（year ended march 31, 2016 · heat exchangers for aircraft research into duralumin entry into the...

（Year ended March 31, 2016）

A e r o s p a c e P r o d u c t s

H e a t C o n t r o l P roducts

H y d r a u l i c C o n t r o l P r o d u c t s

Env i ronmenta l S y s t e m s

M i c r o E l e c t r o n i c s T e c h n o l o g y

M E M S /S e m i c o n d u c t o r M a n u f a c t u r i n g E q u i p m e n t

S e n s o r s

F u e l C e l l

Commercial hydraulic equipment operations started by applying hydraulic technology for propellers

First industrial heat exchangers produced by leveraging aircraft heat exchanger technology

The development department investigates and develops new business operations

Business Mix (results for f iscal 2015)

Fu tu re1900 1950 20001961Foundation of SPP

Start of integratedproduction of propellers

Business expanded into landing gear and heat exchangers for aircraft

Research into duralumin

Entry into the environmental systems market with the commercialization of ozone generators

Introduction of vacuum pump technology

Control taken of a plasma etching specialist

MEMS manufacturing equipment technology employed to start sensor business

Start of semiconductor/MEMS manufacturing equipment business

Start of liquid crystal manufacturing equipment operations

Various technical resources funneled into new operations on fuel cells

▶

* Before fiscal 2015, SPP’s business consisted of two reporting segments, “Aerospace and Related Products” and “Industrial Products.” In fiscal 2015, SPP reorganized its business into three reporting segments, “Aerospace and Related Products,” “Heat Energy and Environmental Related Products,” and “ICT Related Products” to ensure more appropriate information disclosure.

航空宇宙

293（62%）

産業機器

178（38%） Aerospace and

Related Products

332（65%）

Aerospace and Related Products

332（65%）

Heat Energy andEnvironmental

Related Products

124（24%）


Related Products

124（24%）

ICT RelatedProducts

56（11%）

ICT RelatedProducts

56（11%）

Landing Gearsand

Landing GearControl Systems

Heat ControlProducts

OtherProducts

MEMS/SemiconductorManufacturing

EquipmentEnvironmental

Systems and others

HeatExchangersfor Aircraft

HydraulicControl

Products

G r o w t h H i s t o r y▶ Starting with high-precision technology for engineering aircraft equipment, SPP has

extended its business into a broad range of creative areas.▶ SPP is particularly strong in the precision machining of high-strength metal materials,

thermal management, and joining of metal materials.▶ SPP has some 15% of the world market for landing gear systems used in regional jets.▶ We boast world-class shares of the markets for plate-fin heat exchangers and LNG

vaporizers.

C o n t e n t s

3

6

7

10

12

13

15

17

19

37

38

M e s s a g e f r o m t h e P r e s i d e n t

F i n a n c i a l H i g h l i g h t s

S e g m e n t O v e r v i e w

A e r o s p a c e a n d R e l a t e d P r o d u c t s

H e a t E n e r g y a n d E n v i r o n m e n t a l R e l a t e d P r o d u c t s

I C T R e l a t e d P r o d u c t s

C o r p o r a t e G o v e r n a n c e

C S R A c t i v i t i e s

E n v i r o n m e n t a l P r e s e r v a t i o n

C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s

D o m e s t i c a n d O v e r s e a s B a s e s

C o m p a n y P r o f i l e / S t o c k I n f o r m a t i o nNotes on forward-looking statementsInformation provided in this annual report contains certain forward-looking statements concerning performance forecasts and projections made by SPP using information available at present (performance forecasts for fiscal 2016 are the figures announced on April 28) and is subject to various risks and uncertainties. Due to various changes, actual results may vary from those projected in the forward-looking statements.

Aerospace and Re la ted Products

Heat Energy and Environmental Related Products

ICT Re la ted Products

21

Note: The SPTS business was divested in August 2011 (the graph does not include the results for the transferred business).

To achieve our “Aspirat ion” long-term vision,we wi l l pr ior i t ize qual i ty improvement and str ive to signif icantly strengthen our corporate character.

Pres ident

Realizing Investment that can Contribute to our Medium- and Long-term Growth in Fiscal 2015

In fiscal 2015, SPP invested in two businesses contributing

to its medium- and long-term growth. One of them was a

Canadian surface finishing service provider for Aerospace

and Related Products. With this acquisition, the SPP Group

has mostly completed the establishment of its structure to

become a Global Tier 1 supplier of aircraft landing gear. The

other was a Thermal Products business in the U.S for

semiconductor industry. Through this acquisition, SPP aims

to develop its overseas operations and create new products

by leveraging synergy with its original technologies related to

ICT and Related Products.

On the other hand, it has been taking time to harvest the

fruits of previously implemented measures for various

reasons including changing economic environments (e.g.

China’s stagnant economy and changes in demand for

energy including oil), delay in launching new products in the

market in accordance with the original schedule, and

delayed development and productivity improvement. The

SPP Group’s biggest issue is the improvement of its profit

structure because its operating results are poor despite

sales that are continuously increasing at a certain rate. As a

result, our performance has differed significantly from the

planned figures, including declined profit, and stakeholders’

expectations have not been met. All management personnel

are taking this performance seriously.

Prioritizing Quality Improvement

The Mid-Term Management Plan announced in 2014 was

formulated to realize the “Aspiration 2020” long-term vision

(i.e. the SPP Group working with its customers to create

value in growth markets across the globe) and to achieve the

performance targets (net sales of ¥100 billion and operating

margin of 8%). The SPP Group has aimed to grow by

pursuing both quality (i.e. profit margin) and quantity (sales) at

the same time, and has sown seeds for the future (e.g.

investment in various facilities, businesses and development

and addition of human resources).

The aircraft, heat energy/environmental, and ICT businesses

that SPP conducts are areas that have potential for high

future growth in global trends. We believe that the strengths

we have cultivated so far in each business area can be used

for our future growth. Accordingly, although our basic

direction in our long-term vision is unchanged, we think it

necessary to reconsider and review our strategies and target

levels to achieve growth. In other words, SPP will strive to

significantly strengthen its corporate character, prioritizing

the improvement of profit margins from a quality standpoint.

Costs of Structural Reforms in FY 2015

Fiscal 2015 sales increased 8.6% year-on-year to ¥51.21

billion, thanks to the effects of the acquisitions mentioned

above. However, operating income decreased ¥0.24 billion

from the previous year to ¥1.34 billion because customers’

stagnant investment activities affected by declining crude oil

prices and China’s economic slowdown, as well as other

factors, caused our performance to fall far below the planned

figures mainly in relation to Heat Energy and Environmental

Related Products. An additional cause was that our new

product launches and development were delayed.

Ordinary income also decreased significantly year-on-year to

¥0.36 billion because an exchange loss (non-operating

expense) increased due to rapid yen appreciation in and after

mid-year. In addition, SPP posted extraordinary losses for

costs incurred in relation to structural reforms of both the

Chinese environmental system and aging watch-over system

businesses, as well as for losses on valuation of investment

securities related to the capital contribution into a UK company

(a development partner in the Heat Control Products

business). As a result, SPP fell into a net loss amounting to

¥0.59 billion attributable to the owners of the parent.

As extraordinary losses mentioned above are considered

temporary, SPP has decided to pay an annual dividend of ¥7

per share as in the case of fiscal 2014 to comply with its

basic policy for paying stable and continuous dividends.

Aiming for a Positive Cash Flow in Fiscal 2016

In fiscal 2016, we expect to continuously increase sales of

landing gear products, semiconductor/MEMS manufactur-

ing equipment, etc., achieving net sales of ¥55 billion. We

have sought to increase overseas sales, which continuously

account for approximately 50% of overall sales. However, it

is regrettable that operating income is expected to increase

only slightly to ¥1.45 billion because we still cannot achieve

our profitability and productivity targets while fixed costs are

increasing in relation to activities to strengthen business

operations. Ordinary income and net income attributable to

owners of the parent are expected to be ¥1.25 billion and

¥0.7 billion, respectively.

As we have continued to actively make strategic investments,

M e s s a g e f r o m t h e P r e s i d e n t

ICT Related ProductsNet SalesHeat Energy and

Environmental Related ProductsAerospace and Related Products

Operating Income

2006 2007 2008 2009 2010 2011 2012 2013 2014Plan

2014 2015Plan

2015 2016Plan

2016Forecast

2020

Net Sales(billion ¥)

OperatingIncome(billion ¥)

Mid-Term Management Plan “Aspiration 2020”⇒ Will be reviewed

0

20

40

60

80

100

10

30

50

70

90

-1

0

1

2

3

4

5

6

7

8

9

Net sales were below plan,but revenue growth continued.

The largest issue is theimprovement of profit structure.

Actual & forecast

Operating Income

Mid-Term Management Plan

3 4

our free cash flow has been negative. In fiscal 2016,

however, we will aim to achieve a positive free cash flow by

actively reducing assets on a company-wide basis.

Pursuing Lean Management

As described above, SPP’s basic policy is to prioritize the

improvement of profit margins from a quality standpoint and

to significantly strengthen its corporate character in and after

fiscal 2016, while the new Mid-Term Management Plan

starts in fiscal 2017. For this purpose, SPP will focus on the

following points.

(1) Pursuing concentration on core business and competence, and reconstruction of the main business portfolio

While we have already decided to review our business

strategies including partial withdrawal from the

environmental system business in China in fiscal 2015,

we will further pursue concentration on core business

and competence, aiming to optimize the allocation of

invested capital. We will also restructure our portfolio

including the switching of focus areas depending on

changes in the demand.

(2) Making company-wide efforts to reduce total assets, etc. in use so that a corporate structure that can generate a positive cash flow can be created

For the past several years, SPP has continued to make

strategic investments, including the establishment of the

aircraft landing gear-related Global Tier 1 system, but has

continuously experienced negative cash flows. As SPP

considers that it has mostly made necessary, large-sized

investments, it will be able to begin reaping investments

previously made and also take various measures to reduce

total assets in use, aiming to restore positive cash flows.

Through these activities, SPP will strive to solidify its

foundation for further strengthening of business bases and

financial structure suitable for the new Mid-Term

Management Plan.

(3) Improving productivity and promoting cost rationalization continuously and strongly

Since fiscal 2015, SPP has set up a cross-organizational

taskforce to achieve the productivity improvement and cost

rationalization that are the fundamentals of manufacturing.

This taskforce focuses on significantly improving the speed

of solving the problems of Aerospace and Related Products

and other businesses and taking new measures to broaden

its employees’ viewpoint so that they can have all the

business operations (e.g. production, sales, technology and

procurement) in view and thus the value of human assets

can be increased further. As fiscal 2016 is the second year

under this scheme, SPP will move ahead with it more

speedily. As for productivity in particular, SPP will also strive

for production optimization by installing new equipment so

that it can become ready for the commercial production of

MRJ in future. In addition, SPP will strive to reduce total

costs (mainly procurement costs).

(4) Accelerating and expanding the development of differentiated technologies

SPP will accelerate and expand the development of

differentiated technologies for the future without slowing

down. Examples include landing gear extension and

retraction system EHA (Electro-Hydrostatic Actuation), low

noise landing gear systems, and high performance oil

coolers for aircraft engines developed in the Aerospace and

Related Products segment, new applications (e.g. hydrogen

applications) created by Heat Control Products using

diffusion bonding technology, and the expansion of product

lines of Semiconductor/MEMS Manufacturing Equipment by

offering new original products.

There are actually some delays in achieving our long-term

vision. Facing the difficult reality, however, we are prepared

to ensure we realize our aspiration. We appreciate the

support of our stakeholders.

F i n a n c i a l H i g h l i g h t sF o r t h e y e a r s e n d e d M a r c h 3 1 , 2 0 1 6

¥51.21 billion (+ 8.6%) (- ¥0.24 billion) (- ¥2.04 billion)

¥1.34 billion △¥0.59 billion

Net sales

Operating income

Operating margin (not including the SPTS business)

Net income attributable to owners of the parent

Total assets

Equity ratio

Per share

Net income

Cash dividends

(million ¥)

(million ¥)

(%)

(million ¥)

(million ¥)

(%)

(¥)

(¥)

52,296

4,193

1.2

6,695

72,603

45.6

126.37

8.00

2011

40,171

430

1.1

263

75,585

44.1

4.96

7.00

2012

45,032

963

2.1

585

79,948

41.0

11.05

7.00

2013

47,135

1,598

3.4

1,450

81,899

42.4

27.39

7.00

2014

51,211

1,349

2.6

△ 595

83,099

39.7

△ 11.24

7.00

2015

55,000

1,450

2.6

700

84,000

40.6

13.22

7.00

2016Forecast

Contribution from SPTS*

Net Sales

Operating Margin (not including the SPTS business)

Total AssetsEquity Ratio

Resul ts for F iscal 2015

N e ts a l e s

Operatingincome

N e ti n c o m e*

56,237

52,296

40,171

45,03247,135

2010

42,767

2009

48,805

2008

49,903

2007

50,151

2006 2011 2012 2013 2014 2015

51,211

55,000

2016Forecast

▶ Net Sa les・Operat ing Marg in (not including the SPTS business)

80,095

72,60375,585

79,948

2010

81,283

2009

77,674

2008

72,363

2007

67,293

2006 2011 2012 2013 2014 2015

81,899 83,099 84,000

2016Forecast

▶ Tota l Asse ts・Equ i t y Ra t io（million ¥）（%）（%）（million ¥）

6.3 6.1

△1.7

0.6

2.0

1.21.1

2.1

3.4

44.1

39.8

34.2

29.4

35.0

45.644.1

41.042.4

39.7 40.6

2.62.6

0

-10,000

10,000

20,000

30,000

40,000

50,000

60,000

70,000

0

-2.5

5

10

15

100

90

80

70

60

50

40

30

20

10

00

100,000

90,000

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

*SPP Process Technology Systems (SPTS) has been excluded from consolidation since the third quarter of fiscal 2011, following the transfer of the SPTS shares in the first half of that fiscal year.

*Net income attributable to owners of the parent

5 6

Bus iness Pro f i l e

9.5 8.5 9 9 8.4 10 9

11.7 12 12.8 17.6 20.9 23.2 25.5

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016Forecast

Aiming to be a global Tier 1 supplier

12/2014: Wins Dornier Seastarlanding gear contract

07/2006: Wins HJ landinggear development contract

Startingcommercial-production

Starting commercial-production

04/2012: Starts buildingCanadian operation

01/2008: Wins MRJ landinggear development contract

Early phase ofcommercial-production

Private demand ratio:Over 20% → Over 70%

Starting full-fledgeddevelopment programsBecoming a Global Tier 1 supplier of landing gearEntering the development/commercial-productioncycle of heat control systems

Full-fledged developmentfor the private sectorGrowing into a landing gear system integratorDiversifying heat control systems

Products for public sectorDelivery of componentsfor private-sector applications (Tier 2)

S e g m e n t O v e r v i e w A e r o s p a c e a n d R e l a t e d P r o d u c t s

Major product lines and SPP’s Strengths

Landing Gear Systems

Thermal management and the joining of metal materials are SPP’s specialties here.

High efficiency, compact size, and low weight as well as shapes that help reduce air drag contribute to reducing the fuel consumption and noise of aircraft engines.

Since the 1980s, SPP has supplied heat exchangers for almost all engine series of Rolls-Royce, one of the big three manufacturers of aircraft engines.

Technologies developed for aircraft hydraulic equipment are leveraged to offer hydraulic pumps featuring low consumption, low pulsation, and low noise for various applications such as transport equipment and general industrial equipment.

Under strong partnership with the Haitian group, the world’s largest manufacturer of injection molding equipment, a joint venture has been established to develop business in China.

The root of SPP’s Aerospace and Related Products segment is propeller

production, which started in 1933, and its main products currently include

landing gear and heat exchangers.

In 1957, SPP delivered the landing gear system for the T-33 training aircraft to

the former Japanese Defense Agency. Since then, aircraft for the Agency (now

upgraded to a ministry) have almost exclusively been equipped with landing

gear systems from SPP. SPP has also entered into the regional jet market and

has been successful in the area of commercial aircraft. In 1997, the company

worked with U.S.-based Menasco to win a landing gear system project for the

CRJ700 from Bombardier in Canada. In addition, the company is striving to

increase its market share, receiving orders from customers including an order

from Mitsubishi Aircraft Corporation for the MRJ 90 landing gear system.

Furthermore, SPP offers general industrial hydraulic products using hydraulic

control technologies developed in the aircraft equipment business.

SPP Aims to Become Global Tier 1 Supplier of Landing Gear Systems

for Business-Regional Aircraft SPP has aimed to establish its position as a global Tier 1 supplier in the

commercial aircraft market by taking advantage of the technology it has

long developed in public-sector business as a landing gear maker.

Demand for airframes is anticipated to expand in general. Among them,

SPP’s target airframes are of business or regional jets with fewer than

100 seats.

To this end, we have faced the three requirements to be met by a

landing gear system integrator: technological ability, overseas operations,

and MRO.

Regarding technological development ability, SPP has accumulated

technologies by participating in development of MRJ, HondaJet, etc.,

and has refined them by developing new generation technologies. As for

overseas operations, SPP has set up its Canadian subsidiary and

acquired a local company, in order to build a structure to conduct

precision machining and special surface treatment in an integrated

manner. In addition, SPP has built a structure to provide global MRO

services through acquisition and collaboration.

These efforts have ensured continued success, including the first order

received from Dornier, a German company, in 2014. By making full use

of these resources, SPP will strive to acquire more orders.

01,000

-1,000-2,000-3,000-4,000

2,0003,0004,0005,000

Number of aircraftin service

2015 20352015～35

3,267

Retirements

-2,986

New deliveries3,642


3,923

Number of aircraft

Pro jected Demand for Regiona l Jets wi th 20 to 99 seats(Source: Japan Ai rcraf t Deve lopment Corporat ion)

0

10,000

20,000

30,000

40,000

50,000

-10,000


2015 20352015～35

19,947

Retirements-7,325

New deliveries26,349

Number of aircraftin service38,971

Number of aircraft

Pro jected Demand for Bus iness Jets(Source: Japan Ai rcraf t Deve lopment Corporat ion)

Note: A T ier 1 suppl ier concludes d i rect contracts wi th a i rcraf t manufacturers and is involved in the development and commercia l-product ion of landing gear systems r ight f rom the in i t ia l phase of a i rcraf t pro jects.

Note: MRO stands for maintenance, repai rs, and overhaul .

Private demandPublic demand

Many years of experience in the design, development, and production technology for landing gear, with a focus on the outstanding precision machining of high-strength metal materials

Today, SPP products account for some 80% of the landing gear systems installed in the Defense Ministry’s air fleet.

Approximately 15% share of the regional jet market

Involvement in the development projects on the MRJ and HondaJet, both promising products for Japan’s future aviation industry provide opportunities to make technical achievements as a landing gear system integrator.

Purchase of a Canadian specialized surface finishing service provider leads to establishing a production system combining precision machining and specialized surface finishing.

In Japan, SPP took over ANA MRO operations to found a subsidiary in Nagasaki. SPP also works with Lufthansa to strengthen overseas MRO.

QT PumpsHS Pump

Trent 1000®Engine FOHETrent 1000®Engine(Photograph : Courtesy of Rolls-Royce plc.)

Trent 1000®Engine SACOC

CRJ700/900/1000 Dressed Main Landing Gear AssyImpact absorption during landing

CRJ700/900/1000 Dressed Nose Landing Gear AssySteering of surface movement

CRJ1000 (from Bombardier Web Page)

Heat Management Systems

CX Pump

Hydraulic Control Products

Technologicaldevelopmentability as a

Tier 1 supplier

RequirementPrevious Mid-Term Plan

（2011～13）Current Mid-Term Plan（2014～16）

Aspiration 2020（2017～）

Overseasoperations

MRO

Purchase of domestic MROSpecialist (SPPNECO)

Partnership with Lufthansafor overseas MRO

Foundation ofNorth American Subsidiary (SPPCA)

Purchase of CFN

Mitsubishi Regional Jet（MRJ）／HondaJet (HJ)development

MRJ/HJMRJ’s first flight

HJ’s first flight in Japan /Start of commercial-production /Acquisition of FAA Type Certification

Development of new-generation (next-generation and derived) technologies

Promotion of overseas operations(from Tier 2 to Tier 1)

Wins Dornier contract on Seastar CD 2 landing gearAcquisition of Tecnickrome, a Canadian company

Expansion of MRO operationsTo be utilized also for products

for other airlines, as well as the public sector

To become a Global Tier 1Supplier of landing gearfor business -regional aircraft

Net Sales（billion ¥）

0

10

20

30

40

50

7 8


LNG Vaporizer Heat Exchanger for Air Separation Plant

AOP water treatment systemOzone generator

● Construction of a New Plating Factory for Aircraft Parts

As for Heat Control Products, SPP is proud to have the world’s No. 1 share in

the LNG vaporizer market and is highly regarded in various industries for its

compact, high-performance plate-fin heat exchangers that can be used for

various energy-related products.

In the environmental business area, SPP will provide ozone generators used for

water treatment, semiconductor manufacturing, etc.

SPP is also developing fuel cells by combining technologies that it has cultivated

in various business areas.

S e g m e n t O v e r v i e wH e a t E n e r g y a n d

E n v i r o n m e n t a l R e l a t e d

P r o d u c t s


Heat Control Products

New Operations | Fuel Cells (SOFCs)

Ozone generating technology is used as a basis to deliver advanced water treatment systems that are ideal for decomposing persistent substances.

Ozone generators are also provided for the production of semiconductors.

Technology developed for aircraft heat exchangers is applied to industrial equipment

SPP open-rack LNG vaporizers (ORVs) have a higher share (60%) of the world market than any other competitor.

With their high reliability and quality, SPP’s high-performance, compact, and lightweight plate-fin heat exchangers are acclaimed as world-class products.

Domestic market share of heat exchangers for cryogenic applications (for air separation plants, petrochemical plants, etc.) is almost 100%, while the global share is 20 to 30%.

SPP serves Japanese heavy electrical equipment manufacturers as their main supplier of inverter-controlled element coolers for fast trains. SPP’s element coolers for Shinkansen bullet trains boast the monopoly of the Japanese market.

In the fiscal year under review (fiscal 2015), Aerospace and Related

Products achieved net sales of ¥33.17 billion, an increase of 13.1% from

the previous year. Operating income rose by 20.5% to ¥1.87 billion. The

segment posted year-on-year growth in both revenue and earnings.

Revenue grew primarily due to increased sales of landing gear parts,

aircraft heat exchangers, etc., acquisition of a Canadian surface finishing

service provider, and the effect of yen depreciation, while earnings grew

due to reduced fixed cost burdens through business enhancement, as

well as cost saving and other activities.

In fiscal 2016, the segment anticipates a further increase in net sales to

¥34.5 billion, but its operating income is expected to decrease to ¥1.45

billion, primarily due to the effects of the yen appreciation, sales mix, and

inventory reduction measures, as well as increased development costs

and other factors.

▶ Overview of Business Performance 　 in Fiscal 2015

In January 2016, SPP completed the construction of a new plating

factory for aircraft parts inside the premises of the head office/factory.

As part of measures to strengthen its core competencies, SPP has

installed in the factory electroless nickel plating equipment that is

applicable to large landing gear structure parts for regional jets.

Electroless nickel plating is corrosion and abrasion-resistant surface

treatment technology that is more environmentally friendly than other

plating technologies and is gathering a great deal of attention. This

new factory has the capacity to conduct the plating process for large

landing gear structure parts for 20 regional jets per month.

SPP aims to further improve the quality of its aircraft landing gear

products by implementing this new equipment, and also develop its

Aerospace business by improving competitiveness.

● MRJ’s first fl ight

On November 11, 2015, the first test flight for MRJ was made. SPP

has participated in the development of MRJ’s landing gear system.

MRJ is a domestic passenger aircraft developed for the first time in

approximately 50 years. We think it is a great honor to be able to get

involved in this development.

We will make every effort to continuously provide support for flight

testing and commercial production.

¥33.17 billion

¥1.87 billion

T O P I C S

N e ts a l e s

Operatingincome

34,50033,171

29,329

2016（Forecast）

20152014

Net Sales（million ¥）

10,000

0

20,000

30,000

40,000

1,450

1,875

1,555

2016（Forecast）

20152014

OperatingIncome

（million ¥）

500

0

1,000

1,500

2,000

Environmental Systems

9 10


Silicon Deep Etching System SiO2 Sacrificial Layer Etching System

Shifting Focus Areas and Developing New Business Areas to comply

with Changes in DemandSPP’s Heat Energy and Environmental Related Products segment is

struggling due to customers’ stagnant investment activities mainly

related to energy-related sectors, China’s economic slowdown, and

other factors.

To find a way out of this situation, SPP is reviewing its product portfolio

of Heat Control Products. SPP’s main heat exchangers for cryogenic

applications have been used in air separation plants such as steel and

chemical plants, but demand for such products is on the decline mainly

in Japan. Accordingly, SPP is shifting the focus to energy-related

products mainly in overseas markets. In the case of Industrial heat

exchangers, SPP has also focused on domestic makers if they are used

for trains, but will strengthen its activities to gain orders from overseas

makers. In addition, SPP will develop applications using unconventional

diffusion bonding technology as its first priority issue, like

hydrogen-related products.

On the other hand, the business restructuring of Environmental Systems

while the review of China business is underway and the searches for new

business areas in which ozone technology can be used (i.e. core

competence) are considered urgent issues.

Product portfolio restructuring in compliance with changes in demand

Heat exchangers for cryogenic applications

Issues in Heat Energy and Environmental Related Products

For air separation plants For overseas energy-related products

Industrial heat exchangers

Mainly for domestic high-speed train makers

Strengthen activities to receive orders from overseas makers (in Europe, etc.)

Development of new business areas

Heat control products

Development of applications using unconventional diffusion bonding technology (e.g. Hydrogen-related applications)

Environmental systems (Ozone generators)

Review of China business, and searches for new business areas in which ozone technology can be used

In the fiscal year under review (fiscal 2015), Heat Energy and

Environmental Related Products achieved net sales of ¥12.45 billion, a

drop of 13.2% from the previous fiscal year, and incurred an operating

loss of ¥0.02 billion. Both sales and profit declined mainly due to

decreased sales of LNG vaporizers despite a high level of the previous

year sales thanks to large contract deals. Also a factor was uncertainty

of the energy-related business affected by lower crude oil prices and

customers’ sluggish investment activities caused by China’s economic

slowdown and other factors.

In fiscal 2016, net sales are forecast to increase slightly to ¥13 billion

because the macro environment of this business mainly in relation to

heat control products will not recover on a full-scale basis. This segment

is expected to achieve a turnaround and generate income of ¥0.1 billion.

However, it will take some time to achieve a significant increase in

income.


In the fiscal year under review (fiscal 2015), ICT Related Products

achieved net sales of ¥5.58 billion, an increase of 61.4% from the

previous fiscal year, but incurred an operating loss of ¥0.5 billion. Net

sales increased thanks to business acquisitions aiming to obtain

synergies, but there was little effect on earnings because of goodwill

amortization, etc. As a result, development costs were not absorbed

by income, and the segment incurred a loss.

In fiscal 2016, net sales are forecast to be ¥7.5 billion mainly because

sales of MEMS and semiconductor manufacturing equipment are

expected to recover and increase. However, this segment is forecast to

incur an operating loss of ¥0.1 billion because it needs to continuously

bear the burden for commercializing and launching developed

products. It will take some more time to achieve a turnaround.


¥12.45 billion

△¥0.02 billion

N e ts a l e s

Operatingincome

¥5.58 billion

△¥0.5 billion

N e ts a l e s

Operatingincome

100

200

300

400

50013,000

12,455

14,347

2016（Forecast）

20152014


5,000

10,000

15,000

0

100

△23

410

2016（Forecast）

20152014

OperatingIncome

（million ¥）

0

-100

S e g m e n t O v e r v i e w I C T R e l a t e d P r o d u c t s

The ICT Related Products segment prov ides MEMS and

semiconductor manufacturing equipment. SPP is a leading company

providing silicon etching equipment and silicon oxide sacrificial layer

etching equipment which are indispensable for MEMS production. In

1995, SPP became the first provider in the world of silicon etching

equipment.

SPP will also strive to develop high-precision sensors and other MEMS

devices using MEMS manufacturing equipment.


MEMS/Semiconductor Manufacturing Equipment

Satisfactory product line-up of MEMS and semiconductor manufactur-ing equipment enabling users to conduct a wide range of processes from development and trial production to commercial production

As for silicon etching equipment used for three-dimensional forming of electronic devices such as MEMS, our main products, we supply 90% of products demanded globally using our original technologies, together with SPTS Technologies, our partner company (SPP conducts this business mainly in the Japanese market).

Acquired a US-based Thermal Products business for semiconductor industry in June 2015. Aim to secure a foothold for overseas business development and obtain synergies.

New Operations | High Precision Gyro/MEMS Devices, Wireless Sensor Networks

7,500

5,585

3,459

2016（Forecast）

20152014


0

10,000

8,000

6,000

4,000

2,000

△100

△503

△367

2016（Forecast）

20152014

OperatingIncome

（million ¥）

-500

-400

-300

-200

-100

0

-600

100

11 12

Affiliated Companies

Individual business segmentsand indirect department

Business Study Meetings

Responsible Director

Internal AuditingDepartment

ManagementConference

CSRCommittee

AccountingAuditor

Audit & SupervisoryBoard

Audit & SupervisoryBoard Members’ Office

ComplianceCommittee and otherspecial committees

Internal audit

Decision-making Supervision

Appointment/dismissal

Externalaudit


Cooperation

Audit

Monitoringcontrol

President andRepresentative Director

General Meeting of Shareholders

Board of Directors(including two external directors)


Legal AdvisorAdvice

Directors and Audit & Supervisory Board Members (As of June 28, 2016)

■ A u d i t & S u p e r v i s o r y B o a r d M e m b e r s

■ D i r e c t o r s

In charge of Aerospace

In charge of Quality Assurance･ Thermal Control Systems –Aerospace, Research, Purchasing & Transportation

In charge of Heat Exchangers

In charge of Project Management･ Engineering & Development -Aerospace

In charge of Sales & Marketing-Aerospace

In charge of General Administration, Factory Innovation Center

In charge of Sensor, Wireless Sensor Network & Systems, MEMS & Sensor Systems, Fuel Cell Systems

In charge of Corporate Planning, Controlling & Treasury, Information Systems

In charge of Business Strategy Planning･ Production･ Procurement･ Engineering･ Quality Assurance -Heat Exchangers

Attorney at Law

In charge of TSV System Development, Micro Technology

Shinichi MIKIPresident

Yoshio TAOKAExecutive Vice President

In charge of Industrial Hydraulic, Environmental Systems, Microelectronics Technology, Corporate Environmental Control & Facilities Engineering

Kiyotaka NOGIExecutive Vice President

Former Mayor of Amagasaki CityExternal Director, GUNZE LIMITEDExternal Director, PEGASUS SEWING MACHINE MFG. CO., LTD.

Special Advisor, Daikin Industries, Ltd.

Guntaro KAWAMURAExternal Director

Aya SHIRAIExternal Director

Katsuhiko HAMADASenior Managing Director

Shinj i MORINOBUSenior Managing Director

Natsuo HASHIMOTOManaging Director

Jun SHIRAISHIManaging Director

AyumuTAKAHASHIManaging Director

Yoshifumi KAWAKAMISenior Audit & Supervisory Board Member

Takayuki DEJIMASenior Audit & Supervisory Board Member

Ei ichi MORIExternal Audit & Supervisory Board Member

General Manager, Group Companies Planning Division, Nippon Steel & Sumitomo Metal Corporation

Hiroshi ITOExternal Audit & Supervisory Board Member

Attorney at Law

Yasumasa NAKANISHIExternal Audit & Supervisory Board Member

Akihiko MATSUYUKIManaging Director

Junichi SUEKANEDirector

In charge of Business Strategy Planning･ Production･ Strategic Procurement -Aerospace

Masato AYANIDirector

Takayuki KASHIWAManaging Director

Toshihiro HAYAMIManaging Director

C o r p o r a t e G o v e r n a n c e

■ C o r p o r a t e G o v e r n a n c e S y s t e mSPP has adopted a corporate governance system that consists of the

Board of Directors including independent external directors and the

Audit & Supervisory Board.

The Board of Directors meets at least once every month to make

decisions on important matters and supervise the implementation of

specific tasks. Management Conference meetings of the senior

management and Business Study Meetings at individual departments

are also held as appropriate to ensure exhaustive discussion. If

necessary, our legal advisor provides relevant advice. These

procedures allow the company to carry out its operations in a timely

and appropriate fashion.

Audit & Supervisory Board members attend meetings of the Board of

Directors and other significant meetings to correctly understand and

supervise the way the company is managed. They also utilize the

Audit and Supervisory Board Members’ Office to help audit the

internal control system and the risk management structure. Under an

agreement with an accounting auditor, the company conducts

regular audits and, as the need arises, receives professional advice.

■ I n t e r n a l C o n t r o l S y s t e mSPP carries resolutions at its Board of Directors meetings with regard to the basic policy of its internal control system (i.e. the foundation of corporate

governance), and then verifies the effectiveness of the system whenever necessary, aiming for system enhancement and improvement at all times. The

outline of the system is described below.

(1) Compliance

SPP aims to make its employees more aware of legal compliance through

Compliance Committee activities and has also set up a whistle-blowing desk

for early discovery and prevention of violations of laws, etc.

(2) Risk management

SPP holds special committees on business execution risk on a regular basis, aiming

to understand and reduce individual risks. The CSR Committee is responsible for

overall risk management by controlling individual special committees.

(3) Business execution

SPP determines important management matters by holding Board of

Directors meetings where executive directors regularly report their job

execution statuses. SPP has also implemented a system to promote

appropriate and prompt business operations by holding regular Management

Conference meetings and Business Study Meetings at individual departments

and having discussions on important issues.

(4) Group management

SPP offers CSR training to employees including those of its subsidiaries, etc.

so that it can disseminate its group corporate principles and code of conduct.

In addition, its special committee activities include those for subsidiaries, etc.

SPP also aims to comply with its management policy by obligating its

subsidiaries to discuss and report important matters, giving careful

consideration when preparing annual plans and semiannual budgets, and

holding information exchange meetings.

(5) Audit and Supervisory Board members

Audit and Supervisory Board members conduct audits by attending important

meetings including the Board of Directors meetings, inspecting important

documents, gathering information including directors’ reports, etc., and

conducting other activities.

13 14

Safety and Health Committee

Product Liability Committee

Quality Assurance Committee

Human Rights/Diversity Promotion Committee

Environmental Management Committee

Information Security Committee

Risk Management Committee

Compliance Committee

CSRCommittee

Factory tour offered to shareholders

Seihokai’s cleanup activities

Factory tour offered to deaf school students

In the medium term, SPP has the basic policy of hiring 10 to 20 university

and college graduates and 20 to 30 graduates from professional schools

and high schools on a periodic basis. The company also responds

flexibly to the needs to expand operations by recruiting mid-career

employees. (SPP welcomed 50 periodically hired employees in April

2016, after recruiting 16 mid-career employees during fiscal 2015.)

The SPP management also faces up to the challenge of promoting

diversity. Specific measures include positive recruitment of the disabled

(the current employment of 32

persons surpasses the legally

required number of 29) and

establishing and improving

structures for empowering

women (in fiscal 2015, Amagasaki City approved SPP as a gender equality

promoter). In recent years, SPP has also committed to recruiting foreign

employees and interns in anticipation of retaining qualified personnel.

Recruitment plans and diversity commitment1

SPP cares about the communities in which it operates. We interact with

local people by making donations to local events and inviting them to our

summer festival. As we also agree with the broad aims of a local NPO

conducting environmental protection activities in Amagasaki City, SPP’s

hometown, we are cooperating with them by using the NPO’s toilet

paper made of recycled resources from 2015.

Seihokai, the group of SPP’s front-line foremen, spearheads the annual

cleanup of walks and ditches around the SPP Main Plant. We also take

part in Hyogo Prefecture’s

“Hyogo Adopt-Lighting

Maintenance Partners”

project, helping maintain

road lighting installed along

a prefectural route.

The SPP Group actively conducts CSR activities to fulfill its

corporate social responsibility. Chaired by the President, the CSR

Committee has built a framework for CSR activities to probe into

group management from the CSR perspective.

At the same time, we have established the “Code of Conduct” on

the basis of the “Company Principles.” Copies of a brochure

describing our CSR activities and the above rules and basic ideas

are distributed to all employees to develop a keen CSR

awareness.

CSR Activit ies

Employee Relat ions

The “Regulations on Measures against Natural Disasters” provide for

emergencies caused by natural disasters such as earthquakes and

typhoons. Following procedures stated in these regulations, every July

the company registers equipment likely to cause a hazard during natural

disasters, designates evacuation routes and spaces, and maintains an

emergency contact network. In addition, drills on responding to an

earthquake early warning (EEW) are conducted regularly-in May and

November-to ensure the safety of employees. Emergencies other than

natural disasters are addressed by establishing the “Crisis Management

Regulations.” Cards showing “Action to Be Taken in Emergencies Such as

Earthquakes and Terrorist Attacks” are provided to all employees to ensure

the fastest possible action and communication in the event of a disaster.

Measures against natural disasters and other emergencies2

Local contr ibutions2

Social contr ibutions1

Human r ights / Diversity4To increase employee awareness of human rights, promote diversity,

and thereby prevent and eliminate all forms of discrimination, SPP provides

relevant education programs including an annual human rights/diversity

lecture meeting as well as educational material distributed to all employees

during Human Rights Week (December 4 to 10). In addition, we strive to

take every opportunity to raise employee awareness of the need to

eliminate discrimination. Examples include providing education for new

employees (both new graduates and mid-career employees) and having

representatives participate in education programs provided by authorities.

SPP properly addresses harassment–most typically sexual harassment

and workplace bullying–by making separate contacts available for both

men and women.

In addition to committing itself to safety education, SPP holds meetings of

the Safety and Health Committee and monthly ceremonies to pray for safety

at an in-house shrine to improve the safety awareness of all employees.

In 2016, we are giving priority to three areas: continued implementation of

measures to increase safety sensibility, continued operation of the Occupational

Safety and Health Management System (S-OSHMS), and maintenance,

strengthening and environmental improvement of the workplace safety and

health management structure.

As part of our commitment toward employee mental health, SPP asks an external

counselor to visit the company twice a month to open a temporary clinic for

consultation on various concerns (such as those related to psychological

and physical health, human relationships, and family problems).

Safety, health, and f i re prevention3

Year20142015

2016（As of end of June）

020

151

Accidents resulting in leave Accidents not resulting in leave

Relat ions with Society

In fiscal 2015, SPP provided donations and support for various

educational institutions and cultural/sports initiatives. We took part in the

All Japan Student Indoor Flying Robot Contest as presenter, providing

and presenting winners with extra prizes.

SPP’s biannual blood donation events attracted a total of 306

contributors in fiscal 2015.

Shareholder and Investor Relat ions

IR activit ies and disclosureSPP conducts active IR activities to help shareholders and investors better understand our business policies and strategies.

More specifically, these include biannual (spring and autumn) presentations of financial results for institutional investors and

analysts, financial summaries and annual reports for shareholders, and communication via the SPP website. In fiscal 2015,

SPP offered its first factory tour to shareholders.

We will continue to disclose material facts and other relevant information in an appropriate manner via the security

exchange, news media, and our website.

We will remain committed to upgrading our information disclosure and ensuring the timeliness and usefulness of IR information.

C S R A c t i v i t i e s

Following the Sumitomo business slogan of “valuing credibility and

ensuring reliability,” the Sumitomo Precision Products group conducts

business on the following company principles. In so doing we

discharge our responsibilities to different stakeholders in ensuring

sustained business development and an increase in corporate value.

Company Principles

1. COMPLIANCE: Complying with laws and regulations, we will conduct all business activities based on the highest ethical standards.

2. CUSTOMER SATISFACTION: Focusing intensely on market demands and clients´ needs, we will continue to offer quality products and services to achieve the highest customer satisfaction possible.

3. CHANGE & CHALLENGE: Responding sensitively to global trends, we will boldly try to fully meet these changes and keep our eyes open to new opportunities that accompany this changing atmosphere.

4. HUMAN RESOURCES: Respect ing our human resources, we wi l l provide a support ive environment that encourages each individual's fulfillment and harmony among all employees.

5. COEXISTENCE WITH SOCIETY: By playing an active role in society, we will promote good citizenship with our community and harmony with the surrounding environment.

“Toward a Promising Future”Sumitomo Precision Products Group will continue to increase i ts g loba l p resence wi th innovative technology, and will pave its way toward a prosperous tomorrow.

15 16

Exhibit at the 2015 Paris Air Show

Source: JAXAhttp://www.aero.jaxa.jp/research/ecat/fquroh/

Environmental Management RepresentativeGeneral Manager of Corporate EnvironmentalControl & Facilities Engineering Department

Corporate Environmental Control &Facilities Engineering Department

Environmental ManagementCommittee

Internal EnvironmentalAuditor

Working Departments

Environmental Management Officer

1. Establish an environmental management system. Set and review environmental objectives and targets under the system to develop and continually improve environmental preservation activities involving all employees.

2. Reduce the environmental impact of individual phases of business operations, for example by preventing environmental pollution.

3. Comply with environmental laws, ordinances, and other requirements.4. Improve the environmental awareness of employees and facilitate their

environmental preservation activities.5. Promote company-wide activities for resources/energy saving and recycling.6. Take advantage of basic technologies that have long been developed in

individual fields including Aerospace, Hydraulic Control, Heat Control, and Industrial Products, and Environmental Systems to promote the development of environmental preservation technologies and products as a means of social contribution.

Purchasing / Research /Corporate Environmental Control &Facilities Engineering Department

Sensor /New Operation Department

Industrial Equipment Systems Department

Heat ExchangersDepartment

AerospaceDepartment

Management andSales Department

As a responsible member of society, we recognize the significant need to

preserve the local and global environment and meet the challenge of “harmony

with the surrounding environment” stated in the company principle as one

of the top priorities in management, through the following actions:

Environmental Pol icy and Environmental Management

To reduce the environmental impact of its operations, SPP strongly commits

itself toward company-wide activities for saving energy and resources.

The resources-saving initiative focuses on recycling activities, including

not only the reuse of metallic waste generated from the production

process, but also the reuse of logistics and packaging materials and the

recycling of paper by meticulous separation.

The energy-saving work is spearheaded by the Energy-Saving

Committee. Individual workplaces are expected to reduce energy use

through stringent control. In addition, they try to make a difference

through small efforts, such as switching to energy-saving equipment,

removal of some lights, and turning off the power to unused equipment.

These activities do not immediately result in a substantial reduction in

company-wide energy usage because, at SPP, energy usage during

manufacturing differs depending on the product. But they do help us in

our efforts to maintain it at certain levels and even reduce it.

In developing new aerospace products, SPP always focuses on weight

savings, because component weight is an important determinant of the

aircraft’s fuel consumption, hence its environmental impact. SPP

development engineers also work actively to reduce noise emissions

as a way of contributing to environmental protection.

Environmental ly-Fr iendly Products

Aerospace and Related Products

In the aircraft industry, various types of electric components are currently

being used mainly due to the necessity of improving fuel efficiency

through weight reduction and reducing the burden on the environment.

Against this backdrop, SPP is striving to electrify its landing gear systems.

As landing gear extension and retraction system, in medium- and

large-sized aircraft, require a higher power than any other systems in an

aircraft, and it has been technically difficult to electrify such a system, it has

not been realized so far. SPP is getting closer to success in this field for the

first time in the world by adopting a method to operate an actuator using an

electric motor-driven hydraulic pump. We are still at the trial manufacturing

stage but have obtained favorable test results. The prototype was exhibited

at the 2015 Paris Air Show and received a great deal of attention.

■ Development of electric landing gear extension and retraction systems

Efficient, compact, and lightweight, SPP heat exchangers for aircraft

engines help increase aircraft fuel efficiency. Some of them feature

shapes that help reduce air drag, contributing to reducing noise.

■ Heat exchangers for energy-saving aircraft engines

All hydraulic pumps from SPP not only feature low energy consumption,

but also generate very low levels of noise.

■ Low-consumption and low-noise hydraulic pumps

▶ E n e r g y u s a g e

In the area of heat exchangers, SPP offers many product lines

that help spread clean energy sources and promote the efficient

use of energy by providing support in saving energy and reducing

environmental impact. Environmentally-friendly products account

for half of the SPP heat exchanger lineup.

Heat Exchangers

Natural gas is regarded as friendly to

the environment since it generates

low emissions of CO2 and NOx and

no sulfur oxides during combustion.

SPP develops and produces equipment

that vaporizes natural gas liquefied

for transport purposes (LNG).

■ LNG Vaporizers

Hydrogen is raising expectations as a clean source

of energy since the gas generates no CO2

emissions during combustion. All-out national

efforts are now underway to build a hydrogen-based

society. Hydrogen supply infrastructure is the key

requirement for a widespread use of hydrogen fuel

cell vehicles. In this connection, SPP has worked

on the development of diffusion bonded heat

exchangers for hydrogen stations. In 2015, SPP

made the first delivery of this product.

■ Development of heat exchangers for hydrogen stations

■ Development of fuel cells

Here, SPP works on landfill leachate treatment systems using

ozone and energy visualization systems. Fuel cells, which are

drawing enthusiastic attention as an environmentally friendly

power generation technology, are a further area of development

at SPP. Environmentally-friendly products account for some 40%

of SPP offerings in this category.

Other Industr ial Products

Committed toward social contributions through its business

activities, SPP offers many environmentally-friendly products, which

are designed to reduce environmental risks, increase the efficiency of

resources and energy use, or facilitate environmental preservation.

The company also strives to develop new environmental products

and technologies.

O2-

e-

ElectrolyteAnode electrode Cathode electrode

e-

hydrogen H2

Water H2O

reformingFuel**Such as utility gas, LP gas, or kerosene

Oxygen O2 air

E n v i r o n m e n t a l P r e s e r v a t i o n

Ini t iat ives for reducing environmental impact

Fuel cells generate electricity in an electrochemical reaction between oxygen from the air and hydrogen extracted from various fuels such as utility gas. With its high generating efficiency, fuel cell technology produces lower CO2

emissions compared with thermal power generation. It improves energy efficiency even further since the heat generated during power generation can also be used as an energy source. Another highlight is that it generates very little noise, sulfur oxides, or nitrogen oxides.

■ AOP Water Treatment System　 (landfill leachate treatment system)

■ EcoWizard 　 (energy visualization system)

QT PumpsHS PumpsHeat Exchangers for Aircraft Engines

Energy usage GJ（Thousand）

Specificconsumption

2010 2011 2012 2013 2014 2015

Energy usage GJSpecific consumption per ¥million of added value

17 18

0

100

200

300

400

500

600

0

0.2

0.4

0.6

0.8

1.0

1.2

Mil l ions of YenThousands of U.S. Dol lars

(Note 1)

2016 2015 2016


(Note 1)

2016 2015 2016

C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t sS u m i t o m o P r e c i s i o n P r o d u c t s C o . , L t d . a n d C o n s o l i d a t e d S u b s i d i a r i e s

C o n s o l i d a t e d B a l a n c e S h e e tM a r c h 3 1 , 2 0 1 6

ASSETS

CURRENT ASSETS:

Cash and cash equiva lents (Note 15)

Notes and accounts receivable (Note 15) :

Trade

Unconsol idated subsid iar ies and associated companies

A l lowance for doubtfu l accounts

Inventor ies (Note 6)

Deferred tax assets (Note 12)

Other current assets

Tota l current assets

PROPERTY, PLANT AND EQUIPMENT:

Land (Note 7)

Bui ld ings and structures (Note 7)

Machinery and equipment

Lease assets (Note 14)

Construct ion in progress

Tota l

Accumulated depreciat ion

Net property, p lant and equipment

INVESTMENTS AND OTHER ASSETS:

Investment secur i t ies (Notes 5 and 15)

Investments in and advances to unconsolidated subsidiaries and associated companies

Intangib le assets:

Goodwi l l

Other intangib le assets

Deferred tax assets (Note 12)

Other assets

A l lowance for doubtfu l accounts

Tota l investments and other assets

TOTAL

¥6,958

22,201

162

（11）

24,995

1,070

552

55,927

4,658

19,677

36,765

502

51

61,653

（42,277）

19,376

2,052

1,558

2,513

960

485

287

（59）

7,796

¥83,099

¥8,968

20,714

216

(9)

25,643

1,068

378

56,978

4,683

19,198

35,566

415

69

59,931

(40,407)

19,524

2,187

1,710

159

712

400

251

(22)

5,397

¥81,899

$61,783

197,132

1,439

（98）

221,941

9,501

4,901

496,599

41,360

174,720

326,452

4,458

453

547,443

（375,395）

172,048

18,221

13,834

22,314

8,524

4,307

2,548

（524）

69,224

$737,871

¥17,421

7,917

2,708

5,036

18

858

3,734

64

1,365

2,064

41,185

6,408

285

1,214

136

104

8,147

10,312

11,332

11,999

（98）

699

（192）

（1,059）

32,993

774

33,767

¥83,099

¥13,610

2,461

2,795

5,085

22

251

2,827

1,103

1,310

1,946

31,410

13,364

759

742

134

80

15,079

10,312

11,332

12,965

(95)

696

194

(680)

34,724

686

35,410

¥81,899

$154,688

70,298

24,045

44,717

160

7,619

33,156

568

12,120

18,328

365,699

56,899

2,531

10,780

1,208

923

72,341

91,565

100,622

106,544

(870)

6,206

(1,705)

(9,403)

292,959

6,872

299,831

$737,871

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Short- term bank loans (Notes 7 and 15)

Current port ion of long-term debt (Notes 7 and 15)

Payables (Note 15) :

Trade notes

Trade accounts

Unconsol idated subsid iar ies and associated companies

Construct ion

Other

Income taxes payable

Accrued expenses

Other current l iab i l i t ies

Tota l current l iab i l i t ies

LONG-TERM LIABILITIES:

Long-term debt (Notes 7 and 15)

Deferred tax l iab i l i t ies (Note 12)

L iabi l i ty for ret i rement benef i ts (Note 8)

Asset ret i rement obl igat ions

Other long-term l iab i l i t ies

Tota l long-term l iab i l i t ies

COMMITMENTS AND CONTINGENT LIABILITIES (Note 16)

EQUITY (Notes 7, 9 and 19):

Common stock, authorized, 200,000,000 shares; issued, 53,167,798 shares in 2016 and 2015

Capital surplus

Retained earnings

Treasury stock - at cost 233,988 shares in 2016 and 227,082 shares in 2015

Accumulated other comprehensive income:

Unrealized gain on available-for-sale securities

Foreign currency translation adjustments

Defined retirement benefit plans

Total

Noncontrolling interests

Total equity

TOTAL

See notes to consol idated f inancia l statements.

19 20


(Note 1)

Yen U.S. Dol lars

2016 2015 2016

Thousands of U.S. Dol lars

(Note 1)2016

Mil l ions of Yen

2016 2015

Thousands of Shares/Mi l l ions of Yen

Common Stock

Shares Amount Capita lSurplus

Reta inedEarnings

Shares Amount

UnrealizedGain on

Available -for-Sale Securities

ForeignCurrency

TranslationAdjustments

DefinedRetirement

BenefitPlans

Tota l Noncontrolling Interests

Tota lEqui ty

Treasury StockAccumulated Other

Comprehensive Income

Thousands of U.S. Dol lars (Note 1)

CommonStock

Amount Capita lSurplus

Reta inedEarnings

Amount

UnrealizedGain on

Available -for-Sale Securities

ForeignCurrency

TranslationAdjustments

DefinedRetirement

BenefitPlans

Tota l Noncontrolling Interests

Tota lEqui ty

TreasuryStock

Accumulated Other Comprehensive Income



C o n s o l i d a t e d S t a t e m e n t o f O p e r a t i o n sY e a r E n d e d M a r c h 3 1 , 2 0 1 6

C o n s o l i d a t e d S t a t e m e n t o f C h a n g e s i n E q u i t yY e a r E n d e d M a r c h 3 1 , 2 0 1 6

NET SALES

COST OF SALES (Note 14) Gross prof i t

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Notes 10 and 14) Operat ing income

OTHER INCOME (EXPENSES): Interest and div idend income Interest expense Loss on devaluat ion of secur i t ies Gain ( loss) on fore ign currency exchange Equi ty in earn ings of associated companies Prov is ion of a l lowance for doubtfu l accounts Gain on sa les of investment secur i t ies Business t ransformat ion expenses (Note 11) Subsidy income Other – net Other income - net

INCOME BEFORE INCOME TAXES

INCOME TAXES (Note 12) : Current Deferred Tota l income taxes

NET INCOME (LOSS)

NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS

NET INCOME (LOSS) ATTRIBUTABLE TO OWNERS OF THE PARENT

PER SHARE OF COMMON STOCK (Note 2.w): Basic net income Cash div idends appl icable to the year

BALANCE, APRIL 1, 2014

Cumulative effect of accounting change (Note 2.n)

BALANCE, APRIL 1, 2014

　Net income attributable to owners of the parent

　Cash div idends, ¥7.0 per share

　Change in scope of consolidation

　Purchase of t reasury stock

　Net change in the year

BALANCE, MARCH 31, 2015


Cash div idends, ¥7.0 per share

Change in scope of consolidation

Purchase of t reasury stock

Change in the parent's ownership interest

due to transactions with noncontrolling interests

Net change in the year




Cash div idends, $0.06 per share

Change in scope of consol idat ion

Purchase of t reasury stock

Change in the parent's ownership interest

due to transactions with noncontrolling interest

Net change in the year


¥51,211

39,72711,484

10,1351,349

87 (298) (420) (673)

(42)

71 (567)

61 (95)

(1,876)

(527)

427 (464)

(37)

(490)

105

¥(595)

¥(11.24)7.00

53,168

53,168

53,168

53,168

¥10,312

10,312

10,312

¥10,312

¥11,332

11,332

11,332

¥11,332

¥11,877

(20)

11,857

1,450

(370)

28

12,965

(595)

(371)

¥11,999

(222)

(222)

(5)

(227)

(7)

(234)

¥(92)

(92)

(3)

(95)

(3)

¥(98)

¥404

404

292

696

3

¥699

¥(35)

(35)

229

194

(386)

¥(192)

¥32,744

(20)

32,724

1,450

(370)

28

(3)

895

34,724

(595)

(371)

(3)

(762)

¥32,993

¥488

488

198

686

88

¥774

¥33,232

(20)

33,212

1,450

(370)

28

(3)

1,093

35,410

(595)

(371)

(3)

(674)

¥33,767

¥(1,054)

(1,054)

374

(680)

(379)

¥(1,059)

$91,565

$91,565

$100,622

$100,622

$115,122

(5,283)

(3,295)

$106,544

$(844)

(26)

$(870)

$6,180

26

$6,206

$1,723

(3,428)

$(1,705)

$308,330

(5,283)

(3,295)

(26)

(6,767)

$292,959

$6,090

782

$6,872

$314,420

(5,283)

(3,295)

(26)

(5,985)

$299,831

$(6,038)

(3,365)

$(9,403)

Di luted net income per share is not presented because no di lut ive secur i t ies ex ist .


$454,724

352,753101,971

89,99311,978

773 (2,646) (3,729) (5,976)

(373)

630 (5,034)

542 (844)

(16,657)

(4,679)

3,792 (4,120)

(328)

(4,351)

932

$(5,283)

$(0.10)0.06

C o n s o l i d a t e d S t a t e m e n t o f C o m p r e h e n s i v e I n c o m eY e a r E n d e d M a r c h 3 1 , 2 0 1 6

NET INCOME (LOSS)

OTHER COMPREHENSIVE INCOME (LOSS) (Note 17) : Unreal ized gain on avai lable- for-sa le secur i t ies Fore ign currency t rans lat ion adjustments Def ined ret i rement benef i t p lans Share of other comprehensive income ( loss) in associates Tota l other comprehensive income ( loss)

COMPREHENSIVE INCOME (LOSS)

TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO: Owners of the parent Noncontro l l ing interests

¥(490)

18 (343) (379)

(75) (779)

¥(1,269)

¥(1,357) 88

¥47,135

36,30910,826

9,2281,598

350(274)

(14) 691

89 (281)

508

73 (208)

934

2,532

1,290(335)

955

1,577

127

¥1,450

¥27.397.00

¥1,577

292201374

76943

¥2,520

¥2,345175

See notes to consol idated f inancia l statements. See notes to consol idated f inancia l statements.

$ (4,351)

160(3,046)

(3,365) (666)

(6,917)

$(11,268)

$(12,049) 781

(April 1, 2014, as previously reported)

(as restated)

21 22

Mil l ions of Yen

2016 2015 2016

Thousands of U.S. Dol lars

(Note 1)

N o t e s t o C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t sY e a r E n d e d M a r c h 3 1 , 2 0 1 6


1.BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS

The accompanying consolidated financial statements of Sumitomo Precision Products Co., Ltd. (the "Company") have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations and in accordance with accounting principles generally accepted in Japan ("Japanese GAAP"), which are different in certain respects as to application and disclosure requirements of International Financial Reporting Standards.In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the Company's consolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. In addition, certain reclassifications have been made in the 2015 consolidated financial statements to conform to the classifications used in 2016.The consolidated financial statements are stated in Japanese yen, the currency of the country in which the Company is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate of ¥112.62 to $1, the approximate rate of exchange at March 31, 2016. Such translations should not be construed as representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation - The consolidated financial statements as of March 31, 2016,

include the accounts of the Company and its eighteen (thirteen in 2015) significant subsidiaries (together, the "Group"). Tecnickrome Aéronautique Inc. and SPT Microtechnologies USA, Inc. and its consolidated subsidiaries became consolidated subsidiaries during the period.Under the control and influence concepts, those companies in which the Company, directly or indirectly, is able to exercise control over operations are fully consolidated, and those companies over which the Group has the ability to exercise significant influence are accounted for by the equity method.Investments in four (four in 2015) associated companies are accounted for by the equity method.Investments in the remaining unconsolidated subsidiary and associated company are stated at cost. If the equity method of accounting had been applied to the investments in these companies, the effect on the accompanying consolidated financial statements would not be material.The excess of the cost of acquisition over the fair value of the net assets of an acquired subsidiary at the date of acquisition is being amortized over a period of 10 years.All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit included in assets resulting from transactions within the Group is also eliminated.

b. Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements - In May 2006, the Accounting Standards Board of Japan (the "ASBJ") issued ASBJ Practical Issues Task Force ("PITF") No. 18, "Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements" which was subsequently revised in February 2010 and March 2015 to reflect revisions of the relevant Japanese GAAP or accounting standards in other jurisdictions. PITF No. 18 prescribes that the accounting policies and procedures applied to a parent company and its subsidiaries for similar transactions and events under similar circumstances should in principle be unified for the preparation of the consolidated financial statements. However, financial statements prepared by foreign subsidiaries in accordance with either International

Financial Reporting Standards or generally accepted accounting principles in the United States of America (Financial Accounting Standards Board Accounting Standards Codification—"FASB ASC") tentatively may be used for the consolidation process, except for the following items that should be adjusted in the consolidation process so that net income is accounted for in accordance with Japanese GAAP, unless they are not material: (a) amortization of goodwill; (b) scheduled amortization of actuarial gain or loss of pensions that has been recorded in equity through other comprehensive income; (c) expensing capitalized development costs of R&D; and (d) cancellation of the fair value model of accounting for property, plant and equipment and investment properties and incorporation of the cost model of accounting.

c. Unification of Accounting Policies Applied to Foreign Associated Companies for the Equity Method - In March 2008, the ASBJ issued ASBJ Statement No. 16, "Accounting Standard for Equity Method of Accounting for Investments" which was subsequently revised in line with the revisions to PITF No. 18 above. The standard requires adjustments to be made to conform the associate's accounting policies for similar transactions and events under similar circumstances to those of the parent company when the associate's financial statements are used in applying the equity method unless it is impracticable to determine such adjustments. In addition, financial statements prepared by foreign associated companies in accordance with either International Financial Reporting Standards or generally accepted accounting principles in the United States of America tentatively may be used in applying the equity method if the following items are adjusted so that net income is accounted for in accordance with Japanese GAAP, unless they are not material: (a) amortization of goodwill; (b) scheduled amortization of actuarial gain or loss of pensions that has been recorded in equity through other comprehensive income; (c) expensing capitalized development costs of R&D; and (d) cancellation of the fair value model of accounting for property, plant and equipment and investment properties and incorporation of the cost model of accounting.

d. Business Combinations - In October 2003, the Business Accounting Council issued a Statement of Opinion, "Accounting for Business Combinations," and in December 2005, the ASBJ issued ASBJ Statement No. 7, "Accounting Standard for Business Divestitures" and ASBJ Guidance No. 10, "Guidance for Accounting Standard for Business Combinations and Business Divestitures." In December 2008, the ASBJ issued a revised accounting standard for business combinations, ASBJ Statement No. 21, "Accounting Standard for Business Combinations." Major accounting changes under the revised accounting standard are as follows: (1) The revised standard requires accounting for business combinations only by the purchase method. As a result, the pooling-of-interests method of accounting is no longer allowed. (2) The previous accounting standard required research and development costs to be charged to income as incurred. Under the revised standard, in-process research and development costs (IPR&D) acquired in the business combination are capitalized as an intangible asset. (3) The previous accounting standard provided for a bargain purchase gain (negative goodwill) to be systematically amortized over a period not exceeding 20 years. Under the revised standard, the acquirer recognizes the bargain purchase gain in profit or loss immediately on the acquisition date after reassessing and confirming that all of the assets acquired and all of the liabilities assumed have been identified after a review of the procedures used in the purchase price allocation. The revised standard was applicable to business combinations undertaken on or after April 1, 2010.In September 2013, the ASBJ issued revised ASBJ Statement No. 21, "Accounting Standard for Business Combinations," revised ASBJ Guidance No. 10, "Guidance on Accounting Standards for Business

C o n s o l i d a t e d S t a t e m e n t o f C a s h F l o w sY e a r E n d e d M a r c h 3 1 , 2 0 1 6

OPERATING ACTIVITIES:

Income ( loss) before income taxes

Adjustments for :

Income taxes paid

Income taxes refunded

Depreciat ion and amort izat ion

Amort izat ion of goodwi l l

Increase in a l lowance for doubtfu l accounts

Increase in accrued expenses

Decrease ( increase) in l iab i l i ty for ret i rement benef i ts

Increase in asset ret i rement obl igat ions

Loss on devaluat ion of investment secur i t ies

Gain on sa les of investment secur i t ies

Loss (ga in) on fore ign currency exchange

Equi ty in earn ings of associated companies

Business structure improvement expenses

Changes in assets and l iab i l i t ies, net of ef fects:

Decrease in t rade notes and accounts receivable

Increase in inventor ies

Decrease ( increase) in other current assets

Increase (decrease) in t rade notes and accounts payable

Decrease ( increase) in other current l iab i l i t ies

Other – net

Tota l adjustments

Net cash prov ided by (used in ) operat ing act iv i t ies

INVESTING ACTIVITIES:

Purchases of property, p lant and equipment

Purchase of intangib le assets

Proceeds f rom sales of property, p lant and equipment

Purchases of investments in subsidiaries resulting in change in scope of consolidation

Purchases of investments in consol idated subsid iary

Purchases of investment secur i t ies

Proceeds f rom sales of investment secur i t ies

Payments of loans receivable

Proceeds f rom col lect ion of long-term loans receivable

Payment for acquis i t ion of business

Other – net

Net cash used in invest ing act iv i t ies

FINANCING ACTIVITIES:

Increase (decrease) in short- term bank loans – net

Proceeds f rom long-term debt

Repayments of long-term debt

D iv idends paid

Payments for sa les and redempt ion by insta l lment payment

Cash div idends paid to minor i ty shareholders

Other – net

Net cash prov ided by f inancing act iv i t ies

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH EQUIVALENTS

NET DECREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

CASH AND CASH EQUIVALENTS OF NEWLY CONSOLIDATED SUBSIDIARIES

CASH AND CASH EQUIVALENTS, END OF YEAR

¥(527)

(1,759)19

2,494177

5519

3420(71)204

42567

(1,766)769483

68180

81,9121,385

(2,105)(224)

32(1,511)

(245)

7(1,226)

(18)(5,290)

4,0191,023

(2,511)(371)(184)

(1)(3 )

1,972

(77)(2,010)

8,968

¥6,958

¥2,532

(412)45

2,46120

28429

(17)3

14(508)

(25)(89)

512(2,998)

83315

(299)258

(324)2,208

(4,453)(118)

(21)(7)

(31)511

(520)546

11(4,082)

(1,599)5,281

(2,299)(370)(201)

(2)(2 )

808

108(958)

9,83294

¥8,968

$(4,679)

(15,619) 169

22,145 1,572

488 169

27 3,729 (630)

1,811 373

5,034

(15,681) 6,828 4,289

604 1,598

71 16,977 12,298

(18,691) (1,989)

284 (13,417)

(2,175)

62 (10,886)

(160) (46,972)

35,686 9,084

(22,296) (3,295) (1,634)

(9 ) (26)

17,510

(684) (17,848)

79,631

$61,783See notes to consol idated f inancia l statements.

23 24


Combinations and Business Divestitures," and revised ASBJ Statement No. 22, "Accounting Standard for Consolidated Financial Statements." Major accounting changes are as follows:(a) Transactions with noncontrolling interest - A parent's ownership

interest in a subsidiary might change if the parent purchases or sells ownership interests in its subsidiary. The carrying amount of noncontrolling interest is adjusted to reflect the change in the parent's ownership interest in its subsidiary while the parent retains its controlling interest in its subsidiary. Under the previous accounting standard, any difference between the fair value of the consideration received or paid and the amount by which the noncontrolling interest is adjusted is accounted for as an adjustment of goodwill or as profit or loss in the consolidated statement of income. Under the revised accounting standard, such difference is accounted for as capital surplus as long as the parent retains control over its subsidiary.

(b) Presentation of the consolidated balance sheet - In the consolidated balance sheet, "minority interest" under the previous accounting standard is changed to "noncontrolling interest" under the revised accounting standard.

(c) Presentation of the consolidated statement of income - In the consolidated statement of income, "income before minority interest" under the previous accounting standard is changed to "net income" under the revised accounting standard, and "net income" under the previous accounting standard is changed to "net income attributable to owners of the parent" under the revised accounting standard.

(d) Provisional accounting treatments for a business combination - If the initial accounting for a business combination is incomplete by the end of the reporting period in which the business combination occurs, an acquirer shall report in its financial statements provisional amounts for the items for which the accounting is incomplete. Under the previous accounting standard guidance, the impact of adjustments to provisional amounts recorded in a business combination on profit or loss is recognized as profit or loss in the year in which the measurement is completed. Under the revised accounting standard guidance, during the measurement period, which shall not exceed one year from the acquisition, the acquirer shall retrospectively adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date and that would have affected the measurement of the amounts recognized as of that date. Such adjustments shall be recognized as if the accounting for the business combination had been completed at the acquisition date.

(e) Acquisition-related costs - Acquisition-related costs are costs, such as advisory fees or professional fees, which an acquirer incurs to effect a business combination. Under the previous accounting standard, the acquirer accounts for acquisition-related costs by including them in the acquisition costs of the investment. Under the revised accounting standard, acquisition-related costs shall be accounted for as expenses in the periods in which the costs are incurred.

The above accounting standards and guidance for (a) transactions with noncontrolling interest, (b) presentation of the consolidated balance sheet, (c) presentation of the consolidated statement of income, and (e) acquisition-related costs are effective for the beginning of annual periods beginning on or after April 1, 2015. Earlier application is permitted from the beginning of annual periods beginning on or after April 1, 2014, except for (b) presentation of the consolidated balance sheet and (c) presentation of the consolidated statement of income. In the case of earlier application, all accounting standards and guidance above, except for (b) presentation of the consolidated balance sheet and (c) presentation of the consolidated statement of income, should be applied simultaneously.Either retrospective or prospective application of the revised accounting

standards and guidance for (a) transactions with noncontrolling interest and (e) acquisition-related costs is permitted. In retrospective application of the revised standards and guidance, the accumulated effects of retrospective adjustments for all (a) transactions with noncontrolling interest and (e) acquisition-related costs which occurred in the past shall be reflected as adjustments to the beginning balance of capital surplus and retained earnings for the year of the first-time application. In prospective application, the new standards and guidance shall be applied prospectively from the beginning of the year of the first-time application.The revised accounting standards and guidance for (b) presentation of the consolidated balance sheet and (c) presentation of the consolidated statement of income shall be applied to all periods presented in financial statements containing the first-time application of the revised standards and guidance.The revised standards and guidance for (d) provisional accounting treatments for a business combination are effective for a business combination which occurs on or after the beginning of annual periods beginning on or after April 1, 2015. Earlier application is permitted for a business combination which occurs on or after the beginning of annual periods beginning on or after April 1, 2014.The Company applied the revised accounting standards and guidance for (a) transactions with noncontrolling interest, (b) presentation of the consolidated balance sheet, (c) presentation of the consolidated statement of income, and (e) acquisition-related costs above, effective April 1, 2015, and (d) provisional accounting treatments for a business combination above for a business combination which occurred on or after April 1, 2015. The revised accounting standards and guidance for (a) transactions with noncontrolling interest and (e) acquisition-related costs were applied retrospectively for all applicable transactions which occurred in the prospectively.With respect to (b) presentation of the consolidated balance sheet and (c) presentation of the consolidated statement of income, the applicable line items in the 2015 consolidated financial statements have been accordingly reclassified and presented in line with those in 2016.As a result, operating income and income before income taxes for the year ended March 31, 2016, decreased by ¥108 million ($959 thousand). In addition, basic net income per share for the year ended March 31, 2016, decreased by ¥2.03 ($0.02).The Group acquired 100% of the shares of Tecnickrome Aéronautique Inc. on June 4, 2015 and Thermal Products business on June 30, 2015, and accounted for these acquisitions by the purchase method of accounting.

e. Cash Equivalents - Cash equivalents are short-term investments that are readily convertible into cash and that are exposed to insignificant risk of changes in value. Cash equivalents include time deposits, which mature or become due within three months of the date of acquisition.

f. Inventories - Inventories are stated at the lower of cost, determined by the average method for finished goods, semi-finished goods, and work in process, by the specific identification method for certain work in process, and by the moving-average method for all raw materials and supplies, or net selling value.

g. Investment Securities - The standard requires all applicable securities to be classified and accounted for, depending on management's intent, as trading securities, held-to-maturity debt securities or available-for-sale securities. The Group does not have securities in the former two categories.Available-for-sale securities, which are not classified as either trading securities or held-to-maturity debt securities, are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported in a separate component of equity. Nonmarketable available-for-sale securities are stated at cost determined by the moving-average method. For other-than-temporary declines in fair value, investment securities are reduced to net realizable value by a charge to income.

h. Property, Plant and Equipment - Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment of the Company and its consolidated domestic subsidiaries is computed generally by the declining-balance method, while the straight-line method is principally applied to buildings and lease assets of the Company and property, plant and equipment of consolidated foreign subsidiaries. The range of useful lives is principally from 3 to 50 years for buildings and structures and from 4 to 9 years for machinery and equipment. The useful lives for lease assets are the terms of the respective leases.

i. Other Intangible Assets - Intangible assets, except for goodwill, are stated at cost less accumulated amortization, which is computed by the straight-line method over the estimated useful lives of the assets. The useful life is principally 5 years for software for internal use.

j. Long-Lived Assets - The Group reviews its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable. An impairment loss is recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling price at disposition.

k. Derivatives and Hedging Activities - The Group uses derivative financial instruments to manage its exposures to fluctuations in foreign exchange and interest rates. Foreign exchange forward contracts and interest rate swaps are utilized by the Group to reduce foreign currency exchange and interest rate risks. The Group does not enter into derivatives for trading or speculative purposes.Derivative financial instruments are classified and accounted for as follows: (1) all derivatives are recognized as either assets or liabilities and measured at fair value, and gains or losses on derivative transactions are recognized in the consolidated statement of income, and (2) for derivatives used for hedging purposes, if such derivatives qualify for hedge accounting because of high correlation and effectiveness between the hedging instruments and the hedged items, gains or losses on derivatives are deferred until maturity of the hedged transactions.Interest rate swaps which qualify for hedge accounting and meet specific matching criteria are not remeasured at market value but the differential paid or received under the swap agreements is recognized and included in interest expense.

l. Allowance for Doubtful Accounts - Notes and accounts receivable, including loans and other receivables, are valued by providing individually estimated uncollectible amounts plus the amounts for probable losses calculated by applying a percentage based on collection experience to the remaining accounts.

m. Allowance for Investment Loss - Allowance for investment loss provides for loss from investments to associated companies. The amount is estimated in light of the financial standings of the associated companies.

n. Retirement Benefits - The Company and its consolidated domestic subsidiaries have defined benefit retirement plans covering substantially all of their employees. The Group accounts for the liability for retirement benefits based on projected benefit obligations and plan assets at the consolidated balance sheet date.Effective April 1, 2000, the Company adopted a new accounting standard for retirement benefits and accounted for the liability for retirement benefits based on the projected benefit obligations and plan assets at the consolidated balance sheet date. The projected benefit obligations are attributed to periods on a straight-line basis. Actuarial gains and losses are amortized on a straight-line basis over 10 years

within the average remaining service period. Past service costs are amortized on a straight-line basis over 10 years within the average remaining service period.In May 2012, the ASBJ issued ASBJ Statement No. 26, "Accounting Standard for Retirement Benefits" and ASBJ Guidance No. 25, "Guidance on Accounting Standard for Retirement Benefits," which replaced the accounting standard for retirement benefits that had been issued by the Business Accounting Council in 1998 with an effective date of April 1, 2000, and the other related practical guidance, and were followed by partial amendments from time to time through 2009.(a) Under the revised accounting standard, actuarial gains and losses and

past service costs that are yet to be recognized in profit or loss are recognized within equity (accumulated other comprehensive income), after adjusting for tax effects, and any resulting deficit or surplus is recognized as a liability (liability for retirement benefits) or asset (asset for retirement benefits).

(b) The revised accounting standard does not change how to recognize actuarial gains and losses and past service costs in profit or loss. Those amounts are recognized in profit or loss over a certain period no longer than the expected average remaining service period of the employees. However, actuarial gains and losses and past service costs that arose in the current period and have not yet been recognized in profit or loss are included in other comprehensive income and actuarial gains and losses and past service costs that were recognized in other comprehensive income in prior periods and then recognized in profit or loss in the current period are treated as reclassification adjustments.

(c) The revised accounting standard also made certain amendments relating to the method of attributing expected benefit to periods, the discount rate and expected future salary increases.

This accounting standard and the guidance for (a) and (b) above are effective for the end of annual periods beginning on or after April 1, 2013, and for (c) above are effective for the beginning of annual periods beginning on or after April 1, 2014, or for the beginning of annual periods beginning on or after April 1, 2015, subject to certain disclosure in March 2015, all with earlier application being permitted from the beginning of annual periods beginning on or after April 1, 2013. However, no retrospective application of this accounting standard to consolidated financial statements in prior periods is required.The Group applied the revised accounting standard and guidance for retirement benefits for (a) and (b) above, effective March 31, 2014, and for (c) above, effective April 1, 2014. With respect to (c) above, the Group changed the method of attributing the expected benefit to periods from a straight-line basis to a benefit formula basis and the method of determining the discount rate from using the period which approximates the expected average remaining service period to using a single weighted average discount rate reflecting the estimated timing and amount of benefit payment, and recorded the effect of (c) above as of April 1, 2014, in retained earnings. The effects of adopting the revised accounting standard are immaterial.

o. Research and Development Costs - Research and development costs are charged to income as incurred.

p. Asset Retirement Obligations - In March 2008, the ASBJ issued ASBJ Statement No. 18, "Accounting Standard for Asset Retirement Obligations" and ASBJ Guidance No. 21, "Guidance on Accounting Standard for Asset Retirement Obligations." Under this accounting standard, an asset retirement obligation is defined as a legal obligation imposed either by law or contract that results from the acquisition, construction, development and normal operation of a tangible fixed asset and is associated with the retirement of such tangible fixed asset. The asset retirement obligation is recognized as the sum of the discounted

25 26


cash flows required for the future asset retirement and is recorded in the period in which the obligation is incurred if a reasonable estimate can be made. If a reasonable estimate of the asset retirement obligation cannot be made in the period the asset retirement obligation is incurred, the liability should be recognized when a reasonable estimate of the asset retirement obligation can be made. Upon initial recognition of a liability for an asset retirement obligation, an asset retirement cost is capitalized by increasing the carrying amount of the related fixed asset by the amount of the liability. The asset retirement cost is subsequently allocated to expense through depreciation over the remaining useful life of the asset. Over time, the liability is accreted to its present value each period. Any subsequent revisions to the timing or the amount of the original estimate of undiscounted cash flows are reflected as an adjustment to the carrying amount of the liability and the capitalized amount of the related asset retirement cost.

q. Leases - In March 2007, the ASBJ issued ASBJ Statement No. 13, "Accounting Standard for Lease Transactions," which revised the previous accounting standard for lease transactions. Under the previous accounting standard, finance leases that were deemed to transfer ownership of the leased property to the lessee were capitalized. However, other finance leases were permitted to be accounted for as operating lease transactions if certain "as if capitalized" information was disclosed in the notes to the lessee's financial statements. The revised accounting standard requires that all finance lease transactions be capitalized by recognizing lease assets and lease obligations in the consolidated balance sheet. The Company and its consolidated domestic subsidiaries applied the revised accounting standard effective April 1, 2008.All other leases are accounted for as operating leases.

r. Bonuses to Directors and Audit & Supervisory Board Members - Bonuses to directors and Audit & Supervisory Board members are accrued at the end of the year to which such bonuses are attributable.

s. Construction Contracts - In December 2007, the ASBJ issued ASBJ Statement No. 15, "Accounting Standard for Construction Contracts" and ASBJ Guidance No. 18, "Guidance on Accounting Standard for Construction Contracts." Under this accounting standard, construction revenue and construction costs should be recognized by the percentage-of-completion method if the outcome of a construction contract can be estimated reliably. When total construction revenue, total construction costs and the stage of completion of the contract at the consolidated balance sheet date can be reliably measured, the outcome of a construction contract is deemed to be estimated reliably. If the outcome of a construction contract cannot be reliably estimated, the completed-contract method should be applied. When it is probable that the total construction costs will exceed total construction revenue, an estimated loss on the contract should be immediately recognized by providing for a loss on construction contracts.

t. Income Taxes - The provision for income taxes is computed based on the pretax income included in the consolidated statement of income. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax of assets and liabilities. Deferred taxes are measured by applying currently enacted income tax rates to the temporary differences.

u. Foreign Currency Transactions - All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at the exchange rates at the consolidated balance sheet date. The foreign exchange gains and losses from translation are recognized in the consolidated statement of income.

v. Foreign Currency Financial Statements - The consolidated balance sheet accounts and revenue and expense accounts of the consolidated foreign

subsidiaries are translated into Japanese yen at the current exchange rate as of the consolidated balance sheet date except for equity, which is translated at the historical rate. Differences arising from such translation are shown as "Foreign currency translation adjustments" under accumulated other comprehensive income in a separate component of equity.

w. Per Share Information - Basic net income per share is computed by dividing net income attributable to common shareholders by the weighted-average number of common shares outstanding for the period, retroactively adjusted for stock splits. The number of common shares used in computing basic net income per share was 52,937 thousand shares for 2016 and 52,943 thousand shares for 2015.Diluted net income per share reflects the potential dilution that could occur if securities were exercised or converted into common stock. Diluted net income per share of common stock assumes full conversion of the outstanding convertible notes and bonds at the beginning of the year (or at the time of issuance) with an applicable adjustment for related interest expense, net of tax, and full exercise of outstanding warrants (if any).Diluted net income per share is not disclosed because there were no potentially dilutive securities outstanding for the years ended March 31, 2016 and 2015, and the Group's net loss position for the year ended March 31, 2016.Cash dividends per share presented in the accompanying consolidated statement of income are dividends applicable to the respective fiscal years, including dividends to be paid after the end of the year.

x. Accounting Changes and Error Corrections - In December 2009, the ASBJ issued ASBJ Statement No. 24, "Accounting Standard for Accounting Changes and Error Corrections" and ASBJ Guidance No. 24, "Guidance on Accounting Standard for Accounting Changes and Error Corrections." Accounting treatments under this standard and guidance are as follows: (1) Changes in Accounting Policies - When a new accounting policy is applied following revision of an accounting standard, the new policy is applied retrospectively unless the revised accounting standard includes specific transitional provisions, in which case the entity shall comply with the specific transitional provisions. (2) Changes in Presentation - When the presentation of financial statements is changed, prior-period financial statements are reclassified in accordance with the new presentation. (3) Changes in Accounting Estimates - A change in an accounting estimate is accounted for in the period of the change if the change affects that period only, and is accounted for prospectively if the change affects both the period of the change and future periods. (4) Corrections of Prior-Period Errors - When an error in prior-period financial statements is discovered, those statements are restated.

y. New Accounting Pronouncements Tax Effect Accounting - On March 28, 2016, the ASBJ issued ASBJ Guidance No. 26, "Guidance on Recoverability of Deferred Tax Assets," which included certain revisions of the previous accounting and auditing guidance issued by the Japanese Institute of Certified Public Accountants. While the new guidance continues to follow the basic framework of the previous guidance, it provides new guidance for the application of judgment in assessing the recoverability of deferred tax assets.The previous guidance provided a basic framework which included certain specific restrictions on recognizing deferred tax assets depending on the company's classification in respect of its profitability, taxable profit and temporary differences, etc.The new guidance does not change such basic framework but, in limited cases, allows companies to recognize deferred tax assets even for a deductible temporary difference for which it was specifically prohibited to recognize a deferred tax asset under the previous guidance, if the company can justify, with reasonable grounds, that it is probable that the deductible temporary difference will be utilized against future taxable profit in some future period.The new guidance is effective for the beginning of annual periods

beginning on or after April 1, 2016. Earlier application is permitted for annual periods ending on or after March 31, 2016. The new guidance shall not be applied retrospectively and any adjustments from the application of the new guidance at the beginning of the reporting period shall be reflected within retained earnings or accumulated other comprehensive income at the beginning of the reporting period.The Company expects to apply the new guidance on recoverability of deferred tax assets effective April 1, 2016, and is in the process of measuring the effects of applying the new guidance in future applicable periods.

3.CHANGES IN PRESENTATIONS "Subsidy income" of ¥73 million was included in "Other - net" among the other income (expenses) section of the consolidated statement of income for the year ended March 31, 2015. Since the amounts increased, such amounts are presented in the other income (expenses) section of the consolidated statement of income for the year ended March 31, 2016. "Loss on disposal of property, plant and equipment" of ¥249 million was separately presented in the other income (expenses) section of the consolidated statement of income for the year ended March 31, 2015. Since the amounts decreased, such amounts are included in "Other - net" among the other income (expenses) section of the consolidated statement of income for the year ended March 31, 2016."Loss on devaluation of investment securities" of ¥13 million was included in "Other - net" among the operating activities section of the consolidated statement of cash flows for the year ended March 31, 2015. Since the amounts increased, such amounts are presented in the operating activities section of the consolidated statement of cash flows for the year ended March 31, 2016. "Increase in allowance for doubtful accounts" of ¥284 million and "Loss on disposal of property, plant and equipment" of ¥249 million were separately presented in the operating activities section of the consolidated statement of cash flows the year ended March 31, 2015. Since the amounts decreased, such amounts are included in "Other - net" among the operating activities section of the consolidated statement of cash flows for the year ended March 31, 2016.

4.BUSINESS COMBINATIONYear Ended March 31, 2016 (Business Combination by Acquisition)SPP Canada Aircraft, Inc. (SPPCA), a wholly-owned subsidiary of the Company, acquired 100% of the shares of Tecnickrome Aéronautique Inc. (Tecnickrome), a provider of surfacefinishing technologies for the aerospace market based in Quebec, Canada. The brief overview is described as follows.a. Outline of the business combination

(1) Name of acquired company and its business outlineName of the acquired company: Tecnickrome Aeronautique Inc.Business outline: Surface treatment of metallic parts for aircrafts

(2) Major reason for the business combinationThe acquisition enables the Company to provide flexible and high-value services to our customers throughout North America and Europe through SPPCA. This will also significantly enhance the overall capability of the Group, which includes the recently-acquired CFN Precision Ltd., to provide a stable supply of products. Tecnickrome will benefit from the opportunity to provide its high-value products to a broader customer base by expanding its traditional business with the anticipation of further growth.

(3) Date of business combinationJune 4, 2015

(4) Legal form of business combination

Share acquisition in consideration for cash(5) Name of the company after the combination

There is no change.(6) Ratio of voting rights acquired

100%(7) Basis for determining the acquirer

It is based on the fact that SPPCA acquired 100% of voting rights by means of share acquisition in consideration for cash.

b. The period for which the operations of the acquired company are included in the consolidated financial statementsFrom June 4, 2015 to March 31, 2016

c. Acquisition cost of the acquired company and related details of each class of consideration

d. Major acquisition-related costs Advisory fees and commissions to the lawyers and financial institutions: ¥17 million ($151 thousand)

e. Amount of goodwill incurred, reasons for the goodwill incurred, and the method and period of amortization(1) Amount of goodwill incurred

¥1,225 million ($10,877 thousand)(2) Reasons for the goodwill incurred

Goodwill is incurred from expected excess earnings power in the future arising from further business development.

(3) Method and period of amortizationThe goodwill is amortized on a straight-line basis over 10 years.

f. The assets acquired and the liabilities assumed at the acquisition date are as follows:

g. Pro forma information (unaudited)If this business combination had been completed as of April 1, 2015, the beginning of the current fiscal year, the effects on the consolidated statement of income for the year ended March 31, 2016, would be as follows:

Outline of the method of calculation for the effects above:The estimated impact amounts were calculated as the difference between sales and other profits or losses assuming that the business combination had been completed at the beginning of the fiscal year and the acquirer's sales and other profits or losses included in the consolidated statement of income. The amounts in g. shown above have not been audited.

Consideration for acquisition - Cash

Acquisition cost

¥1,548

¥1,548

$13,745

$13,745

Thousands ofU.S. Dollars

Millions ofYen

Current assets

Noncurrent assets

Total assets

¥337

236

¥573

$2,992

2,095

$5,087


Millions ofYen

Current liabilities

Long-term liabilities

Total liabilities

¥154

96

¥250

$1,367

852

$2,219

Sales

Operating income

Income before income taxes


¥228

5

5

4

$2,025

44

44

36


Millions ofYen

Per share of common stock: Basic net income ¥0.07 $0.00

U.S. Dollars Yen

27 28


Loans from banks and insurance companies, due serially to 2022 with interest rates ranging from 0.45% to 5.13% (2016) and from 0.45% to 5.13% (2015):

Collateralized

Unsecured

Obligation under finance leases

Total

Less current portion

Long-term debt, less current portion

2016

¥2,676

11,404

245

14,325

(7,917)

¥6,408

¥3,479

12,005

341

15,825

(2,461)

¥13,364

$23,761

101,261

2,175

127,197

(70,298)

$56,899

2015 2016

Millions of Yen Thousands ofU.S. Dollars

2017

2018

2019

2020

2021

2022 and thereafter

Total

¥7,917

1,560

1,276

2,021

1,267

284

¥14,325

$70,298

13,852

11,330

17,945

11,250

2,522

$127,197


Millions ofYen

Year Ending March 31

Land

Buildings and structures

Total

¥409

57

¥466

$3,632

506

$4,138


Millions ofYen

Balance at beginning of year (as previously reported)

Cumulative effect of accounting change

Balance at beginning of year (as restated)

Increase due to inclusion of subsidiaries in consolidation

Current service cost

Interest cost

Actuarial losses

Benefits paid

Balance at end of year

2016

¥5,775

5,775

374

52

349

(603)

¥5,947

¥5,627

30

5,657

224

347

74

240

(767)

¥5,775

$51,279

51,279

3,321

462

3,099

(5,355)

$52,806

2015 2016


Balance at beginning of year

Expected return on plan assets

Actuarial gains

Contributions from the employer

Benefits paid

Balance at end of year

2016

¥5,033

151

(371)

212

(292)

¥4,733

¥4,554

137

465

201

(324)

¥5,033

$44,690

1,341

(3,294)

1,882

(2,593)

$42,026

2015 2016


Defined benefit obligation

Plan assets

Net liability arising from defined benefit obligation

2016

¥5,947

(4,733)

¥1,214

¥5,775

(5,033)

742

$52,806

(42,026)

$10,780

2015 2016


Equity securities

Cost

¥985

UnrealizedGains

Millions of YenUnrealized

LossesFair Value

¥954 ¥1,939

March 31, 2015

Equity securities

Cost

$7,246

UnrealizedGains

Thousands of U.S. DollarsUnrealized

LossesFair Value

$8,826 $16,072

March 31, 2016

Equity securities

Cost

¥816

UnrealizedGains

Millions of YenUnrealized

LossesFair Value

¥994 ¥1,810

March 31, 2016

Equity securities

Proceeds

¥511

RealizedGains

Millions of YenRealizedLosses

¥508

March 31, 2015

Equity securities

Proceeds

¥71

RealizedGains

Millions of YenRealizedLosses

¥71

March 31, 2016

Finished products and semi-finished products

Work in process

Raw materials and supplies

Total

2016

¥5,086

10,791

9,118

¥24,995

¥5,413

11,678

8,552

¥25,643

$45,161

95,818

80,962

$221,941

2015 2016


Equity securities

Proceeds

$630

RealizedGains

Thousands of U.S. DollarsRealizedLosses

$630

March 31, 2016

Service cost

Interest cost

Expected return on plan assets

Amortization of prior service cost

Recognized actuarial losses

Others

Net periodic benefit costs

2016

¥374

52

(151)

(6)

267

30

¥566

¥347

74

(137)

(6)

350

15

¥643

$3,321

462

(1,341)

(53)

2,371

266

$5,026

2015 2016


(Acquisition of Business)SPP Technologies Co., Ltd. (SPT), a subsidiary of the Company, established a wholly-owned new company in the United States, SPT Microtechnologies USA, Inc. (SPT USA) and SPT USA acquired the Thermal Product (TP) business from SPTS Technologies UK Limited on June 30, 2015. The brief overview is described as follows.a. Outline of the business combination

(1) Outline of acquired businessProduction, sales and support of thermal products for semiconductor related manufacturing

(2) Major reason for the business combinationThe acquisition of the TP business will lead to an expansion of the Microtechnology business unit operated mainly by SPT, by generating a synergy effect with the existing SPT products and technologies, and by obtaining an overseas network.

(3) Date of business combinationJune 30, 2015

(4) Legal form of business combinationAcquisition of business in consideration for cash

(5) Basis for determining the acquirerIt is based on the fact that SPT USA acquired the business in consideration for cash.

b. The period for which the operations of the acquired company are included in the consolidated financial statementsFrom June 30, 2015 to December 31, 2015

c. Acquisition cost of the acquired business and related details of each class of consideration

d. Major acquisition-related costsAdvisory fees and commissions to the lawyers and financial institutions:¥91 million ($808 thousand)

e. Amount of goodwill incurred, reasons for the goodwill incurred, and the method and period of amortization(1) Amount of goodwill incurred

¥1,412 million ($12,538 thousand)The process for distinguishing identifiable assets and liabilities on the date of the business combination is under examination and the purchase price allocation had not yet been completed as of March 31, 2016. Therefore, the amount of goodwill was accounted for on a provisional basis.

(2) Reasons for the goodwill incurredGoodwill is incurred from expected excess earnings power in the future arising from further business development.

(3) Method and period of amortizationThe goodwill is amortized on a straight-line basis over 10 years.

f. The assets acquired and the liabilities assumed at the acquisition date are as follows:

g. Pro forma information (unaudited)If this business combination had been completed as of April 1, 2015, the beginning of the current fiscal year, the effects on the consolidated statement of income for the year ended March 31, 2016, would be as follows:

Outline of the method of calculation for the effects above:The estimated impact amounts were calculated as the difference between sales and other profits or losses assuming that the business combination had been completed at the beginning of the fiscal year and the acquirer's sales and other profits or losses included in the consolidated statement of income. The amounts in g. shown above have not been audited.

5.INVESTMENT SECURITIESThe cost and aggregate fair value of available-for-sale securities at March 31, 2016 and 2015, were as follows:

The proceeds, realized gains and realized losses of the available-for-sale securities which were sold during the years ended March 31, 2016 and 2015, were as follows:

The impairment losses on available-for-sale equity securities for the year ended March 31, 2016, were ¥325 million ($2,886 thousand).

6.INVENTORIES Inventories at March 31, 2016 and 2015, consisted of the following:

7.SHORT-TERM BANK LOANS AND LONG-TERM DEBT Short-term bank loans bear interest at rates ranging from 0.37% to 4.35% at March 31, 2016, and from 0.43% to 6.00% at March 31, 2015.Long-term debt at March 31, 2016 and 2015, consisted of the following:

Annual maturities of long-term debt, as of March 31, 2016, for the next five years and thereafter were as follows:

The carrying amounts of assets pledged as collateral for long-term bank loans of ¥2,676 million ($23,761 thousand) and payables of ¥31 million ($275 thousand) at March 31, 2016, were as follows:

The above assets are provided for the factory foundation mortgage.The above collateralized long-term debt includes the current portion of long-term debt.Long-term bank loans include syndicate loan agreements amounting to ¥5,500 million ($48,837 thousand) at March 31, 2016. In the event that any of the following covenants are violated, the Company may lose the benefit of the term for all the liabilities under these agreements.These agreements include the following financial restriction provisions:(1) Ordinary income in the consolidated or nonconsolidated statements of

operations should not be negative for two consecutive years on or after the fiscal year ended March 31, 2012. Ordinary income means income before income taxes less extraordinary items. The amount of ordinary income in the consolidated and nonconsolidated statements of operations for the year ended March 31, 2016, are ¥365 million and ¥552 million, respectively.

(2) The amount of equity in the consolidated balance sheet at the end of fiscal year should be more than ¥22,500 million.

(3) The amount of equity in the nonconsolidated balance sheet at the end of fiscal year should be more than ¥22,000 million. The amount of equity in the nonconsolidated balance sheet for the year ended March 31, 2016 is ¥33,956 million.

8.RETIREMENT BENEFITS The Company and its domestic consolidated subsidiaries have defined

benefit retirement plans for employees. Employees terminating their employment are, under most circumstances, entitled to retirement benefits determined based on the rate of pay at the time of termination, length of service, and conditions under which the termination occurs. If the termination is involuntary, caused by retirement at the mandatory retirement age or caused by death, the employee is entitled to greater payments than in the case of voluntary termination.Employees of the Company who retire at the mandatory retirement age are entitled to receive approximately 50% of their benefits in the form of an annuity with the balance in a lump-sum payment upon retirement. The funds for the annuity payments are entrusted to an outside trustee.(1) The changes in defined benefit obligation for the years ended March 31,

2016 and 2015, were as follows:

(2) The changes in plan assets for the years ended March 31, 2016 and 2015, were as follows:

(3) Reconciliation between the liability recorded in the consolidated balance sheet and the balances of defined benefit obligation and plan assets

(4) The components of net periodic retirement benefit costs for the years ended March 31, 2016 and 2015, were as follows:

(5) Amounts recognized in other comprehensive income (before income tax effect) in respect of defined retirement benefit plans for the years ended March 31, 2016 and 2015:

Current assets

Noncurrent assets

Total assets

¥615

667

¥1,282

$5,461

5,922

$11,383


Millions ofYen

Sales

Operating income

Income before income taxes


¥643

53

52

27

$5,709

471

462

240


Millions ofYen

Per share of common stock: Basic net income ¥0.51 $0.00

U.S. Dollars Yen

Consideration for acquisition - Cash

Acquisition cost

¥2,694

¥2,694

$23,921

$23,921


Millions ofYen

29 30


(6) Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect of defined retirement benefit plans as of March 31, 2016 and 2015:

(7) Plan assetsa. Components of plan assets

Plan assets as of March 31, 2016 and 2015, consisted of the following:

b. Method of determining the expected rate of return on plan assetsThe expected rate of return on plan assets is determined considering the long-term rates of return which are expected currently and in the future from the various components of the plan assets.

(8) Assumptions used for the years ended March 31, 2016 and 2015, were set forth as follows:

9.EQUITYJapanese companies are subject to the Companies Act of Japan (the "Companies Act"). The significant provisions in the Companies Act that affect financial and accounting matters are summarized below:(a) Dividends

Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend upon resolution at the shareholders' meeting. Additionally, for companies that meet certain criteria including (1) having a Board of Directors, (2) having independent auditors, (3) having an Audit & Supervisory Board, and (4) the term of service of the directors being prescribed as one year rather than the normal two-year term by its articles of incorporation, the Board of Directors may declare dividends (except for dividends-in-kind) at any time during the fiscal year if the Company has prescribed so in its articles of incorporation. The Company meets the above criteria.The Companies Act permits companies to distribute dividends in-kind (noncash assets) to shareholders subject to a certain limitation and additional requirements.Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles of incorporation of the Company so stipulate. The Companies Act provides certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as the amount available for distribution to the shareholders, but the amount of net assets after dividends must be

maintained at no less than ¥3 million.(b) Increases/decreases and transfer of common stock, reserve and surplus

The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus), depending on the equity account charged upon the payment of such dividends, until the aggregate amount of legal reserve and additional paid-in capital equals 25% of the common stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed without limitation. The Companies Act also provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained earnings can be transferred among the accounts with equity under certain conditions upon resolution of the shareholders.

(c) Treasury stock and treasury stock acquisition rightsThe Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to the shareholders which is determined by a specific formula. Under the Companies Act, stock acquisition rights are presented as a separate component of equity. The Companies Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or deducted directly from stock acquisition rights.

10.SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses for the years ended March 31, 2016 and 2015, principally consisted of the following:

11.BUSINESS TRANSFORMATION EXPENSES Details of business transformation expenses in other income (expense) were as follows:(a) Inventory valuation loss in M2M Technologies Inc. (¥345 million ($3,063 thousand))(b) Impairment loss of intangible assets in M2M Technologies Inc. (¥212

million ($1,882 thousand))(c) Some employee termination payments due to restructuring in Ningbo

SPP Hydraulics Co., Ltd. (¥10 million ($89 thousand))M2M Technologies Inc. and Ningbo SPP Hydraulics Co., Ltd. are subsidiaries of the Company.(Impairment Loss)The Group reviewed its long-lived assets for impairment as of March 31, 2016. As a result, the Group recognized an impairment loss of ¥212 million ($1,882 thousand) as business transformation expense for certain intangible assets. Due to a continuous operating loss at that unit, the carrying amount of the relevant intangible assets was written down to the recoverable amount. The recoverable amount of that intangible assets was measured at zero in accordance with use value due to the unlikelihood of cash flow in the future.

12.INCOME TAXES The Company and its domestic subsidiaries are subject to Japanese

Deferred tax assets:

Reserve for accrued bonuses

Liability for retirement benefits

Loss on devaluation of inventories

Loss on devaluation of investment securities

Tax loss carryforwards

Other

Less valuation allowance

Total

Deferred tax liabilities:

Roll-over relief on property, plant and equipment

Net unrealized gain on available-for-sale securities

Prepaid pension cost

Other

Total

Net deferred tax assets

2016

¥418

467

347

59

1,103

889

(1,231)

¥2,052

¥(134)

(304)

(189)

(155)

¥(782)

¥1,270

¥422

388

289

27

861

762

(1,167)

¥1,582

¥(147)

(318)

(198)

(210)

¥(873)

¥709

$3,712

4,147

3,081

524

9,794

7,893

(10,930)

$18,221

$(1,190)

(2,699)

(1,678)

(1,377)

$(6,944)

$11,277

2015 2016


Note:The amounts of net deferred tax assets are shown in the following accounts in the consolidated balance sheets as of March 31, 2016 and 2015.

Deferred tax assets – current

Deferred tax assets – noncurrent

Long-term liabilities – noncurrent

2016

¥1,070

485

(285)

¥1,068

400

(759)

$9,501

4,307

(2,531)

2015 2016


Normal effective statutory tax rate

Nontax deductible expenses

Tax rate difference in foreign subsidiaries

Per capita in local tax

Amortization of goodwill

Equity in earnings of associated companies

Change in valuation allowance

Tax credit

Tax on unrealized intercompany profit

Decrease adjustment of deferred tax assets for changing the tax rate

Other – net

Actual effective tax rate

35.6%

0.7

0.1

0.6

0.3

(1.3)

9.6

(8.6)

(0.7)

1.4

0.0

37.7%

2017

2018

2019

2020

2021

2022 and thereafter

Total

¥46

255

204

105

291

3,244

¥4,145

$408

2,264

1,811

932

2,584

28,805

$36,805


Millions ofYen

Year Ending March 31

Current assets

Noncurrent assets

Goodwill

Current liabilities

Long-term liabilities

Total acquisition cost

Cash and cash equivalent of Tecnickrome

Purchases of investments in subsidiaries resulting in change in scope of consolidation

¥337

236

1,225

154

96

1,548

37

¥1,511

$2,992

2,095

10,877

1,367

852

13,745

328

$13,417


Millions ofYen

Current assets

Noncurrent assets

Goodwill

Total acquisition cost

Account payable in relation to the acquisition cost

Payment for acquisition of business

¥615

667

1,412

2,694

1,468

¥1,226

$5,461

5,922

12,538

23,921

13,035

$10,886


Millions ofYen

national and local income taxes which, in the aggregate, resulted in normal effective statutory tax rates of 33.0% and 35.6% for the years ended March 31, 2016 and 2015, respectively.The tax effects of significant temporary differences and loss carryforwards which resulted in deferred tax assets and liabilities at March 31, 2016 and 2015, were as follows:

A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in the accompanying consolidated statement of income for the year ended March 31, 2015, is as follows:

A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in the accompanying consolidated statement of income for the year ended March 31, 2016 has not been disclosed because of the Group's net loss position.New tax reform laws enacted in 2016 in Japan changed the normal effective statutory tax rate for the fiscal year beginning on or after April 1, 2016, to approximately 30.8%. The effect of these changes was immaterial.At March 31, 2016, certain subsidiaries have expiring tax loss carryforwards aggregating approximately ¥4,145 million ($36,805 thousand) which are available to be offset against taxable income of such subsidiaries in future

years. These tax loss carryforwards, if not utilized, will expire as follows:

13.SUPPLEMENTAL INFORMATION FOR CASH FLOWS For the year ended March 31, 2016The details of assets and liabilities in relation to acquisition of the shares of Tecnickrome for cash and cash equivalents consideration and reconciliation between acquisition costs of the share and net payment for the acquisition are as follows:

The details of assets in relation to acquisition of the TP business from SPTS Technologies UK Limited for cash and cash equivalents consideration and reconciliation between acquisition costs of the business and net payment for the acquisition are as follows:

14.LEASES Total rental expenses including lease payments under finance lease agreements that do not transfer ownership of the leased property to the Group, accounted for as operating lease, were ¥396 million ($3,516 thousand) and ¥336 million for the years ended March 31, 2016 and 2015, respectively.

15.FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES

(1) Group policy for financial instrumentsThe Group uses financial instruments, mainly long-term debt including bank loans and convertible bonds, based on its capital financing plan. Cash surpluses, if any, are invested in low risk financial assets. Short-term bank loans are used to fund the Group's ongoing operations. Derivatives are used, not for speculative purposes, but to manage exposure to financial risks as described in (2) below.

(2) Nature and extent of risks arising from financial instrumentsReceivables, such as trade notes and trade accounts, are exposed to

Debt investments

Equity investments

Cash and cash equivalents

Others

Total

39%

51

4

6

100%

41%

49

3

7

100%

Discount rate

Expected rate of return on plan assets

Expected rate of salary increase

0.865-1.011%

3.0%

1.5-2.4%

0.865-1.011%

3.0%

1.5-2.4%

Prior service cost

Actuarial losses

Total

2016

¥6

453

¥459

¥6

(575)

¥(569)

$53

4,022

$4,075

2015 2016


Unrecognized prior service cost

Unrecognized actuarial losses

Total

2016

2016 2015

2016 2015

¥(36)

1,563

¥1,527

¥(42)

1,110

¥1,068

$(320)

13,879

$13,559

2015 2016


Employees' salaries and bonuses

Net periodic retirement benefit costs

Depreciation and amortization

Research and development costs

Goodwill amortization

2016

¥3,566

144

337

1,226

177

¥3,018

177

391

1,145

20

$31,664

1,279

2,992

10,886

1,572

2015 2016


31 32


customer credit risk. Although receivables in foreign currencies are exposed to the market risk of fluctuation in foreign currency exchange rates, those risks are hedged by using forward foreign currency contracts. Investment securities are mainly equity securities and their fair market value are monitored on a quarterly basis.Payment terms of payables, such as trade notes and trade accounts, are less than one year. Although payables in foreign currencies are exposed to the market risk of fluctuation in foreign currency exchange rates, those risks are generally hedged by using forward foreign currency contracts.Maturities of bank loans and lease obligations are less than seven and a half years after the consolidated balance sheet date. Although a part of such bank loans and lease obligations are exposed to market risks from changes in variable interest rates, those risks are mitigated by using derivatives of interest rate swaps. See Note 16 for more details about derivatives.

(3) Risk management for financial instrumentsCredit Risk Management

Credit risk is the risk of economic loss arising from a counterparty's failure to repay or service debt according to the contractual terms. The Group manages its credit risk from receivables on the basis of internal guidelines, which include monitoring payment terms and balances of major customers by each business administration department to identify the default risk of customers at an early stage. Because the counterparties to derivatives are limited to major international financial institutions, the Group does not anticipate any losses arising from credit risk. See Note 16 for more details about derivatives.

Market risk management (foreign exchange risk and interest rate risk)Foreign currency trade receivables and payables are exposed to market risk resulting from fluctuations in foreign currency exchange rates. Such foreign exchange risk is hedged principally by forward foreign currency contracts. Interest rate swaps are used to manage exposure to market risks from changes in the interest rates of loan payables.Investment securities are managed by monitoring market value and the financial position of issuers on a regular basis.Derivative transactions entered into by the Group have been made in accordance with internal policies which regulate the authorization and credit limit amount by the corporate treasury department.

Liquidity risk managementLiquidity risk comprises the risk that the Group cannot meet its contractual obligations in full on their maturity dates. The Group manages its liquidity risk by holding adequate volumes of liquid assets along with adequate financial planning by the corporate treasury department.

(4) Fair value of financial instrumentsFair values of financial instruments are based on quoted prices in active markets. If a quoted price is not available, other rational valuation techniques are used instead. See Note 16 for the details of fair value for derivatives. (a) Fair value of financial instruments

The above long-term debt includes the current portion of long-term debt.Cash and cash equivalents and Notes and accounts receivableThe carrying values approximate fair value because of their short maturities. Investment securitiesThe fair values are measured at the quoted market price of the stock exchange for the equity instruments. Fair value information for the investment securities by classification is included in Note 5.Short-term bank loans and PayablesThe carrying values approximate fair value because of their short maturities. Long-term debtThe fair values of long-term debt and lease obligations are determined by discounting the cash flows related to the debt at the Group's assumed corporate borrowing rate. DerivativesFair value information for derivatives is included in Note 16.(b) Carrying amount of financial instruments whose fair value cannot

be reliably determined

(5) Maturity analysis for financial assets with contractual maturitiesThe entire cash and cash equivalents, and notes and accounts receivable are due in one year or less as of March 31, 2016. See Note 7 for annual maturities of long-term debt.

16.DERIVATIVES The Group enters into derivative contracts to hedge market risks such as foreign exchange and interest rate fluctuations associated with certain assets and liabilities.It is the Group's policy to use derivatives only for the purpose of reducing

market risks associated with assets and liabilities. The Group does not hold or issue derivatives for speculative purposes.Since all of the Group's derivative transactions are related to qualified hedges of underlying business exposures, market gain or loss risk in the derivative instruments is basically offset by opposite movements in the value of the hedged assets or liabilities.Derivative transactions entered into by the Group have been made in accordance with internal policies which regulate the authorization and credit limit amount. Derivative transactions to which hedge accounting is applied.

The above interest rate swaps which qualify for hedge accounting and meet specific matching criteria are not remeasured at market value but the differential paid or received under the swap agreements is recognized and included in interest expense. In addition, the fair value of such interest rate swaps in Note 15 is included in that of hedged items (i.e., long-term debt).The contract or notional amounts of derivatives which are shown in the above table do not represent the amounts exchanged by the parties and do not measure the Group's exposure to credit or market risk.

17.OTHER COMPREHENSIVE INCOME The components of other comprehensive income for the years ended March 31, 2016 and 2015, were as follows:

18.SEGMENT INFORMATION Under ASBJ Statement No. 17, "Accounting Standard for Segment Information Disclosures" and ASBJ Guidance No. 20, "Guidance on Accounting Standard for Segment Information Disclosures," an entity is required to report financial and descriptive information about its reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components of an entity about which separate financial information is available and such information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Generally, segment information is required to be reported on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments.1. Description of reportable segments

The Group's reportable segments are those for which separate financial information is available and regular evaluation by the Company's management is being performed in order to decide how resources are allocated among the Group. Therefore, the Group consists of three segments: aerospace and related products, heat energy and environmental related products and ICT related products.Starting from the current fiscal year, the components reviewed by management were revised considering the development of the businesses, enhancement of operational structures, and other factors. The "industrial products" segment was divided into "heat energy and environmental related products" consisting of heat exchangers, environmental systems and others, and "ICT related products" consisting of microtechnology and others. Therefore, reportable segments were reorganized from the former two segments "aerospace and related products" and "industrial products" segments, into three segments "aerospace and related products," "heat energy and environmental related products" and "ICT related products."In relation to the changes in the reportable segments, the allocation of certain expenses, including research and development expenses to operating segments, was revised to more appropriately reflect profit/loss by segment. Segment information disclosed for the previous fiscal year is based on the reportable segments of the current fiscal year and the allocation method after revision. Aerospace and related products consists of manufacturing propeller systems, landing gear systems, heat control systems, space equipment, hydraulic pumps, hydraulic valves and others. Heat energy and environmental related products consist of manufacturing LNG vaporizers, heat exchangers, ozone generators and others. ICT related products consist semiconductor equipment and others.

2. Methods of measurement for the amounts of sales, profit, assets and other items for each reportable segmentThe accounting policies of each reportable segment are consistent with those disclosed in Note 2, "Summary of Significant Accounting Policies."


Notes and accounts receivable

Investment securities

Total

Short-term bank loans

Payables

Long-term debt

Total

CarryingAmount

Millions of YenFair Value

UnrealizedLoss

¥6,958

22,352

1,118

¥30,428

¥(17,421)

(12,354)

(14,325)

¥(44,100)

¥6,958

22,352

1,118

¥30,428

¥(17,421)

(12,354)

(14,350)

¥(44,125)

¥(25)

¥(25)

March 31, 2016




Total


Payables

Long-term debt

Total

CarryingAmount

Millions of YenFair Value

UnrealizedLoss

¥8,968

20,921

1,565

¥31,454

¥(13,610)

(10,980)

(15,825)

¥(40,415)

¥8,968

20,921

1,565

¥31,454

¥(13,610)

(10,980)

(15,834)

¥(40,424)

¥(9)

¥(9)

March 31, 2015




Total


Payables

Long-term debt

Total

CarryingAmount

Thousands of U.S. DollarsFair Value

UnrealizedLoss

$61,783

198,473

9,926

$270,182

$(154,688)

(109,697)

(127,197)

$(391,582)

$61,783

198,473

9,926

$270,182

$(154,688)

(109,697)

(127,419)

$(391,804)

$(222)

$(222)

March 31, 2016Interest rate swaps:(fixed rate payment, floating rate receipt)

ContractAmount

HedgedItem

Long-termdebt

¥2,430 ¥2,110

ContractAmount

Due afterOne Year

FairValue

Millions of YenAt March 31, 2016

Interest rate swaps:(fixed rate payment, floating rate receipt)

ContractAmount

HedgedItem

Long-termdebt

$21,577 $18,736

ContractAmount

Due afterOne Year

FairValue

Thousands of U.S. DollarsAt March 31, 2016

Interest rate swaps:(fixed rate payment, floating rate receipt)

ContractAmount

HedgedItem

Long-termdebt

¥2,060 ¥2,030

ContractAmount

Due afterOne Year

FairValue

Millions of YenAt March 31, 2015

Unrealized gain on available-for-sale securities:

Gains arising during the year

Reclassification adjustments to profit or loss

Amount before income tax effect

Income tax effect

Total

Foreign currency translation adjustments:

Adjustments arising during the year

Total

Defined retirement benefit plans:

Adjustments arising during the year

Reclassification adjustments to profit or loss

Amount before income tax effect

Income tax effect

Total

Share of other comprehensive income in associates:

Gains arising during the year

Total

Total other comprehensive income

2016

¥76

(71)

5

13

¥18

¥(343)

¥(343)

¥(720)

261

(459)

80

¥(379)

¥(75)

¥(75)

¥(779)

¥908

(508)

400

(108)

¥292

¥201

¥201

¥225

344

569

(195)

¥374

¥76

¥76

¥943

$674

(630)

44

116

$160

$(3,046)

$(3,046)

$(6,394)

2,318

(4,076)

711

$(3,365)

$(666)

$(666)

$(6,917)

2015 2016


Investments in equity instruments that do not have a quoted market price in an active market

Investments in limited partnerships

Total

2016

¥217

25

¥242

¥591

31

¥622

$1,928

222

$2,150

2015 2016


33 34


3. Information about sales, profit, assets, and other items

4. Information about geographical areas(1) Sales

(2) Property, plant and equipmentInformation about property, plant and equipment by geographical area is not disclosed because Japanese GAAP does not require such disclosure if total assets in Japan represent more than 90% of the consolidated amounts.

5. Information about major customersInformation about major customers is not disclosed for the years ended March 31, 2016 and 2015, because there is no customer that represents more than 10% of net sales in the consolidated statement of income.

6. Information about impairment losses of assets

7. Information about amortization of goodwill

19.SUBSEQUENT EVENTSAppropriations of Retained EarningsAt the general shareholders' meeting held on June 28, 2016, the Company's shareholders approved the following appropriations of retained earnings as of March 31, 2016:

Sales:

Sales to external customers

Intersegment sales or transfers

TotalSegment profit

(operating income)

Segment assets

Other:

Depreciation

Amortization of goodwillInvestment in associated companies accounted for by the equity methodIncrease in property, plant and equipment and intangible assets

Consolidated

Millions of Yen2016

¥51,211

¥51,211

¥1,349

83,099

2,494

177

1,046

5,605

Reconciliations

¥6,427

Total

¥51,211

¥51,211

¥1,349

76,627

2,494

177

1,046

5,605

ICT RelatedProducts

¥5,585

¥5,585

¥(503)

10,755

199

70

1,046

2,157

Heat Energyand EnvironmentalRelated Products

¥12,455

¥12,455

¥(23)

17,376

892

302

Aerospace and Related

Products

¥33,171

¥33,171

¥1,875

48,541

1,403

107

3,146

Reportable Segment

Sales:



TotalSegment profit

(operating income)

Segment assets

Other:

Depreciation


Consolidated

Millions of Yen2015

¥47,135

¥47,135

¥1,598

81,899

2,461

20

1,164

2,261

Reconciliations

¥9,243

Total

¥47,135

¥47,135

¥1,598

72,656

2,461

20

1,164

2,261

ICT RelatedProducts

¥3,459

¥3,459

¥(367)

7,095

111

1,164

69


¥14,347

¥14,347

¥410

18,380

1,016

417


Products

¥29,329

¥29,329

¥1,555

47,181

1,334

20

1,775

Reportable Segment

Sales:



TotalSegment profit

(operating income)

Segment assets

Other:

Depreciation


Consolidated

Thousands of U.S. Dollars2016

$454,724

$454,724

$11,978

737,871

22,145

1,572

9,288

49,769

Reconciliations

$57,068

Total

$454,724

$454,724

$11,978

680,803

22,145

1,572

9,288

49,769

ICT RelatedProducts

$49,592

$49,592

$(4,466)

95,498

1,767

622

9,288

19,153


$110,593

$110,593

$(204)

154,289

7,920

2,682


Products

$294,539

$294,539

$16,648

431,016

12,458

950

27,935

Reportable Segment

¥51,211

Tota l

¥104

Other

¥6,428

Asia

¥4,130

Europe

¥13,004

North America

¥27,545

Japan

Millions of Yen2016

¥47,135

Tota l

¥193

Other

¥8,029

Asia

¥3,171

Europe

¥11,643

North America

¥24,099

Japan

Millions of Yen2015

$454,724

Tota l

$923

Other

$57,077

Asia

$36,672

Europe

$115,468

North America

$244,584

Japan


Note: Sales are classified by country or region based on the location of customers.

Impairment losses of assets

Millions of Yen2016

¥212


Related Products


Products

ICT RelatedProducts

Elimination/Corporate

¥212

Total

Amortization ofgoodwillGoodwill at March 31, 2016

Millions of Yen2016

¥70

1,410

¥107

1,103


Related Products


Products

ICT RelatedProducts


¥177

2,513

Total

Millions of Yen2015

¥20

159


Related Products


Products

ICT RelatedProducts


¥20

159

Total


$622

12,520

$950

9,794


Related Products


Products

ICT RelatedProducts


$1,572

22,314

Total

Impairment losses of assets


$1,882


Related Products


Products

ICT RelatedProducts


$1,882

Total

Appropriations:

Cash dividends, ¥3.5 ($0.03) per share¥185 $1,643


Millions ofYen

I n d e p e n d e n t A u d i t o r ’ s R e p o r tM a r c h 3 1 , 2 0 1 6



35 36

53,167 thousandshares

Ind iv iduals and other35.1%

Financia l Inst i tut ions11.3%

Domest ic Corporat ions

44.8%

Foreign Investors

7.4%

Treasury Stock0.4%

Financia l Instrument Companies

0.9%

Sumitomo Precision Products Co., Ltd.

January, 1961

¥10,311 million

Shinichi Miki

1,888 (Consolidated)

1,184 (Non-consolidated)

1-10 Fuso-cho, Amagasaki, Hyogo 660-0891, Japan

Main Plant (Amagasaki), Shiga Plant, Wakayama Plant (Plant site area：136,844 square meters)

http://www.spp.co.jp

D o m e s t i c a n d O v e r s e a s B a s e sA s o f J u l y 1 , 2 0 1 6

D o m e s t i c

O v e r s e a s

■ Head Office & Main Plant

■ Sumisei Engineering Co., Ltd. （Design, drawing and engineering services） ■ Sumisei Sangyo Co., Ltd. （Sales of all types of materials and machinery parts） ■ Shinsen Seiki Co., Ltd. （Processing of all types of machinery parts）

■ SPP Nagasaki Engineering Co., Ltd （Maintenance, repair and overhaul on aircraft landing gear systems and customer support）

■ Shiga Plant

■ Nagoya Sales Office

■ Tokyo Head Office

■ SPP Technologies Co., Ltd. （Production, sales and support of MEMS/ semiconductor related process tools）

■ Sumisei Hydraulic Systems Co., Ltd. （Production, maintenance and sales of aerospace and hydraulic equipment）

■ Wakayama Plant

■ M2M Technologies Inc. (Solution services utilizing machine to machine communication and cloud computing technology)

■ Sumitomo Precision USA, Inc. （Production and sales of heat exchangers for aerospace）

■ New York Office

■ London Office

■ SPP Canada Aircraft, Inc. （Design, assembly, sales and customer support for Commercial Landing Gear Systems）

■ Sumitomo Precision Shanghai Co., Ltd. （Development and sales of environmental systems）

■ Ningbo SPP Hydraulics Co., Ltd. （Production and sales of QT pumps）

■ Aviocast Inc. （Production and sales of casting products）

■ Silicon Sensing Systems Ltd. （Production and sales of motion sensors）

■ Office & Plant ／ ■ Overseas Office ／ ■ Main Affiliated Company

■ Iruma Plant

■ Tecnickrome Aéronautique Inc. （Surface finishing of aircraft parts）

■ CFN Precision Ltd. （Production and sales of aircraft parts）

■ SPT Microtechnologies USA, Inc. (Manufacture and sales of thermal process furnace equipment etc. and relevant services for semiconductor related device industry)

C o m p a n y P r o f i l e / S t o c k I n f o r m a t i o n

C o m p a n y P r o f i l e ( A s o f M a r c h 3 1 , 2 0 1 6 )

Company Name

Establ ished

Paid- in Capi ta l

Pres ident

Number of Employees

Head Of f ice

Plant

URL

S t o c k I n f o r m a t i o n ( A s o f M a r c h 3 1 , 2 0 1 6 )

F iscal Year

Ordinary Shareholder Meet ing

Record Date

Transfer Agent

Method of Publ ic Not ices

Stock Code

Number of Author ized Shares

Number of Issued Shares

Number of Shareholders

Min imum Trading Uni t

Stock Exchange L ist ing

From April 1 of each year through March 31 of the following year

June

Ordinary Shareholder Meeting: March 31

Year-end Dividends: March 31

Interim Dividends: September 30

1-4-1, Marunouchi, Chiyoda-ku, Tokyo 100-0005, Japan

Sumitomo Mitsui Trust Bank, Limited

To be posted on the Company’s Website （http://www.spp.co.jp）

6355

200,000,000

53,167,798

6,050

1,000

Tokyo

▶ Major Shareholders▶ Breakdown of Shareholders

Name of Shareholder

Nippon Steel & Sumitomo Metal Corporation

Masayoshi Yamauchi

Sumitomo Precision Products Co., Ltd. Kyoeikai

The Master Trust Bank of Japan, Ltd. (trust account)

Japan Trustee Services Bank, Ltd. (trust account)

Sumitomo Corporation

CBNY DFA INTL SMALL CAP VALUE PORTFOLIO

Tatsuo Yamamoto

Sumitomo Mitsui Banking Corporation

CBLDN KIA FUND 136

21,394

1,347

1,025

1,020

964

880

856

573

543

459

Number ofShares

(thousands)

ShareholdingRatio

(%)

40.42

2.54

1.94

1.93

1.82

1.66

1.62

1.08

1.03

0.87

37 38

1-10 Fuso-cho, Amagasaki, Hyogo 660-0891, JapanPhone 81-(0)6-6482-8811 Fax 81-(0)6-6489-5801http://www.spp.co.jp/

（year ended march 31, 2016 · heat exchangers for aircraft research into duralumin entry into the...

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