Hello and thank you all for taking the time to attend TDK s results presentation for the year ended March 2014 (fiscal 2014). My name is Takakazu

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3 Hello and thank you all for taking the time to attend TDK s results presentation for the year ended March 2014 (fiscal 2014). My name is Takakazu Momozuka.

4 I will be presenting the full-year consolidated results. As explained previously, the data tape and Blu-ray businesses are shown as discontinued operations in the consolidated financial statements following our moves to exit these two sectors. Prior-year figures for fiscal 2013 have been adjusted accordingly. Excluding these businesses, net sales for the continuing operations were billion, increasing by billion, or 17%, over the previous year. This marked a new record for TDK. Operating income grew by 14.5 billion, or 65.6%, to 36.6 billion. The income from continuing operations was 39.8 billion on a pretax basis and 21.8 billion in net terms. We posted a net loss on the discontinued data tape and Blu-ray operations of 3.6 billion. After a deduction of 1.9 billion for the net income attributable to non-controlling interests, net income for the year was 16.3 billion, a gain of 15.1 billion in year-on-year terms. Net income per share was In terms of the average exchange rates, the yen depreciated by 20.8% against the dollar to , and by 25.6% to against the euro. The net forex impact was an increase of about billion in sales and 24.3 billion in operating income. To date, we estimated our US dollar forex sensitivity at about 1.5 billion per 1 movement for annual operating income. For the year ending March 2015, we estimate this figure will shift to a gain of about 1.4 billion in operating income per 1 movement, due to changes in product mix and increased dollar-denominated purchases. Our euro forex sensitivity remains minimal.

5 Moving on to business segment performance, net sales for the passive components segment increased 24% year on year to billion. Operating income of 15.4 billion marked the first profit in three years and a major turnaround from the prior year s 11.1 billion operating loss. The depreciated yen s effects were helpful, but the key contributing factors were successful restructuring measures and solid growth in sales in the automotive and smartphone markets. Ceramic capacitors began generating profits again from the first quarter after the earlier restructuring, with strong sales in the automotive market. Aluminum and film capacitors also generated higher sales and profits due to a recovery in orders in industrial equipment and good sales in the automotive market. Inductive devices posted a substantial increase in profits due to automotive demand and an improved product mix. High-frequency components posted higher sales for smartphone and tablet applications, with improvements in productivity helping to suppress losses. Sales of piezoelectric material products increased in the automotive sector and in voice coil motors for camera modules, leading to higher profits on a year-on-year basis. Restructuring charges for passive components totaled 2.7 billion, 1.5 billion less than the figure of 4.2 billion in the previous year. Goodwill amortization costs for EPCOS declined by 0.2 billion to 3.4 billion.

6 The magnetic application segment recorded an 8% increase in net sales to billion and a 24% fall in operating income to 28.1 billion. In the recording devices business, shipments of HDD heads dropped in year-on-year terms due to a surge in demand during fiscal 2013 associated with the major floods in Thailand. Operating income was only slightly lower due to offsetting productivity gains and product mix improvements. Magnets operations recorded a loss as sales and profits both declined, reflecting price erosion caused by changes in rare earths prices and non-recurring expenses for the integration of overseas sites. This business reported a 4.2 billion insurance payout in the previous year relating to the Thai floods. In power supplies, a recovery in sales in the industrial equipment market helped to lift profitability. Restructuring costs for the magnetic application segment totaled 1.9 billion, a decline of 1.3 billion.

7 Next is the film application segment. Net sales increased 26% to billion, and operating income rose 5% to 13.4 billion. In the energy devices (rechargeable batteries) business, we recorded strong sales for smartphone and tablet applications. Besides growing sales with existing customers, we secured new customers to grow the overall business, resulting in significantly higher sales and profits than in the prior year. In the applied films business, we completed the exit from data tape and Blu-ray operations as planned. This business still contains TDK s functional films operations, but the sales were low and the business made a loss. We posted restructuring costs of 2.3 billion for the continuing businesses in the film application segment.

8 In addition to the three main business segments that I have just reviewed, this slide shows net sales for other products, which declined 9.8% year on year to 19.3 billion. This segment saw operating losses grow to 3.2 billion, compared with 1.8 billion in the previous year. This was due to higher new business development costs. In corporate and eliminations, operating losses widened from 15.0 billion to 17.1 billion. This mainly reflected one-off expenses and increased investments in IT systems.

9 This next slide analyzes the year-on-year increase of 14.5 billion in operating income. Changes in sales relating to capacity utilization and product mix factors inflated earnings by 13.1 billion. Sales of passive components rose significantly, and this segment benefited from higher capacity utilization as well. Sales of batteries also rose substantially. The impact of price erosion was around minus 37.0 billion in year-on-year terms. Exchange rate fluctuations inflated earnings by about 24.3 billion. Our rationalization and cost-reduction efforts, combined with lower material prices, yielded a net gain of 17.1 billion, although our hourly wage costs in China increased. The benefits from restructuring affecting operating income were 5.9 billion, mainly reflecting cost savings from facility integration and workforce reductions overseas. This figure consisted of about 4.6 billion from the passive components segment and 1.3 billion from the magnetic application segment. Higher SG&A expenses resulted in an earnings drag of 2.2 billion, after deducting 2.0 billion from the proceeds of asset sales. There was also a drag of 6.7 billion as no insurance payouts relating to the Thai floods were received this year. Overall, operating income rose to 36.6 billion.

10 This next slide analyzes the 4Q results of fiscal 2014 by business segment compared with the previous quarter and the fourth quarter of the previous year. Restructuring costs for continuing operations totaled about 6.0 billion in the 4Q. The charge for discontinued operations was about 0.1 billion, relating to the costs of exiting the Blu-ray and other businesses. The total sales for the passive components business were billion, 0.9% higher than in the 3Q. Capacitor sales rose 4% to 36.1 billion. Although automotive sector sales were strong in the 3Q and 4Q, seasonal demand peaked in the 3Q for gaming equipment. Capacitor sales were strong in Europe to the industrial equipment and automotive sectors. Inductive device sales in the 4Q were flat at 34.9 billion. Higher sales in the automotive market were offset by lower sales in the markets for communications and information equipment. Sales of other passive components edged 0.8% lower in the 4Q to 47.1 billion. High-frequency component sales also declined in the 4Q due to a drop-off in orders from major smartphone and tablet makers as production entered a seasonal output correction. In contrast, having experienced a similar correction in the 3Q, orders for voice coil motors used in camera modules recovered in the 4Q, helping sales to grow strongly compared with the previous quarter. Together with strong sales in the automotive markets, this supported a healthy overall sales performance. Operating income in the passive components segment was 0.3 billion in the 4Q, declining by 5.8 billion from the 3Q figure of 6.1 billion. This was the result of seasonal factors such as output corrections at major smartphone and tablet makers and a reduction in capacity utilization in China due to the Lunar New Year holidays, as well as lower profits from high-frequency components and inductive devices. Charges for restructuring increased from about 0.2 billion in the 3Q to around 1.5 billion in the 4Q. In the magnetic application products business, sales of 89.5 billion in the 4Q were down 6.5% in quarter-on-quarter terms. Sales of recording devices benefited in the 3Q from surging demand linked to the replacement of Windows XP and new gaming console launches. This led to reduced shipments of HDD heads in the 4Q, with quarterly sales slipping 11.3% to 61.2 billion. Sales of other magnetic application products rose 5.6% to 28.3 billion. This result reflected good sales of magnets for automotive applications, as well as strong sales of power supplies in the industrial equipment markets. Operating income for this segment declined by 4.9 billion, from 10.3 billion in the 3Q to 5.4 billion in the 4Q, reflecting the drop in HDD head shipments and seasonal factors such as lower capacity utilization. The segment booked restructuring charges of about 1.9 billion for the 4Q. Sales of film application products were 29.1 billion in the 4Q, down 29% in quarter-on-quarter terms. Sales of batteries fell in the 4Q as leading customers adjusted production levels. Segment operating income of 1.1 billion represented a decline of 5.7 billion from the 3Q figure of 6.8 billion. This also reflected a reduction in sales caused by the output correction at major customers. The segment booked restructuring costs of about 2.3 billion for the 4Q. Sales in the other products segment increased by 1.5 billion in the 4Q relative to the 3Q. Segment operating income was flat. Losses incurred in corporate and eliminations were 4.5 billion in the 4Q, an increase of 0.1 billion compared with 4.4 billion in the 3Q.

11 Turning to the consolidated financial position as of the end of March 2014, this slide displays the changes compared with the end of March Total assets increased by 70.0 billion to 1,239.6 billion. Total liabilities were billion. Stockholders equity was billion, an increase of 74.1 billion, helping the stockholders equity ratio to surpass the 50% mark to reach 51.3%. Cash and cash equivalents and short-term investments were billion at the end of March, up 36.0 billion from the previous year-end. Interest-bearing debt shrank by 28.6 billion to billion. This helped the net cash position improve by 64.6 billion, to minus 7.5 billion at the year-end. TDK has thus nearly achieved the target of eliminating net debt by the end of March 2015 ahead of schedule. We have achieved steady improvement in our net cash position by reducing capital expenditures and cutting inventories.

12 Free cash flow increased to 71.9 billion in fiscal 2014, reflecting the growth in operating cash flows to billion coupled with a reduction in investment cash flows to minus 55.4 billion.

13 I would now like to talk briefly about the HDD heads situation within the recording devices business. We estimated the HDD market at 552 million units in fiscal 2014, and forecast it will decline to 535 million units in fiscal Based on these market assumptions, our shipment index for HDD heads was 72 in the 4Q of fiscal 2014, down from 100 in the 1Q of fiscal We expect the index to fall to 71 in the 1Q of the current fiscal year.

14 My final slide looks at the progress that TDK has made with restructuring over the past year. Having reviewed our business portfolio, we have exited non-core operations. As of the end of March, we had stopped production of all data tape and Blu-ray products. With the aim of optimizing production bases and reinforcing our manufacturing capabilities, we have been integrating facilities, especially outside Japan. We initially budgeted 10 billion for related restructuring costs, but in the end we spent a total of 10.5 billion, split between 7.1 billion for continuing operations and 3.4 billion for discontinued operations. Benefits accrued in fiscal 2014 from restructuring amounted to 2.3 billion. In line with earlier projections, we expect restructuring benefits in fiscal 2015 of around 4.0 billion. As we explained before, TDK has finished all of the large-scale restructuring measures. Our aim going forward is to concentrate our management resources on growth areas and focus on our core businesses. That concludes my part of the presentation for the fiscal 2014 results. Thank you for your attention today.

15 Hello, my name is Takehiro Kamigama. I will present the full-year consolidated projections for fiscal 2015.

16 My first slide shows you our performance and dividend forecasts. We expect net sales to grow 6.7% to 1,050 billion and operating income to increase 55.7% to 57 billion. Our forecast for income from continuing operations is 56 billion on a pretax basis and 34 billion at the net income level. Projected net income per share is We expect to pay interim and final dividends of 40 per share, for total annual dividends of 80 per share. These figures use exchange rate assumptions of 100 against the US dollar and 135 against the euro.

17 This next slide shows the projected breakdown of sales in fiscal 2015 by business segment. We see sales rising 10 15% to billion in the passive components segment, mainly driven by higher sales of high-frequency components for ICT applications and ongoing expansion in the automotive market. Sales in the magnetic application products segment are expected to dip up to 5%, falling from billion recorded in fiscal This is mainly due to the HDD market having matured. Sales in the film application products segment are expected to grow 20 25% from billion recorded in fiscal 2014, based on higher demand for rechargeable batteries as customers seek out energy devices that can deliver greater power and capacity in more compact packages. Overall, we expect sales to rise 6.7% to 1,050 billion. This would take TDK s sales above the 1 trillion mark for the first time in our history.

18 Next, I would like to explain the priority areas where we are focusing our efforts. We see our three priority markets as the automotive, ICT and industrial equipment/energy sectors. At the start of April, we reorganized our sales structure along these lines so we can achieve our strategic goals in each of these areas quickly. Our five priority businesses targeting these markets are inductive devices, high-frequency components, piezoelectric material products, HDD heads, and rechargeable batteries. We see each of these businesses as pillars of TDK s growth, and we plan to focus our resources in these areas.

19 TDK s sales in the automotive market made up about 17% of our total sales in fiscal We aim to increase this proportion to 20% in the near future. TDK already has a high share of the market for powertrain-related electronic components through our sales of capacitors and inductive devices. We aim to target the demand created by the increasing use of automotive electronics and the trend towards eco-friendly cars such as hybrids and fully electric vehicles. We also plan to reinforce our position within the market for powertrain-related electronic components. Sensors are a particular area of growth. Already the sensor business generates about half of our automotive market sales. Targeted products for growth include temperature sensors with built-in protection thermistors and current sensors, both of which are becoming more important in cars. We are also using our proprietary HDD head technology to develop advanced tunnel magnetoresistive (TMR) sensors such as angle sensors. We think that sensors based on our TMR technology have considerable sales growth potential over the longer term. In addition to passive components, relative to our electronics sector competitors we also own a range of products that have applications in the automotive sector. These include power supplies, magnets and EV battery packs. In the power supply sector, our focus is to grow sales of DC-DC converters and battery chargers. Our DC-DC converters achieve high conversion efficiencies using in-house heat sink technology and new high-performance ferrite materials. The gain in conversion efficiency enables us to make these products more compact. Soon they will be able to fit into the palm of your hand. With magnets, we offer both ferrite and metal varieties. These have a range of applications in the automotive sector. We aim to expand sales by developing specialized products using novel materials and production technologies. Another area where we see long-term growth potential is in battery packs for electric vehicles that can make use of wireless charging based on magnetic resonance coupling technology. We have already begun mass production of battery packs for EVs. Currently most of our battery sales are for smartphone and tablet applications, but over the medium- and long-terms we aim to sell more batteries in the automotive market.

20 Turning next to the ICT market, we see growth coming from various products for smartphone and tablet device applications. TDK supplies a range of products for these markets, such as the actuators used in camera modules. Demand is growing as functions for camera modules get more sophisticated. We are trying to grow sales of high valueadded products such as closed-loop voice coil motors and optical image stabilizers (actuators to help prevent blurry photos caused by camera shake). High-performance devices increasingly need more power as well, and we are developing new lithium polymer batteries designed to fit into new, more compact devices. Our batteries also have advantages in larger sizes. Therefore, we are expecting steady growth in the rechargeable batteries business overall. Elsewhere, the growth of the multi-band compatible LTE market is creating demand for high-frequency components such as SAW, BAW and TC-SAW filters. We are focusing on growing sales of all these products.

21 We expect to achieve higher sales of TC-SAW and BAW filters in particular in China due to the local spread of TD-LTE mobile networks. We are receiving many orders for these items. In South Korea, too, orders are increasing for diversity module and discrete solutions using TC-SAW and BAW filters. In North America, our high-frequency components business is growing via power amplifier manufacturers, and we also expect higher demand for diversity modules. Besides increasing production capacity to supply new orders, we are targeting productivity improvements and reducing production costs to boost our profit margins. This means enlarging wafer size and creating small-package products. We are also trying to expand sales of thin-film electronic parts based on in-house technology.

22 In the industrial equipment and energy market, we are looking to expand our sales of various products used in power installations, including batteries used in energy storage systems, power components for inverters, bidirectional DC-DC converters, and metal magnets used in wind power equipment.

23 The next slide shows sales growth projections by priority market. As I mentioned earlier, we expect nearly 7% sales growth in fiscal By market, we are forecasting growth of 6% in the industrial equipment and energy sectors, 8% in the ICT sector, and 10% in the automotive sector. The figure for ICT includes operations in HDD heads which bring stable income. The projected sales growth figure for the high-frequency components business is a little over 20%.

24 Next, I would like to outline the key initiatives in our five priority businesses in more detail for this fiscal year. In inductive devices, we are focusing on inductors for automotive use in both the multilayer and wire-wound categories, particularly multilayer inductors. In metal coils, we aim to boost sales across our full lineup of thin-film, wire-wound and multilayer products. We are confident that TDK is cost-competitive in this sector. In high-frequency components, we plan to grow sales of SAW, TC-SAW and BAW filters and other discrete products using performance gains and miniaturization. This means building on our success in securing reference design approvals from top IC manufacturers. In piezoelectric material products, as I mentioned earlier, we are working to expand sales of actuators for camera modules and also expect to develop automotive sales. In HDD heads, we are targeting a higher share of the market for HDDs used in nearline storage. To generate stable revenues and high profits in this business, we are also continuing to develop HDD heads based on new technologies such as thermal-assist, shingled and two-dimensional magnetic recording. In rechargeable batteries, our goal is to keep growing by satisfying the rapidly growing demand for lithium polymer batteries. Over the medium- and long-terms, we also aim to develop new batteries for markets outside of smartphone, tablet and other ICT applications.

25 There are specific profitability issues that we are looking to address in the magnet and power supply businesses. With magnets, we finished consolidating our ferrite magnet production facilities in China in fiscal We also built new integrated production lines. These measures should help to boost productivity substantially. We are looking to secure more orders for magnets used in cars and home appliances. In metal magnets, we are targeting the automotive, industrial equipment and energy sectors where there is rising demand for high-quality, high-performance magnets. In power supplies, we are seeing a substantial recovery in orders due to increasing capital investment in the semiconductor and industrial equipment sectors. By launching new products, we aim to boost profitability by improving the product mix. We are also working to expand our share of the market for compact, high-efficiency automotive DC-DC converters. Through these various initiatives, we expect to make rapid improvements in the profitability of both of these businesses.

26 Based on all the activities that I have outlined to rebalance our business portfolio, we expect the consolidated earnings base to be significantly better balanced in fiscal 2015 than it was two years earlier. As you can see from the chart, the magnetic application products segment generated most of the profit in fiscal 2013, but there was a turnaround in passive components in fiscal In fiscal 2015, we expect another good performance from magnetic application products, higher profits from film application products, and a doubling of profits from passive components compared with the previous year. This will result in balanced earnings from our three core businesses. We still need to do more to increase margins and boost earnings, but it is important that we achieve an optimal balance of earnings in fiscal We will then target further earnings growth from fiscal 2016.

27 Before ending, I would like to touch on two of the fascinating product areas among the many that we have in development at TDK. The first is magnetic sensors based on GMR and TMR technology from the HDD heads business. They are used in GMR encoders for cameras and TMR angle sensors, which I mentioned earlier. The angle sensors come in analog and digital varieties. Other products that incorporate TMR technology include the TMR gear tooth sensor, pictured here, and the TMR linear magnetic scale. We have begun mass production of some of these products. We will continue developing this range since the products leverage TDK s wealth of expertise in magnetic recording.

28 Next is the semiconductor-embedded substrate, or SESUB for short. We are receiving a lot of inquiries at present about using this technology in wearable healthcare devices, which naturally require compact electronic components.

29 Our SESUB Bluetooth modules are small enough to fit 12 of them on a 10-yen coin. Their tiny size makes them extremely useful in any wearable application, yet they are not products that any company could easily make. Mass production commenced in February We will focus on growing sales of these differentiated products. Thank you for your time today.

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