SUMITOMO RIKO COMPANY LTD.

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED MARCH 31, 2019 AND 2018 TOGETHER WITH INDEPENDENT AUDITOR’S REPORT 1. Consolidated Financial Highlights IFRS Fiscal year 127th 128th 129th 130th 131th

Year end March 2015 March 2016 March 2017 March 2018 March 2019 Millions Thousands of Net sales 401,016 424,485 422,630 462,885 469,705 4,231,577 of yen U.S. dollars Profit before income Millions Thousands of 6,452 11,896 13,300 11,285 700 6,306 taxes of yen U.S. dollars Profit or loss attributable to Millions Thousands of 1,141 2,901 5,195 3,528 (5,022) (45,243) owners of the parent of yen U.S. dollars company Comprehensive income for the year Millions Thousands of attributable to 16,303 (12,967) 3,279 5,162 (5,585) (50,314) of yen U.S. dollars owners of the parent company Equity attributable to Millions Thousands of 174,761 159,893 161,293 164,379 158,319 1,426,298 owners of the parent of yen U.S. dollars Millions Thousands of Total assets 399,441 385,371 404,799 414,233 397,279 3,579,092 of yen U.S. dollars Equity attributable to owners of the parent Yen 1,683.11 1,539.94 1,553.44 1,583.17 1,524.82 U.S. dollars 13.74 per share Profit or loss attributable to owners of the parent Yen 10.98 27.94 50.04 33.98 (48.37) U.S. dollars (0.44) company per share (basic) Profit attributable to owners of the parent Yen ― ― ― ― ― U.S. dollars ― company per share (diluted) Equity attributable to owners of the parent % 43.8 41.5 39.8 39.7 39.9 ratio Profit to equity attributable to % 0.7 1.8 3.2 2.1 (3.1) owners of the parent ratio Price earnings ratio Times 95.9 35.1 22.5 31.7 ― Net cash provided by Millions Thousands of 21,331 29,854 33,161 31,622 31,462 283,441 operating activities of yen U.S. dollars Net cash used in Millions Thousands of (22,774) (33,990) (32,534) (27,445) (28,251) (254,514) investing activities of yen U.S. dollars Net cash provided by Millions Thousands of (used in) financing 11,234 (1,106) 10,715 (6,127) (8,368) (75,388) of yen U.S. dollars activities Cash and cash Millions Thousands of equivalents at end of 38,307 30,981 43,854 41,973 38,371 345,685 of yen U.S. dollars year Number of 23,568 23,790 24,453 25,689 26,156 employees Persons [average number of [2,511] [1,951] [1,786] [1,633] [1,770] temporary workers]

―1― (Notes) 1. Effective from the 128th fiscal year, consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”). 2. Consumption tax is not included in net sales. 3. Profit attributable to owners of the parent company per share (diluted) is not stated here because there were no residual shares. 4. The amounts shown are rounded to the nearest whole unit.

―2― Japanese GAAP Fiscal year 127th 128th

Year end March 2015 March 2016 Millions of Net sales 400,930 424,485 yen Millions of Ordinary income 8,408 10,936 yen

Net income (loss) attributable to Millions of (4,429) (815) owners of parent yen

Millions of Comprehensive income 13,167 (19,762) yen Millions of Net assets 199,225 172,665 yen Millions of Total assets 406,777 378,178 yen Net assets per share Yen 1,731.04 1,485.17

Net income (loss) per share Yen (42.66) (7.85)

Diluted net income per share Yen ― ―

Shareholders’ equity ratio % 44.2 40.8

Return on equity % (2.5) (0.5)

Price earnings ratio Times ― ―

Net cash provided by operating Millions of 19,547 25,512 activities yen Net cash used in investing Millions of (17,184) (29,648) activities yen Net cash provided by (used in) Millions of 2,692 (1,106) financing activities yen

Cash and cash equivalents at end Millions of 47,518 30,981 of year yen

Number of employees 23,568 23,790 [average number of temporary Persons [2,511] [1,951] workers] (Notes) 1. Audits according to the provisions of Article 193-2, Paragraph 1 of the Financial Instruments and Exchange Act have not been conducted for the figures for the 128th fiscal year. 2. Consumption tax is not included in net sales. 3. The diluted net income per share is not stated because there were no residual shares and a net loss per share was posted in the127th and 128th fiscal year. 4. The price earnings ratio for the 127th and 128th fiscal year was not stated because a net loss per share was posted. 5. The amounts shown are rounded to the nearest whole unit.

―3― 1. Summary of Results

(1) Business Results Regarding the global economy in FY2018, while the U.S. administration strengthened protectionist economic policies, the U.S. economy continued to expand as consumer spending remained strong against the backdrop of a favorable labor market and personal incomes, and private-sector capital investment continued to recover. In Europe, partly owing to the turmoil about Brexit, European economies entered a downward phase. In China where stable economic growth continued, the trend toward an economic slowdown became evident mainly because of the U.S.-China trade friction. Meanwhile, in Japan, although exports trended downward, owing to the U.S.-China trade friction and the slowing of Chinese economy, production in the private sector recovered moderately as the impact from natural disasters was resolved, and consumer spending showed a recovery reflecting improvement in the labor market and personal incomes. Regarding the business environment surrounding the Sumitomo Riko Group, in the automotive industry, our main market, whereas demand for large vehicles such as pickup trucks and sports utility vehicles (SUVs) was buoyant, sales of new vehicles decreased centering on sedans and compact cars in the U.S. In China, sales of new vehicles also decreased, affected by tighter environmental regulations and the U.S.-China trade friction. In Europe, the market shrank against the backdrop of an economic slowdown. In Japan, sales of kei cars were brisk. Regarding the General Industrial Products Business, whereas sales in the electronics field decreased because of sluggish demand, demand in the construction machinery market, the main market of the infrastructure field, remained strong centering on China and India. In these circumstances, based on the “Sumitomo Riko Group 2022 Vision (2022V)”, the mid-term management vision whose theme is to “aim to achieve consistent growth and strengthen the organizational structure in a business environment facing a profound transformation phase,” the Group is working to enhance corporate value with the “creation of new businesses and new customers,” “MONOZUKURI Innovation,” and “strengthening of global business foundations” as core business strategies. Consolidated net sales in FY2018 increased 1.5% year on year to ¥469,705 million due to strong sales of automotive products and the infrastructure field in China and Asia. Although profitability in Japan and Europe improved, business profit decreased 27.1% year on year to ¥9,379 million because productivity continued to deteriorate as a result of labor shortages in the U.S. in FY2018 and the profitability of subsidiaries deteriorated in Brazil due to the impact of the shrinking automotive market in Argentina. Operating profit decreased 90.5% year on year to ¥1,153 million because of an increase in other expenses due to the recording of an impairment loss. Sumitomo Riko Company Limited determined that it would take time to recoup investment in an anti-vibration rubber manufacturing subsidiary acquired in 2013 and, thus, recorded a loss on impairment of goodwill and noncurrent assets. The Company also recorded a loss on impairment of noncurrent assets of subsidiaries in Mexico and Brazil owing to a decline in profitability in line with the change in the business environment. Profit before income taxes decreased 93.8% year on year to ¥700 million, and a loss attributable to the owners of the parent company was ¥5,022 million compared with profit attributable to the owners of the parent company of ¥3,528 million for the previous fiscal year.

―4― Business results for each segment were as follows.

1) Automotive Products In Japan, sales increased year on year, reflecting an increase in the production volume of kei cars. Overseas, sales were strong until the second quarter, From the third quarter onward, however, sales were adversely affected by a slowdown in automotive production due to the shrinking automotive market in China, the introduction of a new exhaust gas test procedure called the Worldwide Harmonized Light Vehicles Test Procedure (WLTP) in Europe and the shrinking automotive market in Argentina where currency depreciation has resulted in economic stagnation. As a result, sales to external customers increased 1.2% year on year to ¥398,160 million. Business profit decreased 20.4% year on year to ¥7,771 million because of deterioration of profitability in the U.S. due to an increase in prices of steel materials and sales slowdown, as well as deterioration of profitability resulting from a rapid decrease in sales in Brazil and higher launching costs for new products in Mexico.

2) General Industrial Products In the infrastructure field, sales of hydraulic hoses increased, reflecting higher demand for construction and civil engineering machinery in China. On the other hand, in the electronics field, sales of functional components for printers decreased because of demand slowdown. In the housing environment field, sales of seismic control dampers decreased. Consequently, sales to external customers increased 3.0% year on year to ¥71,545 million. Business profit decreased 48.0% to ¥1,608 million, however, as a result of a decrease in productivity due to lower sales of functional components for printers, rolling stock components and seismic control dampers.

Consolidation The consolidated financial statements include the accounts of the Company and its 79 subsidiaries. Investments in 8 associates meeting the significant influence requirement were accounted for by the equity method. There were no unconsolidated subsidiaries or associates to which the equity method was applied.

Research and development costs Expenses related to research and development of new products and basic research are charged to income when incurred. The Companies’ research and development expenses for the year ended March 31, 2019 were ¥15,002 million.

―5― 1. Consolidated Financial Statements (1) Consolidated Financial Statements 1) Consolidated Statement of Financial Position Thousands of Millions of yen U.S. dollars FY2017 FY2018 FY2018 Notes (As of March 31, (As of March 31, (As of March 31, 2018) 2019) 2019) Assets Current assets Cash and cash equivalents 7, 19 41,973 38,371 345,685 Trade and other receivables 8, 19 96,293 92,892 836,865 Inventories 9 53,599 57,002 513,532 Income taxes receivable 999 3,290 29,640 Other financial assets 19 550 887 7,991 Other current assets 8,404 6,574 59,226 Total current assets 201,818 199,016 1,792,939

Noncurrent assets Property, plant and equipment 10, 12 156,297 154,335 1,390,405 Goodwill 11 5,622 645 5,811 Intangible assets 11, 12 21,834 19,687 177,360 Investments accounted for using the equity method 30 4,435 4,014 36,162 Deferred tax assets 17 2,215 2,199 19,811 Retirement benefit assets 16 10,795 8,694 78,324 Other financial assets 19 7,632 6,730 60,631 Other noncurrent assets 3,585 1,959 17,649 Total noncurrent assets 212,415 198,263 1,786,153 Total assets 414,233 397,279 3,579,092

Liabilities Current liabilities Trade and other payables 13, 19 82,566 80,921 729,018 Bonds and borrowings 14, 19 9,292 15,065 135,721 Income taxes payable 2,508 1,720 15,495 Provisions 15 3,446 2,375 21,396 Other financial liabilities 19 1,845 3,980 35,856 Other current liabilities 13,827 12,079 108,820 Total current liabilities 113,484 116,140 1,046,306

Noncurrent liabilities Bonds and borrowings 14, 19 96,755 87,305 786,532 Deferred tax liabilities 17 6,513 5,400 48,649 Retirement benefit liabilities 16 7,962 8,224 74,090 Provisions 15 617 561 5,054 Other financial liabilities 19 654 523 4,712 Other noncurrent liabilities 3,789 2,528 22,775 Total noncurrent liabilities 116,290 104,541 941,812 Total liabilities 229,774 220,681 1,988,118

Equity Capital stock 21 12,145 12,145 109,414 Capital surplus 21 10,729 12,051 108,568 Retained earnings 142,201 135,284 1,218,775 Treasury stock 21 (270) (271) (2,441) Other components of equity 21 (426) (890) (8,018) Total equity attributable to owners of the parent 164,379 158,319 1,426,298 Noncontrolling interests 29 20,080 18,279 164,676 Total equity 184,459 176,598 1,590,974 Total equity and liabilities 414,233 397,279 3,579,092

―6― 2) Consolidated Statement of Operations Thousands of Millions of yen U.S. dollars FY2017 FY2018 FY2018 Notes (Year ended (Year ended (Year ended March 31, 2018) March 31, 2019) March 31, 2019) Net sales 6,18 462,885 469,705 4,231,577 Cost of sales 22 (392,936) (402,444) (3,625,622) Gross profit 69,949 67,261 605,955 Selling, general and administrative (520,027) expenses 22 (57,242) (57,723) Equity in earnings of associates 30 153 (159) (1,432) Business profit 6 12,860 9,379 84,496 Other income 24 1,405 1,355 12,207 Other expenses 24 (2,069) (9,581) (86,316) Operating profit 12,196 1,153 10,387 Financial income 23 365 693 6,243 Financial expenses 23 (1,276) (1,146) (10,324) Profit before income taxes 11,285 700 6,306 Income tax expense 17 (5,482) (3,606) (32,486) Profit or loss for the year 5,803 (2,906) (26,180)

Profit attributable to: Owners of the parent company 3,528 (5,022) (45,243) Noncontrolling interests 29 2,275 2,116 19,063 Profit or loss for the year 5,803 (2,906) (26,180)

Yen U.S. dollars FY2017 FY2018 FY2018 Notes (Year ended (Year ended (Year ended March 31, 2018) March 31, 2019) March 31, 2019) Profit attributable to owners of the parent company per share Profit or loss attributable to owners of the parent company per share (basic) 26 33.98 (48.37) (0.44)

―7―

3) Consolidated Statement of Comprehensive Income Thousands of Millions of yen U.S. dollars FY2017 FY2018 FY2018 Notes (Year ended (Year ended (Year ended March 31, 2018) March 31, 2019) March 31, 2019) Profit or loss for the year 5,803 (2,906) (26,180)

Other comprehensive income Items that will not be reclassified to net profit (loss) Financial assets measured at fair value 25 783 (538) (4,847) through other comprehensive income Remeasurements of defined benefit plans 25 1,074 (96) (865) Share of other comprehensive income of associates accounted for using equity method 25 (6) (6) (54)

Items that will be reclassified to net profit (loss) Foreign currency translation adjustments of foreign operations 25 109 404 3,641 Cash flow hedges 25 88 36 324 Share of other comprehensive income of associates accounted for using equity method 25 188 (214) (1,928) Total other comprehensive income 2,236 (414) (3,729) Comprehensive income for the year 8,039 (3,320) (29,909)

Comprehensive income for the year attributable to: Owners of the parent company 5,162 (5,585) (50,314) Noncontrolling interests 2,877 2,265 20,405 Comprehensive income for the year 8,039 (3,320) (29,909)

―8― 4) Consolidated Statement of Changes in Equity FY2017 (From April 1, 2017 to March 31, 2018) (Millions of yen) Other components of equity Financial assets Capital Capital Retained Treasury measured at Notes Remeasurements stock Surplus earnings stock fair value of defined through other benefit plans comprehensive income Balance as of April 1, 2017 12,145 10,729 139,474 (269) 3,686 ― Profit or loss for the year ― ― 3,528 ― ― ― Other comprehensive income 25 ― ― ― ― 777 1,065 Total comprehensive income ― ― 3,528 ― 777 1,065 for the year Purchase and disposal of 21 ― ― ― (1) ― ― treasury stock Dividends of surplus 21 ― ― (2,077) ― ― ― Reclassification to retained ― ― 1,274 ― (209) (1,065) earnings Other ― ― 2 ― ― ― Total transactions with owners ― ― (801) (1) (209) (1,065) Balance as of March 31, 2018 12,145 10,729 142,201 (270) 4,254 ―

Other components of equity Foreign Total equity currency attributable to Noncontrolling Notes translation Cash flow Total equity Total owners of the interests adjustments hedges parent of foreign operations Balance as of April 1, 2017 (4,108) (364) (786) 161,293 18,496 179,789 Profit or loss for the year ― ― ― 3,528 2,275 5,803 Other comprehensive income 25 (296) 88 1,634 1,634 602 2,236 Total comprehensive income (296) 88 1,634 5,162 2,877 8,039 for the year Purchase and disposal of 21 ― ― ― (1) ― (1) treasury stock Dividends of surplus 21 ― ― ― (2,077) (1,293) (3,370) Reclassification to retained ― ― (1,274) ― ― ― earnings Other ― ― ― 2 ― 2 Total transactions with owners ― ― (1,274) (2,076) (1,293) (3,369) Balance as of March 31, 2018 (4,404) (276) (426) 164,379 20,080 184,459

―9― FY2018 (From April 1, 2018 to March 31, 2019) (Millions of yen) Other components of equity Financial assets Capital Capital Retained Treasury measured at Notes Remeasurements stock surplus earnings stock fair value of defined through other benefit plans comprehensive income Balance as of April 1, 2018 12,145 10,729 142,201 (270) 4,254 ― Cumulative effect of ― ― 281 ― ― ― accounting change Restated balance 12,145 10,729 142,482 (270) 4,254 ― Profit or loss for the year ― ― (5,022) ― ― ― Other comprehensive income 25 ― ― ― ― (545) (87) Total comprehensive income ― ― (5,022) ― (545) (87) for the year Purchase and disposal of 21 ― ― ― (1) ― ― treasury stock Dividends of surplus 21 ― ― (2,077) ― ― ― Changes in ownership interests in subsidiaries 29 ― 1,322 ― ― ― ― without change of control Reclassification to retained ― ― (99) ― 12 87 earnings Total transactions with owners ― 1,322 (2,176) (1) 12 87 Balance as of March 31, 2019 12,145 12,051 135,284 (271) 3,721 ―

Other components of equity Foreign Total equity currency attributable to Noncontrolling Notes translation Cash flow Total equity Total owners of the interests adjustments hedges parent of foreign operations Balance as of April 1, 2018 (4,404) (276) (426) 164,379 20,080 184,459 Cumulative effect of ― ― ― 281 ― 281 accounting change Restated balance (4,404) (276) (426) 164,660 20,080 184,740 Profit or loss for the year ― ― ― (5,022) 2,116 (2,906) Other comprehensive income 25 33 36 (563) (563) 149 (414) Total comprehensive income 33 36 (563) (5,585) 2,265 (3,320) for the year Purchase and disposal of 21 ― ― ― (1) ― (1) treasury stock Dividends of surplus 21 ― ― ― (2,077) (1,283) (3,360) Changes in ownership interests in subsidiaries 29 ― ― ― 1,322 (2,783) (1,461) without change of control Reclassification to retained ― ― 99 ― ― ― earnings Total transactions with owners ― ― 99 (756) (4,066) (4,822) Balance as of March 31, 2019 (4,371) (240) (890) 158,319 18,279 176,598

―10 ― FY2018 (From April 1, 2018 to March 31, 2019) (Thousands of U.S. dollars) Other components of equity Financial assets Capital Capital Retained Treasury measured at Notes Remeasurements stock surplus earnings stock fair value of defined through other benefit plans comprehensive income Balance as of April 1, 2018 109,414 96,658 1,281,090 (2,432) 38,324 ― Cumulative effect of ― ― 2,532 ― ― ― accounting change Restated balance 109,414 96,658 1,283,622 (2,432) 38,324 ― Profit or loss for the year ― ― (45,243) ― ― ― Other comprehensive income 25 ― ― ― ― (4,910) (784) Total comprehensive income ― ― (45,243) ― (4,910) (784) for the year Purchase and disposal of 21 ― ― ― (9) ― ― treasury stock Dividends of surplus 21 ― ― (18,712) ― ― ― Changes in ownership interests in subsidiaries 29 ― 11,910 ― ― ― ― without change of control Reclassification to retained ― ― (892) ― 108 784 earnings Total transactions with owners ― 11,910 (19,604) (9) 108 784 Balance as of March 31, 2019 109,414 108,568 1,218,775 (2,441) 33,522 ―

Other components of equity Foreign Total equity currency attributable to Noncontrolling Notes translation Cash flow Total equity Total owners of the interests adjustments hedges parent of foreign operations Balance as of April 1, 2018 (39,677) (2,486) (3,839) 1,480,891 180,902 1,661,793 Cumulative effect of ― ― ― 2,532 ― 2,532 accounting change Restated balance (39,677) (2,486) (3,839) 1,483,423 180,902 1,664,325 Profit for the year ― ― ― (45,243) 19,063 (26,180) Other comprehensive income 25 299 324 (5,071) (5,071) 1,342 (3,729) Total comprehensive income 299 324 (5,071) (50,314) 20,405 (29,909) for the year Purchase and disposal of 21 ― ― ― (9) ― (9) treasury stock Dividends of surplus 21 ― ― ― (18,712) (11,559) (30,271) Changes in ownership interests in subsidiaries 29 ― ― ― 11,910 (25,072) (13,162) without change of control Reclassification to retained ― ― 892 ― ― ― earnings Total transactions with owners ― ― 892 (6,811) (36,631) (43,442) Balance as of March 31, 2019 (39,378) (2,162) (8,018) 1,426,298 164,676 1,590,974

―11 ―

5) Consolidated Statement of Cash Flows Thousands of Millions of yen U.S. dollars FY201 7 FY201 8 FY201 8 (From April 1, (From April 1, (From April 1, Notes 2017 to March 2018 to March 2018 to March 31, 201 8) 31, 201 9) 31, 201 9) Cash flows from operating activities Profit before income taxes 11,285 700 6,306 Depreciation and amortization 28,766 29,781 268,297 Impairment loss on fixed assets 405 7,178 64,667 Equity in losses (earnings) of associates (153) 159 1,432 Interest and dividend income (333) (253) (2,279) Interest expense 986 1,047 9,432 Decrease (increase) in trade and other receivables (5,491) 2,706 24,378 Decrease (increase) in inventories (3,459) (3,811) (34,333) Increase (decrease) in trade and other payables 4,443 (661) (5,955) Increase (decrease) in provisions 88 (1,009) (9,090) Other, net 2,040 3,988 35,928 Subtotal 38,577 39,825 358,783 Interest and dividends received 348 303 2,730 Payments for interest (1,003) (1,033) (9,306) Payments for income taxes (6,300) (7,633) (68,766) Net cash provided by operating activities 31,622 31,462 283,441 Cash flows from investing activities Payment for purchases of property, plant and equipment and intangible assets (30,145) (29,978) (270,072) Proceeds from sales of property, plant and equipment and intangible assets 383 453 4,081 Proceeds from sales of other financial assets 2,347 1,464 13,189 Other, net (30) (190) (1,712) Net cash used in investing activities (27,445) (28,251) (254,514) Cash flows from financing activities Net increase (decrease) in short-term bank loans 20 (1,981) 1,020 9,189 Proceeds from long -term debt and issuance of bonds 20 14,921 1,000 9,009 Repayment of long -term debt and redemption of bonds 20 (15,045) (5,012) (45,153) Payments for acquisition of interests in subsidiaries from non -controlling interests ― (1,461) (13,162) Cash dividends paid (2,077) (2,077) (18,712) Cash dividends paid to noncontrolling interests (1,293) (1,283) (11,559) Other, net 20 (652) (555) (5,000) Net cash used in financing activities (6,127) (8,368) (75,388) Effect of exchange rate changes on cash and cash equivalents 69 1,555 14,011 Net increase (decrease) in cash and cash equivalents (1,881) (3,602) (32,450) Cash and cash equivalents at beginning of year 7 43,854 41,973 378,135 Cash and cash equivalents at end of year 7 41,973 38,371 345,685

―12 ― [Notes to the Consolidated Financial Statements] 1. Reporting Entity Sumitomo Riko Company Limited (“the Company”) is a company incorporated in Japan. The consolidated financial statements of the Company have a fiscal year-end date of March 31, 2019 and consist of the financial statements of the Company, its consolidated subsidiaries (the “Sumitomo Riko Group”) and its associates. The details of the principal businesses of the Sumitomo Riko Group are described in Note 6, “Segment Information.” The parent company of the Company is Sumitomo Electric Industries, Ltd.

2. Basis of Preparation (1) Compliance with IFRS The Sumitomo Riko Group’s consolidated financial statements satisfy all of the requirements concerning the “Designated International Accounting Standards Specified Company” prescribed in Article 1-2 of the “Ordinance on Consolidated Financial Statements” and are prepared in accordance with IFRS under the provisions of Article 93 of the Ordinance. The consolidated financial statements for the current fiscal year have been approved at the Board of Directors meeting held on June 20, 2019.

(2) Basis of measurement Except for financial instruments stated in Note 3, “Significant Accounting Policies,” the consolidated financial statements are prepared on the historical cost basis.

(3) Presentation currency The Sumitomo Riko Group’s consolidated financial statements are prepared in Japanese yen, which is the functional currency of the Company. Figures less than one million yen are rounded to the nearest million yen. U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥111.00 = U.S.$1.00 as of March 31, 2019.

(4) Changes in accounting policies The following new and revised standards were adopted in FY2018.

IFRS Description Revenue from Provides accounting treatment for revenue recognition and the disclosure IFRS 15 Contracts with thereof Customers

The Sumitomo Riko Group has applied “Revenue From Contracts with Customers” (IFRS 15) from FY2018. In applying IFRS 15, Sumitomo Riko Group adopted a method of recognizing the cumulative impact of initially applying the new standard at the date of initial application, which is accepted as a transitional measure. Following the application of IFRS 15, the Group recognizes revenues based on the five-step approach below.

Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

The Sumitomo Riko Group Automotive Product segment supplies anti-vibration rubber, hoses, interior equipment, sound reducing materials etc., to domestic and foreign customers, and it supplies cleaning blades, ―13 ― anti-vibration rubber for trains, houses, bridges and electronic devices, hydraulic hoses, industrial hoses etc., to domestic and foreign customers in the General Industrial Product segment.

In the sale of these products, the Group recognizes revenue principally at the time of delivery of the product since the Group deems that the performance obligation is satisfied when the customer gains control over the product at delivery in most cases. Revenue is measured by deducting discount estimates, etc., from the amount of consideration promised in the contracts with customers. As a result, retained earnings increased 281 million yen at the beginning of the consolidated fiscal year compared to that of the previous fiscal year. However, the impact on the consolidated financial statements for the current consolidated fiscal year was immaterial.

―14 ― 3. Significant Accounting Policies Unless otherwise indicated, accounting policies stated below have been consistently applied to all the terms stated in the consolidated financial statements.

(1) Basis of consolidation 1) Subsidiaries A subsidiary is an entity that is controlled by the Sumitomo Riko Group. As a result of such control, the Sumitomo Riko Group has exposures and rights to variable returns from its involvement with an entity and has the ability to affect those returns through its power over such entity. A subsidiary is consolidated from the date the Sumitomo Riko Group obtains control over such subsidiary, and the consolidation is suspended from the date control is lost. All inter-Group balances of receivables and payables and inter-Group transactions and unrealized gains and losses arising from inter-Group transactions are eliminated when preparing consolidated financial statements. Comprehensive income for subsidiaries is allocated to the equity attributable to owners of the parent and noncontrolling interests even if the noncontrolling interests result in a deficit balance.

The consolidated financial statements include the financial statements of certain subsidiaries that have a fiscal closing date different from that of the parent company. It is impracticable to unify the fiscal closing date of the subsidiaries with that of the parent company due to the requirements of local laws and regulations where subsidiaries are located and for other reasons. The difference between the fiscal closing date of these subsidiaries and that of the parent company does not exceed three months. When the financial statements of subsidiaries used in the preparation of the consolidated financial statements are prepared as of dates that are different from the fiscal closing date of the parent company, adjustments are made for the effects of significant transactions or events that occur between the fiscal closing date of the subsidiary and that of the parent company. If there is any change in the Sumitomo Riko Group’s interest in a subsidiary, but the parent company retains control over the subsidiary, such transaction is accounted for as an equity transaction. Any difference between the adjustment to the noncontrolling interests and the fair value of the consideration received is recognized directly in equity as the equity attributable to owners of the parent.

2) Associates Associates are those entities in which the Sumitomo Riko Group has significant influence on their financial and operating policies but does not have control or joint control over them. Associates are accounted for using the equity method from the date the Sumitomo Riko Group gains significant influence until the date it loses that influence. The consolidated financial statements include investments in certain associates that have a fiscal closing date different from that of the parent company. It is impracticable to unify the fiscal closing date of the associates with that of the parent company due to the requirements of local laws and regulations where the associates are located and for other reasons. Adjustments are made for the effects of significant transactions or events that occur after the associate’s fiscal closing date.

―15 ― (2) Business combinations and goodwill The Sumitomo Riko Group applies the acquisition method for the accounting treatment of business combinations. Identifiable assets acquired and identifiable liabilities and contingent liabilities assumed in a business combination are measured at their acquisition-date fair value. Expenses incurred in relation to the acquisition are recognized as expenses when they are incurred. Noncontrolling interests are recognized separately from the Sumitomo Riko Group’s equity. On an acquisition-by-acquisition basis, a measurement basis of noncontrolling interests is selected from either fair value or proportionate share of noncontrolling interests in the recognized amounts of the acquiree’s identifiable assets and liabilities. If the sum of the consideration transferred the amount of noncontrolling interests in the acquiree and the fair value of equity interests in the acquiree held previously by the Sumitomo Riko Group exceeds the net amount of identifiable assets and liabilities at the acquisition date, goodwill is measured at the excess amount. If such amount is less than the net amount of identifiable assets and liabilities acquired in the case of a bargain purchase, the difference is recognized as profit or loss. Goodwill is not amortized, and is tested for impairment every year or when there is an indication of impairment. The carrying amount of goodwill is presented at cost less accumulated impairment loss. The impairment loss of goodwill is recognized as profit or loss and is not reversed. Goodwill is allocated to cash-generating units or groups of cash-generating units based on the allocation of expected benefits from business combinations for the purpose of impairment testing.

(3) Foreign currencies 1) Foreign currency transactions The financial statements of each company of the Sumitomo Riko Group are prepared using the functional currency as the currency of the primary economic environment in which the company operates. The consolidated financial statements are presented in Japanese yen, which is the functional currency of the Company. A foreign currency transaction is translated into the functional currency of each company of the Sumitomo Riko Group using the exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the end of the reporting period are translated into the functional currency at the exchange rate prevailing at the end of the reporting period and translation differences are recognized as profit or loss; provided, however, that translation differences arising from financial assets measured through other comprehensive income and cash flow hedges are recognized as other comprehensive income.

2) Foreign operations Assets and liabilities of foreign operations are translated into Japanese yen using the exchange rate at the end of the reporting period. Income and expenses are translated into Japanese yen at the average exchange rate for the fiscal year unless exchange rates during the fiscal year significantly fluctuate. Exchange differences arising from the translation of financial statements of foreign operations are recognized in other comprehensive income, and the differences are included in other components of equity as “foreign currency translation adjustments of foreign operations.”

(4) Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of approximately three months or less and insignificant risk of changes in value.

―16 ― (5) Financial instruments 1) Non-derivative financial assets (i) Classification The Sumitomo Riko Group classifies non-derivative financial assets into financial assets measured at amortized cost, financial assets measured at fair value through other comprehensive income and financial assets measured at fair value through profit or loss.

Financial assets measured at amortized cost Financial assets are classified into financial assets measured by amortized cost if the following conditions are met. - The financial asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows. - The contractual terms of financial assets give rise on specified dates to cash flows that are solely for payments of principal and interest on the principal amount outstanding.

Financial assets measured at fair value through other comprehensive income (a) Debt instruments measured at fair value through other comprehensive income The financial assets are classified into debt instruments measured at fair value through other comprehensive income if the following conditions are met. - The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial asset. - The contractual terms of the financial assets give rise on specified dates to cash flows that are solely for payments of principal and interest on the principal amount outstanding.

(b) Equity instruments measured at fair value through other comprehensive income Of financial assets other than financial assets measured at amortized cost or debt instruments measured at fair value through other comprehensive income, equity instruments for which the Sumitomo Riko Group made an irrevocable election to disclose subsequent changes in fair value as at initial recognition are classified into financial assets measured at fair value through other comprehensive income.

Financial assets measured at fair value through profit or loss Financial assets other than financial assets measured at amortized cost or financial assets measured at fair value through other comprehensive income are classified as financial assets measured at fair value through profit or loss. However, the Sumitomo Riko Group may at initial recognition irrevocably choose to designate a financial asset which is not measured at fair value through profit or loss as a financial asset measured at fair value through profit or loss if doing so eliminates or significantly reduces an accounting mismatch.

(ii) Initial recognition and measurement The Sumitomo Riko Group initially recognizes trade and other receivables when they are incurred. Other financial assets are initially recognized on the transaction date when the Sumitomo Riko Group becomes a party to the contractual provisions of the financial assets. All financial assets are initially measured at fair value plus transaction costs, except when they are classified into financial assets measured at fair value through profit or loss.

―17 ― (iii) Subsequent measurement After initial recognition, financial assets are measured according to the classifications described below.

Financial assets measured at amortized cost Financial assets measured at amortized cost are measured at amortized cost using the effective interest method.

Financial assets measured at fair value through other comprehensive income (a) Debt instruments measured at fair value through other comprehensive income Except for impairment gains and losses and foreign exchange gains and losses, changes in fair value on debt instruments measured at fair value through other comprehensive income are recognized in other comprehensive income until they are derecognized. If such debt instruments are derecognized, other comprehensive income recognized in the past is transferred to profit or loss.

(b) Equity instruments measured at fair value through other comprehensive income Changes in fair value on equity instruments measured at fair value through other comprehensive income are recognized in other comprehensive income. If such equity instruments are derecognized or the fair value decreases significantly, other comprehensive income recognized in the past is directly transferred to retained earnings. Dividends from such equity instruments are recognized as profit or loss.

Financial assets measured at fair value through profit or loss Financial assets measured at fair value through profit or loss are measured at fair value after initial recognition, and the changes are recognized as profit or loss.

(iv) Derecognition Financial assets are derecognized if the contractual rights to cash flows expire or are assigned or substantially all the risks and rewards of the ownership are transferred. If the Sumitomo Riko Group has no reasonable expectations of recovering all or part of the value of a financial asset, the Sumitomo Riko Group directly reduces the gross carrying amount of the financial asset.

(v) Impairment The Sumitomo Riko Group recognizes an allowance for doubtful accounts for expected credit losses on financial assets measured at amortized cost.

Determining significant increases in credit risk At the end of each reporting period, the Sumitomo Riko Group compares the risk of a default occurring on a financial asset as of the end of the reporting period with the risk of a default occurring at the date of initial recognition and assesses whether the credit risk on the financial asset has increased significantly after the initial recognition. In assessing whether there is any change in the risk of default, the Sumitomo Riko Group takes into account past due information and the following matters as supplemental information. - Significant change in a credit risk rating of the financial asset by external rating agencies - Downgrading of an internal credit risk rating - Deterioration of the borrower’s operating results

―18 ― Expected credit loss approaches Expected credit losses are the present value of the difference between contractual cash flows the Sumitomo Riko Group has a right to receive pursuant to a contract and the cash flows actually expected to be received by the Sumitomo Riko Group. If the credit risk on a financial asset has increased significantly after initial recognition, the Sumitomo Riko Group measures the allowance for doubtful accounts for the financial asset at an amount equal to the lifetime expected credit loss. If the credit loss has not increased significantly, the Sumitomo Riko Group measures the allowance for doubtful accounts for that financial asset at an amount equal to a 12-month expected credit loss. Notwithstanding the above, the Sumitomo Riko Group measures the allowance for doubtful accounts at an amount equal to lifetime expected credit losses for trade receivables that do not contain a significant finance component. The provision for the allowance for doubtful accounts for financial assets is recognized in profit or loss. In the case of an occurrence of any event that reduces the allowance for doubtful accounts, the reversal of the allowance for doubtful accounts is recognized in profit or loss.

2) Non-derivative financial liabilities (i) Classification The Sumitomo Riko Group classifies non-derivative financial liabilities into financial liabilities measured at amortized cost. However, if the Sumitomo Riko Group, at initial recognition, chooses to designate a financial liability as a financial liability measured at fair value through profit or loss, the financial liability is classified into a financial liability measured at fair value through profit or loss.

(ii) Initial recognition and measurement Debt securities issued by the Sumitomo Riko Group are initially recognized on the issue date. Other financial liabilities are initially recognized on the transaction date when the Sumitomo Riko Group becomes a party to the contractual provisions of the financial liability. All financial liabilities are initially measured at fair value plus transaction costs, except when they are classified into financial liabilities measured at fair value through profit or loss.

(iii) Subsequent measurement With regard to the measurement of financial liabilities after initial recognition, financial liabilities measured at amortized cost are measured at amortized cost using the effective interest method, and financial liabilities measured at fair value through profit or loss are measured at fair value after initial recognition and the changes are recognized as profit or loss.

(iv) Derecognition A financial liability is derecognized when it is extinguished, i.e., when the obligation specified in the contract is discharged or cancelled or expires.

3) Derivatives and hedge accounting The Sumitomo Riko Group uses derivatives such as foreign exchange contracts and interest rate swaps to hedge foreign exchange risk and interest rate risk. The derivatives are initially measured at fair value at the date when the derivative contract is entered into and are subsequently measured at fair value. Changes in the fair value of derivatives are recognized in profit or loss. However, the effective portion of cash flow hedges changes is recognized in other comprehensive income.

―19 ― (i) Qualifying criteria for hedge accounting To assess whether a hedging relationship meets the qualifying criteria for hedge accounting, the Sumitomo Riko Group documents at the inception of the hedging relationship the relationship between a hedging instrument and hedged item and the risk management objectives and strategies for undertaking various hedges. When a derivative used for hedging offsets the fair value of a hedged item or changes in cash flows, the Sumitomo Riko Group assesses and documents at the inception of the hedging relationship and on an ongoing basis whether the hedging relationship meets the hedge effectiveness requirements. The Sumitomo Riko Group performs the ongoing assessment of hedge effectiveness at the end of each reporting period or upon a significant change in the circumstance affecting the hedge effectiveness requirements.

(ii) Accounting for qualifying hedging relationship Hedging relationships that meet qualifying criteria for hedge accounting are accounted for as follows.

Cash flow hedges For changes in the fair value of hedging instruments, the effective portion of the cash flow hedge reserve is recognized in other comprehensive income, and any reserve other than the effective portion of the hedge is recognized in profit or loss. If a hedged forecast transaction subsequently results in the recognition of a non-financial asset or non- financial liability or a hedged forecast transaction for a non-financial asset or non-financial liability becomes a firm commitment for which fair value hedge accounting is applied, the Sumitomo Riko Group directly transfers the cash flow hedge reserve to the initial cost or other carrying amount of the asset or liability. Cash flow hedge reserve on cash flow hedges other than those stated above is reclassified to profit or loss in the same period during which hedged expected future cash flows affect profit or loss. However, if that amount is a loss and the Sumitomo Riko Group expects that all or a portion of that loss will not be recovered in one or more future periods, it immediately reclassifies the amount that is not expected to be recovered into profit or loss. When the Sumitomo Riko Group discontinues hedge accounting, if the hedged future cash flows are still expected to occur, cash flow hedge reserve remains in the reserve until the future cash flows occur. If the hedged future cash flows are no longer expected to occur, the cash flow hedge reserve is immediately reclassified into profit or loss.

4) Offsetting financial assets and financial liabilities A financial asset and a financial liability is offset and presented as a net amount in the statement of financial position only when the Sumitomo Riko Group has a legally enforceable right to set off recognized amounts and intends either to settle on a net basis or realize the asset and settle the liability simultaneously.

5) Fair value of financial instruments The fair value of financial instruments that are traded in active financial markets at each reporting date is determined by quoted prices or dealer quotations. If there is no active market, the fair value of financial instruments is determined using appropriate valuation models.

(6) Inventories The cost of inventories includes all costs of purchase, costs of conversion, and other costs incurred in bringing inventories to their present location and condition. Inventories are measured at lower of cost and net realizable value. Net realizable value is determined as the estimated selling price in the ordinary course of business less related direct sales costs. The costs of inventories are determined principally by the weighted average method.

―20 ― (7) Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment loss. The cost includes any costs directly attributable to the acquisition of the assets, their dismantlement, removal or restoration and any borrowing costs eligible for capitalization. Capitalized finance leases are also included in property, plant and equipment. Subsequent costs are included in the carrying amount of the asset or recognized as a separate asset only when it is probable that future economic benefits associated with the item will flow to the Sumitomo Riko Group and the cost of the item can be measured reliably. All other costs relating to repairs and maintenance are recognized in profit or loss when they are incurred.

Property, plant and equipment other than land and construction in progress are depreciated with respect to their depreciable amounts, the costs of the asset less their residual values, using the straight-line method over the estimated useful life of the each component of the assets. The estimated useful lives of major property, plant and equipment are as follows: - Buildings and structures: 3 to 50 years - Machinery, equipment and vehicles: 4 to 12 years - Tools, furniture and fixtures: 2 to 15 years

The depreciation methods, estimated useful lives, and residual values of property, plant and equipment are reviewed at the end of each reporting period.

(8) Intangible assets Intangible assets are stated at cost less accumulated amortization and accumulated impairment loss. A separately acquired intangible asset is initially measured at cost, and the cost of the intangible asset acquired in a business combination is measured at fair value at the acquisition date. Expenditures related to internally generated intangible assets are recognized as expenses when they are incurred, with the exception of development expenses that meet the criteria for capitalization. Intangible assets are amortized with respect to the costs of the assets less their residual values using the straight-line method over the estimated useful life of the asset. The estimated useful lives of major intangible assets are as follows: - Software: 5 years - Development assets: 5 years The amortization methods, estimated useful lives and residual values of intangible assets are reviewed at the end of each reporting period.

(9) Leases The Sumitomo Riko Group determines whether an arrangement is or contains a lease based on the substance of the arrangement at its inception. The Sumitomo Riko Group determines the substance of the contract based on whether the performance of the arrangement relies on the use of a specific asset or asset group and the right to use such asset is conveyed pursuant to the arrangement. The Sumitomo Riko Group classifies a lease that transfers substantially all the risks and rewards incidental to ownership of an asset to the Sumitomo Riko Group as a finance lease and a lease other than a finance lease as an operating lease. In finance lease transactions, leased assets and lease obligations are stated in the consolidated statement of financial position at the lower of the fair value of the leased property and the present value of the minimum lease payments, each determined at the inception of the lease. Lease payments are allocated to finance costs and the payments of lease obligations using the interest method. Finance costs are recognized in profit or loss. Leased assets are depreciated using the straight-line method over the shorter of their estimated useful lives and lease terms.

―21 ― Lease payments under operating leases are recognized as expenses using the straight-line method over the lease term.

(10) Impairment of non-financial assets The Sumitomo Riko Group assesses on a quarterly basis whether there is any indication that an asset may be impaired. If any indication exists or if an impairment test is required, the Sumitomo Riko Group estimates the recoverable amount of the asset. The Sumitomo Riko Group defines recoverable amount of an asset or cash- generating unit as the higher of value in use and fair value less costs to sell. In determining the fair value less costs to sell, the Sumitomo Riko Group uses an appropriate valuation model supported by available fair value indicators. In determining value in use, estimated future cash flows are discounted to the present value, using discount rates that reflect current market assessments of the time value of money and the risks specific to the asset. If the carrying amount of the asset or cash-generating unit exceeds the recoverable amount, an impairment loss is recognized in profit or loss. Impairment loss for a cash-generating unit is recognized first by reducing the carrying amount of any allocated goodwill and then allocating the remaining loss to the other assets of the cash-generating unit on a pro-rata basis based on the carrying amount of each asset. Assets other than goodwill are reviewed on a quarterly basis to determine whether there is any indication that an impairment loss recognized in prior years may have decreased or may no longer exist. If any such indication exists, the recoverable amount of the asset or cash-generating unit is estimated. If the recoverable amount exceeds the carrying amount of the asset or cash-generating unit, the impairment loss is reversed within the amount not exceeding the carrying amount that would have been determined if no impairment loss had been recognized for the asset for prior years, net of depreciation and amortization.

(11) Employee benefits 1) Post-employment benefits (a) Defined benefit plan The Company and some subsidiaries have adopted defined benefit plans. An asset or liability recognized in the consolidated statements of financial position related to a defined benefit plan is recognized at the amount of the present value of defined benefit obligations less the fair value of plan assets. Defined benefit obligations are calculated on a yearly basis using the projected unit credit method. As to a discount rate, a discount period is determined based on the period until the expected date of future benefit payment in each fiscal year, and the discount rate is determined by reference to market yields on high quality corporate bonds at the fiscal year-end corresponding to the discount period. Remeasurements of the asset or liability for retirement benefits is recognized in other comprehensive income and immediately reclassified in retained earnings in the period in which they occur. The remeasurements are comprised mainly of actuarial gains and losses relating to defined benefit obligations and the return on plan assets (excluding the amount of net interest on plan assets). Past service costs are recognized in profit or loss in the period in which they occur.

(b) Defined contribution plan The Company and some subsidiaries have adopted defined contribution plans. Payments to defined contribution plans are recognized as expenses when an employee has rendered the related service.

2) Other long-term employee benefits Obligations with respect to long-term employee benefits other than post-retirement benefits are calculated by estimating the future amount of benefits that employees will have earned as consideration for their services in the current and prior fiscal years and discounting such amount in order to determine the present value. 3) Short-term employee benefits

―22 ― Short-term employee benefits are measured on an undiscounted basis and are expensed when the related service is rendered. The Sumitomo Riko Group owes legal and constructive payment obligations as a consequence of past employee services provided. If the amount of payment obligations can be reliably estimated, the estimated amount to be paid is recognized as a liability.

(12) Provisions and contingent liabilities Provisions are recognized when the Sumitomo Riko Group has present legal and constructive obligations as a result of past events, it is probable that outflows of resources will be required to settle such obligations and reliable estimates can be made of the amounts. If the time value of money is material, the amount of a provision is measured at the present value of the expenditures expected to be required to settle the obligation, discounting the expenditures using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the liability. The increase in the provisions due to the passage of time is recognized in profit or loss. With respect to provision for product warranties, to provide for future payments for the costs of quality assurance for products, a provision is recognized for expected losses corresponding to the sales for the current fiscal year based on past experience plus expected costs taking into account actual costs incurred in the past. The expected outflow of economic benefits in the future is within one year from the end of each reporting period. A provision for business structure improvement is recognized when a formal detailed plan is approved within the Sumitomo Riko Group, and it has started to implement such restructuring plan or announced its main features to those affected by the plan. The expected outflow of economic benefits in the future may be affected by future business plans, etc. When the Sumitomo Riko Group has a present legal or constructive obligation, an environmental provision is recognized at an amount considered to be appropriate in order to provide for expenditures for environmental measures. The expected timing of the outflow of economic benefits in the future may be affected by future business plans, etc. The Sumitomo Riko Group discloses contingent liabilities in the notes if it has possible obligations at the end of the reporting period whose existence cannot be confirmed at that date or if the obligations do not meet the recognition criteria.

(13) Treasury stock Treasury shares are measured at cost and deducted from equity. No gain or loss is recognized at the initial purchase, sale or retirement thereof. Any difference between the carrying amount and the consideration received from the sale is recognized as equity.

(14) Revenue recognition 1) Sale of goods The Sumitomo Riko Group has applied “Revenue From Contracts with Customers” (IFRS 15) from FY2018. Following the application of IFRS 15, the Group recognizes revenues based on the five-step approach below.

Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

The Sumitomo Riko Group Automotive Product segment supplies anti-vibration rubber, hoses, interior

―23 ― equipment, sound reducing materials etc., to domestic and foreign customers, and it supplies cleaning blades, anti-vibration rubber for trains, houses, bridges and electronic devices, hydraulic hoses, industrial hoses etc., to domestic and foreign customers in the General Industrial Product segment.

In the sale of these products, the Group recognizes revenue principally at the time of delivery of the product since the Group deems that the performance obligation is satisfied when the customer gains control over the product at delivery in most cases. Revenue is measured by deducting discount estimates, etc., from the amount of consideration promised in the contracts with customers.

2) Provision of services Revenue from rendering services is measured at the fair value of the consideration or receivables received by rendering services in the course of ordinary business. When the outcome of a transaction involving rendering services can be estimated reliably, revenue is recognized by reference to the stage of completion of the transaction at the end of the reporting period.

3) Dividend income Dividend income is recognized at the fair value of the consideration or receivables when the right to receive the dividend payment is established.

(15) Government grants Government grants are recognized at fair value when there is reasonable assurance that any conditions of compliance will be complied with and that the grants will be received. If a government grant relates to an expense item, the government grant is recognized in profit or loss on a systematic basis over the periods in which the related expenses which the grant is intended to compensate is recognized as an expense. If the grant relates to an asset, the grant is recognized in profit or loss on a systematic basis over the useful life of the asset, and unearned grants are recognized in liabilities as deferred revenue.

(16) Financial income and expenses Financial income comprises interest income, dividend income and gains on valuation of derivatives (excluding gains on hedging instruments recognized in other comprehensive income). Interest income is accrued using the effective interest method. Financial expenses comprise interest expense and losses on the valuation of derivatives (excluding losses on hedging instruments recognized in other comprehensive income).

(17) Income taxes The income tax expense comprises current and deferred taxes. These are recognized in profit or loss, except for items recognized in other comprehensive income or cases in which these relate to items directly recognized in equity. Current taxes are calculated in accordance with the tax rates that have been enacted or substantially enacted by the end of the reporting period in the countries where the Company and its subsidiaries conduct business and generate taxable profit. Deferred tax assets and liabilities are recognized using the asset-liability method on temporary differences arising between the carrying amounts of assets and liabilities for their tax basis and accounting purposes. Deferred tax assets are recognized for deductible temporary differences and carryforwards of unused tax credits and unused tax losses which may reduce future tax burdens to the extent that it is probable that future taxable profit will be available against which they can be utilized. Meantime, deferred tax liabilities are recognized for taxable temporary differences. However, deferred tax assets and liabilities are not recognized for the following

―24 ― temporary differences. - Temporary differences arising from the initial recognition of goodwill - Temporary differences arising from the initial recognition of assets and liabilities in transactions that are not business combinations and at the time of transaction affect neither accounting profit nor loss and taxable profit (loss) - Taxable temporary differences arising from investments in subsidiaries and associates to the extent that the timing of the reversal of the temporary difference is controlled and that it is probable that the temporary difference will not reverse in the foreseeable future

The carrying amount of a deferred tax asset is reviewed every fiscal year and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. An unrecognized deferred tax asset is reviewed every fiscal year and is recognized to the extent that it has become probable that future taxable profit will be available to allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured in accordance with tax laws and tax rates that are expected to apply in the period in which the asset is realized or the liability is settled based on the tax laws and the tax rates that have been enacted or substantially enacted at the end of the reporting period. Deferred tax assets and liabilities are offset if the Company and its subsidiaries have a legally enforceable right to offset a current tax asset against a current tax liability and if the same taxation authority levies income taxes either on the same taxable entity or on different taxable entities that intend to settle current tax assets and liabilities on a net basis.

(18) Profit attributable to owners of the parent company per share Profit attributable to owners of the parent company per share (basic) is calculated by dividing profit attributable to owners of the parent company by the weighted average number of outstanding common shares adjusted by the number of treasury shares.

(19) Segment information An operating segment is a component of business activities that generate revenues and incur expenses including in transactions with other operating segments. Discrete financial information on the operating results of all operating segments is available and regularly reviewed by management to allocate management resources to each segment and assess its performance.

4. Significant Accounting Estimates and Judgements The consolidated financial statements of the Sumitomo Riko Group contain management estimates and assumptions. These estimates and assumptions are based on the best judgment of management in light of past performance and various other factors deemed to be reasonable as of the end of the reporting period. However, actual results may differ from these estimates and assumptions. The estimates and underlying assumptions are reviewed on an ongoing basis. The effect of a change in accounting estimates is recognized in the accounting period of the change and future accounting periods which the change affects.

Among the above estimates and assumptions, major estimates and assumptions that may have a material effect on the consolidated financial statements of the Sumitomo Riko Group are as follows.

(1) Impairment of non-financial assets The Sumitomo Riko Group conducts an impairment test on property, plant and equipment, goodwill, and intangible assets in accordance with Note 3, “Significant Accounting Policies.” When calculating a recoverable amount in the impairment test, certain assumptions are made mainly for future cash flows and discount rates. These assumptions are based on the best estimates and judgments made by management. However, when a

―25 ― review of the assumptions is required, there is a possibility that these estimates may be affected by changes in uncertain future economic conditions and may have a material impact on the consolidated financial statements.

(2) Current and deferred income tax The Sumitomo Riko Group is affected by income taxes in numerous tax jurisdictions worldwide. When determining the estimated amount of income taxes in each jurisdiction, significant judgment is required. Final tax amounts may often contain uncertainty because of the nature of the transactions and the calculation methods used.

The Sumitomo Riko Group recognizes liabilities for anticipated tax audit issues based on an estimate as to whether additional tax collection is required. If the final tax amount related to these issues is different from the amount that has been initially recognized, the difference may have a material impact on the consolidated financial statements. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized. In recognizing deferred tax assets, when judging the possibility of the future taxable income, the Sumitomo Riko Group reasonably estimates the timing and amount of future taxable income and determines the amount. When taxable income arises and the amount of such income may be affected by changes in uncertain future economic conditions. Therefore, if the timing and amount that have actually arisen differ from the estimate, this may have a material impact on the consolidated financial statements in future periods.

(3) Employee benefits The Sumitomo Riko Group has various types of retirement benefit plans including defined benefit plans. The present value, related service cost, etc., of defined benefit obligations are calculated based on actuarial assumptions such as the discount rate and mortality rate. Actuarial assumptions are based on the best estimates and judgments made by management. However, when a review of the assumptions is required, there is a possibility that these may be affected by changes in uncertain future economic conditions which may have a material impact on the consolidated financial statements.

(4) Provisions and contingent liabilities The Sumitomo Riko Group recognizes various provisions such as the provision for product warranties, in the consolidate statement of financial position. These provisions are recognized based on the best estimates of the expenditures required to settle the obligations taking into account risks and uncertainty relating to the obligations as of the end of the reporting period. Expenditures that are required to settle the obligations are calculated by comprehensively taking into account possible results. However, they may be affected by the occurrence of unexpected events or changes in circumstances and may, if the actual payment differs from the estimate, have a material impact on the consolidated financial statements in future periods. The Sumitomo Riko Group discloses contingent liabilities taking into account all available evidence as of the end of the reporting period and the probability and monetary effects thereof.

(5) Valuation of financial instruments In measuring the fair value of some types of financial instruments, the Sumitomo Riko Group adopts a valuation technique that uses unobservable inputs in the markets. When the review of the unobservable inputs are required, there is a possibility that these may be affected by the results of changes in uncertain future economic conditions which may have a material impact on consolidated financial statements.

―26 ― 5. New Standards and Interpretations not yet applied By the date of approval of the consolidated financial statements, the following new and revised standards and interpretations have been issued. However, those will not be effective for mandatory adoption before the fiscal year ended March 31, 2019 and will not be early adopted by the Sumitomo Riko Group.

Mandatory Adoption by IFRS adoption Sumitomo Riko Description (effective date ) Group Fiscal year ending Provides accounting treatment IFRS 16 Leases January 1, 2019 for leases and the disclosure March 31, 2020 thereof

Adoption of IFRS 16 has resulted in the recognition of assets and liabilities, with some exceptions, for leases that were previously classified as operating leases under IAS 17. In applying the standard, the Sumitomo Riko Group will select a method to recognize the cumulative impact at the date of initial application. The main impact of the adoption of this standard on the consolidated financial statements of the Group is that assets and liabilities are expected to increase approximately 9,384 million yen in the consolidated statement of financial position at the beginning of the fiscal year ending March 2020.

6. Segment Information (1) Outline of reportable segments Reportable segments of the Sumitomo Riko Group are the components of the Sumitomo Riko Group for which discrete financial information is available and are evaluated regularly by the Board of Directors in deciding how to allocate management resources and in assessing performance. The Sumitomo Riko Group has established management systems by product and service and formulates comprehensive strategies for its products and services in Japan and overseas to develop business activities. Therefore, the Sumitomo Riko Group comprises segments by product and service based on management systems and has two reportable segments: “Automotive Products” and “General Industrial Products.” Major products/services or business contents by reportable segment are as follows.

Reportable segments Major products/services or business contents Automotive Products Anti-vibration rubber, hoses, sound proofing products, interior equipment, etc. Precision resin blades and rolls, anti-vibration rubber for railroad trucks, General Industrial Products housing, bridges, and electronic equipment, high pressure hoses and feeder hoses, rubber sealants, etc.

―27 ― (2) Sales, profit or loss, assets and other items by reportable segment Accounting policies of the reportable segments are the same as the accounting policies of the Sumitomo Riko Group described in Note 3, “Significant Accounting Policies.” Intersegment sales and transfers are based on prevailing market prices. Sales, profit or loss, assets and other items by reportable segment of the Sumitomo Riko Group are as follows.

FY2017 (From April 1, 2017 to March 31, 2018) (Millions of yen) Automotive General Adjustment Consolidated Industrial Total financial Products (Note) ２ Products statements Net sales Sales to external customers 393,440 69,445 462,885 ― 462,885 Intersegment sales and 1,481 14,122 15,603 (15,603) ― transfers Total 394,921 83,567 478,488 (15,603) 462,885 Segment profit (Note) １ 9,766 3,094 12,860 ― 12,860 Other income 1,405 Other expenses (2,069) Operating profit 12,196 Financial income 365 Financial expenses (1,276) Profit before income taxes 11,285 Other items Segment assets 300,345 92,521 392,866 21,367 414,233 Depreciation and 22,698 6,068 28,766 ― 28,766 amortization Impairment loss 41 364 405 ― 405 Equity in earnings of 71 82 153 ― 153 associates Investments accounted for 3,901 534 4,435 ― 4,435 using the equity method Increases in property, plant and equipment and 24,206 5,902 30,108 ― 30,108 intangible assets (Note) １． Segment profit is business profit, it is calculated by subtracting cost of sales, selling, general and administrative expenses from net sales, and including equity in earnings of affiliated companies (Note) ２． The adjustment to segment assets of ¥21,367 million includes corporate assets not allocated to each reportable segment of ¥30,070 million and the elimination of intersegment receivables and payables of ¥(8,703) million.

―28 ― FY2018 (From April 1, 2018 to March 31, 2019) (Millions of yen) Automotive General Adjustment Consolidated Industrial Total financial Products (Note) ２ Products statements Net sales Sales to external customers 398,160 71,545 469,705 ― 469,705 Intersegment sales and 1,668 14,784 16,452 (16,452) ― transfers Total 399,828 86,329 486,157 (16,452) 469,705 Segment profit (Note) １ 7,771 1,608 9,379 ― 9,379 Other income 1,355 Other expenses (9,581) Operating profit 1,153 Financial income 693 Financial expenses (1,146) Profit before income taxes 700 Other items Segment assets 287,313 90,345 377,658 19,621 397,279 Depreciation and 23,571 6,210 29,781 ― 29,781 amortization Impairment loss 7,022 156 7,178 ― 7,178 Equity in earnings of (236) 77 (159) ― (159) associates Investments accounted for 3,415 599 4,014 ― 4,014 using the equity method Increases in property, plant and equipment and 24,664 6,926 31,590 ― 31,590 intangible assets (Note) １． Segment profit is business profit, it is calculated by subtracting cost of sales, selling, general and administrative expenses from net sales, and including equity in earnings of affiliated companies (Note) ２． The adjustment to segment assets of ¥19,621 million includes corporate assets not allocated to each reportable segment of ¥26,112 million and the elimination of intersegment receivables and payables of ¥(6,491) million.

―29 ― FY2018 (From April 1, 2018 to March 31, 2019) (Thousands of U.S. dollars) Automotive General Adjustment Consolidated Industrial Total financial Products (Note) ２ Products statements Net sales Sales to external customers 3,587,027 644,550 4,231,577 ― 4,231,577 Intersegment sales and 15,027 133,189 148,216 (148,216) ― transfers Total 3,602,054 777,739 4,379,793 (148,216) 4,231,577 Segment profit (Note) １ 70,009 14,487 84,496 ― 84,496 Other income 12,207 Other expenses (86,316) Operating profit 10,387 Financial income 6,243 Financial expenses (10,324) Profit before income taxes 6,306 Other items Segment assets 2,588,405 813,921 3,402,326 176,766 3,579,092 Depreciation and 212,351 55,946 268,297 ― 268,297 amortization Impairment loss 63,261 1,406 64,667 ― 64,667 Equity in earnings of (2,126) 694 (1,432) ― (1,432) associates Investments accounted for 30,766 5,396 36,162 ― 36,162 using the equity method Increases in property, plant and equipment and 222,198 62,396 284,594 ― 284,594 intangible assets (Note) １． Segment profit is business profit, it is calculated by subtracting cost of sales, selling, general and administrative expenses from net sales, and including equity in earnings of affiliated companies (Note) ２． The adjustment to segment assets of U.S.$ 176,766 thousand includes corporate assets not allocated to each reportable segment of U.S.$235,243 thousand and the elimination of intersegment receivables and payables of U.S.$(58,477) thousand.

(3) Revenue from major products and services The description of information is omitted because the same information is disclosed in “(1) Outline of reportable segments” and “(2) Sales, profit or loss, assets and other items by reportable segment.”

―30 ―

(4) Information on geographical areas Sales to external customers (Thousands of (Millions of yen) U.S. dollars) FY2017 FY2018 FY2018 (From April 1, 2017 (From April 1, 2018 (From April 1, 2018 to March 31, 2018) to March 31, 2019) to March 31, 2019) Japan 183,251 184,217 1,659,613 U.S. 71,108 72,611 654,153 China 71,473 75,318 678,541 Other 137,053 137,559 1,239,270 Total 462,885 469,705 4,231,577 (Note) Sales are classified based on the location of customers.

Noncurrent assets (Thousands of (Millions of yen) U.S. dollars) FY2017 FY2018 FY2018 (As of March 31, (As of March 31, (As of March 31, 2018) 2019) 2019) Japan 90,723 84,389 760,261 U.S. 21,355 20,361 183,432 China 21,591 22,035 198,514 Other 53,669 49,840 449,018 Total 187,338 176,625 1,591,225 (Note) Noncurrent assets are based on the physical location where the assets are located. Financial instruments, deferred tax assets and defined benefit assets are not included.

(5) Information on major customers There were three customer groups that accounted for 10% or more of the revenue (automotive products segment) of the Sumitomo Riko Group in the previous and current fiscal year. The revenue generated by the three customer groups was ¥273,234 million and ¥281,669 million (U.S.$2,537,559 thousand) in the previous and current year, respectively.

―31 ― 7. Cash and Cash Equivalents The breakdown of cash and cash equivalents is as follows. (Thousands of (Millions of yen) U.S. dollars) FY2017 FY2018 FY2018 (As of March 31, (As of March 31, (As of March 31, 2018) 2019) 2019) Cash and time deposits (maturing within three months) 41,973 38,371 345,685 Total 41,973 38,371 345,685 (Note) The balance of “cash and cash equivalents” in the statement of financial position at the end of the previous fiscal year and the current fiscal year matches the balance of “cash and cash equivalents” stated in the consolidated cash flow statement .

8. Trade and Other Receivables The breakdown of trade and other receivables is as follows. (Thousands of (Millions of yen) U.S. dollars) FY2017 FY2018 FY2018 (As of March 31, (As of March 31, (As of March 31, 2018) 2019) 2019) Accounts receivable - trade 80,746 76,327 687,631 Notes receivable - trade 6,173 5,607 50,514 Electronically recorded monetary claims - operating 7,588 8,940 80,541 Accounts receivable - other 987 1,592 14,342 Other 1,160 854 7,694 Allowance for doubtful accounts (361) (428) (3,857)

Total 96,293 92,892 836,865

9. Inventories The breakdown of inventories is as follows. (Thousands of (Millions of yen) U.S. dollars) FY2017 FY2018 FY2018 (As of March 31, (As of March 31, (As of March 31, 2018) 2019) 2019)

Merchandise and finished goods 13,035 15,181 136,766

Work in process 10,215 10,694 96,342

Raw materials and supplies 30,349 31,127 280,424

Total 53,599 57,002 513,532 (Note) The amount of the write-down of inventories recognized in cost of sales in the current fiscal year is ¥(373) million (U.S.$(3,360) thousand) (¥238 million for the previous fiscal year). There was no reversal of a material write-down in the previous fiscal year or the current fiscal year.

―32 ― 10. Property, Plant and Equipment Cost, accumulated depreciation and accumulated impairment loss on property, plant and equipment were as follows. There is no property, plant and equipment pledged as collateral to secure debt. (Millions of yen) Buildings Machinery, Tools, Construction Cost and equipment furniture Land Total in progress structures and vehicles and fixtures Balance as of April 1, 2017 111,560 254,105 57,509 15,594 9,741 448,509 Acquisitions ― ― ― 286 24,442 24,728 Disposals (246) (4,903) (2,071) (53) (75) (7,348) Reclassification from 2,530 15,372 6,113 ― (24,015) ― construction in progress Exchange rate differences 133 (251) (128) 16 109 (121) Other 29 201 (506) ― (33) (309) Balance as of March 31, 2018 114,006 264,524 60,917 15,843 10,169 465,459 Acquisitions ― ― ― 5 24,102 24,107 Disposals (796) (16,941) (3,976) ― (149) (21,862) Reclassification from 3,060 17,827 6,565 ― (27,452) ― construction in progress Exchange rate differences (200) 1,342 (410) 19 5 756 Other 1 (43) 156 ― (138) (24) Balance as of March 31, 2019 116,071 266,709 63,252 15,867 6,537 468,436 (Note) There were no borrowing costs included in the cost of acquisition.

(Thousands of U.S. dollars) Buildings Machinery, Tools, Construction Cost and equipment furniture Land Total in progress structures and vehicles and fixtures Balance as of March 31, 2018 1,027,081 2,383,099 548,802 142,730 91,613 4,193,325 Acquisitions ― ― ― 45 217,135 217,180 Disposals (7,171) (152,622) (35,820) ― (1,342) (196,955) Reclassification from 27,568 160,604 59,144 ― (247,316) ― construction in progress Exchange rate differences (1,802) 12,090 (3,694) 171 45 6,810 Other 9 (387) 1,405 ― (1,242) (215) Balance as of March 31, 2019 1,045,685 2,402,784 569,837 142,946 58,893 4,220,145 (Note) There are no borrowing costs included in the cost of acquisition.

―33 ― (Millions of yen) Accumulated depreciation and Buildings Machinery, Tools, Construction and equipment furniture Land Total accumulated impairment loss in progress structures and vehicles and fixtures Balance as of April 1, 2017 (60,541) (187,969) (45,426) (55) (35) (294,026) Depreciation (Note) (3,698) (12,945) (5,634) ― ― (22,277) Impairment loss (Note) (0) (337) (47) ― ― (384) Disposals 174 4,508 2,155 ― 10 6,847 Exchange rate differences (53) 295 (71) (4) ― 167 Other 9 (7) 512 ― (3) 511 Balance as of March 31, 2018 (64,109) (196,455) (48,511) (59) (28) (309,162) Depreciation (Note) (3,612) (13,325) (5,778) ― ― (22,715) Impairment loss (Note) ― (1,259) (25) ― ― (1,284) Disposals 717 16,211 3,712 ― ― 20,640 Exchange rate differences (84) (1,240) (36) (3) ― (1,363) Other (10) (69) (159) ― 21 (217) Balance as of March 31, 2019 (67,098) (196,137) (50,797) (62) (7) (314,101) (Note) The depreciation of property, plant and equipment is included in “cost of sales” and “selling, general and administrative expenses” in the consolidated statements of income, and any related impairment loss is included in “other expenses” in the consolidated statements of income.

(Thousands of U.S. dollars) Accumulated depreciation and Buildings Machinery, Tools, Construction and equipment furniture Land Total accumulated impairment loss in progress structures and vehicles and fixtures Balance as of March 31, 2018 (577,559) (1,769,865) (437,036) (532) (252) (2,785,244) Depreciation (Note) (32,541) (120,045) (52,054) ― ― (204,640) Impairment loss (Note) ― (11,342) (225) ― ― (11,567) Disposals 6,459 146,045 33,441 ― ― 185,945 Exchange rate differences (757) (11,171) (324) (27) ― (12,279) Other (90) (622) (1,432) ― 189 (1,955) Balance as of March 31, 2019 (604,488) (1,767,000) (457,630) (559) (63) (2,829,740) (Note) The depreciation of property, plant and equipment is included in “cost of sales” and “selling, general and administrative expenses” in the consolidated statements of income, and any related impairment loss is included in “other expenses” in the consolidated statements of income.

(Millions of yen) Buildings Machinery, Tools, Construction Carrying amount and equipment furniture Land Total in progress structures and vehicles and fixtures Balance as of April 1, 2017 51,019 66,136 12,083 15,539 9,706 154,483

Balance as of March 31, 2018 49,897 68,069 12,406 15,784 10,141 156,297 Balance as of March 31, 2018 (Thousands of U.S. dollars) 449,522 613,234 111,766 142,198 91,361 1,408,081 Balance as of March 31, 2019 48,973 70,572 12,455 15,805 6,530 154,335 Balance as of March 31, 2019 (Thousands of U.S. dollars) 441,197 635,784 112,207 142,387 58,830 1,390,405

―34 ― 11. Goodwill and Intangible Assets (1) Goodwill and intangible assets 1) Cost, accumulated depreciation, accumulated impairment loss and carrying amounts The cost and increases/decreases in accumulated amortization of and accumulated impairment loss on goodwill and intangible assets were as follows. There were no significant intangible assets that had an indefinite useful life.

(Millions of yen) Intangible assets Cost Goodwill Development Customer Software Other Total assets related assets Balance a s of March 11,253 20,322 17,000 5,823 4,080 47,225 31, 2017 Acquisitions ― ― 273 ― 1,882 2,155 Internal generation ― 3,215 ― ― ― 3,215 Disposals ― (2,114) (186) ― (24) (2,324) Exchange rate differences 993 174 43 ― (28) 189 Other ― (191) 101 ― 109 19 Balance a s of March 31, 2018 12,246 21,406 17,231 5,823 6,019 50,479 Acquisitions ― ― 2,368 ― 857 3,225 Internal generation ― 4,388 ― ― ― 4,388 Disposals ― (2,348) (180) ― (182) (2,710) Exchange rate differences (530) (318) (31) ― (424) (773) Other ― (311) (95) ― (736) (1,142) Balance a s of March 31, 2019 11,716 22,817 19,293 5,823 5,534 53,467

(Thousands of U.S. dollars) Intangible assets Cost Goodwill Development Customer Software Other Total assets related assets Balance a s of March 31, 2018 110,324 192,847 155,234 52,459 54,225 454,765 Acquisitions ― ― 21,333 ― 7,721 29,054 Internal generation ― 39,532 ― ― ― 39,532 Disposals ― (21,153) (1,622) ― (1,640) (24,415) Exchange rate differences (4,774) (2,865) (279) ― (3,820) (6,964) Other ― (2,802) (856) ― (6,631) (10,289) Balance a s of March 31, 2019 105,550 205,559 173,810 52,459 49,855 481,683

―35 ― (Millions of yen) Accumulated Intangible assets amortization and Goodwill Development Customer accumulated impairment Software Other Total loss assets related assets Balance a s of April 1, (6,074) (10,708) (9,172) (2,567) (1,720) (24,167) 2017 Amortization (Note) ― (3,302) (2,016) (642) (529) (6,489) Impairment loss (Note) ― ― ― ― (21) (21) Disposals ― 2,114 185 ― 15 2,314 Exchange rate differences (550) (45) (37) ― (1) (83) Other ― 13 (103) ― (109) (199) Balance a s of March 31, 2018 (6,624) (11,928) (11,143) (3,209) (2,365) (28,645) Amortization (Note) ― (3,612) (2,274) (642) (538) (7,066) Impairment loss (Note) (4,756) ― ― (1,000) (138) (1,138) Disposals ― 2,348 177 ― 178 2,703 Exchange rate differences 309 281 40 ― 12 333 Other ― 21 1 ― 11 33 Balance a s of March 31, 2019 (11,071) (12,890) (13,199) (4,851) (2,840) (33,780) (Note) The amortization of intangible assets is included in “cost of sales” and “selling, general and administrative expenses” in the consolidated statements of income, and impairment loss is included in “other expenses” in the consolidated statements of income.

(Thousands of U.S. dollars) Accumulated Intangible assets amortization and Goodwill Development Customer accumulated impairment Software Other Total loss assets related assets Balance a s of March 31, 2018 (59,676) (107,459) (100,387) (28,910) (21,306) (258,062) Amortization (Note) ― (32,541) (20,486) (5,784) (4,846) (63,657) Impairment loss (Note) (42,847) ― ― (9,009) (1,244) (10,253) Disposals ― 21,153 1,595 ― 1,604 24,352 Exchange rate differences 2,784 2,532 360 ― 108 3,000 Other ― 189 9 ― 99 297 Balance a s of March 31, 2019 (99,739) (116,126) (118,909) (43,703) (25,585) (304,323) (Note ) The amortization of intangible assets is included in “cost of sales” and “selling, general and administrative expenses” in the consolidated statements of income, and impairment loss is included in “other expenses” in the consolidated statements of income.

―36 ―

(Millions of yen) Intangible assets Carrying amount Goodwill Development Customer Software Other Total assets related assets Balance as of April 1, 2017 5,179 9,614 7,828 3,256 2,360 23,058

Balance as of March 31, 2018 5,622 9,478 6,088 2,614 3,654 21,834

Balance as of March 31, 2018 (Thousands of U.S. dollars) 50,648 85,388 54,847 23,549 32,919 196,703

Balance as of March 31, 2019 645 9,927 6,094 972 2,694 19,687

Balance as of March 31, 2019 (Thousands of U.S. dollars) 5,811 89,433 54,901 8,756 24,270 177,360

2) Impairment test The carrying amounts of goodwill allocated to each cash-generating unit were as follows. (Thousands of (Millions of yen) U.S. dollars) FY2017 FY2018 FY2018 Reportable segment Cash-generating unit (As of March 31, (As of March 31, (As of March 31, 2018) 2019) 2019) SumiRiko AVS Group ― ― (former Anvis Group) 4,992 Automotive Products Inoac Tokai (Thailand) 630 645 5,811

Total 5,622 645 5,811

The recoverable amount measured by an impairment test is calculated based on an asset’s value in use. In calculating the value in use, estimated cash flows based on a business plan (five years maximum) reflecting past experience and external information and approved by management are discounted to their present value using the weighted average cost of capital (8.05% to 13.47%) of the relevant cash-generating unit. Cash flows exceeding the term of the business plan are estimated based mainly on a long-run average growth rate (0% to 2.08%) in the market to which the cash-generating unit belongs. In the previous fiscal year, no impairment loss on goodwill was recognized. However, any change in the major assumptions used in the impairment test would create a risk of impairment. If a weighted average capital cost increased by 2%, it is probable that an impairment loss would arise. In FY2018, the Company recognized a loss on impairment of goodwill of the SumiRiko AVS Group (former Anvis Group). The Company reviewed the business plan of the former Anvis Group in consideration of the prolonged sluggishness in the European market, delayed sales in the aftermath of the introduction of a new exhaust gas test procedure in Europe, the production transfer of certain automotive manufacturers from Mexico to the U.S. in response to the U.S. administration’s policy of expanding domestic demand and a decrease in the automotive production volume in the Chinese market resulting from the U.S.-China trade friction. As a result of the review, the recoverable amount was determined to be below the carrying amount and that it would take a long time to recoup the investment. No impairment loss was recognized for the goodwill of Inoac Tokai (Thailand) because the recoverable amount exceeded the carrying amount. Moreover, even if the main assumptions used for the impairment test varied within a reasonably predictable range, the possibility of the recoverable amount becoming less than the carrying amount was judged to be low.

―37 ― 12. Impairment of Non-financial Assets The Sumitomo Riko Group groups assets by company and business based on the smallest units that generate cash flows. Impairment loss is included in “other expenses” in the consolidated statements of income.

FY2017 (From April 1, 2017 to March 31, 2018) In the previous fiscal year, impairment loss was recognized on the production facilities and development assets of a company that manufactures automotive products since it was unlikely that the Company would earn the initially expected revenue due to deterioration of a part of the business environment. The recoverable amount for the automotive products business was zero. In addition, an impairment loss was recognized on the production facilities of a company that manufactures general industrial products since it was unlikely that the Company would earn the initially expected revenue. The recoverable amount of the general industrial products business was zero.

(Millions of yen) Amount of Reportable segment Type of assets impairment loss Machinery, equipment and Automotive Products 20 vehicles Intangible assets (other) 21 Subtotal 41 General Industrial Products Buildings and structures 0 Machinery, equipment and vehicles 317 Tools, furniture and fixtures 47 Subtotal 364 Total 405

―38 ― FY2018 (From April 1, 2018 to March 31, 2019) In the current fiscal year, impairment loss was recognized on the production facilities and intangible assets of companies that manufacture automotive products since it was unlikely that the Company would earn the initially expected revenue. The recoverable amount for the automotive products business was calculated based on value in use. The discount rate used to estimate value in use was the weighted average cost of capital (8.05% to 20.11%). In addition, an impairment loss was recognized on the production facilities of a company that manufactures general industrial products since it was unlikely that the Company would earn the initially expected revenue. The recoverable amount of the general industrial products business was zero.

(Thousands of (Millions of yen) U.S. dollars) Amount of Amount of Reportable segment Type of assets impairment loss impairment loss Machinery, equipment and Automotive Products 1,129 10,171 vehicles Goodwill 4,756 42,847 Intangible assets (other) 1,137 10,244 Subtotal 7,022 63,262 General Industrial Products Machinery, equipment and 130 1,171 vehicles Tools, furniture and fixtures 25 225 Intangible assets (other) 1 9 Subtotal 156 1,405 Total 7,178 64,667

13. Trade and Other Payables The breakdown of trade and other payables is as follows. (Thousands of (Millions of yen) U.S. dollars) FY201 7 FY201 8 FY201 8 (As of March 31, (As of March 31, (As of March 31, 201 8) 201 9) 201 9) Accounts payable – trade 63,309 60,684 546,702 Electronically recorded obligations - operating 2,714 2,754 24,811 Notes payable - trade 1,787 1,861 16,766 Accounts payable - other 14,756 15,622 140,739 Total 82,566 80,921 729,018

―39 ― 14. Bonds and Borrowings The breakdown of bonds and borrowings is as follows. (Thousands of U.S. (Millions of yen) dollars) FY201 7 FY201 8 FY201 8 (As of March 31, (As of March 31, (As of March 31, 201 8) 201 9) 201 9) Current liabilities Short-term bank loans 4,292 5,065 45,631 Current portion of long-term debt 5,000 10,000 90,090 Total 9,292 15,065 135,721 Noncurrent liabilities Bonds 44,805 44,828 403,856 Long-term debt 51,950 42,477 382,676 Total 96,755 87,305 786,532

(1) Bonds The summary of issuance conditions for bonds is as follows.

(Thousands of (Millions of yen) U.S. dollars) FY2017 FY2018 FY2018 Interest Maturity Name Type Issue date (As of March (As of March (As of March rate Collateral date 31, 2018) 31, 2019) 31, 2019) (%) The 6th Sumitomo unsecured February February Riko Co., straight 28, 2013 10,000 10,000 90,090 0.936 None 28, 2023 Ltd. bond The 7th Sumitomo unsecured September September Riko Co., straight 6, 2016 15,000 15,000 135,135 0.35 None 4, 2026 Ltd. bond The 8th Sumitomo unsecured September September Riko Co., straight 6, 2016 5,000 5,000 45,045 0.63 None 5, 2031 Ltd. bond The 9th Sumitomo unsecured September September Riko Co., straight 21, 2017 15,000 15,000 135,135 0.455 None 21, 2027 Ltd. bond Total 45,000 45,000 405,405

(2) Borrowings The average interest rates on “short-term bank loans,” “current portion of long-term debt,” and “long-term debt” in the current fiscal year were 6.97%, 0.51% and 0.51%, respectively. Loans in “long-term loans” become due between 2020 and 2024.

(3) Collateral There are no assets pledged as collateral and debt with collateral.

―40 ― 15. Provisions Changes in provisions were as follows. (Millions of yen) Provision for Provision for business Provision for product structure environmental Other Total warranties measures improvement Balance as of April 1, 2017 511 375 516 2,461 3,863 Provisions made 342 191 143 2,763 3,439 Unwinding of the discount ― ― ― 2 2 related to the passage of time Decreases (provisions used) (230) (400) (89) (2,017) (2,736) Decreases (reversals made) (48) ― (439) (126) (613) Exchange rate differences 31 32 44 1 108 Balance as of March 31, 2018 606 198 175 3,084 4,063 Provisions made 125 ― ― 1,018 1,143 Unwinding of the discount ― ― ― 1 1 related to the passage of time Decreases (provisions used) (283) (192) (7) (1,271) (1,753) Decreases (reversals made) (103) ― ― (354) (457) Exchange rate differences (15) (3) (8) (35) (61) Balance as of March 31, 2019 330 3 160 2,443 2,936 (Note 1) Explanations of each provision are described in Note 3 (12), “Significant Accounting Policies - Provisions and contingent liabilities.”

(Note 2) “Other” includes the provision for loss on litigation and other items. However, the Company does not describe information separately in accordance with Article 92 of IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” because such disclosure can be expected to seriously prejudice the position of the Sumitomo Riko Group. (Thousands of U.S.dollars) Provision for Provision for business Provision for product structure environmental Other Total warranties measures improvement Balance as of March 31, 2018 5,459 1,784 1,577 27,784 36,604 Provisions made 1,126 ― ― 9,171 10,297 Unwinding of the discount ― ― ― 9 9 related to the passage of time Decreases (provisions used) (2,550) (1,730) (63) (11,450) (15,793) Decreases (reversals made) (928) ― ― (3,189) (4,117) Exchange rate differences (135) (27) (72) (316) (550) Balance as of March 31, 2019 2,972 27 1,442 22,009 26,450 (Note 1) Explanations of each provision are described in Note 3 (12), “Significant Accounting Policies - Provisions and contingent liabilities.”

(Note 2) “Other” includes the provision for loss on litigation and other items. However, the Company does not describe information separately in accordance with Article 92 of IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” because such disclosure can be expected to seriously prejudice the position of the Sumitomo Riko Group.

―41 ― 16. Employee Benefits (1) Outline of retirement benefit plans The Company and some consolidated subsidiaries have defined benefit plans such as corporate pension fund plans and retirement lump-sum pension plans. In addition, the Company and some consolidated subsidiaries have defined contribution pension plans and advance payment systems for retirement. In some cases when employees retire, the Company and some consolidated subsidiaries pay special retirement benefits that are not subject to retirement benefit obligations based on an actuarial valuation method pursuant to IAS 19, “Employee Benefits.”

(2) Defined benefit plan The Sumitomo Riko Group has established defined benefit plans. The amount of benefits is determined based on assessment elements such as length of service, job performance and ability and titles.

1) Risks related to defined benefit plans The Sumitomo Riko Group is exposed to various risks related to its defined benefit plans. The Sumitomo Riko Group is not exposed to a significant concentration of risk on its pension assets. The major risks are as follows. Changes in plan asset Investments in equity instruments and debt instruments are exposed to fluctuation risk. Changes in corporate A decrease in the yield on corporate bonds in the market results in an increase in defined bond interest rates benefit obligations.

2) Amounts recognized in the consolidated statements of financial position The net liabilities (assets) for defined benefit in the consolidated statements of financial position were as follows. (Thousands of U.S. (Millions of yen) dollars) FY2017 FY201 8 FY201 8 (As of March 31, (As of March 31, (As of March 31, 201 8) 201 9) 201 9) Defined benefit obligation 27,811 28,388 255,748 Fair value of plan assets (30,644) (28,858) (259,982) Total (2,833) (470) (4,234) Amounts in the consolidated statements of financial position Retirement benefit liabilities 7,962 8,224 74,090 Retirement benefit assets 10,795 8,694 78,324

3) Amounts recognized in the consolidated statements of income Amounts recognized as expenses in the consolidated statements of income were as follows. (Thousands of (Millions of yen) U.S. dollars) FY2017 FY2018 FY2018 (From April 1, 2017 (From April 1, 2018 (From April 1, 2018 to March 31, 2018) to March 31, 2019) to March 31, 2019) Service cost for the current fiscal year 1,685 1,790 16,126 Net interest expense 40 42 378 Total 1,725 1,832 16,504

―42 ― 4) Defined benefit obligation Changes in defined benefit obligation were as follows. (Thousands of (Millions of yen) U.S. dollars) FY2017 FY2018 FY2018 (From April 1, 2017 (From April 1, 2018 (From April 1, 2018 to March 31, 2018) to March 31, 2019) to March 31, 2019) Balance at the beginning of the year 27,049 27,811 250,550 Service cost 1,685 1,790 16,126 Interest cost 149 142 1,279 Actuarial loss (gain) (Note 1) 291 300 2,703 Benefits paid (1,504) (1,715) (15,450) Exchange rate differences 141 60 540 Balance at the end of the year 27,811 28,388 255,748 (Note 1) Actuarial gains and losses are those arising mainly from changes in financial assumptions. (Note 2) The weighted average duration of defined benefit obligations is 10.5 years (10.7 years in the previous fiscal year).

5) Plan assets The Sumitomo Riko Group’s investment policies for plan assets are to allocate its portfolio into various instruments such as equity instruments, debt instruments and insurance contracts, aiming to secure stable profit in the long-term in order to fulfill the obligations to pay benefits for future periods. The Sumitomo Riko Group reviews investment policies as needed in consideration of the financial position and investment environment of the corporate pension fund plan. When conducting management of each asset, the Sumitomo Riko Group strives to diversify risks and pursue operational efficiencies through continuous monitoring. Changes in fair value of plan assets are as follows. (Thousands of (Millions of yen) U.S. dollars) FY2017 FY2018 FY2018 (From April 1, 2017 (From April 1, 2018 (From April 1, 2018 to March 31, 2018) to March 31, 2019) to March 31, 2019) Balance at the beginning of the year (28,900) (30,644) (276,072) Interest income (109) (100) (901) Return on plan assets (1,875) 1,462 13,171 Contributions by the employer (700) (715) (6,441) Benefits paid 940 1,139 10,261 Balance at the end of the year (30,644) (28,858) (259,982) (Note) Expected contributions for the next fiscal year is ¥775 million (U.S.$6,982 thousand).

―43 ― The breakdown of fair value of plan assets is as follows. (Millions of yen) Quoted price in an active market is available No quoted price in an active market is available FY2018 FY2018 FY2017 FY2018 (As of March FY2017 FY2018 (As of March 31, (As of March (As of March 31, 2019) (As of March (As of March 2019) 31, 2018 31, 2019) (Thousands of 31, 2018 31, 2019) (Thousands of U.S. dollars) U.S. dollars) Domestic 10,724 4,515 40,676 ― ― ― stocks Foreign stocks 4,044 4,378 39,441 ― ― ― Domestic bonds 5,681 9,428 84,937 ― ― ― Foreign bonds 2,791 1,531 13,793 ― ― ― General accounts of life insurance ― ― ― 3,969 4,025 36,261 companies Cash and cash ― ― ― 1,556 2,934 26,432 equivalents Other ― ― ― 1,879 2,047 18,442 Total 23,240 19,852 178,847 7,404 9,006 81,135

6) Assumptions used for actuarial calculations Major assumptions used for actuarial calculations were as follows.

FY2017 FY2018 (As of March 31, 2018) (As of March 31, 2019) Discount rate (weighted average) 0.4% 0.3%

7) Sensitivity analysis Effects on defined benefit obligations due to changes in actuarial assumptions were as follows. In this analysis, it is assumed that all other variables remain fixed. This analysis is based on the range of a variable that is deemed reasonable at the end of the reporting period. FY201 7 FY201 8 FY2018 (As of March 31, (As of March 31, (As of March 31, 2019) 201 8) 201 9) ¥1,2 10 million ¥931 million U.S.$ 8,387 thousand 0.5% increase in discount rate decrease decrease decrease 0.5% decrease in discount rate ¥1, 283 million ¥1,2 76 million U.S.$ 11,495 thousand increase increase increase

(3) Defined contribution plan Retirement benefits paid for defined contribution plans are recognized as expenses in the period in which the employees render the related services, and contributions payable are recognized as liabilities. Retirement benefits paid for defined contribution plans are as follows. (Thousands of (Millions of yen) U.S. dollars) FY2017 FY2018 FY2018 (From April 1, 2017 (From April 1, 2018 (From April 1, 2018 to March 31, 2018) to March 31, 2019) to March 31, 2019) Retirement benefits paid for defined 629 608 5,477 contribution plans

―44 ― 17. Income Taxes (1) Deferred tax 1) The breakdown of changes in deferred tax assets and liabilities The breakdown of changes in deferred tax assets and liabilities is as follows.

FY2017 (From April 1, 2017 to March 31, 2018) (Millions of yen) Amount Balance as of Amount recognized in other Balance as of recognized in March 31, 2017 comprehensive March 31, 2018 profit or loss income Deferred tax assets Accrued bonus 1,413 43 ― 1,456 Tax loss carryforwards 2,003 (584) ― 1,419 Inventories 1,073 (289) ― 784 Impairment loss 56 109 ― 165 Retirement benefit liabilities 1,688 (65) 36 1,659 Other 3,136 (73) (39) 3,024 Subtotal 9,369 (859) (3) 8,507 Deferred tax liabilities Accelerated depreciation and (2,679) 851 ― (1,828) amortization of overseas subsidiaries Intangible assets (3,382) 284 ― (3,098) Changes in the fair value of financial (1,627) ― (254) (1,881) assets Retirement benefit assets (2,914) 128 (529) (3,315) Reserved profit of overseas (2,203) 186 ― (2,017) subsidiaries Other (1,061) 395 ― (666) Subtotal (13,866) 1,844 (783) (12,805) Total (4,497) 985 (786) (4,298) (Note) The difference between the amount recognized in profit or loss and total deferred tax expenses is due to exchange rate fluctuations.

―45 ― FY2018 (From April 1, 2018 to March 31, 2019) (Millions of yen) Amount Balance as of Amount recognized in other Balance as of recognized in March 31, 2018 comprehensive March 31, 2019 profit or loss income Deferred tax assets Accrued bonus 1,456 43 ― 1,499 Tax loss carryforwards 1,419 367 ― 1,786 Inventories 784 (51) ― 733 Impairment loss 165 12 ― 177 Retirement benefit liabilities 1,659 2 51 1,712 Other 3,024 (90) (39) 2,895 Subtotal 8,507 283 12 8,802 Deferred tax liabilities Accelerated depreciation and (1,828) (798) ― (2,626) amortization of overseas subsidiaries Intangible assets (3,098) 510 ― (2,588) Changes in the fair value of financial (1,881) ― 231 (1,650) assets Retirement benefit assets (3,315) 627 16 (2,672) Reserved profit of overseas (2,017) 7 ― (2,010) subsidiaries Other (666) 209 ― (457) Subtotal (12,805) 555 247 (12,003) Total (4,298) 838 259 (3,201) (Note) The difference between the amount recognized in profit or loss and total deferred tax expenses is due to exchange rate fluctuations. (Thousands of U.S. dollars) Amount Balance as of Amount recognized in other Balance as of recognized in March 31, 2017 comprehensive March 31, 2018 profit or loss income Deferred tax assets Accrued bonus 13,117 387 ― 13,504 Tax loss carryforwards 12,784 3,306 ― 16,090 Inventories 7,063 (459) ― 6,604 Impairment loss 1,486 108 ― 1,594 Retirement benefit liabilities 14,946 18 459 15,423 Other 27,243 (811) (351) 26,081 Subtotal 76,639 2,549 108 79,296 Deferred tax liabilities Accelerated depreciation and (16,468) (7,189) ― (23,657) amortization of overseas subsidiaries Intangible assets (27,910) 4,595 ― (23,315) Changes in the fair value of financial (16,946) ― 2,081 (14,865) assets Retirement benefit assets (29,865) 5,649 144 (24,072) Reserved profit of overseas (18,171) 63 ― (18,108) subsidiaries Other (6,000) 1,883 ― (4,117) Subtotal (115,360) 5,001 2,225 (108,134) Total (38,721) 7,550 2,333 (28,838) (Note) The difference between the amount recognized in profit or loss and total deferred tax expenses is due to exchange rate fluctuations.

―46 ― In recognizing deferred tax assets, the Group considers whether it can use all or part of future deductible temporary differences or carryforward unused tax losses with respect to future taxable income. In evaluating the recoverability of deferred tax assets, the Group considers the planned reversal of deferred tax liabilities, expected future taxable income and tax planning. For recognized deferred tax assets, the Group has determined that there is a high probability of materializing tax benefits based on historical taxable income levels and on future taxable income projections for the period in which it can recognize deferred tax assets. However, the deferred tax assets that the Group considers recognizable would necessarily decrease if future projected taxable income declined during the period in which deductions are possible.

2) Deductible temporary differences and tax loss carryforwards for which deferred tax assets are not recognized Deductible temporary differences and tax loss carryforwards for which deferred tax assets are not recognized were as follows. (Thousands of (Millions of yen) U.S. dollars)

FY2017 FY2018 FY2018 (As of March 31, 2018) (As of March 31, 2019) (As of March 31, 2019)

Deductible temporary differences 7,699 7,422 66,865 Tax loss carryforwards 54,937 53,340 480,541 Total 62,636 60,762 547,406

The expiration of tax loss carryforwards for which deferred tax assets were not recognized was as follows. (Thousands of (Millions of yen) U.S. dollars)

FY2017 FY2018 FY2018 (As of March 31, 2018) (As of March 31, 2019) (As of March 31, 2019) 1st year 853 559 5,036 2nd year 834 964 8,685 3rd year 1,101 1,459 13,144 4th year 1,580 1,041 9,378 5th year onwards 50,569 49,317 444,298 Total 54,937 53,340 480,541

3) Taxable temporary differences associated with equity in subsidiaries for which deferred tax liabilities are not recognized The total amount of taxable temporary differences associated with the reserved profit of subsidiaries for which deferred tax liabilities are not recognized in the current fiscal year was ¥6,056 million (U.S.$54,559 thousand) and ¥5,580 million in the previous fiscal year. Deferred tax liabilities were not recognized for the above temporary differences as the Sumitomo Riko Group was able to control the timing of the reversal of such temporary differences and it was probable that the temporary differences would not reverse in the foreseeable future.

―47 ― (2) Income tax expense 1) Tax expense The breakdown of major income tax expenses is as follows. (Thousands of (Millions of yen) U.S. dollars) FY2017 FY2018 FY2018 (From April 1, 2017 (From April 1, 2018 (From April 1, 2018 to March 31, 2018) to March 31, 2019) to March 31, 2019) Current tax expense Current fiscal year (6,453) (4,567) (41,144) Subtotal (6,453) (4,567) (41,144) Deferred tax expense (Note) Origination and reversal of temporary 353 961 8,658 differences Changes in tax rates, etc. 618 ― ― Subtotal 971 961 8,658 Total (5,482) (3,606) (32,486) (Note) Deferred tax expenses include the amount of expenses arising from the write-down of deferred tax assets or the reversal of a previous write-down (a reassessment of the recoverability of deferred tax assets). Fluctuation in deferred tax expenses in association with the expenses in the previous fiscal year and the current fiscal year were ¥3,178 million (decrease) and ¥573 million (U.S.$5,162 thousand) (Increase), respectively.

2) The reconciliation of the statutory tax rate and effective tax rate The reconciliation of the statutory tax rate and effective tax rate of the Sumitomo Riko Group is as follows. The effective tax rate represents the ratio of income tax expenses to profit before income taxes.

FY2017 FY2018 (From April 1, 2017 (From April 1, 2018 to March 31, 2018) to March 31, 2019) Statutory tax rate 30.8% 30.6% Difference in tax rates applied to overseas subsidiaries (10.4)% (120.0)% Changes in unrecognized deferred tax assets 28.2% 162.9% Goodwill impairment ― 214.6% Impact of changes in tax rates, etc. (5.5)% ― Withholding tax, etc., in foreign countries 10.4% 117.8% Investment gain/loss in equity method associates (0.4)% 7.0% Reserved profit of overseas subsidiaries and equity -method associates 0.2% 1.7% Items not permanently deductible 0.4% 119.8% Other (5.1)% (19.6)% Effective tax rate 48.6% 514.8% (Note) The Sumitomo Riko Group is subject mainly to corporate tax, inhabitants tax, and enterprise tax (included in nontaxable expenses), and the effective tax rate calculated based on these for the current fiscal year was 30.6% (the previous fiscal year was 30.8%). However, overseas subsidiaries were subject to income tax at their respective locations.

（Change of description ） In the previous consolidated fiscal year, “Items not permanently deductible” included in “Others”, were to be described separately in the current consolidated fiscal year as they had become more important. In order to reflect these changes in description, the notes in the previous fiscal year have been reclassified. As a result, the “(4.7)%” shown as “Others” in the previous consolidated fiscal year's note has been

―48 ― reclassified as “Items not permanently deductible” (0.4%) and “Others” (5.1%).

―49 ― 18. Revenue (1) Breakdown of Revenue The Sumitomo Riko Group Automotive Product segment supplies anti-vibration rubber, hoses, interior equipment, sound reducing materials etc., to domestic and foreign customers. And it supplies cleaning blades, anti-vibration rubber for trains, houses, bridges and electronic devices, hydraulic hoses, industrial hoses etc., to domestic and foreign customers in the General Industrial Product segment.

In the sale of these products, the Group recognizes revenue principally at the time of delivery of the product since the Group deems that the performance obligation is satisfied when the customer gains control over the product at delivery in most cases. Revenue is measured by deducting discount estimates, etc., from the amount of consideration promised in the contracts with customers.

FY2018 (From April 1, 2018 to March 31, 2019) (Millions of yen) Reportable segments Japan U.S. Asia Europe other Total Automotive Products 131,394 103,728 109,924 53,114 398,160 General Industrial 52,087 329 16,776 2,353 71,545 Products Total 183,481 104,057 126,700 55,467 469,705 (Note) Amounts are shown as sales to external customers.

(Thousands of U.S. dollars) Reportable segments Japan U.S. Asia Europe other Total Automotive Products 1,183,730 934,486 990,306 478,505 3,587,027 General Industrial 469,252 2,964 151,135 21,199 644,550 Products Total 1,652,982 937,450 1,141,441 499,704 4,231,577 (Note) Amounts are shown as sales to external customers.

(2) Contract balance The balance of receivables from contracts with customers and contract liabilities are as follows. (Thousands of

(Millions of yen) U.S. dollars) FY2017 FY2018 FY2018 (From April 1, 2017 (From April 1, 2018 (From April 1, 2018 to March 31, 2018) to March 31, 2019) to March 31, 2019) Receivable arising from 94,507 90,874 818,686 contracts with customer Contract liabilities 573 901 8,117 In the consolidated statement of financial position, receivables arising from contracts with customers are included in trade and other receivables. The entire balance of advances received at the beginning of FY2018 is recognized as revenue for FY2018.

(3) Transaction price allocated to the remaining performance obligations The Group has no material transactions in which the individual expected contractual periods exceed one year. Thus, the Group applies the practical expedient and omits a description of the remaining performance

―50 ― obligations. The consideration arising from contracts with customers does not include any significant amounts not included in the transaction price.

(4) Assets recognized from costs to obtain or fulfill a contract with a customer The amount of assets recognized from the costs to obtain or fulfill a contract with a customer in FY2018 was not significant. If the depreciation period of the assets to be recognized is one year or less, the Group applies the practical expedient and recognizes the incremental costs of obtaining a contract as an expense when incurred.

19. Financial Instruments (1) Capital management The objectives in capital management of the Sumitomo Riko Group is to maintain its capacity to survive as a going concern in order to offer returns to our shareholders, provide benefits to other stakeholders and maintain an optimal capital structure toward the reduction of capital costs. To maintain and control the capital structure, the Sumitomo Riko Group may adjust the amount of dividends to the shareholders, redeem capital to the shareholders, issue new shares or reduce debt through the sale of assets. Items subject to management by the Sumitomo Riko Group are net interest-bearing debt, which is the total debt less cash and cash equivalents, the equity attributable to owners of the parent and the ratio of net worth to liabilities. The amounts of each are as follows.

(Thousands of (Millions of yen) U.S. dollars) FY2017 FY2018 FY2018 (As of March 31, 2018) (As of March 31, 2019) (As of March 31, 2019) Interest-bearing debt 106,663 102,944 927,423 Less: Cash and cash equivalents (41,973) (38,371) (345,685) Net interest-bearing debt 64,690 64,573 581,738 Capital (equity attributable to owners of the parent) 164,379 158,319 1,426,298 Ratio of net worth to liabilities 39.4% 40.8%

At the Sumitomo Riko Group, management monitors and confirms the plans for profits and investments and these indicators at the time of planning and reviewing the medium-term management plan. The Sumitomo Riko Group is not subject to any significant externally imposed capital requirements (except for general requirements such as those required by the Companies Act).

―51 ― (2) Classification of financial instruments (Thousands of (Millions of yen) U.S. dollars) FY2017 FY2018 FY2018 (As of March 31, (As of March 31, (As of March 31, 2018) 2019) 2019) Financial assets

Financial assets measured at fair value through profit or loss Derivatives 374 610 5,495 Financial assets measured at fair value through other comprehensive income Equity instruments 6,386 5,738 51,694 Financial assets measured at amortized cost Cash and cash equivalents 41,973 38,371 345,685 Trade and other receivables 96,293 92,892 836,865 Other financial assets 1,422 1,269 11,433 Total 146,448 138,880 1,251,172 Financial liabilities Financial liabilities measured at fair value through profit or loss Derivatives 306 163 1,468 Financial liabilities measured at amortized cost Bonds 44,805 44,828 403,856 Borrowings 61,242 57,542 518,397 Trade and other payables 82,566 80,921 729,018 Other financial liabilities 1,797 3,995 35,992 Financial liabilities designated as hedging instruments Derivatives 396 345 3,108 Total 191,112 187,794 1,691,839

Financial assets measured at fair value through profit or loss and financial assets measured at fair value through other comprehensive income are included in “other financial assets” in the consolidated statements of financial positions. Financial liabilities measured at fair value through profit or loss and financial liabilities designated as hedging instruments are included in “other financial liabilities” in the consolidated statements of financial positions. The Sumitomo Riko Group does not own any financial assets or financial liabilities for which the Sumitomo Riko Group has irrevocably chosen at initial recognition to designate as a financial asset or financial liability measured at fair value through profit or loss.

―52 ― [Financial assets measured at fair value through other comprehensive income] The Sumitomo Riko Group designates shares for long-term holding as financial assets measured at fair value through other comprehensive income. These shares are held for expanding its revenue base by maintaining and strengthening relationships with business partners. The fair value of and dividend income on equity instruments measured at fair value through other comprehensive income recorded in “other financial assets” at the end of the reporting period were as follows. (Millions of yen) (Thousands of U.S. dollars) FY2017 FY2018 FY2018 FY2017 (From April 1, FY2018 (From April 1, FY2018 (From April (As of March 2017 to March (As of March 2018 to March (As of March 1, 2018 to 31, 2018) 31, 2019) 31, 2019) March 31, 31, 2018) 31, 2019) 2019) Dividend Dividend Dividend Fair value income Fair value income Fair value income Listed stock 54 1 164 1 1,477 9 Unlisted stock 6,332 10 5,574 10 50,217 90 Total 6,386 11 5,738 11 51,694 99

Equity instruments measured at fair value through other comprehensive income which were disposed of during the respective fiscal years were as follows. (Millions of yen) (Thousands of U.S. dollars) FY2017 FY2018 FY2018 (From April 1, 2017 (From April 1, 2018 (From April 1, 2018 to March 31, 2018) to March 31, 2019) to March 31, 2019) Fair value as Accumulated Dividend Fair value as Accumulated Dividend Fair value as Accumulated Dividend of the gains of the gains of the gains income income income disposal date (losses) disposal date (losses) disposal date (losses) 2,352 302 75 1,447 (17) ― 13,036 (153) ― In order to enhance the efficiency and effective use of owned assets, the Sumitomo Riko Group regularly assesses the fair value of equity instruments and the financial conditions of issuers and reviews the appropriateness of holding the instruments. In the previous fiscal year and the current fiscal year, accumulated gains (after tax) included in other components of equity that have been reclassified to retained earnings were ¥209 million and ¥(12) million (U.S.$ (108) thousand), respectively.

(3) Financial risk management The Sumitomo Riko Group is exposed to various risks, including credit risk, liquidity risk and market risk (foreign exchange risk, interest rate risk and share price fluctuation risk). The Sumitomo Riko Group uses derivative financial instruments such as exchange forward contracts and interest rate swaps to hedge market risk. The Sumitomo Riko Group executes and manages derivative transactions in accordance with internal rules and regulations that provide transaction authority, and it is the Group’s policy not to use derivative financial instruments for speculative transactions. The Sumitomo Riko Group procures necessary funds mainly by borrowings from banks and the issuance of corporate bonds in light of its capital investment plan. The Sumitomo Riko Group invests temporary surplus funds in highly secure financial assets and procures short-term working capital by the borrowings from banks. The Sumitomo Riko Group manages liquidity risk associated with capital procurement by taking measures such as each company preparing a monthly funding plan.

―53 ― 1) Credit risk The Sumitomo Riko Group is exposed to credit risk –the risk of financial assets becoming unrecoverable due to the default of the relevant investee. To deal with such risk, the Sumitomo Riko Group manages the deadline and balance of each business partner in accordance with the credit management regulations of the Sumitomo Riko Group and establishes a system in which the Sumitomo Riko Group regularly assesses the credit status of major business partners. Furthermore, the Sumitomo Riko Group takes preservative measures such as acquiring security and factoring as necessary. To reduce risks of fluctuations in foreign currency rates, the Sumitomo Riko Group enters into derivative instrument transactions only with financial institutions that have high credit ratings. Therefore, the impact on the credit risk is limited. There is no material credit risk exposure with specific counterparties or excessive concentration of credit risk that requires special management. As for financial assets, the carrying amount after considering impairment in the consolidated financial statements is the maximum exposure pertaining to the credit risk of the Sumitomo Riko Group. As for debt guarantees, the balance presented in Note 26, “Contingent Liabilities,” is the maximum exposure pertaining to the credit risk of the Sumitomo Riko Group. As for these exposures pertaining to credit risks, there are no assets held as collateral or other credit enhancements.

(i) Credit risk exposure The credit risk exposures of the Sumitomo Riko Group pertaining to trade and other receivables were as follows.

FY2017 (As of March 31, 2018) (Millions of yen) Financial assets for which the allowance for doubtful accounts is measured at an amount equal to lifetime Financial assets for which the allowance for expected credit loss doubtful accounts is Financial asset s for which Days in arrears measured at an amount Financial assets for which the allowance for doubtful Total equal to 12-month credit risk increased accounts is always expected credit loss significantly after initial measured at an amount recognition equal to a lifetime expected credit loss Current 3,243 ― 84,103 87,346 Within 30 days 7 ― 7,414 7,421 Between 31 -60 104 ― 1,599 1,703 days Between 61 -90 2 ― 248 250 days Over 90 days 231 ― 1,149 1,380 Total 3,587 ― 94,513 98,100

―54 ―

FY2018 (As of March 31, 2019) (Millions of yen) Financial assets for which the allowance for doubtful accounts is measured at an amount equal to lifetime Financial assets for which the allowance for expected credit loss doubtful accounts is Financial asset s for which Days in arrears measured at an amount Financial assets for which the allowance for doubtful Total equal to 12-month credit risk increased accounts is always expected credit loss significantly after initial measured at an amount recognition equal to a lifetime expected credit loss Current 3,417 ― 81,495 84,912 Within 30 days 9 ― 6,471 6,480 Between 31 -60 50 ― 1,230 1,280 days Between 61 -90 81 ― 463 544 days Over 90 days 177 ― 1,253 1,430 Total 3,734 ― 90,912 94,646

(Thousands of U.S. dollars) Financial assets for which the allowance for doubtful accounts is measured at an amount equal to lifetime Financial assets for which the allowance for expected credit loss doubtful accounts is Financial asset s for which Days in arrears measured at an amount Financial assets for which the allowance for doubtful Total equal to 12-month credit risk increased accounts is always expected credit loss significantly after initial measured at an amount recognition equal to a lifetime expected credit loss Current 30,784 ― 734,189 764,973 Within 30 days 81 ― 58,297 58,378 Between 31 -60 450 ― 11,081 11,531 days Between 61 -90 730 ― 4,171 4,901 days Over 90 days 1,595 ― 11,288 12,883 Total 33,640 ― 819,026 852,666

―55 ― (ii) Analysis of changes in allowance for doubtful accounts The Sumitomo Riko Group reviews the recoverability of trade receivables, etc., depending on the credit conditions of counterparties and recognizes allowance for doubtful accounts. Changes in allowance for doubtful accounts were as follows.

FY2017 (From April 1, 2017 to March 31, 2018) (Millions of yen)

Lifetime expected credit loss Financial asset s for which 12-month expected Financial assets for which the allowance for doubtful Total credit loss credit risk increased accounts is always significantly after initial measured at an amount recognition equal to a lifetime expected credit loss Balance at the ― 5 345 350 beginning of the year Increases during the year (provisions ― ― 133 133 made) Decreases during the year (provisions ― (5) (67) (72) used) Decreases during the ― ― (28) (28) year (reversals made) Transfer during the ― ― ― ― year Exchange rate ― (0) 2 2 differences Balance at the end of ― ― 385 385 the year

FY2018 (From April 1, 2018 to March 31, 2019) (Millions of yen) Lifetime expected credit loss Financial asset s for which 12-month expected Financial assets for which the allowance for doubtful Total credit loss credit risk increased accounts is always significantly after initial measured at an amount recognition equal to a lifetime expected credit loss Balance at the ― ― 385 385 beginning of the year Increases during the year (provisions ― ― 238 238 made) Decreases during the year (provisions ― ― (22) (22) used) Decreases during the ― ― (105) (105) year (reversals made) Transfer during the ― ― ― ― year Exchange rate ― ― (11) (11) differences Balance at the end of ― ― 485 485 the year

―56 ― (Thousands of U.S. dollars) Lifetime expected credit loss Financial asset s for which 12-month expected Financial assets for which the allowance for doubtful Total credit loss credit risk increased accounts is always significantly after initial measured at an amount recognition equal to a lifetime expected credit loss Balance at the ― ― 3,468 3,468 beginning of the year Increases during the year (provisions ― ― 2,144 2,144 made) Decreases during the year (provisions ― ― (198) (198) used) Decreases during the ― ― (946) (946) year (reversals made) Transfer during the ― ― ― ― year Exchange rate ― ― (99) (99) differences Balance at the end of ― ― 4,369 4,369 the year

2) Liquidity risk The Sumitomo Riko Group procures working capital and funds for capital expenditures through borrowings from financial institutions and the issuance of corporate bonds, which exposes the Group to the risk of inability to perform these obligations, i.e., liquidity risk. The Sumitomo Riko Group borrows funds from financial institutions and issues corporate bonds when needed to secure the minimum cash on hand necessary for conducting its business. In addition, the Sumitomo Riko Group has established a commitment line to respond to emergency situations such as in the event of sudden funding requirements and significant declines in liquidity in markets. The Company manages liquidity risks by preparing a monthly fund plan by assessing from time to time funding requirements of the respective Group companies. Remaining contractual maturities for non-derivative financial liabilities and derivative financial liabilities were as follows.

FY2017 (As of March 31, 2018) (Millions of yen) Due after 1 Due after 2 Due after 3 Due after 4 Carrying Contractual Due within year years years years Due after 5 amount cash flows 1 year through 2 through 3 through 4 through 5 years years years years years Non -derivative financial liabilities Trade and other payables 82,566 82,566 82,566 ― ― ― ― ― Bonds 44,805 46,973 245 246 246 246 10,238 35,752 Borrowings 61,242 61,702 9,420 10,112 15,095 14,521 5,020 7,534 Other 1,797 1,797 1,599 172 7 5 4 10 Total 190,410 193,038 93,830 10,530 15,348 14,772 15,262 43,296 Derivative financial liabilities Foreign exchange 306 306 306 ― ― ― ― ― contracts Interest rate swaps 396 396 145 145 50 31 11 14 Total 702 702 451 145 50 31 11 14

―57 ―

FY2018 (As of March 31, 2019) (Millions of yen) Due after 1 Due after 2 Due after 3 Due after 4 Carrying Contractual Due within year years years years Due after 5 amount cash flows 1 year through 2 through 3 through 4 through 5 years years years years years Non -derivative financial liabilities Trade and other 80,921 80,921 80,921 ― ― ― ― ― payables Bonds 44,828 46,727 246 246 246 10,238 152 35,599 Borrowings 57,542 57,839 15,161 15,087 14,050 5,019 1,018 7,504 Other 3,995 3,995 3,817 156 5 7 4 6 Total 187,286 189,482 100,145 15,489 14,301 15,264 1,174 43,109 Derivative financial liabilities Foreign exchange 163 163 163 ― ― ― ― ― contracts Interest rate 345 345 183 70 47 18 16 11 swaps Total 508 508 346 70 47 18 16 11

(Thousands of U.S. dollars) Due after 1 Due after 2 Due after 3 Due after 4 Carrying Contractual Due within year years years years Due after 5 amount cash flows 1 year through 2 through 3 through 4 through 5 years years years years years Non -derivative financial liabilities Trade and other 729,018 729,018 729,018 ― ― ― ― ― payables Bonds 403,856 420,963 2,216 2,216 2,216 92,234 1,369 320,712 Borrowings 518,397 521,073 136,586 135,919 126,577 45,216 9,171 67,604 Other 35,992 35,992 34,387 1,405 45 63 36 56 Total 1,687,263 1,707,046 902,207 139,540 128,838 137,513 10,576 388,372 Derivative financial liabilities Foreign exchange 1,468 1,468 1,468 ― ― ― ― ― contracts Interest rate 3,108 3,108 1,649 631 423 162 144 99 swaps Total 4,576 4,576 3,117 631 423 162 144 99

―58 ― 3) Market risk (i) Foreign exchange risk Since the Sumitomo Riko Group operates business globally and the procurement of certain raw materials and the sales of some products are conducted in foreign currencies, foreign currency denominated receivables and payables arising from such transactions are exposed to foreign currency risk. The foreign currency risk of the Sumitomo Riko Group arises from the fluctuation of foreign currencies, including the U.S. dollar, Chinese yuan and euro. The Sumitomo Riko Group hedges foreign exchange risk by entering into forward foreign exchange contracts for foreign currency denominated receivables and payables, taking into account that the foreign exchange risk arising therefrom are offset in the future.

Foreign exchange sensitivity analysis The following table represents the sensitivity analysis for foreign exchange risk exposure (net) of the Sumitomo Riko Group. (Thousands of (Millions of yen) U.S. dollars) FY2017 FY2018 FY2018 (From April 1, 2017 (From April 1, 2018 (From April 1, 2018 to March 31, 2018) to March 31, 2019) to March 31, 2019) Profit before income taxes 11 (2) (18) The sensitivity analysis shows an impact on profit before income taxes that would result from a 1% appreciation of the yen against all foreign currency denominated financial instruments held at the fiscal year-end. The analysis is based on the assumption that all other variable factors are held constant.

(ii) Interest rate risk The Sumitomo Riko Group pays interest accrued in association with the procurement of funds necessary for working capital and capital investment. However, when borrowing funds under floating rate terms, as the amounts of interest is subject to the effects of fluctuation in market interest rates, the Sumitomo Riko Group is exposed to interest rate risk from the fluctuation of the future cash flows of interest. As to borrowings under floating rate terms that belong to long-term borrowings with the main purpose of capital investment, the Sumitomo Riko Group in principle enters into interest rate swap contracts with financial institutions under which the Sumitomo Riko Group receives interest at floating rates while paying interest at fixed rates and thereby receives the difference in order to suppress the increase in interest payments caused by higher interest rates. As a result, interest payments have a minor impact on the Sumitomo Riko Group, and the interest rate risk is considered to be less important. Therefore, no interest rate sensitivity analysis is conducted.

(iii) Share price fluctuation risk The Sumitomo Riko Group owns shares of companies with which the Sumitomo Riko Group has business relationships in order to promote smooth business activities. As a result, the Sumitomo Riko Group is exposed to share price fluctuation risks. The Sumitomo Riko Group regularly assesses the fair value of shares and the financial conditions of counterparties and continuously reviews the status of its share-holding taking into account the relationships with counterparties. Securities are designated as financial assets measured at fair value through other comprehensive income and have no impact on the fluctuation of share prices and no material impact on other comprehensive income.

―59 ― (4) Fair value of financial instruments 1) Fair value measurement (Cash and cash equivalents, trade and other receivables and trade and other payables) As these are settled within a short period of time, the carrying amounts are reasonably approximate to their respective fair value. (Other financial assets and other financial liabilities) Other financial assets such as time deposits that have a maturity of over three months are settled within a short period of time. Therefore, the carrying amounts are reasonably approximate to their respective fair value. For financial assets measured at fair value through other comprehensive income, the fair value is determined using valuation techniques based on the market prices on stock exchanges as to listed shares and market prices of comparable companies as to unlisted shares. For the fair value of financial assets and financial liabilities measured at fair value through profit or loss, financial assets and derivative financial liabilities designated as hedging instruments are determined based on the prices presented by counterparty financial institutions. (Bonds and borrowings) The fair value of bonds and borrowings are calculated based on the present value by discounting future cash flows at the interest rate of a new similar borrowing.

2) Fair value of financial instruments by class The fair value of financial instruments measured at amortized cost is as follows. Financial instruments measured at fair value are disclosed in Note 18 (2), “Financial Instruments -Classification of financial instruments.” (Thousands of (Millions of yen) U.S. dollars) FY2017 FY2018 FY2018 (As of March 31, (As of March 31, (As of March 31, 2018) 201 9) 2019) Carrying Carrying Carrying Fair value Fair value Fair value amount amount amount Financial assets measured at amortized cost Cash and cash equivalents 41,973 41,973 38,371 38,371 345,685 345,685 Trade and other receivables 96,293 96,293 92,892 92,892 836,865 836,865 Other financial assets 1,422 1,422 1,269 1,269 11,433 11,433 Financial liabilities measured at amortized cost Bonds 44,805 45,301 44,828 45,747 403,856 412,135 Borrowings 61,242 61,306 57,542 57,591 518,397 518,838 Trade and other payables 82,566 82,566 80,921 80,921 729,018 729,018 Other financial liabilities 1,797 1,797 3,997 3,997 35,992 36,009

―60 ― 3) Fair value hierarchy The following table shows the analysis of the fair value of financial assets and financial liabilities measured on a recurring basis. These fair value measurements are categorized into three levels in a fair value hierarchy based on the inputs in valuation techniques. The respective levels are defined as follows. Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities that the Sumitomo Riko Group can access at the measurement date Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly Level 3: Unobservable inputs for the asset or liability

Transfers between the levels of fair value hierarchy are recognized on the day of the event or change in circumstance that caused the transfer.

FY2017 (As of March 31, 2018) (Millions of yen) Level 1 Level 2 Level 3

Financial assets measured at fair value through profit or loss Derivatives ― 374 ― Financial assets measured at fair value through

other comprehensive income Listed stock 54 ― ― Unlisted stock ― ― 6,332 Total assets 54 374 6,332 Financial liabilities measured at fair value through profit or loss Derivatives ― 306 ― Financial liabilities designated as hedging instruments Derivatives ― 396 ― Total liabilities ― 702 ―

FY2018 (As of March 31, 2019) (Millions of yen) Level 1 Level 2 Level 3

Financial assets measured at fair value through profit or loss Derivatives ― 610 ― Financial assets measured at fair value through

other comprehensive income Listed stock 164 ― ― Unlisted stock ― ― 5,574 Total assets 164 610 5,574 Financial liabilities measured at fair value through profit or loss Derivatives ― 163 ― Financial liabilities designated as hedging instruments Derivatives ― 345 ― Total liabilities ― 508 ―

―61 ― (Thousands of U.S. dollars) Level 1 Level 2 Level 3 Financial assets measured at fair value through profit or loss Derivatives ― 5,495 ― Financial assets measured at fair value through other comprehensive income Listed stock 1,477 ― ― Unlisted stock ― ― 50,217 Total assets 1,477 5,495 50,217 Financial liabilities measured at fair value through profit or loss Derivatives ― 1,468 ― Financial liabilities designated as hedging instruments Derivatives ― 3,108 ― Total liabilities ― 4,576 ― All of the fair value hierarchy of financial instruments measured at amortized cost disclosed in “2) Fair value of financial instruments by class” belong to Level 3. There were no transfers between Level 1 and Level 2 in the previous fiscal year or the current fiscal year.

4) Information on fair value measurement categorized within Level 2 and Level 3 (a) Valuation techniques and inputs Financial assets and financial liabilities categorized within Level 2 are derivative financial assets and derivative financial liabilities. The fair value of these assets and liabilities are determined based on the prices presented by counterparty financial institutions. Financial assets categorized within Level 3 are mainly unlisted shares. The fair value of unlisted shares is determined by using valuation techniques based on the market prices of comparable companies and others. In measuring the fair value of unlisted shares, unobservable inputs such as valuation multiples are used.

(b) Valuation process The fair value of financial instruments categorized in Level 3 is measured in accordance with relevant internal rules and regulations. In measuring the fair value, the Sumitomo Riko Group uses techniques and inputs that reflect the nature, characteristics and risks of the relevant financial instruments most appropriately. The results of the measurement are reviewed by senior managers.

(c) Fair value measurement on a recurring basis categorized within Level 3 Significant unobservable inputs related to the measurement of the fair value of financial instruments categorized within Level 3 on a recurring basis are an EBIT ratio and illiquidity discount. The fair value increases (decreases) when the EBIT ratio increases (decreases) and decreases (increases) when the illiquidity discount increases (decreases).

With respect to financial instruments categorized within Level 3, no significant impact on the fair value is assumed even if unobservable inputs are changed to reasonable alternative assumptions.

―62 ― 5) Reconciliation of financial instruments categorized within Level 3 from the balance at the beginning and end of the year (Thousands of (Millions of yen) U.S. dollar s) FY2017 FY2018 FY2018 (From April 1, 2017 (From April 1, 2018 (From April 1, 2018 to March 31, 2018) to March 31, 2019) to March 31, 2019) Balance at the beginning of the 5,397 6,332 57,045 year Purchases ― ― ― Total gains or losses Other comprehensive income 935 (758) (6,828) (Note) Sales, settlements ― ― ― Other changes ― ― ― Balance at the end of the year 6,332 5,574 50,217 (Note) Gains and losses included in other comprehensive income relate to shares, etc., that are not traded in markets held by the Sumitomo Riko Group as of the end of reporting period. These shares, etc., are included in “financial assets measured at fair value through other comprehensive income.”

(5) Derivative financial instruments Cash flow hedges A cash flow hedge is a hedge to avoid the risk of fluctuation in future cash flows. The Sumitomo Riko Group uses interest rate swaps to hedge the fluctuation in cash flows related to borrowings with floating rates. Changes in the fair value of a derivative transaction designated as a cash flow hedge is recognized in other comprehensive income of other components of equity and reclassified to profit or loss when the hedged items are recognized in profit or loss. At the end of current fiscal year, the period in which cash flows are expected to occur and the period in which these are expected to affect profit or loss was from 2 years to 6 years.

Derivatives for which hedge accounting is not applied The Sumitomo Riko Group uses derivatives if the use of derivatives is economically reasonable, including when a hedging relationship does not meet the qualifying criteria for hedge accounting. The Sumitomo Riko Group uses forward exchange contracts to avoid exchange fluctuation risk related to assets and liabilities denominated in foreign currencies. The Sumitomo Riko Group does not apply hedge accounting to such derivative transactions and recognizes all changes in fair value in profit or loss.

Derivatives designated as hedging instruments as of the end of the previous fiscal year and the end of the current fiscal year were as follows.

FY2017 (As of March 31, 2018) (Millions of yen) Carrying amount of Line item of hedging Changes in fair value Notional amount hedging instrument instrument in in calculating of hedging consolidated ineffective portion of instrument statements of Assets Liabilities hedges financial position Cash flow hedges

Interest rate risk Other financial Interest rate swap 23,500 ― 396 liabilities ― (current, noncurrent)

―63 ― FY2018 (As of March 31, 2019) (Millions of yen) Carrying amount of Line item of hedging Changes in fair value Notional amount hedging instrument instrument in in calculating of hedging consolidated ineffective portion of instrument statements of Assets Liabilities hedges financial position Cash flow hedges

Interest rate risk Other financial Interest rate swap 24,138 ― 345 liabilities ― (current, noncurrent)

(Thousands of U.S. dollars) Carrying amount of Line item of hedging Changes in fair value Notional amount hedging instrument instrument in in calculating of hedging consolidated ineffective portion of instrument statements of Assets Liabilities hedges financial position Cash flow hedges

Interest rate risk Other financial Interest rate swap 217,459 ― 3,108 liabilities ― (current, noncurrent)

Assets and liabilities designated as hedged items as of the end of the previous fiscal year and the end of the current fiscal year were as follows.

FY2017 (As of March 31, 2018) (Millions of yen) Changes in fair value in calculating ineffective portion of hedges Reserve of cash flow hedges

Cash flow hedges Interest rate risk Borrowings ― (276)

FY2018 (As of March 31, 2019) (Millions of yen) Changes in fair value in calculating Reserve of cash flow hedges ineffective portion of hedges

Cash flow hedges Interest rate risk Borrowings ― (240)

(Thousands of U.S. dollars) Changes in fair value in calculating Reserve of cash flow hedges ineffective portion of hedges

Cash flow hedges Interest rate risk Borrowings ― (2,162)

―64 ― Effects of hedge accounting on the consolidated statements of income in the previous fiscal year and the current fiscal year were as follows.

FY2017 (From April 1, 2017 to March 31, 2018) (Millions of yen) Changes in value Line item in Amount of hedging Ineffective profit or loss transferred from Line item instruments portion (including reserve of cash affected by recognized in other recognized in ineffective flow hedges to transfer in profit comprehensive profit or loss portion of profit or loss or loss income (Note) hedges) (Note) Cash flow hedges

Interest rate risk Financial Interest rate swap 127 ― ― 150 expenses (Note) Amounts are before adjustment for tax effect.

FY2018 (From April 1, 2018 to March 31, 2019) (Millions of yen) Changes in value Line item in Amount of hedging Ineffective profit or loss transferred from Line item instruments portion (including reserve of cash affected by recognized in other recognized in ineffective flow hedges to transfer in profit comprehensive profit or loss portion of profit or loss or loss hedges) (Note) income Cash flow hedges

Interest rate risk Financial Interest rate swap 52 ― ― 155 expenses (Note) Amounts are before adjustment for tax effect. (Thousands of U.S. dollars) Changes in value Line item in Amount of hedging Ineffective profit or loss transferred from Line item instruments portion (including reserve of cash affected by recognized in other recognized in ineffective flow hedges to transfer in profit comprehensive profit or loss portion of profit or loss or loss hedges) (Note) income Cash flow hedges

Interest rate risk

Interest rate swap 468 ― ― 1,396 Financial expenses (Note) Amounts are before adjustment for tax effect.

―65 ― The fair value of derivatives for which hedge accounting was not applied as of the end of the previous fiscal year and the end of the current fiscal year were as follows. (Thousands of (Millions of yen) U.S. dollars) FY2017 FY201 8 FY201 8 (As of March 31, (As of March 31, (As of March 31, 2018) 201 9) 201 9) Assets Liabilities Assets Liabilities Assets Liabilities

Derivatives not designated as hedging instruments:

Foreign exchange contracts 374 306 610 163 5,495 1,468

Total 374 306 610 163 5,495 1,468

The total fair value of derivatives designated as hedging instruments are classified into noncurrent assets or liabilities if the period up to the maturity of a hedged item exceeds 12 months and into current assets or liabilities if the period up to the maturity does not exceed 12 months.

20. Cash Flow Information Reconciliation of liabilities arising from financing activities Reconciliation of liabilities arising from financing activities is as follows:

FY2017 (From April 1, 2017 to March 31, 2018) (Millions of yen)

Balance as of Noncash changes Balance as of March 31, Cash flows Amortized Foreign March 31, 2017 Acquisition cost exchange 2018 measurement movement Short -term bank loans 6,367 (1,981) ― ― (94) 4,292 Long-term debt 56,146 (45) ― 8 841 56,950

Bonds 44,853 (79) ― 31 ― 44,805 Finance lease obligations 702 (651) 563 ― 2 616 Total 108,068 (2,756) 563 39 749 106,663

FY2018 (From April 1, 2018 to March 31, 2019) (Millions of yen)

Balance as of Noncash changes Balance as of March 31, Cash flows Amortized Foreign March 31, 2018 Acquisition cost exchange 2019 measurement movement Short -term bank loans 4,292 1,020 ― ― (247) 5,065 Long-term debt 56,950 (4,012) ― 8 (469) 52,477

Bonds 44,805 ― ― 23 ― 44,828 Finance lease obligations 616 (554) 513 ― (1) 574 Total 106,663 (3,546) 513 31 (717) 102,944

―66 ― (Thousands of U.S. dollars) Noncash changes Balance as of Balance as of March 31, Cash flows Amortized Foreign March 31, 2018 Acquisition cost exchange 2019 measurement movement Short -term bank loans 38,667 9,189 ― ― (2,225) 45,631 Long-term debt 513,063 (36,144) ― 72 (4,225) 472,766

Bonds 403,649 ― ― 207 ― 403,856 Finance lease obligations 5,550 (4,993) 4,622 ― (9) 5,170 Total 960,929 (31,948) 4,622 279 (6,459) 927,423

21. Equity and Other Equity Items (1) Capital stock and capital surplus Changes in the number of authorized shares and the number of outstanding shares were as follows. Number of Number of Capital Capital stock Capital authorized outstanding Capital stock surplus (Thousands surplus (Millions of (Thousands shares shares yen) (Millions of of U.S. of U.S. (Shares) (Shares) yen) dollars) dollars) Balance as of April 1, 2017 400,000,000 104,042,806 12,145 10,729 Changes ― ― ― ― Balance as of March 31, 2018 400,000,000 104,042,806 12,145 10,729 109,414 96,658 Changes ― ― ― 1,322 ― 11,910 Balance as of March 31, 2019 400,000,000 104,042,806 12,145 12,051 109,414 108,568 (Note 1) The shares issued by the Company are common shares with no par value. (Note 2) Outstanding shares are fully paid.

(2) Treasury stock Changes in the number of shares of and amount of treasury stock were as follows. Number of Amount Amount shares (Thousands of (Shares) (Millions of yen) U.S. dollars) Balance as of April 1, 2017 212,483 269 Changes 1,169 1 Balance as of March 31, 2018 213,652 270 2,432 Changes 757 1 9 Balance as of March 31, 2019 214,409 271 2,441 (Note 1) The increase in the number of shares of and amount of treasury stock during the fiscal year was due to the purchase of shares less than one unit. (Note 2) The amount of treasury stock held by associates as of the end of the previous fiscal year and the end of the current fiscal year was ¥37 million and ¥38 million (U.S.$342 thousand), respectively.

(3) Other components of equity 1) Financial assets measured at fair value through other comprehensive income Changes in the fair value of financial assets are measured at fair value through other comprehensive income. 2) Cash flow hedges The Sumitomo Riko Group uses derivatives for hedging to avoid the risk of fluctuation in future cash

―67 ― flows. This is the effective portion of changes in the fair value of derivative transactions designated as cash flow hedges. 3) Foreign currency translation adjustments This is a foreign currency translation difference that occurs when consolidating financial statements of foreign operations that are prepared in foreign currencies. 4) Remeasurements of defined benefit plans These mainly comprise actuarial gains and losses on defined benefit obligations and the return on plan assets (excluding the amount of interest income on plan assets).

(4) Dividends Dividends paid for each fiscal year were as follow. FY2017 (From April 1, 2017 to March 31, 2018) Total amount of Dividend per share Resolution Class of shares dividend Record date Effective date (Yen) (Millions of yen) Ordinary General Meeting of Shareholders on Common stock 1,038 10.00 March 31, 2017 June 23, 2017 June 22, 2017 Board of Directors’ September 30, December 1, Meeting on Common stock 1,038 10.00 2017 2017 October 30 , 2017

FY2018 (From April 1, 2018 to March 31, 2019) Total amount Total amount Class of of dividend of dividend Dividend per Dividend per Resolution (Thousands share share Record date Effective date shares (Millions of of U.S. (Yen) (U.S. dollars) yen) dollars) Ordinary General Meeting of Common March 31, June 22, Shareholders stock 1,038 9,351 10.00 0.09 2018 2018 on June 21, 201 8 Board of Directors’ Meeting on Common 1,038 9,351 10.00 0.09 September December October 30, stock 30, 2018 3, 2018 201 8

Dividends for which the effective date falls in the following fiscal year are as follows. FY2017 (From April 1, 2017 to March 31, 2018)

Total amount of Dividend per share Resolution Class of shares dividend Record date Effective date (Yen) (Millions of yen) Ordinary General Meeting of Shareholders on Common stock 1,038 10.00 March 31, 2018 June 22, 2018 June 21, 201 8

―68 ― FY2018 (From April 1, 2018 to March 31, 2019) Total amount Total amount Class of of dividend of dividend Dividend per Dividend per Resolution (Thousands share share Record date Effective date shares (Millions of of U.S. (Yen) (U.S. dollars) yen) dollars) Ordinary General Meeting of Common March 31, June 21, Shareholders stock 415 3,739 4.00 0.04 2019 2019 on June 20, 201 9

22. Breakdown of Expenses The breakdown of cost of sales, selling and general and administrative expenses is as follows. (Thousands of (Millions of yen) U.S. dollars) FY2017 FY2018 FY2018 (From April 1, 2017 (From April 1, 2018 (From April 1, 2018 to March 31, 2018) to March 31, 2019) to March 31, 2019) Raw materials and consumables used (232,746) (239,558) (2,158,180) Employee expenses (103,935) (107,085) (964,730) Depreciation and amortization (28,766) (29,781) (268,297) Cost of outsourced processing (28,530) (27,871) (251,090) Research and development expenses (11,581) (10,614) (95,622) Other (44,620) (45,258) (407,730) Total (450,178) (460,167) (4,145,649)

23. Financial Income and Financial Expenses (1) Financial income The breakdown of financial income is as follows. (Thousands of (Millions of yen) U.S. dollars) FY2017 FY201 8 FY2018 (From April 1, (From April 1, (From April 1, 2017 to March 31, 2018 to March 31, 2018 to March 31, 2018) 201 9) 2019) Interest income Financial assets measured at amortized cost 242 242 2,180 Financial assets measured at fair value 5 ― ― through other comprehensive income Dividend income Financial assets measured at fair value 86 11 99 through other comprehensive income Foreign exchange gains (Note) ― 411 3,703 Other 32 29 261 Total 365 693 6,243 (Note) Valuation gains and losses on currency derivatives are included in foreign exchange gains.

―69 ― (2) Financial expenses The breakdown of financial expenses is as follows. (Thousands of (Millions of yen) U.S. dollars) FY2017 FY2018 FY2018 (From April 1, (From April 1, (From April 1, 2017 to March 31, 2018 to March 31, 2018 to March 31, 2018) 2019) 2019) Interest expense Financial liabilities measured at amortized cost (986) (1,047) (9,432) (Note 1) Foreign exchange losses (Note 2) (167) ― ― Other (123) (99) (892) Total (1,276) (1,146) (10,324) (Note 1) Valuation gains and losses on interest rate derivatives are included in interest expense. (Note 2) Valuation gains and losses on currency derivatives are included in foreign exchange losses.

24. Income and Expenses (Excluding Financial Income and Financial Expenses) (1) Other income The breakdown of other income is as follows. (Thousands of (Millions of yen) U.S. dollars) FY2017 FY2018 FY2018 (From April 1, (From April 1, (From April 1, 2017 to March 31, 2018 to March 31, 2018 to March 31, 2018) 2019) 2019) Gain on sales of property, plant and equipment 142 126 1,135 Gain on sales of scrap 118 136 1,225 Other 1,145 1,093 9,847 Total 1,405 1,355 12,207

(2) Other expenses The breakdown of other expenses is as follows. (Thousands of (Millions of yen) U.S. dollars) FY2017 FY2018 FY2018 (From April 1, (From April 1, (From April 1, 2017 to March 31, 2018 to March 31, 2018 to March 31, 2018) 2019) 2019) Loss on sales and retirement of property, plant and equipment (314) (636) (5,730) Impairment loss (405) (7,178) (64,667) Business structure improvement expenses (310) (50) (450)

Other (1,040) (1,717) (15,469)

Total (2,069) (9,581) (86,316)

―70 ― 25. Other Comprehensive Income Reclassification adjustments and income tax effects for other comprehensive income were as follows. (Thousands of (Millions of yen) U.S. dollars) FY2017 FY2018 FY2018 (From April 1, (From April 1, (From April 1, 2017 to March 31, 2018 to March 31, 2018 to March 31, 2018) 2019) 2019) Financial assets measured at fair value through other comprehensive income Amount arose during the year 1,130 (774) (6,973) Reclassification adjustments ― ― ― Before income tax effect 1,130 (774) (6,973) Income tax effect (347) 236 2,126 Financial assets measured at fair value through 783 (538) (4,847) other comprehensive income Remeasurements of defined benefit plans Amount arose during the year 1,567 (163) (1,468) Reclassification adjustments ― ― ― Before income tax effect 1,567 (163) (1,468) Income tax effect (493) 67 603 Remeasurements of defined benefit plans 1,074 (96) (865) Share of other comprehensive income of associates accounted for using equity method Amount arose during the year 182 (220) (1,982) Reclassification adjustments ― ― ― Before income tax effect 182 (220) (1,982) Income tax effect ― ― ― Share of other comprehensive income of 182 (220) (1,982) associates accounted for using equity method Foreign currency translation adjustments of foreign operations Amount arose during the year 109 404 3,641 Reclassification adjustments ― ― ― Before income tax effect 109 404 3,641 Income tax effect ― ― ― Foreign currency translation adjustments of foreign operations 109 404 3,641 Cash flow hedges Amount arose during the year (23) (103) (928) Reclassification adjustments 150 155 1,396 Before income tax effect 127 52 468 Income tax effect (39) (16) (144) Cash flow hedges 88 36 324 Total other comprehensive income 2,236 (414) (3,729)

―71 ― 26. Profit Attributable to Owners of the Parent Company Per Share The basis of calculating profit attributable to owners of the parent company per share (basic) was as follows. FY201 7 FY201 8 (From April 1, (From April 1, 2017 to March 31, 2018 to March 31, 201 8) 201 9) Pro fit attributable to owners of the parent company 3,528 (5,022) (Millions of yen) Pro fit attributable to owners of the parent company (Thousands of U.S. dollars) (45,243) Weighted average number of common stock during 103,830 103,829 the year (Thousands of shares) Pro fit attributable to owners of the parent company 33.98 (48.37) per share (basic) (Yen) Pro fit attributable to owners of the parent company (0.44) per share (basic) (U.S. dollars )

27. Contingent Liabilities The Sumitomo Riko Group had the following contingent liabilities for the year ended March 31, 2018.

(1) Lawsuits, etc. In the automotive products business, the Company is under negotiations with certain automotive manufacturers for compensation for damages. The Company does not disclose the details of such lawsuits and related matters in accordance with Article 92 of IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”, because such disclosure could seriously prejudice the position of the Company and its subsidiaries.

28. Related Party Transactions (1) Parent company The Sumitomo Riko Group is controlled by Sumitomo Electric Industries, Ltd. (established in Japan), which holds 50.7% of the shares of the Company. The remaining 49.3% of the shares are held by multiple shareholders.

(2) Corporate pension for employees FY2018 (From April 1, 2018 to March 31, 2019)

Name of company Transaction contents Trade Amount Trade Amount (Millions of yen) (Thousands of U.S. dollar) Corporate pension Sumitomo Riko Return of retirement 1,674 15,081 for employees Pension Fund benefit trust assets

(3) Executive compensation Executive compensation of the Sumitomo Riko Group was as follows.

FY2017 (From April 1, 2017 to March 31, 2018) (Millions of yen) Total amount of compensation by type Total amount of compensation Basic compensation Bonus Executive compensation 387 332 55

―72 ― FY2018 (From April 1, 2018 to March 31, 2019) (Millions of yen) Total amount of compensation by type Total amount of compensation Basic compensation Bonus Executive compensation 312 312 ―

(Thousands of U.S. dollars) Total amount of compensation by type Total amount of compensation Basic compensation Bonus Executive compensation 2,811 2,811 ―

29. Subsidiaries (1) Major subsidiaries Major subsidiaries of the Group companies consisted of following. Voting rights as of March 31, 2019 did not significantly change from the previous year. Parent Company’s percentage of Name Location Capital Main business voting rights (%) (Note) (Parent company) Millions of yen General Owned Sumitomo Electric Industries, Ltd. Chuo-ku, Osaka 99,737 Industrial 50.7 Products (1.0)

(Consolidated subsidiaries)

Millions of yen Automotive Tokai Chemical Industries, Ltd. Kani-gun, Gi ｆu 80.0 825 Products SumiRiko Kyushu Company Bungotakada-shi, Millions of yen Automotive 100.0 Limited Oita 3,500 Products Millions of yen General SumiRiko Fine Elastomer, Ltd. Ageo-shi, Saitama Industrial 100.0 71 Products General SumiRiko Oita Advanced Elastomer Bungotakada-shi, Millions of yen Industrial 100.0 Company Limited Oita 450 Products Millions of yen General Sumitomo Riko Hosetex, Ltd. Ayabe-shi, Kyoto Industrial 100.0 3,000 Products Millions of yen Automotive SumiRiko Metex Company Limited Komaki-shi, Aichi 100.0 30 Products Millions of yen General SumiRiko Corporation Nagoya-shi, Aichi Industrial 100.0 100 Products

Millions of yen General SumiRiko Logitech Company Komaki-shi, Aichi Industrial 90.0 Limited 70 Products

U.S. dollars Automotive Sumitomo Riko America, Inc. U.S.A. 100.0 Products 879

―73 ― Parent Company’s percentage of Name Location Capital Main business voting rights (%) (Note) U.S. dollars Automotive 100.0 SumiRiko Tennessee, Inc. U.S.A. 446 Products (100.0)

Millions of U.S. dollars Automotive 100.0 SumiRiko Ohio, Inc. U.S.A 5 Products (100.0) SumiRiko Technical Center U.S. dollars Automotive 100.0 U.S.A. America, Inc. 35 Products (100.0) S-Riko de Querétaro, S.A.P.I. de Millions of U.S. dollars Automotive 100.0 Mexico C.V. 55 Products (62.3) Millions of euros Automotive SumiRiko Poland Sp.z o.o. Poland 77.1 7 Products Millions of euros Automotive Sumitomo Riko Europe GmbH Germany 100.0 12 Products SumiRiko AVS Holding Germany Millions of euros Automotive Germany 100.0 GmbH 5 Products Millions of euros Automotive SumiRiko Italy S.p.A. Italy 100.0 30 Products Millions of Chinese Automotive Tokai Dalian Hose Co., Ltd. China yuan 90.0 Products 58 Millions of Chinese Automotive Tokai Rubber (Tianjin) Co., Ltd. China yuan 86.4 Products 116 Millions of Chinese Tokai Chemical (Tianjin) Auto Automotive 84.6 China yuan Parts Co., Ltd. Products 28 (64.6) Millions of Chinese General Sumitomo Riko (China) Co., Ltd. China yuan Industrial 100.0 5 Products Millions of Chinese Automotive Tokai Rubber (Jiaxing) Co., Ltd. China yuan 100.0 Products 243 Millions of Chinese Tokai Rubber Technical Center Automotive China yuan 100.0 (China) Co., Ltd. Products 89 Millions of Chinese General 89.2 TRFH Co., Ltd. China yuan Industrial 257 Products (64.17) Millions of Chinese Tokai Rubber (Guangzhou) Co., Automotive China yuan 100.0 Ltd. Products 181

―74 ― Parent Company’s percentage of Name Location Capital Main business voting rights (%) (Note) SumiRiko Eastern Rubber Millions of baht Automotive 66.0 Thailand (Thailand) Ltd. 153 Products (6.67) Millions of baht Automotive Sumitomo Riko (Asia Pacific) Ltd. Thailand 100.0 20 Products Millions of baht Automotive Inoac Tokai (Thailand) Co.,Ltd. Thailand 50.6 45 Products Billions of Automotive PT. Tokai Rubber Indonesia Indonesia Indonesian rupiah 91.5 Products 350.6 50 other companies

(Companies accounted for using the equity method) Daeheung Rubber & Technology Millions of won Automotive Korea 30.0 Co., Ltd. 784 Products 7 other companies

(Note) Parent Company’s percentage of voting rights indicated inside parentheses refers to indirect ownership.

FY2018 (From April 1, 2018 to March 31, 2019) Impact of SumiRiko Fine Elastomer becoming a wholly-owned subsidiary In October 2018, the Company acquired 4% of the total number of issued shares of SumiRiko Fine Elastomer Ltd. (hereinafter, “SRK-FE”), a consolidated subsidiary. In November 2018, SRK-FE conducted a share buyback and purchased 20% of the total number of its own issued shares. As a result of these transactions, the Group holds all the issued shares of SRK-FE. The Group owned 76% of the total number of issued shares of SRK-FE immediately before these transactions. Thus, these transactions are recorded under accounting treatment as capital transactions. The increase in capital surplus and the decrease in noncontrolling interests as a result of these transactions were as follows.

(Millions of yen) (Thousands of U.S. dollars) Increase in capital surplus 1,322 11,910 Decrease in non-controlling interests 2,783 (25,072)

(2) Summary of financial and other information on subsidiaries with significant noncontrolling interests SumiRiko Eastern Rubber (Thailand) Ltd. FY2017 FY2018 (As of March 31, 2018) (As of March 31, 2019) Ownership ratio of noncontrolling interests (%) 34.00% 34.00%

As of the end of the previous fiscal year and the end of the current fiscal year, the total assets of SumiRiko Eastern Rubber (Thailand) Ltd. were ¥28,682 million and ¥30,376 million (U.S.$273,658 thousand), respectively, and the total liabilities were ¥3,842 million and ¥3,959 million (U.S.$35,667 thousand), respectively. Profit for the previous fiscal year and the current fiscal year allocated to noncontrolling interests was ¥913 million and ¥825 million (U.S.$7,432 thousand), respectively, and the dividends paid to

―75 ― noncontrolling interests were ¥489 million and ¥475 million (U.S.$ 4,279 thousand), respectively.

30. Investments Accounted for Using the Equity Method The carrying amount of equity in associates, which were immaterial individually, attributable to the Sumitomo Riko Group accounted for using the equity method was as follows. (Thousands of (Millions of yen) U.S. dollars) FY2017 FY2018 FY2018 (As of March 31, 2018) (As of March 31, 2019) (As of March 31, 2019) Carrying amount 4,435 4,014 36,162

A summary of consolidated financial information on associates, which were immaterial individually, accounted for using the equity method is as follows. The following amounts represent the Group companies’ portion of ownership interests. (Thousands of (Millions of yen) U.S. dollars) FY201 7 FY201 8 FY2018 (From April 1, (From April 1, (From April 1, 2017 to March 2018 to March 2018 to March 31, 201 8) 31, 201 9) 31, 2019) Profit for the year (profit or loss from continuing 153 (159) (1,432) operations Other comprehensive income (net of tax) 182 (220) (1,982) Total comprehensive income for the year 335 (379) (3,414) (Note) As of the date of transition to IFRS, the end of the previous fiscal year and the end of the current fiscal year, there was no significant cumulative investment loss on associates for which the Sumitomo Riko Group had stopped recognizing its equity.

31. Subsequent Events There are no subsequent events to be disclosed.

―76 ― (2) Others 1) Quarterly information for the current fiscal year

Year ended March (Cumulative period) 1Q 2Q 3Q 31, 2019 (Millions Net sales of yen) 118,093 231,370 350,429 469,705 Profit before (Millions income taxes of yen) 2,581 4,046 6,459 700 Profit attributable to owners of the (Millions 997 1,093 1,736 (5,022) parent company of yen) Profit attributable to owners of the parent company (Yen) 9.61 10.53 16.72 (48.37) per share (basic)

Year ended March (Cumulative period) 1Q 2Q 3Q 31, 2019 (Thousands Net sales of U.S. 1,063,901 2,084,414 3,157,018 4,231,577 dollars) (Thousands Profit before of U.S. 23,252 36,450 58,189 6,306 income taxes dollars) Profit attributable (Thousands to owners of the of U.S. 8,982 9,847 15,640 (45,243) parent company dollars) Profit attributable to owners of the parent (U.S. company per share dollars) 0.09 0.09 0.15 (0.44) (basic)

(Each quarter) 1Q 2Q 3Q 4Q Profit attributable to owners of the parent company per share (Yen) 9.61 0.92 6.19 (65.09) (basic)

(Each quarter) 1Q 2Q 3Q 4Q Profit attributable to owners of the (U.S. parent company per dollars) 0.09 0.00 0.06 (0.59) share (basic)

2) Lawsuits, etc. The Company was named as a defendant in a lawsuit from Mazda Motor Corporation (hereinafter, “Mazda”) and received a complaint in June 2014. According to the complaint, Mazda had been seek an amount in controversy of ¥16,270 million, alleging that Mazda had to implement market improvement measures with respect to three types of passenger cars due to defects in the Company’s parts for power steering devices and that the cause of the defects is attributable to the Company. On June 24, 2019, the Hiroshima District Court dismissed the Mazda's claim. Mazda filed an appeal to the Hiroshima High Court in complaint of the decision, and the case is pending. The Company believes that the judgment of the first trial is fair and appropriate, and will continue to take appropriate actions at the court of second instance to ensure that the Company's allegations are justified.

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