost, accumulated depreciation and impairment loss, and the carrying amounts of property,
plant and equipment.
Cost(Unit: Million yen)
Machinery,
Buildings
equipment
and structures and vehicles

Note: Financial assets among “Trade and other receivables” are classified as financial assets measured at amortized cost.

Balance as of April 1, 2015
8. OTHER FINANCIAL ASSETS(Unit: Million yen)
FY2016FY2017(As of March 31, 2016)(As of March 31, 2017)¥ 6,336¥ 4,839

Short-term loans receivable

63Long-term loans receivable

517

520

Deposits with maturities of three months or more

¥55,619¥64,395

Tools,
furnitureand fixtures

Land

Constructionin progress

Total¥33,579¥11,312¥ 9,214¥174,119

Acquisition cost

507

1,302

1,044

—

14,961

17,815

Sales or disposal(1,489)(1,932)(4,053)(192)—(7,667)

Reclassification to other account

3,682

5,745

1,853

8

(13,044)(1,754)

Effects of foreign currency translation(2,948)(4,118)(1,788)

(319)

(974)

(10,150)

0

302

458

15

(69)

707

Other

¥55,372¥65,694¥31,093¥10,823¥10,086¥173,070

Acquisition cost

Balance as of March 31, 2016

583

1,228

568

—

8,381

10,762

Lease receivables

6,450

4,376

Sales or disposal(1,070)(3,961)(1,431)(0)(0)(6,464)Equity instruments

13,283

14,579Reclassification to other account

5,916

5,366

1,824

93

(13,623)(422)

Effects of foreign currency translation

111

(833)

(289)

(14)

(732)

(1,759)

Other

—

—

77

1

—

78

¥60,913¥67,493¥31,842¥10,903¥ 4,111¥175,265

Derivative financial assets
Others

4

6

3,930

5,004

—

(3)

Total

¥30,529¥29,327

Current assets¥ 8,948¥ 7,307

Non-current assets

21,58022,019Total¥30,529¥29,327

Allowance for doubtful accounts

Balance as of March 31, 2017

Notes: 1. Deposits with maturities of three months or more, short-term loans receivable, long-term loans receivable and lease receivables areclassified as financial assets measured at amortized cost.
2. Equity instruments are classified as financial assets measured at fair value through other comprehensive income.
3. Derivative financial assets are classified as financial assets measured at a fair value through net profit or loss.

50 TS TECH Report 2017

TS TECH Report 201751

Accumulated depreciation and impairment loss
(Unit: Million yen)
Machinery,
Buildings
equipment
and structures and vehicles

Balance as of April 1, 2015

Tools,
furnitureand fixtures

Land

Constructionin progress

Total

11. INTANGIBLE ASSETS(1) Schedule of intangible assets
The following are changes in the cost, accumulated amortization and impairment loss, and carrying amounts of intangible assets.
Cost¥22,669¥48,383¥28,715¥—¥ 2¥99,770

Depreciation

2,069

4,443

2,163

—

—

8,675

Impairment loss

—

(6)

(7)

—

—

(14)

Sales or disposal(1,249)(1,722)(3,930)——(6,901)

Balance as of April 1, 2015

75

(199)

(160)

—

(2)

(287)

Acquisition cost(828)

(2,727)(1,380)——(4,937)

0

37

389

—

—

427

¥22,735¥48,207¥25,788¥—¥—¥96,732

Reclassification to other accountEffects of foreign currency translation
Other
Balance as of March 31, 2016
Depreciation

2,270

4,170

2,102

—

—

8,543

Impairment loss

212

30

14

—

—

257

Sales or disposal(877)(3,642)(1,332)——(5,852)

3

(104)

144

—

—

43

Effects of foreign currency translation

(81)

(749)

(210)

—

—

(1,041)

Other

—

(0)

5

—

—

5

¥24,264¥47,912¥26,512¥—¥—¥98,688

Reclassification to other accountBalance as of March 31, 2017

Note: Depreciation of property, plant and equipment is included in the cost of sales and selling, general and administrative expenses in the
consolidated statement of profit or loss.

(Unit: Million yen)

Increase due to internal development

SoftwareDevelopment
expenses

Other

Total

¥4,540¥10,714¥2,496¥17,751

145

—

48

193

—

2,419

—

2,419

Disposal(114)(1,446)(4)(1,565)

Effects of foreign currency translation

(82)

(94)

(232)

(409)

Other
Balance as of March 31, 2016

164

—

(157)

6

¥4,652¥11,592¥2,150¥18,396

Acquisition cost

218

—

272

491

Increase due to internal development

—

1,786

—

1,786

Disposal

(32)

(376)

(0)

(409)

Effects of foreign currency translation

(25)

(2)

(110)

(138)

Other

162

—

(266)

(103)

¥4,975¥13,000¥2,046¥20,022

SoftwareDevelopment
expenses

Other

Total

¥3,538¥2,812¥240¥6,591

Balance as of March 31, 2017
Accumulated amortization and impairment loss

Carrying amounts(Unit: Million yen)

(Unit: Million yen)
Machinery,
Buildings
equipment
and structures and vehicles

Balance as of April 1, 2015

¥32,950¥16,011

Tools,
furnitureand fixtures¥4,863Land

Constructionin progress

Total¥11,312¥ 9,211¥74,349

Amortization

426

1,505

56

1,988

Disposal(107)(1,446)(0)(1,554)

Effects of foreign currency translation

(61)

—

(27)

(89)

Other

(3)

—

(3)

(6)

¥3,791¥2,871¥264¥6,928

Amortization

384

1,565

42

1,992

Disposal

(31)

(376)

(0)

(408)

Balance as of March 31, 2016

32,636

17,486

5,304

10,823

10,08676,338

Balance as of March 31, 2017

36,64919,5805,330

10,903

4,111

76,576(2) Leased assets
The carrying amounts of leased assets included in property, plant and equipment are as follows.
(Unit: Million yen)
Machinery,
Buildings
equipment
and structures and vehicles

Tools,
furnitureand fixtures

Total

Balance as of April 1, 2015

¥1,188¥76¥249¥1,514

Balance as of March 31, 2016

1,053

58

214

1,326

Balance as of March 31, 2017

869

31

195

1,097

Balance as of April 1, 2015

Balance as of March 31, 2016

Effects of foreign currency translation

(23)

1

(12)

(34)

Other

(157)

—

6

(151)

¥3,962¥4,063¥300¥8,327

Balance as of March 31, 2017

Note: Amortization of intangible assets is included in the cost of sales and selling, general and administrative expenses in the consolidated
statement of profit or loss.

Carrying amounts(Unit: Million yen)

Balance as of April 1, 2015

SoftwareDevelopment
expenses

Other

Total

¥1,002¥7,901¥2,256¥11,160

Balance as of March 31, 2016

860

8,721

1,885

11,467

Balance as of March 31, 2017

1,012

8,937

1,745

11,695

Note: Amortization of intangible assets is included in the cost of sales and selling, general and administrative expenses in the consolidated
statement of profit or loss.

52 TS TECH Report 2017

TS TECH Report 201753

(2) Development expenses
The breakdown of development expenses is as follows.

14. OTHER FINANCIAL LIABILITIESThe breakdown of other financial liabilities is as follows.
(Unit: Million yen)

(Unit: Million yen)

FY2016FY2017FY2016FY2017(April 1, 2015–March 31, 2016)(April 1, 2016–March 31, 2017)(As of March 31, 2016)(As of March 31, 2017)¥13,168¥12,382¥3,227¥2,217

Reclassification to capitalized development expenses(2,419)(1,786)

Derivative financial liabilities

022

Amortization of capitalized development expenses

1,505

1,565

Total

¥3,227¥2,239¥12,254¥12,162
Current liabilities¥1,452¥  709Non-current liabilities

1,775

1,530

Total

¥3,227¥2,239R&D expenditures incurred during the period

Total

Lease obligations

12. TRADE AND OTHER PAYABLES
The breakdown of trade and other payables is as follows.

Notes:	1. Lease obligations are classified as financial liabilities measured at amortized cost.
(Unit: Million yen)
FY2016FY2017(As of March 31, 2016)(As of March 31, 2017)

Notes and accounts payable–trade¥47,788¥48,165

Other

18,43521,310Total¥66,224¥69,476

2. Derivative financial liabilities are classified as financial liabilities measured at a fair value through net profit or loss.

15. INCOME TAXES(1) Deferred tax assets and deferred tax liabilities
The breakdown of deferred tax assets and deferred tax liabilities is as follows.

Note: Financial liabilities related to “Trade and other payables” are classified as financial liabilities measured at amortized cost.

For the year ended March 31, 2016 (April 1, 2015 to March 31, 2016)(Unit: Million yen)

13. BORROWINGS
The breakdown of borrowings is as follows.
(Unit: Million yen)
FY2016FY2017(As of March 31, 2016)(As of March 31, 2017)

Averageinterest rates¥1,070¥  9670.45%

Non-current borrowings scheduled for
payment within one year

15

5

0.55%

Non-current borrowings

21

315

0.74%

¥1,107¥1,288—Current borrowings

Total
Current liabilities¥1,086

¥973

21

315

¥1,107¥1,288Non-current liabilities
Total

Notes: 1. Borrowings are classified as financial liabilities measured at amortized cost.
2. “Average interest rates” of borrowings indicate the weighted-average interest rate on the balance of borrowings at the end of FY2017.
3. Repayments of non-current borrowings at the end of FY2017 are due from 2018 to 2021.

Balance atthe beginning of
the fiscal year

Recognizedthrough net
profit or loss

Recognizedthrough othercomprehensive
incomeBalance atthe end of
the fiscal year

Deferred tax assets
Inventories¥ 2,086¥(362)¥   —¥ 1,723

Property, plant and equipment

905

(279)

—

626

Intangible assets

866

(5)

—

861

Investments in equity instruments

—

—

1

1

Accrued expenses and provisions

1,261

186

—

1,447

Net defined benefit liability

165

29

(13)

180

Unused tax losses

13

(8)

—

5

Other
Total deferred tax assets

754

(28)

—

726

¥ 6,054¥(468)¥   (12)¥ 5,573¥ 1,068¥   57¥   —¥ 1,125

Deferred tax liabilities
Property, plant and equipment
Intangible assets

2,559

129

—

2,689

Investments in equity instruments

4,614

—

(1,321)

3,292

Net defined benefit asset

165

99

(89)

175

Undistributed earnings of foreign subsidiaries

730

(74)

—

655

Other

881

(296)

—

585

Total deferred tax liabilities¥10,019¥ (84)¥(1,411)¥ 8,523

Net deferred tax liabilities¥ (3,965)¥(384)¥ 1,399¥(2,949)

Note: The difference between the total amount recognized through net profit or loss and total deferred tax expenses is due to fluctuations inforeign exchange rates.

54 TS TECH Report 2017

TS TECH Report 201755

For the year ended March 31, 2017 (April 1, 2016 to March 31, 2017)(Unit: Million yen)
Balance atthe beginning of
the fiscal year

Recognizedthrough net
profit or loss

Recognizedthrough othercomprehensive
incomeBalanceat the end of
the fiscal year

¥ 1,723¥   (96)¥  —¥ 1,627

Property, plant and equipment

626

130

—

757

Intangible assets

861

(704)

—

156

Investments in equity instruments

1

—

(1)

—

Accrued expenses and provisions

1,447

1,259

—

2,707

180

46

(6)

220

5

(5)

—

—

726

135

—

862

¥ 5,573¥ 766¥   (8)¥ 6,331¥ 1,125¥ (126)¥  —¥   999

Intangible assets

2,689

(801)

—

1,887

Investments in equity instruments

3,292

—

383

3,675

Net defined benefit asset

175

103

282

560

Undistributed earnings of foreign subsidiaries

655

238

—

894

Other

585

1,994

—

2,580

Total deferred tax liabilities

8,523

1,409

665

10,598Net deferred tax liabilities¥(2,949)¥ (643)¥(673)¥(4,266)

Deferred tax assets
Inventories

Net defined benefit liability
Unused tax losses
Other
Total deferred tax assets
Deferred tax liabilities
Property, plant and equipment

The breakdown by expiration date of unused tax losses and tax credits for which deferred tax assets have not been recognized is
as follows. Amounts are presented on a taxable amount basis.
(Unit: Million yen)
FY2016FY2017(As of March 31, 2016)(As of March 31, 2017)¥ —¥   26

Between 1 and 2 years

41

423

Between 2 and 3 years

401

807

Between 3 and 4 years

2158

Between 4 and 5 years

159

30

More than 5 years

103

55

Total

¥708

¥1,502

Within 1 year

Taxable temporary differences relating to investments in subsidiaries for which deferred tax liabilities have not been recognized
are as follows.
Deferred tax liabilities were not recognized as the timing of the reversal of the temporary differences could be controlled by theGroup and it was probable that the temporary differences would not reverse in the foreseeable future.
Amounts are presented on an income basis.
(Unit: Million yen)Taxable temporary differences

FY2016FY2017(As of March 31, 2016)(As of March 31, 2017)¥101,124¥105,133

FY2016FY2017(April 1, 2015–March 31, 2016)(April 1, 2016–March 31, 2017)¥11,333¥10,151

(43)

(25)

¥11,290¥10,126¥  (360)¥  (439)67—(2) Income tax expenses
The breakdown of income tax expenses is as follows.
(Unit: Million yen)

Note: The difference between the total amount recognized through net profit or loss and total deferred tax expenses is due to fluctuations inforeign exchange rates.

Current tax expense
Deferred tax assets and deferred tax liabilities in the consolidated statement of financial position are as follows.

Taxable amount for the fiscal year
(Unit: Million yen)

FY2016FY2017(As of March 31, 2016)(As of March 31, 2017)

Deferred tax assets¥ 1,897¥ 1,906

Deferred tax liabilities

4,847

6,173

¥(2,949)¥(4,266)

Net deferred tax liabilities

Deductible temporary differences for which deferred tax assets have not been recognized are as follows. Amounts are presented
on a taxable amount basis.

Adjustment for prior years
Total current tax expense
Deferred tax expense
Accrual and reversal of temporary differences
Changes in tax rates

355

1,018

Total deferred tax expense¥    61¥   579

Total income tax expense¥11,352¥10,705

Changes in unrecognized temporary differences, etc.

(Unit: Million yen)

Deductible temporary differences

56 TS TECH Report 2017

FY2016FY2017(As of March 31, 2016)(As of March 31, 2017)

¥864

¥456

TS TECH Report 201757

Reconciliation of the effective statutory tax rates with the average actual tax rates in the consolidated statement of profit or loss
is as follows.

For the year ended March 31, 2017 (April 1, 2016 to March 31, 2017)(Unit: Million yen)

(Unit: %)FY2016FY2017(April 1, 2015–March 31, 2016)(April 1, 2016–March 31, 2017)

32.3%

30.1

Differences with tax rates applied to foreign subsidiaries

(7.2)

(4.3)

Undistributed earnings of foreign subsidiaries

(0.2)

0.7

Permanent differences including dividend income

(5.3)

(6.2)

Effective statutory tax rate

Provision for
product
warranties (Note)

Balance at the beginning of the fiscal year
Increase during the period
Decrease during the period (provision used)¥3,937¥  3¥—¥3,940

—

87

13

101

¥3,937¥ 91¥13¥4,042Current liabilities
Non-current liabilities
Total

Note:	In conjunction with a recall by a major customer, a provision for product warranties has been recorded in the amount which the Group is
expected to bear with respect to said customer. The amount which the Group is expected to bear has been estimated based on the latest
repair information. The timing of the payment will depend on factors including when the payment invoice is received from the major
customer. A portion of the amount of the provision for product warranties is expected to be compensated pursuant to an agreement withbusiness partners. The amount to be compensated in the year ended March 31, 2017 is estimated to be ¥3,544 million, which has been
included in “Trade and other receivables.”Note: In conjunction with the revision of Japanese tax laws, the effective statutory tax rate was changed from 32.3% to 30.1%.

16. PROVISIONS
Changes in the amounts of provisions are as follows.
For the year ended March 31, 2016 (April 1, 2015 to March 31, 2016)(Unit: Million yen)

Balance at the beginning of the fiscal year

Provision for
product
warranties (Note)

Asset retirement
obligations

Other

Total

¥—

¥229

¥34

¥263

Increase during the period

—

5

10

15

Decrease during the period (provision used)

—

(74)

(14)

(88)

Effects of foreign currency translation

—

—

(5)

(5)

Balance at the end of the fiscal year

¥—

¥160

¥24

¥185

Current liabilities

¥—

¥107

¥—

¥107

Non-current liabilities

—

53

24

78

Total

¥—

¥160

¥24

¥185

17. POST-EMPLOYMENT BENEFITS(1) Overview of the post-employment benefit plan adopted by the GroupTo prepare for the payment of retirement benefits to its employees, the Company and certain consolidated subsidiaries haveadopted funded and unfunded defined benefit plans and defined contribution plans.
The defined benefit plans consist mainly of a contract-type, corporate pension plan which pays out lump-sum payments andannuities based on a points system.
The contract-type, corporate pension plan is managed, pursuant to a defined benefit corporate pension contract entered intoby both labor and management, through the entrustment of the management and administration of plan assets to an investment
institution.
In addition, the contract sets forth mandatory recalculation of premiums every five years, pursuant to the Defined Benefit
Corporate Pension Act, in order to maintain balanced finances into the future.
(2) Defined benefit plan(i) R econciliation of defined benefit obligations (assets) with the net defined benefit liability (asset) recorded in the consolidated statement of financial position(Unit: Million yen)
FY2016FY2017(As of March 31, 2016)(As of March 31, 2017)

Ending balance of defined benefit obligations¥15,982¥15,851

Ending balance of plan assets(15,634)(16,649)

347

(798)

Net amount of defined benefit obligations and assets
Net defined benefit liability

945

1,098

Net defined benefit asset(598)(1,896)¥   347¥   (798)Net amount of liabilities and assets recorded in the consolidated
statement of financial position

58 TS TECH Report 2017

(119)
136

2.8

29.9

3,839

(13)

¥4,042

0.9

27.8%

—

(106)

1

Changes in unrecognized deferred taxes

Average actual tax rate

36

—

¥13

8.7

—

3,803

—

(1.2)

(0.7)

¥  185

¥ 91

9.0

0.2

¥24

134

(1.6)

(0.3)

Total

¥3,937

Effects of foreign currency translation

Tax credits

Other

¥160

Other

Balance at the end of the fiscal year

Differences due to factors including elimination of intra-grouptransactions

Changes in tax rates¥   —

Asset retirement
obligations

TS TECH Report 201759

(ii) Reconciliation of present value of defined benefit obligations(Unit: Million yen)
FY2016FY2017(April 1, 2015–March 31, 2016)(April 1, 2016–March 31, 2017)¥15,185¥15,982

Service cost

1,034

1,127

Interest cost

126

89

Past service cost

5

37

Actuarial differences (due to changes in demographic assumptions)—(2)

Actuarial differences (due to changes in financial assumptions)

464

(619)

Actuarial differences (due to adjustments)

(149)

60

Benefits paid

(602)

(822)

Effects of foreign currency translation

(81)

(0)

¥15,982¥15,851

Beginning balance of defined benefit obligations

Ending balance of defined benefit obligations(v) Investment policy of plan assets
With respect to its plan assets, the Group upholds the investment policy of maintaining a well-balanced, diversified portfolio
comprised mainly of conventional assets within the acceptable boundaries of risk and of aiming for long-term, stable revenue
levels that will ensure the performance of its payment obligations.
The Group reviews its investment policy as necessary depending on the financial conditions and the investment environment of
the defined benefit plans.
(vi) Significant actuarial assumptions and analysis of sensitivity thereto
Significant actuarial assumptions are as follows.
(Unit: %)FY2016FY2017(As of March 31, 2016)(As of March 31, 2017)

0.3%

0.7%

Discount rate

The estimated effects of changes in actuarial assumptions on defined benefit obligations are as follows.

Notes: 1. Service cost, interest cost and past service cost are included in the cost of sales and selling, general and administrative expenses in
the consolidated statement of profit or loss.

(Unit: Million yen)

2. Actuarial differences are included in remeasurements of net defined benefit plans in the consolidated statement of comprehensive
income.

(iii) Reconciliation of the fair values of plan assets(Unit: Million yen)
FY2016FY2017(April 1, 2015–March 31, 2016)(April 1, 2016–March 31, 2017)¥14,825¥15,634

Interest income

60

81

Return on plan assets other than interest

55

421

Contributions from the employer

1,302

1,314

Benefits paid

(593)

(798)

Effects of foreign currency translation

(15)

(4)

¥15,634¥16,649

Beginning balance of plan assets

Ending balance of plan assets

Notes:	1. Interest income is included in the cost of sales and selling, general and administrative expenses in the consolidated statement of profit
or loss.
2. Return on plan assets other than interest is included in remeasurements of net defined benefit plans in the consolidated statement ofcomprehensive income.

Effects on defined benefit obligations

Discount rate

Changes in assumptions

FY2016FY2017(As of March 31, 2016)(As of March 31, 2017)

Rise by 0.5%¥(814)¥(847)

Fall by 0.5%

894

930

Note: This analysis assumes that all variables other than the discount rate remain fixed.

(vii) Contribution to plan assets in the following fiscal year
The Company plans to contribute ¥1,227 million to the plan assets in the year ending March 31, 2018.
(viii) Maturity analysis of defined benefit plans
Maturity analysis of defined benefit plans is as follows.
(Unit: Year)
FY2016FY2017(As of March 31, 2016)(As of March 31, 2017)

11.3

11.6

FY2016FY2017(As of March 31, 2016)(As of March 31, 2017)

¥548

¥542

Weighted-average duration(3) Defined contribution plans
Amounts recognized as expenses of the defined contribution plans are as follows.

(iv) Major breakdown of fair values of plan assets(Unit: Million yen)

(Unit: Million yen)
FY2016FY2017(As of March 31, 2016)(As of March 31, 2017)

Assets with quoted
market prices
in active markets

Assets without quoted
market prices
in active markets

Assets with quoted
market prices
in active markets

Assets without quoted
market prices
in active markets

Equity instruments¥ 7,250¥    —¥ 8,024¥   —

Debt instruments

5,977

—

6,578

—

General accounts

—

1,294

—

1,379

Other

76

1,035

81

586

Total

¥13,305¥2,329¥14,683¥1,96560 TS TECH Report 2017

Amounts recorded as expenses

TS TECH Report 201761

18. NET ASSETS AND OTHER COMPONENTS OF EQUITY(1) Management of shareholders’ equity
The Group manages its shareholders’ equity in order to ensure the stable, continuous payout of dividends while at the same time
utilizing it in investments for the development of new technology and the expansion of its business.
The Group uses the equity ratio as the primary indicator in the management of shareholders’ equity, which is calculated by
dividing “Total equity attributable to owners of parent” by “Total liabilities and equity.”(5) Changes in other components of equity
Changes in other components of equity are as follows.
For the year ended March 31, 2016 (April 1, 2015 to March 31, 2016)(Unit: Million yen)
Change infair value of
Remeasurements
available-for-saleof net defined
financial assets
benefit plans(Unit: Million yen)
FY2016FY2017(As of March 31, 2016)(As of March 31, 2017)

Shareholders’ equity
Total equity attributable to owners of parent¥197,060¥212,417

Total liabilities and equity

303,948

322,202

64.8%

65.9%

Equity ratio (%)

Beginning balance
Other comprehensive income
Ending balance(ii) Other retained earnings
Other retained earnings represent the cumulative amount of profits earned by the Group.
(4) Details of other components of equity
Details of other components of equity are as follows.
(i) Change in fair value of available-for-sale financial assets
Valuation difference between the cost and fair value of equity instruments designated as available-for-sale financial assets(ii) Remeasurements of net defined benefit plans
Returns on plan assets other than actuarial differences and interest¥9,972¥(596)¥12,195¥21,571(2,294)(195)(11,517)(14,007)¥7,678¥(792)¥   677¥ 7,563(Unit: Million yen)
Change infair value of
Remeasurements
available-for-saleof net defined
financial assets
benefit plans

Beginning balance
Other comprehensive income
Ending balance¥7,678Differenceson translationfrom foreign
operations

Total¥  677¥7,563¥(792)

926

676(1,549)53¥8,604¥(115)¥  871¥7,617(6) Total number of shares authorized to be issued and total number of shares issued
The total numbers of shares authorized to be issued and shares issued were as follows.

(ii) Other capital surplus
Changes in ownership interest in subsidiaries that do not involve loss of control are accounted for as capital transactions
and amounts equivalent to goodwill and negative goodwill arising from such transactions are recorded in other capital surplus.
(3) Details of retained earnings(i) Legal retained earnings
The Companies Act requires that an amount equivalent to 10% of dividends from retained earnings to be paid be appropriatedand set aside as legal capital surplus and legal retained earnings until the total of legal capital surplus and legal retained earnings
amounts to 25% of common stock. Such legal retained earnings may be used to compensate for capital deficits. Legal retained
earnings may also be reversed by resolution of a shareholders’ meeting.

Total

For the year ended March 31, 2017 (April 1, 2016 to March 31, 2017)

Note: The Group is not subject to any material restrictions from third parties regarding its shareholders’ equity.

(2) Details of capital surplus
Details of capital surplus are as follows.
(i) Legal capital surplus
The Companies Act of Japan (hereinafter “Companies Act”) requires that in the issue of shares, 50% or more of the amount of
payment for shares and assets delivered be incorporated into common stock and the remaining amount be incorporated into
legal capital surplus. The Companies Act also provides that legal capital surplus may be incorporated into common stock byresolution of a shareholders’ meeting.

Differenceson translationfrom foreign
operations(Unit: Number of shares)
FY2016FY2017(As of March 31, 2016)(As of March 31, 2017)

Total number of shares authorized to be issued

272,000,000

272,000,000

Number of shares issued

68,000,000

68,000,000

Note: All shares issued by the Company are common stock with no par value and no restrictions on the shareholders’ rights.

(7) Treasury stock
The number of treasury stock is as follows.
(Unit: Number of shares)

Number of treasury stock

FY2016FY2017(As of March 31, 2016)(As of March 31, 2017)

1,974

2,050

Note: The number of treasury stock increased by 166 shares in FY2016 and by 76 shares in FY2017 due to the purchase of shares constituting lessthan one unit.

19. COST OF SALES AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Major expense items included in the breakdown of cost of sales and selling, general and administrative expenses according to
the nature of the cost are as follows.
(Unit: Million yen)(iii) Differences on translation from foreign operations
Translation differences arising from the translation of financial statements of subsidiaries prepared in functional currencies otherthan Japanese yen into Japanese yen

62 TS TECH Report 2017

FY2016FY2017(April 1, 2015–March 31, 2016)(April 1, 2016–March 31, 2017)

Depreciation and amortization¥10,819¥10,602

Employee benefit expenses

71,76369,027TS TECH Report 201763

20. OTHER INCOME AND OTHER EXPENSES
The breakdown of other income is as follows.
(Unit: Million yen)

Land and building rent received
Gain on disposal of non-current assets
Gain on government grants

FY2016FY2017(April 1, 2015–March 31, 2016)(April 1, 2016–March 31, 2017)¥  171¥156

22. EARNINGS PER SHARE
Basic earnings per share and the basis for estimation are outlined below.
Latent common stock that has a dilution effect is not included.
(Unit: Million yen)
FY2016FY2017(April 1, 2015–March 31, 2016)(April 1, 2016–March 31, 2017)¥23,528¥19,622

Income attributable to owners of parent

1,031

156

66

30

Average number of common shares for the period (1,000 shares)

67,99867,997

Basic earnings per share (yen)¥346.01¥288.58

Other

423

383

Total

¥1,693¥726

The breakdown of other expenses is as follows.
(Unit: Million yen)

23. OTHER COMPREHENSIVE INCOME
The breakdown of each component of other comprehensive income is as follows.
(Unit: Million yen)

FY2016FY2017(April 1, 2015–March 31, 2016)(April 1, 2016–March 31, 2017)

FY2016FY2017¥379¥  656(April 1, 2015–March 31, 2016)(April 1, 2016–March 31, 2017)

Impairment loss

14

284

Other

78

91

Total

¥472

¥1,032¥   (265)¥  972

Loss on disposal of non-current assets

Components that will not be reclassified subsequently to net profit
or loss
Remeasurements of net defined benefit plans
Gains (losses) during the year

69

(297)

(196)

674

Gains (losses) during the year

(3,605)

1,373

Reclassification adjustments

(32)

(76)

Before tax(3,637)

1,296

Income tax benefit (expense)

1,323

(384)

Subtotal(2,314)912(14,498)(2,248)

Income tax benefit (expense)
Subtotal

21. FINANCE INCOME AND FINANCE COSTS
The breakdown of finance income is as follows.

Components that may be reclassified subsequently to net profit
or loss(Unit: Million yen)
FY2016FY2017(April 1, 2015–March 31, 2016)(April 1, 2016–March 31, 2017)

Interest income¥1,145¥1,067

Dividends income

388

552

Other

59

78

Total

¥1,593¥1,699Notes: 1. Interest income is interest income associated with financial assets measured at amortized cost.

Change in fair value of available-for-sale financial assets

Differences on translation from foreign operations
Gains (losses) during the year

2. Dividends income is dividend income associated with financial assets measured through other comprehensive income.

Share of other comprehensive income of associates accounted
for using the equity method

The breakdown of finance costs is as follows.
FY2016FY2017(April 1, 2015–March 31, 2016)(April 1, 2016–March 31, 2017)

Interest expense

¥182

¥158

Foreign exchange losses

378

630

Other

28

0

Total

¥589

¥788

Total other comprehensive income, net of tax(86)¥ (747)

24. DIVIDENDS
For the year ended March 31, 2016 (April 1, 2015 to March 31, 2016)(1) Dividends paid

Note: Interest expense is interest expense associated with financial liabilities measured at amortized cost.
Resolution

64 TS TECH Report 2017

(65)¥(17,074)

Gains (losses) during the year
(Unit: Million yen)Class ofsharesAnnual General Meetingof Shareholders heldon June 23, 2015

CommonsharesBoard of Directors’ meeting
held on November 4, 2015

CommonsharesTotal amountof dividends(Million yen)

Dividend
per share(Yen)

Record date

Effective date

¥2,039¥30.00March 31, 2015

June 24, 2015

¥2,243¥33.00

September 30, 2015 November 30, 2015

TS TECH Report 201765

(2) Dividends whose record date is in the current fiscal year but whose effective date is in the following fiscal year

Resolution

Annual General Meetingof Shareholders heldon June 24, 2016

Class ofshares

Source ofdividends

CommonsharesRetainedearnings

Total amountof dividends(Million yen)

¥2,243

Dividend
per share(Yen)¥33.00Record date

March 31, 2016(3) Matters concerning affiliates
The Group does not have individually significant affiliates. Matters concerning affiliates which are not individually significant are
as follows.

Effective dateJune 27, 2016

(Unit: Million yen)

Carrying amount of equity interest

FY2016FY2017(As of March 31, 2016)(As of March 31, 2017)¥1,016¥1,028For the year ended March 31, 2017 (April 1, 2016 to March 31, 2017)(1) Dividends paid
Class ofsharesResolution

Annual General Meetingof Shareholders heldon June 24, 2016

CommonsharesBoard of Directors’ meeting
held on October 28, 2016

CommonsharesTotal amountof dividends(Million yen)

(Unit: Million yen)
Dividend
per share(Yen)

Record date

Effective date

¥33.00March 31, 2016

June 27, 2016

¥2,379¥35.00

September 30, 2016 November 28, 2016

(2) Dividends whose record date is in the current fiscal year but whose effective date is in the following fiscal year

Resolution

Annual General Meetingof Shareholders heldon June 23, 2017Class ofshares

Source ofdividends

CommonsharesRetainedearnings

Total amountof dividends(Million yen)

Dividend
per share(Yen)

Record date

Effective date

¥2,379¥35.00March 31, 2017

June 26, 2017

25. NON-CASH TRANSACTIONS
Details of significant non-cash transactions are as follows.
(Unit: Million yen)

Acquisition of assets through a finance lease arrangement

FY2016FY2017(April 1, 2015–March 31, 2016)(April 1, 2016–March 31, 2017)¥1,436¥654

26. SUBSIDIARIES AND AFFILIATES, ETC.
(1) Composition of the corporate group
The composition of the Group is as stated in “1. Corporate Summary (4) State of Subsidiaries and Affiliates” in the Company’s
annual securities report.

FY2017(April 1, 2016–March 31, 2017)

¥482

¥324

The Group’s equity interest in
Net income¥2,243

FY2016(April 1, 2015–March 31, 2016)

Other comprehensive income

(65)

(86)

Comprehensive income

416

237

27. FINANCIAL INSTRUMENTS(1) Details and the extent of risks arising from financial instruments(i) Policies on the management of financial instruments and risk management
The Group is exposed to various risks arising from financial instruments including credit risk, market risk and liquidity risk. To
manage the exposures to these risks, the Group conducts risk management according to a certain set of policies.
In terms of investments. The Group primarily uses principal-guaranteed time deposits and similar financial instruments while interms of the procurement of funds, the Group procures its necessary funds through bank loans and similar financial instruments.
The Group enters into derivative transactions to minimize the risk of future fluctuations in exchange rates but strictly adheresto the policy of avoiding such transactions for speculative purposes.
(ii) Credit risk (Risk of a business partner defaulting on its contractual obligations)
Trade and other receivables are exposed to the credit risk of customers.
The Group manages these risks in accordance with its credit management regulations by periodically monitoring whether any
customer has gone over its credit limit, which is set for each customer, while also making efforts to identify at an early stage
concerns for collection due to deterioration of the customer’s financial position and mitigate said risks.
The majority of the Group’s trade and other receivables are due from Honda Motor Co., Ltd. and its group companies, whose
creditworthiness is high and poses minimal credit risk.
When engaging in derivative transactions, the Group deals exclusively with financial institutions with high credit ratings inorder to mitigate credit risk.
The carrying amounts of financial assets after impairment losses presented in the consolidated statement of financial position
represent the maximum exposure of the Group to credit risk.

(2) Matters concerning subsidiaries
The Group does not have significant subsidiaries in which the Group has non-controlling interests.

66 TS TECH Report 2017

TS TECH Report 201767

(iii) Market risk (Foreign currency risk)
As the Group conducts its business globally, it engages in foreign currency-denominated transactions and accordingly its profitsand cash flows are exposed to the risk of fluctuating exchange rates.
The Group engages in derivative transactions, namely forward exchange contracts, to mitigate such risks in terms of its foreign
currency-denominated trade receivables and payables.
In the execution and administration of derivative transactions, the funding division obtains the approval of the person with thedecision-making authority in accordance with the internal rules which set forth transaction authority and other matters.
In terms of the financial instruments held by the Group at the end of FY2016 and FY2017, the impact of a 1% appreciation of theJapanese yen against the U.S. dollar and Chinese yuan on the income before tax is as follows.
(Unit: Million yen)
Impact on income before tax
FY2016FY2017(April 1, 2015–March 31, 2016)(April 1, 2016–March 31, 2017)1% appreciation of Japanese yen against the U.S. dollar

¥(29)

¥(25)

1% appreciation of Japanese yen against the Chinese yuan

(36)

(47)

(Price fluctuation risks of equity instruments)
The Group holds equity instruments that include the stocks of publicly traded companies with which it maintains business
relationships and is thus exposed to the risk of fluctuating market prices of these instruments.
The Group manages such risks by periodically monitoring the fair value of said instruments and the financial condition of its
investment targets as well as conducting ongoing reviews of its status of holdings.
In terms of the equity instruments held by the Group at the end of FY2016 and FY2017, the impact of a 1% decline in market
prices on other comprehensive income is as follows.
(Unit: Million yen)
Impact on other comprehensive income
FY2016FY2017(April 1, 2015–March 31, 2016)(April 1, 2016–March 31, 2017)

1% decline in market price¥(131)(2) Fair value measurement
Fair values are classified into the following three levels according to the extent to which the input information used in the measurement is observable and the materiality of said input.
Level 1: Quoted prices of similar assets and liabilities in active markets
Level 2: Input other than quoted prices included in Level 1 that is observable either directly or indirectly
Level 3: Input including that not based on observable market data
No transfers occurred between Levels 1, 2 and 3 during FY2017.
(i) Method of measuring fair value(Equity instruments)
Equity instruments are mainly stocks of publicly traded companies and are measured based on the prices quoted by the stock
exchanges.
(Derivative financial assets and derivative financial liabilities)
The fair values of the forward exchange contracts are measured based on the prices quoted by the financial institutions.
(Long-term loans receivable)
Long-term loans receivable are measured at the present value of future cash flows discounted by an interest rate that reflects anappropriate indicator such as the yield on Japanese government bonds to which a credit spread has been added.
(Long-term loans payable)
Long-term loans payable are measured at the present value of the total of principal and interest discounted by an interest rate thatwould be used for a similar loan.
(Financial instruments other than those above)
Financial instruments other than those above are measured at amortized cost but statement thereof has been omitted as theirmeasured carrying amounts approximate their fair values(ii) Carrying amounts and fair values of financial instruments(Financial instruments measured at fair value on a recurring basis)
FY2016 (As of March 31, 2016)(Unit: Million yen)¥(144)

Note: This analysis assumes that all variables other than the market prices remain fixed.

The outstanding balance of financial liabilities by contractual maturity is as follows.
Trade and other payables, short-term loans payable and derivative finance liabilities have been omitted as their contractual
maturities are all less than one year.
Lease obligations are stated Note 28, “Leases.”

Level 1

Level 2

Level 3Total

Equity instruments¥13,283¥13,198¥—¥84¥13,283

4

—

4

—

4

0

—

0

—

0

Financial assets measured at a fair value
through net profit/loss
Derivative financial assets
Financial liabilities measured at a fair value
through net profit/loss
Derivative financial liabilities
FY2017 (As of March 31, 2017)(Unit: Million yen)

Long-term loans payable (including those scheduled for payment within one year)(Unit: Million yen)
FY2016FY2017(As of March 31, 2016)(As of March 31, 2017)¥15¥

Between 1 and 5 years

21

315

More than 5 years

—

—

Total

¥36

¥321

5

Fair value

Carrying
amountLevel 1

Level 2

Level 3

Total

¥14,579¥14,492¥—¥86¥14,579

6

—

6

—

6

22

—

22

—

22

Available-for-sale financial assets
Equity instruments
Financial assets measured at a fair value
through net profit/loss
Derivative financial assets
Financial liabilities measured at a fair value
through net profit/loss
Derivative financial liabilities

68 TS TECH Report 2017

Carrying
amountAvailable-for-sale financial assets(iv) Liquidity risk (Risk of not being able to execute payment on the payment date)
While the Group procures necessary funds from bank loans and other means, it is exposed to the risk of not being able to execute
payment on the payment date due to deterioration of the fund-raising environment and other factors.
The Group manages said risk by having the Company’s accounting division prepare and update fund management plans basedon the reports of each division in order to mitigate liquidity risk.

Within 1 year

Fair value

TS TECH Report 201769

(Financial instruments measured at amortized cost)
FY2016 (As of March 31, 2016)(Unit: Million yen)
Carrying
amountFair value
Level 1

Level 2

Level 328. LEASES(1) Lease as lessee(i) Minimum total lease payments
The breakdown of the minimum total lease payments (present value) under finance leases is as follows.
(Unit: Million yen)

Total
FY2016FY2017(As of March 31, 2016)(As of March 31, 2017)

Within 1 year

¥1,452¥  687

Between 1 and 5 years

1,342

1,227

Loans and receivablesLong-term loans receivable (including thosescheduled for payment within one year)

¥517

¥—

¥489

¥—

¥489

Financial liabilities measured at amortized costLong-term loans payable (including thosescheduled for payment within one year)

—

36

—

36

Total

2. Certain major lease contracts have renewal and purchase options. However, there are no lease contracts with contingent rent, escalation
clauses (a provision to increase lease obligations) or specific contractual restrictions (such as restrictions on dividends, additional borrowing or additional lease contracts).

(Unit: Million yen)
Carrying
amountFair value
Level 1

Level 2

Level 3

Total

Loans and receivables
¥520

¥—

¥526

¥—

¥526

(ii) Non-cancelable operating leases
The breakdown of the minimum total lease payments under non-cancelable operating leases is as follows.
(Unit: Million yen)

Financial liabilities measured at amortized costLong-term loans payable (including thosescheduled for payment within one year)302¥2,217

Notes: 1. The outstanding balance of minimum total lease payments is included in “Other financial liabilities” in the consolidated statement offinancial position.

FY2017 (As of March 31, 2017)

Long-term loans receivable (including thosescheduled for payment within one year)433¥3,227More than 5 years
36

321

—

320

—

320

(3) Offsetting of financial assets and financial liabilities
Information on the offsetting of financial assets and financial liabilities recognized for a single counterparty is as follows.

FY2016FY2017(As of March 31, 2016)(As of March 31, 2017)¥  414¥296

Between 1 and 5 years

718

475

More than 5 years——¥1,133¥772

Within 1 year

Total

(Unit: Million yen)

Gross amount of financial assets recognized
Offset amountAmount of financial assets presented inconsolidated statement of financial position

FY2016FY2017(As of March 31, 2016)(As of March 31, 2017)¥188,527¥203,010

10,711

9,650

177,816

193,360

Gross amount of financial liabilities recognized

81,27082,654

Offset amount

10,711

9,650¥ 70,559¥ 73,004

Amount of financial liabilities presented inconsolidated statement of financial position(iii) Operating lease payments recognized as expenses during the fiscal year
Operating lease payments recognized as expenses during the fiscal year are as follows.
(Unit: Million yen)

Operating lease payments

FY2016FY2017(April 1, 2015–March 31, 2016)(April 1, 2016–March 31, 2017)

¥687

¥569

(2) Lease as lessor
Minimum total lease payments to be received
The breakdown of the minimum total lease payments to be received under finance leases is as follows.
(Unit: Million yen)
FY2016FY2017(As of March 31, 2016)(As of March 31, 2017)

Within 1 year

¥2,470¥2,326

Between 1 and 5 years

3,980

2,050

—

—

¥6,450¥4,376More than 5 years
Total

Notes: 1. The outstanding balance of minimum total lease payments to be received is included in “Other financial assets” in the consolidated
statement of financial position.
2. There are no lease contracts with renewal and purchase options, contingent rent and escalation clauses (a provision to increase leasereceivables).

70 TS TECH Report 2017

TS TECH Report 201771

29. RELATED-PARTY DISCLOSURES(1) Transactions between the submitting company and related parties
The balances of transactions and receivables/payables between the submitting company and related parties are as follows.

(Unit: Million yen)

Other affiliates

Name

Honda MotorCo., Ltd.

Nature of relatedparty transaction

Transaction
amountSale ofthe Company’s
products¥47,692

Account

Accounts
receivable–trade

Outstandingbalance¥7,507

Note: Business terms and conditions, and policy for the determination of business terms and conditions
Business terms and conditions for the sale of products are determined upon the submission of individual quotes and price negotiations.

(Unit: Million yen)

Other affiliates

Name

Honda MotorCo., Ltd.

Subsidiaries ofother affiliates

Nature of relatedparty transaction

Transaction
amountSale ofthe Company’s
products¥45,958

Account

Accounts
receivable–trade

Outstandingbalance¥5,760Note: 	Business terms and conditions, and policy for the determination of business terms and conditions
Business terms and conditions for the sale of products are determined upon the submission of individual quotes and price negotiations.

Name

Nature of relatedparty transaction

Transaction
amount

Honda
Manufacturingof Alabama, LLC.

Sale ofthe Company’s
products¥46,536

Account

Accounts
receivable–trade

Outstandingbalance¥4,149Note: Business terms and conditions, and policy for the determination of business terms and conditions
Business terms and conditions for the sale of products are determined upon the submission of individual quotes and price negotiations.

For the year ended March 31, 2017 (April 1, 2016 to March 31, 2017)(Unit: Million yen)Type of related party

For the year ended March 31, 2017 (April 1, 2016 to March 31, 2017)

Type of related party(Unit: Million yen)Type of related party

For the year ended March 31, 2016 (April 1, 2015 to March 31, 2016)

Type of related party(ii) TS TECH ALABAMA, LLC.
For the year ended March 31, 2016 (April 1, 2015 to March 31, 2016)Subsidiaries ofother affiliates

Name

Nature of relatedparty transaction

Transaction
amount

Honda
Manufacturingof Alabama, LLC.

Sale ofthe Company’s
products¥38,870

Account

Accounts
receivable–trade

Outstandingbalance¥2,916

Note: Business terms and conditions, and policy for the determination of business terms and conditions
Business terms and conditions for the sale of products are determined upon the submission of individual quotes and price negotiations.

(iii) TS TECH CANADA INC.
For the year ended March 31, 2016 (April 1, 2015 to March 31, 2016)(Unit: Million yen)

(2) Transactions between the consolidated subsidiaries of the submitting company and related parties
The balances of transactions and receivables/payables between the consolidated subsidiaries of the submitting company andrelated parties are as follows.
(i) TS TECH USA CORPORATION
For the year ended March 31, 2016 (April 1, 2015 to March 31, 2016)(Unit: Million yen)Type of related party

Subsidiaries ofother affiliates

Name

Honda of America
Mfg., Inc.

Nature of relatedparty transaction

Transaction
amountSale ofthe Company’s
products¥69,515

Account

Accounts
receivable–trade

Outstandingbalance

Type of related party

Subsidiaries ofother affiliates

Name

Honda Canada,
Inc.

Nature of relatedparty transaction

Transaction
amountSale ofthe Company’s
products¥58,633

Account

Accounts
receivable–trade

Outstandingbalance¥3,404

Note: Business terms and conditions, and policy for the determination of business terms and conditions
Business terms and conditions for the sale of products are determined upon the submission of individual quotes and price negotiations.

For the year ended March 31, 2017 (April 1, 2016 to March 31, 2017)(Unit: Million yen)

¥4,756
Type of related party

Name

Transaction
amountSale ofthe Company’s
products¥50,206

Account¥5,780Subsidiaries ofother affiliates

For the year ended March 31, 2017 (April 1, 2016 to March 31, 2017)

Note: Business terms and conditions, and policy for the determination of business terms and conditions
Business terms and conditions for the sale of products are determined upon the submission of individual quotes and price negotiations.

(Unit: Million yen)Type of related party

Subsidiaries ofother affiliates

Name

Honda of America
Mfg., Inc.

Transaction
amountSale ofthe Company’s
products¥55,243

Account

Accounts
receivable–trade

Outstandingbalance¥4,328

Note: Business terms and conditions, and policy for the determination of business terms and conditions
Business terms and conditions for the sale of products are determined upon the submission of individual quotes and price negotiations.

Accounts
receivable–trade

Outstandingbalance

Note:	Business terms and conditions, and policy for the determination of business terms and conditions
Business terms and conditions for the sale of products are determined upon the submission of individual quotes and price negotiations.

Nature of relatedparty transaction

Honda Canada,
Inc.

Nature of relatedparty transaction(iv) TS TECH (THAILAND) CO., LTD.
For the year ended March 31, 2016 (April 1, 2015 to March 31, 2016)(Unit: Million yen)Type of related party

Subsidiaries ofother affiliates

Name

Nature of relatedparty transaction

Transaction
amount

Honda
Automobile(Thailand) Co., Ltd.

Sale ofthe Company’s
products¥13,646

Account

Accounts
receivable–trade

Outstandingbalance¥3,009Note: Business terms and conditions, and policy for the determination of business terms and conditions
Business terms and conditions for the sale of products are determined upon the submission of individual quotes and price negotiations.

72 TS TECH Report 2017

TS TECH Report 201773

Independent Auditors’ Report

For the year ended March 31, 2017 (April 1, 2016 to March 31, 2017)(TRANSLATION)(Unit: Million yen)

Name

Nature of relatedparty transaction

Transaction
amount

Honda
Automobile(Thailand) Co., Ltd.

Sale ofthe Company’s
products¥16,911

Type of related party

Subsidiaries ofother affiliates

Account

Accounts
receivable–trade

June 23, 2017

¥3,407To the Board of Directors of TS TECH Co., Ltd.
Deloitte Touche Tohmatsu LLC

Note: Business terms and conditions, and policy for the determination of business terms and conditions
Business terms and conditions for the sale of products are determined upon the submission of individual quotes and price negotiations.

(3) Remuneration of key management personnel
The remuneration to the Directors and Auditors of the Company is as follows.
(Unit: Million yen)

Basic remuneration and bonuses

INDEPENDENT AUDITOR’S REPORT

Outstandingbalance

FY2016FY2017(April 1, 2015–March 31, 2016)(April 1, 2016–March 31, 2017)

¥552

¥505

30. CONTINGENT LIABILITIESThe Company provides guarantees to financial institutions on the borrowings by employees. The guarantee amounts are
as follows.

Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:

Hirohisa Kato

Designated Unlimited Liability Partner
Engagement Partner,
Certified Public Accountant:Kenji Morita

Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:Kazuyoshi Kuramoto(Unit: Million yen)

Employees (Company housing and mortgage loans)

FY2016FY2017(April 1, 2015–March 31, 2016)(April 1, 2016–March 31, 2017)

¥74

¥59

31. SUBSEQUENT EVENTS
Not applicable
OTHER
Quarterly information for the fiscal year under review.
(Unit: Million yen)
Cumulative period

1st quarter2nd quarter3rd quarter

4th quarter

Net sales¥103,817¥202,067¥311,073¥425,794

Income before income taxes

7,527

14,861

24,56235,792

Income attributable to owners of parent

3,964

8,059

14,606

19,622

Earnings per share (yen)¥  58.30¥ 118.52¥ 214.80¥ 288.58

Accounting period

1st quarter2nd quarter3rd quarter

4th quarter¥58.30¥60.22¥96.28¥73.78

Earnings per share (yen)[Audit of Financial Statements]
Pursuant to the first paragraph of Article 193-2 of the Financial Instruments and Exchange Act, we have audited the consolidated
financial statements included in the Financial Section, namely, the consolidated statement of financial position as of March 31,2017 of TS TECH Co., Ltd. (the “Company”) and its consolidated subsidiaries, and the consolidated statements of comprehensive
income, changes in equity and cash flows for the fiscal year from April 1, 2016 to March 31, 2017, and notes to consolidated
financial statements.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordancewith International Financial Reporting Standards pursuant to the provisions of Article 93 of the Ordinance on Terminology, Forms
and Preparation Methods of Consolidated Financial Statements, and for such internal control as management determines isnecessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due tofraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit
in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material
misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements inorder to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of theconsolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

74 TS TECH Report 2017

TS TECH Report 201775

Corporate Data and Stock Information
Corporate Data (as of March 31, 2017 )Audit Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial positionof TS TECH Co., Ltd. and its consolidated subsidiaries as of March 31, 2017, and the results of their operations and their cash flows
for the year then ended in accordance with International Financial Reporting Standards.
[Audit of Internal Control]
Pursuant to the second paragraph of Article 193-2 of the Financial Instruments and Exchange Act, we have audited management’s
report on internal control over financial reporting of TS TECH Co., Ltd. as of March 31, 2017.
Management’s Responsibility for the Report on Internal Control
Management is responsible for designing and operating effective internal control over financial reporting and for the preparationand fair presentation of its report on internal control in accordance with assessment standards for internal control over financial
reporting generally accepted in Japan. There is a possibility that misstatements may not be completely prevented or detected byinternal control over financial reporting.
Auditor’s Responsibility
Our responsibility is to express an opinion on management’s report on internal control based on our internal control audit. We
conducted our internal control audit in accordance with auditing standards for internal control over financial reporting generally
accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
management’s report on internal control is free from material misstatement.
An internal control audit involves performing procedures to obtain audit evidence about the results of the assessment of internal
control over financial reporting in management’s report on internal control. The procedures selected depend on the auditor’s
judgment, including the significance of effects on reliability of financial reporting. An internal control audit includes examining
representations on the scope, procedures and results of the assessment of internal control over financial reporting made bymanagement, as well as evaluating the overall presentation of management’s report on internal control.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, management’s report on internal control over financial reporting referred to above, which represents that theinternal control over financial reporting of TS TECH Co., Ltd. as of March 31, 2017 is effectively maintained, presents fairly, in allmaterial respects, the results of the assessment of internal control over financial reporting in accordance with assessment standards for internal control over financial reporting generally accepted in Japan.

Company NameTS TECH Co., Ltd.

Establishment

December 5, 1960

Head Office

3-7-27 Sakae-cho, Asaka-shi, Saitama 351-0012, Japan

Common Stock¥4,700,000,000

Corporate Representative

President, Michio InoueLines of Business

Manufacture and sale of seats for automobiles; interior trim and interior components for automobiles; motorcycle seats; and motorcycle parts and accessories

Number of Employees

16,335 (consolidated) 1,710 (non-consolidated)

Closing of Accounts

March 31

Securities Traded

Tokyo Stock Exchange (First Section)

Main Banks

The Bank of Tokyo-Mitsubishi UFJ, Ltd. / Sumitomo Mitsui Banking Corporation / Saitama Resona Bank, Limited

Main Customers

Honda Motor Co., Ltd. / Honda R&D Co., Ltd. / Honda Trading Corporation / Honda Access Corp. /Suzuki Motor Corporation / Yamaha Motor Co., Ltd. / Kawasaki Heavy Industries, Ltd. / PARAMOUNTBED CO., LTD.

Member Organization

Japan Auto Parts Industries Association

Stock Information (as of March 31, 2017)
Total Number of Shares Authorized to Be Issued

272,000,000

Total Number of Shares Outstanding

68,000,000

Number of Shareholders

Major Shareholders (as of March 31, 2017)

Individuals andothers0.1%

Financial
institutions

9.4%

36.2%

11,549Equity participation
Number of shares
Voting stake (%)
held (thousands)

Interest
Our firm and the engagement partners do not have any interest in the Company for which disclosure is required under the provisions of the Certified Public Accountants Act.

Honda Motor Co., Ltd.

15,36022.6

Japan Trustee Services Bank, Ltd. (Trust Account)

3,225

4.7

Mitsui Sumitomo Insurance Company, Limited

2,451

3.6

The above represents a translation, for convenience only, of the original report issued in the Japanese language.

Japan Trustee Services Bank, Ltd. (Sumitomo Mitsui
Trust Bank, Limited Retrust Portion, Sumitomo Mitsui
Banking Corporation Pension Trust Account)

2,199

3.2

Sumitomo Life Insurance Company

1,940

2.9

Saitama Resona Bank, Limited

1,720

2.5

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

1,710

2.5

Bridgestone Corporation

1,536

2.3

Taiyo Life Insurance Company

1,400

2.1

Mitsubishi UFJ Trust and Banking Corporation

1,360

2.0

36
76 TS TECH Report 2017

National government
and local government

Ownership anddistribution ofshares (%)

Foreign
Securities
corporations
companies
and others
0.8%
Other corporations
24.1%
and others
29.4%* Treasury stock is included in “Individuals and others”.

TS TECH Report 201777

Third-Party Opinion

Third-Party Opinion

We live in an age that demands
promotion of ESG-related issues

Mizue Unno

Managing Director,
So-Tech Consulting Inc.
Ms. Unno was in charge of marketing strategy
and environmental business development
support at an economic consulting company.
In 1996, she went independent andfounded So-Tech Consulting Inc. The company
works in the environmental and sustainability
sectors and is building a network of professionals around the world. With a focus on the global
strategies of Japanese companies, So-Tech
Consulting uses its unique eye for analysis tocarry out ambitious recommendations regarding
management in the areas of ESG and sustainability.

In response to the commitment made lastyear by President Inoue, the TS TECH Grouppositioned ESG management as the main
pillar of its Medium-Term Management Plan,
making it clear that it is working to address
this matter at all of their global locations.
With respect to governance, TS TECH
not only properly addresses the governancecode and creates internal mechanisms, butalso adopts measures that form the foundation for its business. Among these measures,
TS TECH should be commended for having a
stance that seeks value creation throughpartnerships with stakeholders in the areas ofcustomer quality and expansion of sales to
new customers.
Regarding environmental and social
matters, TS TECH is highly regarded for its
strategic approach to human resources—theheart of the company—as it works to realize
its vision to become an “Innovative Quality
Company.” This is the company’s underlying
strength. Please continue to create successstories that utilize your diversity, not just inJapan but also around the world.

Environmental and social contribution
efforts are the “E” and “S” of ESG—theactivities that build trust with regional
stakeholders. I hope that you consider
strategic environmental and social efforts
that benefit not only society but also yourbusiness efforts and that you develop themin ways that raise employee awareness.
From this point on, it will be necessary
to determine specific approaches to theeight corporate initiatives stipulated in the
13th Medium-Term Business Plan and tocreate a results assessment for the purposeof the measures’ ongoing development.
Please reconcile these with your current
value creation processes and non-financial
measures, and systematically organize andreport on them. It is also important to choose
issues from among the SDGs that are
relevant to your company and incorporate
them into your activities, so I, therefore,
recommend that you consider doing so.

Response to the Third-Party Opinion
We have been exchanging views regarding
our efforts for continuous corporate growthwith Ms. Unno since last year. In response to
feedback from our stakeholders, we shifted
the focus of our 13th Medium-Term Management Plan, which went into effect this fiscal
year, to ESG management in order tobecome a company with even higher
expectations from a global society.
In particular, in terms of our highly
regarded measures concerning humanresources, in order to pass on our company’s
underlying strength (corporate culture) tothe next generation, we are implementing
educational programs for our TS Philosophy,
created under the 12th Medium-Term
Management Plan, on a global scale. We

78 TS TECH Report 2017

have already completed the first phase,
educating our managers at all locations; weare currently educating all employees
worldwide, taking into account respective
cultures and customs, and promoting
localization of management in each region.
We are also doing what we can to conduct
environmental conservation and social
contributions in accordance with local needs.
Just as you suggested, from this point
on, we will focus on contributing to the SDGs
that are challenges for the Earth as a whole.
At the same time, we will work to promote
ESG management through means thatenable us to organize results and evaluationsof corporate measures in easy-to-understandways to deliver systematic reports.

Yoshitaka Nakajima

Managing Director,
Corporate Administration Division
Executive General Manager,
TS TECH Co., Ltd.

3-7-27 Sakae-cho, Asaka-shi, Saitama 351-0012, Japan
URL: http://www.tstech.co.jp

July 2017
Printed in Japan