Environmental and Social Activity Report 2017

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Contact KYB Corporation Environment & Safety Control Dept.

World Trade Center Bldg. 4-1, Hamamatsu-cho 2-chome Minato-ku, Tokyo 105-6111 Japan TEL.+81-3-3435-6465 FAX.+81-3-3436-6759

Considerations made for paper use Forest Neighborhood Use of FSC certi ed Association paper® Paper used for this printing is We used paper made of timber useful for the effective use of from adequately managed thinning and timber from forest forests. thinning that revive forests.

Considerations made for Green Printing Use of Non-VOC ink Waterless printing printing Environmentally friendly printing We used environmentally friendly We adopted waterless printing with materials and printing methods were 100% vegetable oil ink free from VOC organic materials that generate less used to produce this report. (volatile organic compound). waste. Top Message

We will contribute to the realization of a sustainable society by promoting vigorous activity of human resources and by innovation in skilled manufacturing.

Yasusuke Nakajima Representative Director and President Executive Officer KYB Corporation

Introduction consolidated performance started to recover in the second half of KYB has grown globally since its foundation in 1935 as a leading fiscal year 2016, in conjunction with the effects of structural reforms manufacturer based on its core vibration/power control and signs of the bottoming out of the construction machinery market technology with the generous understanding and support of all in China. In fiscal year 2017, we will vigorously seek and provide stakeholders. Today, KYB products support people in every corner definitive solutions to any problems not solved by the previous of the world and, thereby, provide safety, security, and comfort. medium-term plan, and in our efforts to create a management system Fiscal year 2017 is the first fiscal year of the 2017 medium-term and earnings foundation that can flexibly respond to abrupt changes plan. Subsequently, KYB continues to serve as a reliable brand in the business environment, we will further accelerate and promote contributing to the creation of an affluent society, through our drastic structural reforms in all aspects, including organization, monozukuri (development/manufacturing) for human happiness production, and bases. and will take a strong step towards dramatic improvement in the next three years with a sense of mission and joy. We look forward KYB Group initiatives for society/environment to your continued support as we pursue our mission. The KYB Group returns to the basics of skilled manufacturing by giving priority to the sites in the 2017 medium-term plan and strives Looking back at fiscal year 2016 for quality improvement, productivity improvement, response to Looking back at the KYB Group’s performance in fiscal year 2016, we customers, cooperation with suppliers, business contributions, and see that because of business environment changes, such as the fair trade (legal compliance) in the collaborative activities of the economic slowdown in China and economic downturn in emerging production, sales, and technical departments. Depending on reforms countries, a variety of different measures were implemented, from giving priority to the sites, we intend to be a corporate group including management integration or other dramatic structural that continues to contribute to the sustainable growth of society by reforms in China and the Nagano region and the reduction of fixed providing the highest level of technology, quality, and credibility to overheads. Meanwhile a global sales expansion policy was promoted our customers and society. The KYB Action Guidelines specifically through aggressive marketing activities. Accordingly, the Group’s provide that every employee should be aware and act as a good

2 Environmental and Social Activity Report 2017 Contents

2 Top Message / Contents 4 What KYB Aims to Be 6 Outline of KYB Group 8 KYB Here and There 10 2016 Action Highlights

Environmental Report

14 Environmental Management Basic environmental policy Environmental conservation objectives Chemical substance management

16 Initiatives to Reduce Environmental Burden Activities at plants

Social Report 18 Side by side with the customer Activities for customer satisfaction improvement corporate citizen who contributes to the healthy growth of society by 20 With Business Partners acknowledging that society is the basis of the company’s continuing Establishment of partnership existence, always valuing the sense of community, and working to actively absorb different cultures and information outside the 21 For the Community Social Support Activities company. We intend to cooperate with the community by hosting and supporting community events in which many of our employees 24 With Employees Human resource utilization and work participate every year. environment improvement in cooperation For the purposes of the protection of the natural environment, Human resource development and technical the KYB Group develops a number of domestic and international capability improvement activities for global environmental protection during business Employee communications development. The company’s attitudes towards learning about 27 Creation of Safe and Comfortable Workplaces nature and respecting the environment are reflected in our product Occupational safety and health manufacturing that contributes to environmental protection or reduces the environmental load. Management Report 28 Corporate Management I will be very pleased if KYB Group initiatives for society and the Corporate governance environment become better understood through this report so that 29 Internal control / Compliance we can continue receiving support from increasing numbers of 30 Environmental data compilation stakeholders. I also look forward to receiving your comments on this 30 Editorial Policy report, and hope that you will express your frank opinions regarding the KYB Group. The content of this report has been posted on our website, so please take a look. http://www.kyb.co.jp/company/csr.html

Environmental and Social Activity Report 2017 3 What KYB Aims to Be Vision Monozukuri for Our Precision, Value human happiness Technology for comfortable living What KYB Aims to Be Your Advantage By providing technologies and products The KYB Group aims to satisfy its stakeholders at a time of increasing focus on corporate social responsibility. that make people’s lives safe and comfortable, Based on KYB’s management philosophy, each employee will maintain an awareness of our responsibility as a the KYB Group contributes to society business, and manifest that awareness through actions that will always comply with the law. We will moreover work to enhance our corporate value so that our company continues to be a trusted.

Relationship between the KYB Group and stakeholders Mission Monozukuri taken Management principles Society one step further The KYB Group contributes to society providing technologies and products Contribute to the community make life safe and comfortable. Coexistence with suppliers and local communities 1. Challenge higher objectives and construct livelier corporate cultural climate.

2. Maintain grace and good faith, and pay attention to nature and the environment. Customers Global Provide environment 3. Always seek creative ideas and contribute to the progress of customers, Coexist with the useful technologies shareholders, suppliers and society. global environment and products What the KYB brand can do for the world Environmental management, Quality, customer satisfaction environmental and Management Vision and new product and social report, Vision Monozukuri for human happiness technology energy-saving plant Social Responsibility in the development KYB Group KYB’s aim is to support the development of society through the joy of Monozukuri, and make people happier as Human Resources Development KYB Group a result. To cultivate the talent to achieve the objectives with a thorough understanding of the Through our business activities, the KYB Group aims to principles and the strategy. contribute to the development of our customers, Technology and Product Development The mission of KYB brand shareholders, suppliers and society through the constant To provide products that are impressive, comfortable and reliable to customers Employees Mission Monozukuri taken one step further Shareholders pursuit of creativity. throughout the world. Achieve Monozukuri (Japanese manufacturing expertise) Provide healthy Following our Corporate management philosophy and KYB will remain an enterprise able to bring value to our clients and markets thanks to the reliable technical returns on business a healthy workplace To make our plants enjoyable, dynamic places to work, and at the same time full of vision, units of the KYB Group incorporate CSR initiatives expertise we have built up over the years. activities environment discipline based on the eld priority doctrine, in order to produce products Human rights, worker safety into their yearly action plans and put them into practice. Through our own efforts, we take Monozukuri one step further to provide our clients with new value and greater satisfactory to the customer. Economic contribution and and health, human asset They then follow up on these actions as part of an internal control development satisfaction than they have ever known. Management ongoing cycle of improvement and reform. Always keep social responsibilities of the corporation in mind and provide ef cient group management. Employees carry the KYB Group’ s Action Guidelines Value made possible by the KYB brand with them to deepen their awareness of the importance Value Technology for comfortable living Guiding Principles of CSR (Corporate social responsibilities). Sensory value : comfortable living, the joy of Monozukuri ( 1 ) Establishment and its practice of the ( 8 ) Dealing with our suppliers (13) Protection of intellectual property (20) Safety and health Functional value : reliable quality corporate ethics ( 9 ) Prompt dealing with rights (21) Education and Training and career The value KYB promises its end users is a higher level of “comfortable living” that comes from creative ( 2 ) Thorough implementation of slogan customers’complains (14) Retention of trade secret development technology and sincere product development. of “Customers First” (10) Participation in activities of industry (15) Protection of personal information (22) Prohibition of discriminatory actions ( 3 ) Pursuit of product safety circles and other related and data (23) Prohibition of harassment actions The value KYB promises its clients is the “reliable quality” that comes from thinking of the end user as “our organization. ( 4 ) Appropriate accounting and account (16) Protection of other company (24) Prohibition of child labor and forced client”. settlement (11) Breaking connection with anti-social property labor power or groups The value KYB promises each employee is “the joy of Monozukuri” that comes from knowing he or she is ( 5 ) Disclosure of corporate information (17) Coexistence with local communities (25) Maintenance and improvement of ( 6 ) Compliance with laws and order (12) Prohibition of insider trading (18) Preservation of natural environment good and healthy workplace changing the world. ( 7 ) Dealing with our customers (19) Labor - management cooperation environment

4 Environmental and Social Activity Report 2017 What KYB Aims to Be Vision Monozukuri for Our Precision, Value human happiness Technology for comfortable living What KYB Aims to Be Your Advantage By providing technologies and products The KYB Group aims to satisfy its stakeholders at a time of increasing focus on corporate social responsibility. that make people’s lives safe and comfortable, Based on KYB’s management philosophy, each employee will maintain an awareness of our responsibility as a the KYB Group contributes to society business, and manifest that awareness through actions that will always comply with the law. We will moreover work to enhance our corporate value so that our company continues to be a trusted.

Environmental and Social Activity Report 2017 5 2000

Outline of KYB Group Af liate companies in Japan KYB Trondule Co., Ltd. Kayaba System Machinery Co., Ltd. ● KYB-YS Co., Ltd. KYB Trondule Co., Ltd. Kumagaya Plant Company overview KYB-YS Co., Ltd. ● Gifu North Plant ● Gifu South Plant Sagami Plant Company Name KYB Corporation Plants Kumagaya, Sagami, Gifu North, Gifu South, Gifu East KYB Kanayama Co., Ltd. ● Gifu East Plant Head Of ce KYB Motorcycle Suspension Co., Ltd. ● KYB Kanayama Co., Ltd. Founded Kayaba Research Center, November 19, 1919 Laboratories Basic Technology R&D Center, ● KYB Motorcycle Suspension Co., Ltd. Takako Industries, Inc. Takako Industries, Inc. Established Kayaba Manufacturing Co., Ltd. March 10, 1935 Production Technology R&D Center Kayaba System Machinery Co., Ltd. Incorporated November 25, 1948 (KYB Corporation) Developmental Experiment Center Head Of ce World Trade Center Bldg., 2-4-1, Machine Tools Center Hamamatsu-cho, Minato-ku, Tokyo 105-6111, Japan Electronics Technology Center KYB Group production bases Chief Representative Representative Director, President Yasusuke Nakajima Number of Employees 14,350 persons (As of the end of March 2017, consolidated) Capital 27,647,600,000 yen (As of the end of March 2017) 3,715 persons (As of the end of March 2017, non-consolidated)

Net sales (billion yen) Number of employees (persons)

Non-consolidated Consolidated Non-consolidated Consolidated 13,796 14,350 13,033 13,732 ● KLRC ● KWT 400.0 12,000 12,306 Europe ● KIMZ ●CKMZ 370.4 Czech Republic 352.7 355.3 355.3 China ● KMCZ ● KCME 305.7 300.0 9,000 United States ● KAC ● TAC Spain

● ● KYBSE KSS ● KMSI ● KCPL Taiwan ● KMT 200.0 191.6 198.2 207.4 6,000 ● KAMS 187.0 186.5 India Mexico Thailand Vietnam 3,846 3,601 3,661 3,679 3,715 100.0 3,000 ● KMEX ● KYBT ● KMV ● TVC ● KST Malaysia ● KMSB ● KSMSB 0 0 Indonesia 2012 2013 2014 2015 2016 (FY) 2012 2013 2014 2015 2016 (FY) Americas ● PT.KYBI ● KHMI Brazil ● PT.Chita ● KMB

Major Products Overseas af liate companies Asia Americas PT.KYBI PT. Kayaba Indonesia AC (automotive components) operations Shock absorbers, suspension systems, power steering systems, vane pumps, front forks, oil-cushion KAC KYB Americas Corporation PT. Chita PT. Chita Indonesia units, stay dampers, free locks TAC Takako America Co., Inc. KMV KYB Manufacturing Vietnam Co., Ltd. KMEX KYB Mexico S.A. de C.V. TVC Takako Vietnam Co., Ltd. KMB KYB-Mando do Brasil Fabricante de Autopeças S.A. KMSB KYB-UMW Malaysia Sdn. Bhd. HC (hydraulic components) operations Cylinders, valves, oil dampers for railroad, collision bumpers, pumps, motors Asia KSMSB KYB-UMW Steering Malaysia Sdn. Bhd. KIMZ KYB Industrial Machinery (Zhenjiang) Ltd. KMSI KYB Motorcycle Suspension India Pvt. Ltd. Special-purpose vehicles, Concrete mixer trucks, granule carriers, special-purpose vehicles,, aircraft landing systems, aircraft KWT Wuxi KYB Top Absorber Co., Ltd. KCPL KYB-Conmat Pvt. Ltd. Aircraft components, system products pilot systems, aircraft control systems, aircraft emergency systemsmotion, simulators, hydraulic KLRC Changzhou KYB Leadrun Vibration Reduction Technology Co., Ltd. Europe and electronic equipment systems, auditorium and stage control systems, naval ship equipment, tunnel boring machines, CKMZ CHITA KYB Manufacturing (Zhenjiang) co., Ltd. KYBSE KYB Suspensions Europe, S.A.U. environmental devices, earthquake-resistant and vibration insulation dampers, seismic isolation KMT KYB Manufacturing Taiwan Co., Ltd. KSS KYB Steering Spain, S.A. systems and vibration control dampers, electronic applications KST KYB Steering (Thailand) Co., Ltd. KAMS KYB Advanced Manufacturing Spain, S.A.U. KYBT KYB (Thailand) Co.,Ltd. KMCZ KYB Manufacturing Czech s.r.o. KHMI PT.KYB Hydraulics Manufacturing Indonesia KCME KYB CHITA Manufacturing Europe, s.r.o. Net sales by business segment in scal 2016 (Consolidated) Net Sales by geographic region in scal 2016 (Consolidated)

Special-purpose vehicle Others History business and others 13.3% 1919 Founded Kayaba Research Center 1999 Formulated the Corporate Guiding Principles 7.9% Southeast Asia 1927 Established Kayaba Seisakusho 2001 All KYB plants acquired ISO 14001 certi cation 7.0% 1935 Established Kayaba Manufacturing Co., Ltd. 2005 Formulated new management principals and management vision HC Operations Adopted “KYB” as a shared corporate name China Incorporated Kayaba Industry Co., Ltd. AC Operations Japan 1948 Kayaba Seisakusho around the time of its founding 27.1% 355.3 355.3 2008 Held company’s rst robot contest 7.0% 1959 Company stock listed on the Tokyo Stock Exchange billion yen 65.0% billion yen 46.5% ◀Interior of anechoic chamber United States at the Electronics 1981 Uni ed production system under KPS name Technology Center

11.4% 1985 Changed trade name to Kayaba Industry Co.,Ltd. Test course on the grounds of the Developmental Europe 1992 Set up the Environment and Safety Committee Experiment Center▶ 14.8% 1993 Held rst company-wide sports and culture interactive event 2011 Established Developmental Experiment Center,started operating test course 1998 All KYB plants acquired ISO 9001 certi cation 2015 Changed trade name to KYB Corporation * For details on sales gures and applicable range, please refer to our nancial reports. Major Products

6 Environmental and Social Activity Report 2017 2000

Net sales (billion yen) Number of employees (persons)

Environmental and Social Activity Report 2017 7 KYB Here and There

KYB products support different types of monozukuri. They help with the everyday life of the people and provide safety and comfort. Listed below are the KYB products used in various applications.

1 Automobiles 14 Aircraft Components

Whether it be for a comfortable drive with KYB provides a wide range of aircraft family or a motor sports scene with severe components meeting the high reliability conditions, KYB automotive components seek standards demanded by the aerospace industry, including components for steering, a drivability level satisfactory for everyone. landing, and hydraulic and pneumatic systems.

2 Motorcycles 13 Sports, Environment, and Welfare

KYB strives for the highest level of driving stability and great driving performance with its motorcycle components by using KYB core technologies are used to develop race-proven technology built for extreme sports, environment, and welfare products. speed and stability.

3 Railroad Equipment 12 Agricultural Machinery

KYB railroad equipment works to buffer rolls from air pressure when cornering, KYB agricultural machinery components passing oncoming trains, or entering a save space and energy for more efcient tunnel to achieve appropriate comfort farming. levels at high speed travel.

4 Construction Machinery 5 Industrial Machinery 6 Industrial Vehicles 7 Special-Purpose Vehicles 8 Marine Vessels 9 Building and Stage Equipment 10 Seismic Isolation Dampers 11 Testers

Base isolation and seismic dampers utilizing KYB industrial machinery components, KYB demonstrates its hydraulic technology KYB hydraulic and tension control KYB proprietary hydraulic technology hold the KYB special-purpose vehicles offer support including opening/closing devices for trucks, on forklifts and other industrial vehicles to technologies add comfort to transport, KYB technology provides stage performance top share of the Japanese domestic market. Our tester products are used in simulators KYB components are widely used in for comfort in all living environments. KYB are used to improve the environments of the provide the powerful support for improved supply, rescue and other work at sea for spaces with rigging, acoustic re ectors, and In the spirit of extensive market-oriented to verify the durability and performance of construction machinery at the construction concrete mixer trucks hold the highest production based on collaboration with our plant, ofce, and home. operational efciency. submarine explorers and mother ships. other support equipment. parts and components. sites under severe conditions. market share in Japan. customers, KYB will protect safety.

8 Environmental and Social Activity Report 2017 KYB Here and There

KYB products support different types of monozukuri. They help with the everyday life of the people and provide safety and comfort. Listed below are the KYB products used in various applications.

1 Automobiles 14 Aircraft Components

2 Motorcycles 13 Sports, Environment, and Welfare

3 Railroad Equipment 12 Agricultural Machinery

4 Construction Machinery 5 Industrial Machinery 6 Industrial Vehicles 7 Special-Purpose Vehicles 8 Marine Vessels 9 Building and Stage Equipment 10 Seismic Isolation Dampers 11 Testers

Environmental and Social Activity Report 2017 9 Highlight 02 Product development 2016 Action Highlights Conventional model Tandem type New model We combine our core competence in vibration control technology and power control technology Hydraulic piston pump with systems technology and electronic technology to respond to our customers’ wide-ranging 1C/B type needs in a variety of different elds. The highlights in this edition will introduce products developed with for small excavators (high performance) Performance consideration for safety and the environment, programs for global human resource development, and more. Conventional model

adopted for Toyota’s Lexus LC, the company’s new-generation platform for FR characteristics of comfort and steering stability. Compared with current models, which improves the workability of the excavators while saving

vehicles, followed by Prius, which rst introduced the TNGA (Toyota New Global adjustable damping shock absorbers, this product achieves much greater energy. Hydraulic piston pump for compact, 6-9 ton hydraulic excavators *C/B: cylinder block Architecture) platform. For this shock absorber, a new proportional solenoid responsiveness when changing the damping force and is capable of controlling

valve has been adopted for use in the main mechanism where damping force is damping force characteristics from softer to harder modes in a continuous,

adjustable, which makes it possible to change the damping force using electric smooth manner. Moreover, this shock absorber instantly generates the required

signals emitted from the ECU (engine control unit, a microcomputer that controls damping force in response to input from the road surface, thus providing comfort Highlight 03 Product development

total operation of engine) installed in the vehicle. Shock absorbers are mounted and high steering stability in any situation. We will continue to develop products that provide comfort with the joy of driving to meet customer expectations. T-S oil damper

After the Great East Japan Earthquake, the conventional expectations of the areas that would be affected by huge earthquakes in the Nankai Trough off the Paci c coast has been reviewed; now, the predictions are that the ground motion generated by such earthquakes would be much longer than previously expected for the conventional building design processes. Once such earthquakes occur, they can cause excessive deformation of the base-isolated oor,* which may lead to collisions with surrounding retaining walls* or damage to the seismic Base-isolated oor isolator. A solution to this problem is to suppress the deformation of the Damper base-isolated oor by increasing the resistance of the damper. However, this method is problematic in that it blocks movement of the base-isolated oor Installation of damper in building

during moderate earthquakes, which are the most typical type of earthquake, base-isolated oor. and degrades the seismic isolation effect. To address this issue, we developed a This prevents the collision of retaining walls, thus ensuring the safety of damper that satis es the following two conditions in collaboration with Taisei people and property in the building.

Corporation. *Base-isolated oor: Support members, such as seismic isolation rubber, and damping members, 1) Demonstrating high seismic-isolation performance with appropriate damping such as oil dampers, are installed in this oor. This oor is mainly located on force in the event of moderate and small earthquakes. the rst oor of the basement. *Retaining walls: The side walls in the base-isolated oor. When viewed from the sides, the 2) Increasing the damping force in a huge earthquake or earthquake with Adjustable damping with a solenoid valve Lexus LC500h base-isolated oor has a concave shape, which is formed by these side walls. unexpectedly long-period ground motion to suppress deformation of the

10 Environmental and Social Activity Report 2017 Highlight 02 Product development 2016 Action Highlights Conventional model Tandem type New model We combine our core competence in vibration control technology and power control technology Hydraulic piston pump with systems technology and electronic technology to respond to our customers’ wide-ranging 1C/B type needs in a variety of different elds. The highlights in this edition will introduce products developed with for small excavators (high performance) Performance consideration for safety and the environment, programs for global human resource development, and more. Conventional model

We developed a new hydraulic piston pump for compact, 6-9 ton 1C/B type hydraulic excavators. With an additional tandem pump for the 1 C/B* as Less than 6 ton 6–9 ton 10 ton or more the basic pump structure, the pump length has been shortened for this excavators class Highlight 01 Product development high-performance piston pump intended for compact hydraulic excavators. Equipped with a load-sensing control function to provide ow control, this product allows for ow control irrespective of the workload. In addition, Adjustable damping with a solenoid valve the variable gain function added to load-sensing control makes it possible to maintain work speed even when the operator is saving energy by on Lexus LC reducing engine speed, thus realizing energy savings and superior usability at the same time. We developed a special rotary part to improve Our adjustable damping shock absorber with a proportional solenoid has been to absorb vibrations from the frame and largely contribute to improving the basic the energy ef ciency of the pump by about 4% compared to conventional adopted for Toyota’s Lexus LC, the company’s new-generation platform for FR characteristics of comfort and steering stability. Compared with current models, which improves the workability of the excavators while saving vehicles, followed by Prius, which rst introduced the TNGA (Toyota New Global adjustable damping shock absorbers, this product achieves much greater energy. Hydraulic piston pump for compact, 6-9 ton hydraulic excavators *C/B: cylinder block Architecture) platform. For this shock absorber, a new proportional solenoid responsiveness when changing the damping force and is capable of controlling valve has been adopted for use in the main mechanism where damping force is damping force characteristics from softer to harder modes in a continuous, adjustable, which makes it possible to change the damping force using electric smooth manner. Moreover, this shock absorber instantly generates the required signals emitted from the ECU (engine control unit, a microcomputer that controls damping force in response to input from the road surface, thus providing comfort Highlight 03 Product development total operation of engine) installed in the vehicle. Shock absorbers are mounted and high steering stability in any situation. We will continue to develop products that provide comfort with the joy of driving to meet customer expectations. T-S oil damper

Environmental and Social Activity Report 2017 11 Highlight 04 Product development Highlight 05 Human resource development Development of a large concrete mixer truck for India Enhancing opportunities for women

MR8040X As part of our efforts as a company where human resources can achieve In scal 2016, we sponsored career training for women to change the their full potential to continuously create new value and competitiveness, awareness of women employees we also sponsored training for managers we promote active participation by women in order to create a more of women employees to change the awareness of managers. comfortable work environment.

Four pillars to achieve this objective are as follows:

❶Capacity development and training to change awareness ❷Development of work environments more comfortable for everyone ❸Support for employees who take childcare leave ❹Support for various ways of working

Career training for women

We convened the childcare exchange meeting* to reect the voices of more women employees, and we asked each of the KYB’s business sites and domestic group companies to choose a woman representative. The representatives chosen from each site formed a committee to discuss ways to enhance opportunities for women (Harmony Project) and to implement various *Childcare exchange meeting: This is an event to address measures to achieve the goals. We will continue to encourage diversity through the concerns of employees during childcare leave through the introduction of a work-at-home system, promotion of work-life balance, and MR8040X communication with senior employees who have children. an awareness survey for improvement of the work environment. Childcare exchange meeting In response to the growing demand for large drums in the Indian method where the power is directly transferred to the drum via the market, KCPL developed a concrete mixer truck (hereafter mixer truck) P.T.O (power takeoff, a device that takes power from the engine) with an 8 m3 load capacity. The mixer truck can load and transport a instead of the sub-engine drive method. This eliminated the need for larger volume of Ready-Mixed concrete compared to the mixer truck the sub-engine and reduced the product weight by about 500 kg. With with a 6 m3 load capacity, which had already been released since the increased drum size and reduced weight, this mixer truck reduces October 2013. While the conventional mixer truck with a 6 m3 load the transfer frequency, transport period, and fuel cost. We will capacity uses a sub-engine mounted on the equipment side to drive continue to develop products and environmentally friendly mixer the mixer, in addition to the engine installed on the chassis side to trucks to meet customer needs. drive the drum, the newly developed MR8040X introduced a new

The rst meeting of the Committee for enhancement of opportunities for women

VOICE Voices from the participants

“Instead of just taking super cial “I would like to reect the opinions measures, I would like to think about of many employees in our projects what is needed to foster enthusiasm to make our workplace more among employees.” comfortable.”

Miho Shimada Hiromi Sanpei CAE Promotion Sagami Branch Manager Human Resources (Sagami resident)

12 Environmental and Social Activity Report 2017 Highlight 04 Product development Highlight 05 Human resource development Development of a large concrete mixer truck for India Enhancing opportunities for women

Four pillars to achieve this objective are as follows:

Career training for women

The rst meeting of the Committee for enhancement of opportunities for women

VOICE Voices from the participants

Miho Shimada Hiromi Sanpei CAE Promotion Sagami Branch Manager Human Resources (Sagami resident)

Environmental and Social Activity Report 2017 13 Environmental Report Environmental Management

Basic environmental policy

Slogan Mid-term policy Protect the Green Earth and Mid-term policy regarding the environment and safety Create Products Gentle to the Environment We have been formulating Phase 2 of our mid-term policy since scal year 2014. Basic Environmental Policies We have started safety activities. The KYB Group creates products gentle to both people and the earth. We are dedicated to the promotion of environmental activities as an important tool for evaluating management. Environmental/Safety Mid-term Policy (2014 to 2016) Abstract below 1. Coordinates and builds up productive and corporate activities based on the recycling to reduce impacts on the environment. 1. Creation of factories aiming to minimize the energy consumption 2. Strive to ensure long-term and sustainable operations throughout the and waste entire KYB Group. Reduce energy consumption per unit by 1% per year relative to 2013 levels, 3. Work to promote harmony with society and contribute to the global and reduce amounts of industrial waste per unit by 3% per year relative to community as a good corporate citizen. 2013 levels. 4. Clarify every employee’s role so that all employees can participate 2. Creation and expansion of industrial accident free production bases fully. The employees’ awareness about the safety will be improved and critical hazards eliminated. Environment & Safety Management system The “Environment & Safety Committee” was organized with direc- As of scal year 2017, the mid-term policy phase 3 will be developed, and tors responsible for environment & safety as leaders to harmonize our we have started environment and safety activities based on the new intentions regarding environment and safety related approaches. mid-term policy formulated under the keywords: compliance with the KYB has implemented the system shown below. rules, speed, and challenge.

KYB’s Environment Management System Summary of the Environmental/Safety Mid-term Policy President (2017 to 2019) Executive Of cer for 1. Creation of plants aiming to minimize energy consumption and Environment & Safety Respective business units waste Environment & Safety Committee Plant General Manager Environment development for partial supply of energy Chairman:Executive Of cer Promotion of measures through energy visualization for Environment & Safety Promotion of waste volume reduction and recycling Overall Safety Supervisor Environment Supervisory Of cer Subcommittees 2. Creation and expansion of industrial and re accident-free produc- Environment Preservation Safety and Health Committee Environment Supervisory Committee tion bases Subcommittee Energy-saving Plant Committee Subcommittees Subcommittees Risk assessment and promotion of measures for industrial accidents Safety and Health Subcommittee Fire accident-free

Message from Director in Charge

Aiming to be a corporation that can contribute to achieving a sustainable society

We detected residual contamination caused by a previous leak on the site of our plant at a level that exceeded environment quality standards. We sincerely apologize to our customers, neighbors, and concerned parties for any concern and inconvenience caused by this inci- dent. As a result of our investigation, we found no discharge off the site of the plant. However, any delay in reporting to the local govern- ment is a problem of great signi cance, and we intend to ensure compliance with the agreements and environmental laws and regulations and will continue to clean up and monitor contaminants. Our goals were not achieved for energy reduction and industrial waste reduction through the activities in connection with monozukuri. In scal year 2017, we will enhance energy visualization and waste volume reduction and recycling based on the reection in scal year 2016 and will promote further loss elicitation and corrective actions. In conclusion, I would like to express my gratitude to you for your interest in this report. We are committed to further expanding and Kazuhiro Ogata improving the content, and hope to receive your continuing support and guidance in our efforts. Managing Executive Of cer

14 Environmental and Social Activity Report 2017 Environmental Environmental Initiatives to Reduce Report Management Environmental Burden Social Report Management Report 15 ------in the scal year of 2017 Overview of major approaches Global warming prevention or other Replacement to LED, LVD, high-ef ciency lighting and reductions the and plants in consumption air in air conditioning load. reduction material Waste turning sludge and white gasoline into andsludge whiteturning gasoline valuable products. Paint gas volume reduction through biological treatment, introduction and systems, treatment of waste Environmental and Social Activity Report 2017 PCB waste removed from KSM P31 page Publication Publication : Goal not attained × × × × × ○ ○ × × ○ Evaluation : Goal attained × ○ Response to PCB Response disposal posal contract with a company specializing detoxi cation in processes andstarted disposal since scal year 2012. we So have far, completed the disposal of transformers stored at KYB-YS Co., Ltd., its Casting Cen andter, the KSM Mie Plant. proceed will We with disposal under the plan for each scal year. Transformers and other electrical equipment containing PCBs are stored securely at each business establishment. concluded We a dis sources), ashpoint, and ignition temperature, which are the basic fac tors explosion in and re phenomena. Chemical substances handled by the plants include invisible gaseous substances and those with a ash point below room temperature. strive We to provide useful information to those who handle chemical substances so that they understand through risk assessments the importance of eliminating ignition sourc es to prevent explosions and res caused by chemical substances. 504 t 4.7% 90.1% 3,469 t 17,931 t 96,546 t-CO Results of 2016 0.71 kl/million yen 28.5 kg/million yen 2.09 kg/million yen 251.8 kg/million yen ------or less 519 t or519 less 3.5% or less 3,393 t or less Target values Target 18,356 t or less 90.6% or higher 90,823 t-CO 0.64 kl/million yen or less 2.95 kg/million yen or less 28.36 kg/million yen or less 243.08 kg/million yen or less basic unit Recycle rate Metal scraps Metal emission volume Zero emission General waste General Industrial waste CO Metal waste per unit Energy volume usage General waste per unit Industrial waste per unit Theme - emissions and energy consumption are calculated using methods determined by KYB. warming We will continue will We with activities that enable us to provide prod Risk assessment of chemical substances Support for environmental controls on products For energy, crude oil equivalent is calculated for electricity and fuel and the totalCO value is displayed as total energy consumption. recycling rate recycling Energy saving Activity results of 2016 Improvement of reImprovement of Reduction of waste Prevention global of Chemical substanceChemical management Environmental conservation objectives source recovery and AnEnvironment Management Activities Plan was made at each production site according to corporate environmental policies for dif ferent activities aiming to achieve the goals, but we failed to achieve the goals compared to the benchmarks of scal year 2013 because of the start of operations ofthe Developmental Experiment Center, contaminant discharge, and other factors. We will promote furtherreductions in energy consumption, productivity improvement, andrecycling in scal year 2017. ical substances subject to the regulations after conducting an investi gation of the chemical substances contained our in products to accumu late the data. can We use this database to provide a rapid response to whether or not prohibited and restricted substances are used at the request of our customers and to respond to inquiries about highly con cerned substances additionally registered to prohibited and restricted substances since the implementation of the REACH Regulations. Forprotection of theenvironment, the REACHRegulations, other ELV and RoHS directives, and various laws and regulations are established under which stricter regulations are implemented. In order to address the stricter REACH and other regulations, we built a database of chem In scal year we 2015, assessed the health risks of chemical substances at of the all production sites Japan. in In scal year 2016, we assessed the explosion and re risk from chemical substances at the Gifu South Plant and Gifu East Plant. For the assessment, we submitted an expla nationdepartments toall thathandle chemicalsubstances about the threeelements for combustion (i.e., combustibles, oxygen, and ignition (Note) Basic units are calculated on the basis of marginal pro t. ● ucts that conform to the needs of our customers and of the market. Environmental Report Initiatives to Reduce Environmental Burden

Activities at plants

Alteration of the reduction neutralization treatment to Power regarding the signi cance of saving energy and the exhibited unit. In an aboveground and automated process addition, the presentation of an energy saving activity report was given by the At the Gifu North Plant, the reduction neutralization treatment* is conducted energy saving subcommittee of KYB Gifu South Area, and about 100 employ- for the hexavalent chromium in the waste uid from the aged plating uid re- ees recognized the importance of energy-saving activities. generation unit and the plating water washing unit in the wastewater treatment facility. The old reduction neutralization treatment required manual Reduction of CO Emissions Achieved by the Heat batch processing in the underground pit. Recently, the equipment has been Shield Coating on the Roof of Building No. 1 changed to an aboveground unit and auto- The Kumagaya Plant installed a heat shield coating on the roof of building No. mated after installation of a new reduction 1 in July 2016. The reduction of CO emissions is mandatory in Saitama Pre- neutralization unit. As well as providing a fecture, which operates a carbon emission trading program for emitted CO preventive measure for underground con- gas. In addition, the number of extremely hot days in summer averages 26 tamination, the new unit reduced consump- days in the most recent ve years in Kumagaya City of Saitama Prefecture, tion of chemical agents by 12% and reduced which has a negative inuence on the working environment in the plant. After man-hours by 65% for the reduction neutral- installation of the heat shield coating, the air-conditioning load was de- ization process. creased and resulted in approximately a 7% per year reduction in CO emis- * Reduction neutralization process for hexavalent chromium: sions. In addition, the indoor temperature was decreased by 2 degrees C from Installed Treatment Unit Detoxifying treatment of hexavalent chromium including trivalent chromium the average per year. Actually, the employees felt the decrease in the indoor temperature. Because the Kumagaya Energy Saving Exhibition Plant had concerns about roof leaks (joint event with Chubu Electric Power Co., Inc.) because of the decrepit state of the At the Gifu South Plant on Septem- buildings, the heat shield coating is ber 7, 2016, the Energy Saving Exhi- expected to prevent leaks as well. bition, a joint event with Chubu Elec- Roof after Implementation of Heat Shield Coating tric Power Co., Inc., was held with the goal of enhancing the awareness Plant Air and Noise Abatement Measures of energy saving by the worksites. TAC (USA) Chubu Electric Power is deploying a Beginning Brie ng As one of the work environment improvement activities, an investigation of solution service that provides advice to companies in the region. Chubu Elec- the noise levels was conducted at 26 points in the plant, and noise control tric Power advises on energy saving activities based on the energy technolo- measures were implemented for cutting equipment and the material barrel gies cultivated through power supplying businesses. The exhibition was one polisher, which exceeded the criteria. Low noise air blow nozzles were in- of those services in which a demonstration machine (comparison of power stalled for the cutting equipment, and soundproof sheets were attached to consumption between LED lights and mercury lamps, air demonstration units, the material barrel polisher. These improvements reduced noise by 14% to etc.) owned by the Solution Laboratory (SOLAB) of Chubu Electric Power was 23%, and adoption of low noise air blow nozzles reduced air consumption by brought to the Gifu South Plant demonstrated. Furthermore, as the opening to a maximum of 80% per nozzle. A lateral spread will be continuously promoted the Energy Saving Exhibition, an explanation was made by Chubu Electric to other processing areas for improvement of the work environment.

A view of the Energy Saving Exhibition A view of the Energy Saving Exhibition Low Noise Air Nozzles Material Barrel Polisher with Soundproof Sheets

16 Environmental and Social Activity Report 2017 Environmental Environmental Initiatives to Reduce Report Management Environmental Burden Social Report Management Report 17

- - - - Powder Metal Ferrite Highest Priority (400ºC to 450ºC) (standby energy) occurs (Iron) Zinc Waste (Aluminum) After Implementation Ground Waste Industrial Waste Chromium Waste Buff Polishing Dust Thermal Cracking Extract metals with thermal cracking Powder Environmental and Social Activity Report 2017 Metal Ferrite Amorphous Transformers Secondary Priority emissions required for industrial waste treat waste industrial for required emissions . For. improvement of the environment, ground sludge (1200ºC to 1500ºC) Ash Emission CO Industrial Waste Before Implementation Incineration KMSB (Malaysia) Improvement of Environment by Reduced Industrial Wastes Introduction of Amorphous Transformer ders of ground sludge as buf ng waste could be reused. This achieved reductiona of 40%CO in ment. The environment friendly activities continue will a proactive in manner the in future. was dewatered to cut down waste emissions. Furthermore, treatment was changed from incineration to thermal cracking, and the metal pow formers atthe Gifu North Plant. regardless of whether a load present is or absent. The "no-load loss" has been reduced by approximately 40% by the introduction of amorphous trans A large part of industrial waste by KMSB was generated from grinding, coating, and plating. The burning treatment emittedsubstantial amountsof CO The transformers work 24/7 without a shutdown and continuously lose elec tricity little by little. Even a tiny loss accumulates and results an in enormous loss of energy. This loss classi ed is as load loss caused bythe loading of the transformer while electricity used; is no-load loss - at the ̶ Bldg. A, Bldg. B, and Bldg. C ̶ Primary Storage of White Gasoline Heater/Cooler for Air Conditioner Replacement to Gas Burning Absorption Type Water Reuse of Waste White Gasoline There are three of ce buildings For the trend requiring reduced emissions of waste uid, industrial waste, the recycling of an average of 4.3 tons per month of waste white gasoline is promotedas valuable that had been treated as industrial waste. Industrial waste and treatment costs have been reduced by the acceptance of thermal recycling as fuel for boilers by Joumyaku Sangyo Co., Ltd. Gifu North Plant. An absorption type water heater and cooler with a "burning heavy heat oil" source had been being used for "Bldg. in air A" conditioning from the time of construction but the 1991, in frequent stoppage and degraded conditioning air ef ciency became noticeable with the aging of the equipment. Using the replacement of the equip ment as an opportunity, the heat source was changed from "heavy oil burning" to "gas burning" to save energy. The stability of conditioner air operation advantageous is to improve the work environment. Gifu North Plant Bldg. A: Gas Burning Absorption Type Water Heater and Cooler for Heater Water Gifu North Plant Bldg. A: Gas Burning Absorption Type Air Conditioning Social Report Side by side with the customer

Activities for customer satisfaction improvement

Basic quality policy What KYB Aims to Be: Quality problem prevention cycle

At KYB, we believe that good quality is our company's life, and we therefore Development and design make every effort to provide skilled manufacturing and services of the qual- Create good blueprints Realization of Improvement of products that satisfy If you follow the ity that will satisfy our customers and society. We do this by a variety of robustness design requirements blueprint, the required activities for quality improvement, including actively promoting the sharing functions are guaranteed. of quality information and faster information delivery within the group. Production Manufacturingand technology inspection Create good conditions Maintenance, management Quality Assurance System If you follow the and improvement established processing If you observe work standards We have built a quality assurance system that complies with the ISO 9001 conditions, quality per based on “good blueprints” and the blueprints is “good conditions”, only good products will be made. standard, which places emphasis on the quality of work processes as well as guaranteed. quality of products and quality of services, and we have this system in opera- Establish good conditions for maintenance and management tion. We also strive on an everyday basis to make improvements in those aspects of quality. Kickoff of Quality Innovation Quality at the development design stage, which includes the develop- For the promotion of manufacturing in favor of the customer, quality innovation ment of manufacturing methods and processes for producing our products, activities have started. In the beginning, a kickoff ceremony was held with the are determining factors in the market quality of our products. Furthermore, attendance of plant managers and hub directors of the KYB Group to ensure the degree of completeness of production shop oor work procedures and achievement of the global goal on total defect loss. The secure achievement other such rules, together with the level of perfection in operation, will con- of the quality goals was considered dif cult with conventional efforts. Conse- tribute to a reduction in process defects and other such quality losses that quently, the promotion of full occur in skilled manufacturing. participation by everyone and At KYB, we implement what is called a three-step evaluation process concentrated action for im- for methods of developing and mass producing products, technologies, man- provement under strong lead- ufacturing methods, and so on. We make every effort for higher quality ership was af rmed to recover throughout the product life cycle, from the product planning stage to improve- unachieved goals. Explanation of Objectives by Vice President Komiya ment of defects and change management after mass production and shipment. At our production bases, we take a variety of quality improvement The Activities of Full-Time Improvement Team measures under the leadership of the base managers and plant managers, After identifying the four worst overseas hubs for defective quality, sup- and we are working to promote the unerring operation of our three-step eval- port for improvement to reduce defective quality problems and education uation system. of personnel in improvement methods for an independent hub were implemented. The fundamental process is to prevent the outow of defects Development of products and technology through a 3-step to the customer and the intensi cation of quality checks (lineup of inspec- evaluation process and the Declaration of Quality and Safety tion tools and instruction of inspection methods). As part of the series of training sessions for an independent hub, an investigation of the true Step Goal of the 3 steps Quality assurance steps

Proof of possibility causes, veri cation of permanent measures and effects, and the dissem- Prior/Model development Development quality (Description/evaluation of developed quality) DR0 evaluation meeting ination of measures for similar processes are issued as instructions on Proof of mass production Order development Start quality (Actual proof/evaluation of developed quality) the production lines. Fur- DR1 evaluation meeting Proof and serialization of applicability Mass production development/ Mass production quality thermore, the veri cation of Production preparations (Actual proof/evaluation of start evaluation) DR2 evaluation meeting improvement levels of each Mass Declaration of Quality and Safety hub is implemented through production There will be con rmation before the start of regular production that the mass product quality has been built an evaluation of improve- into the design. ment skills.

Study meeting at KAC

18 Environmental and Social Activity Report 2017 Side by side With Business Partners For the Community With Employees Safety and health Environmental Report Social Report with the customer Management Report 19 - - Major Presentation Major Environmental and Social Activity Report 2017 Piston pumps, motors, etc., for hydraulic meat processing machinery Drive recorders, communication terminals for mobile body, etc. etc. devices, semi-active Actuators, Piston pumps, motors, etc., for water machinery processing meat driven pressure absorbersShock absorbersShock absorbersShock etc. brakes, power Wheels/brakes, HTS, various power steering, hydraulic etc.motors, absorbersShock Hydraulic products for compact shovels, etc. absorbersShock etc. pumps, concrete mixers, Concrete absorbersShock Seismic isolation/vibration suppression oil etc.dampers, Exhibition opinions. continue will We to positively participate exhibitions. in ' Plant for Individual Tour Shareholders Information supply to customers The Japan 41st Meat Industry Fair 2016 Automotive Engineering Exposition 2016 Yokohama Inno Trans 2016 FOOMA JAPAN 2016 (2016 International Food Machinery and Technology Exhibition) Moscow Automechanika China Auto Salon Automechanika Frankfurt 2016 2016 Aerospace Exhibition International International China Agricultural Machinery Exhibition Manila Auto Salon bauma China 2016 2016 Shanghai Automechanika bauma CONEXPO INDIA 2016 Tokyo Auto Salon 2017 Exhibition Technology 8thThe Vibration Explanation of the Production Processes holders. continuously will We hold plant tours and make will an effort for deeper understanding of our company. In March 2017, a plantIn March tour for 2017, individual shareholders was held at the Sagami Plant. First, an introduction to our company was provided to shareholders, along with an overview of the Sagami Plant. Then, the shareholders went on a plant tour two in groups to both the factory and the KYB museum. In the factory the tour, shareholders observed the coating process during production, and the in museum, the visitors were shown the history of our company and its products. After the tour, we received valuable opinions through conversations with the share We thinkWe that exhibitions are precious opportunities to directly hear cus tomers (partial) Participated Exhibitions - - Customer General MotorsGeneral Isuzu Motors Limited UMW Toyota Motor Corporation Jatco Ltd. Mitsubishi Fuso Truck and Bus Corporation Hong Leong Yamaha Motor Sdn. Bhd. Hitachi Construction Hitachi Machinery Co., Ltd. Jatco Guangzhou Ltd. Yamaha Motor Yamaha Co., Ltd. *, and reduce*, con and 2 Description Zero complaints for months 12 Achievement of goals for quality and delivery CO of Reduction Acquired full scores for quality and delivery Contributed to the development of high ef ciency vane pumps Excellence in quality, cost, delivery, and development was acclaimed Contributed to quality, delivery and cooperation for cost Sales expansion and reduced commended were costs problems no of Achievement for quality and delivery industrial waste emissions Contributed to supply in India Award Best Performance Award Excellent Supplier Award Supplier Authorization Global Quality Award Supplier Quality Award Environmental Convention Supplier Award Global Development Award Global Contribution Contribution Global Award Excellent Supplier Award and safety where reports are made on the statuses up to yesterday and mutually con rmed. Continuous 3 Years Supplier Award List KST (Thailand): Winning of Supplier Award for KYB KYB KYB KYB Hub KMS KIMZ KMSB KMSB KMSB Kanayama Awarding Ceremony Awarding quality, A short meeting held by concerned people at the start of work regarding production, *Asa-Ichi-Kai: tation of the 5S and safety activities. The diligent, continued efforts to reduce in-process defects, improve the skills of workersthrough cross-sectional team activities, such as Asa-Ichi-Kai Awardedthe honorary award from Isuzu Motors Ltd.for continuous full scores quality in and delivery for the three scal years of 2013–2015. KST delivers pumps for power steering SUVs in and pickup trucks to Isuzu Motors Ltd. Thework environment has improved afterimplemen tamination have successfully led to this award. With Business Partners

Establishment of partnership

Basic policy for procurement ing counties in Africa, are de ned as conict minerals. We have been KYB is making an effort to take the corporate social responsibility (CSR) required to con rm that purchasing or using the minerals extracted there and continue to be a company relied upon by the society. Suppliers are will not fund armed conicts or contribute to the infringement of human important partners for us to continuously develop through craftsmanship rights in the conict area. and help realize a wealthy society. Our basic policy for procurement is de- The KYB group companies is well aware of the CSR perspective and of scribed below: For detail, see our website the import of nancial regulatory reforms (the Dodd-Frank Act) in the United http://www.kyb.co.jp/company/csr.html States. We are acting on that basis to create our own corporate guidelines, and we are collaborating with our customers and suppliers on measures to ●Activity results of 2015 prevent the use of con ict minerals that have been extracted illegally. ❶ Procurement activities aiming at the ❻ Timely delivery coexistence and mutual prosperity of ❼ Protection of natural environment KYB and our suppliers ❽ Construction of global procurement Survey of status of business continuity plan (BCP) activities ❷ Legal compliance system In preparation for three interlocked earthquakes (Tokai-Tonankai-Nankai) and ❸ Quality First ❾ Risk management ❹ Safety and health, human rights and 10 Classi ed information management because of the growing concern over such natural disasters, an explanation labor 11 Prevention of corrosion was provided for BCP action during the procurement policy brie ng. Further- Continuous cost reduction activities ❺ more, a seven category [(1) Actions for anticipated risks, (2) Securing the personal safety and emergency evacuation, (3) Disaster task force, (4) Safety Fiscal Year 2016 Procurement Policy Brie ng con rmation, (5) Property damage con rmation, (6) Instruction for returning In scal year 2015, we again held a KYB Procurement Policy Brie ng in home and people who have dif culty returning home, and (7) Re-establish- order to strengthen the collaboration between KYB and our suppliers. ment task force]] 100-item questionnaire was implemented and a self-as- (Shinagawa Intercity Hall: Minato-Ku, Tokyo) On the day of the meeting, sessment was conducted in consideration of the value of understanding the we welcomed suppliers from 214 companies, 4 more companies than in BCP activity statuses of our suppliers. We received reports from 411 compa- the previous scal year, to whom we presented explanations of company nies, which made it possible to grasp the status of the suppliers. We asked for policy, procurement policy, and quality policy. scheduled future activities for those items that had not been implemented We also presented commendations to outstanding suppliers who and asked for grasping the action status of each company. had achieved results from their who have achieved an effect in QCD. After that, we also held a so- Activation of Improvement Activities by Holding cial reception for the suppliers a Supplier QC Circle Convention as an occasion for friendly ex- With the goal of activating improvement activities by suppliers, a con- change. vention of supplier QC circles is held every year. Fiscal year 2016 was the 46th convention. Among the 200 persons from 132 suppliers in atten- Action against conict minerals dance, six companies gave presentations on excellent improvements Four kinds of minerals (tantalum, tungsten, tin and gold) produced in con- among the 33 applicant companies. Hekikai Kouki Co., Ltd., received the ict areas, including the Democratic Republic of Congo and its neighbor- highest award (Gold Award) for the third consecutive year.

VOICE

On winning the Gold Award in the Supplier QC Circle Convention < Hekikai Kouki Co., Ltd. > The theme of the circle where we gave our presentation was "Increased productivity targeting the stability of the casting worksite." The best aspect for us after this activity was that all of our members cooperated in analyzing the current situation and offered ideas in responding to the need for improvement despite the busy production schedule of our company. Through veri cation of effects, we experienced a feeling of accom- Mr. Shin Okada (on left) plishment in achieving zero overtime by signi cantly reducing the time required for manual operations, and simultaneously secured the safety of Mr. Ryouhei Aoyama (on right) operators. Our members understood that a task that once seemed impossible eventually could be solved by brainstorming ideas, which enhanced our daily motivation for improvement. Encouraged by the Gold Award, we will further increase customer satisfaction through quick and vibrant activities by everyone at the workshop.

20 Environmental and Social Activity Report 2017 Side by side With Business Partners For the Community With Employees Safety and health Environmental Report Social Report with the customer Management Report 21 - - - - Environmental and Social Activity Report 2017 Awareness on Cautions and Greeting Campaign for on Cautions and Greeting Campaign for Awareness Commuting Children at the Railway Crossing Exhibition and Sale Event for Supporting the Reconstruction of the Great East Japan Earthquake Accidents Campaign for Prevention of Railroad Crossing For a Bright Future road (Meitetsu) Hiromi Line, and a railway crossing located is front in of themain gate. Many employees travel over this railway crossing, which also serves as a commuting path for the children of the local Dota Ele mentary School. the Campaign to Prevent Railway Crossing Accidents was implemented with the slogan "Let's Eliminate Railway Crossing Accidents" as an early morning greeting campaign of the Gifu South Plant with the cooperation of Nagoya Railroad and the local police on April 7 when the entrance and opening ceremonies of the elementary school were held. The range of contributions was to ensure the safety of KYB employees and the schoolchildren and residents the in region. The Gifu South Plant next is to Kanigawa Station of the Nagoya Rail As part of a series of social contribution activities, KYB cooperates with various organizations every In year. scal year 2016, donations were made Committee to the "Japan for UNICEF", "Keidanren Committee of Nature Conservation", and the "Children's Future Backing up Foundation. Furthermore, a donation was made for the Kumamoto earthquake recon struction efforts, and an exhibition and sales event provided support for the second time for the Great East Japan Earthquake reconstruction ef forts the in domestic devastated areas. continue will We activities to expand the network of support for bright a future. Certi cate of Appreciation from the Cabinet Of ce Awareness Campaign by Nagoya Railroad Employees Employees Railroad Nagoya by Campaign Awareness and by Kani Police Of cers - - - - -

Water-Discharge Exercise Water-Discharge Medical Diagnosing The Ceremony - - -

Medical Organizations Joint Comprehensive Disaster Drill with Neighborhood KMSI (India): Support for a Local Elementary School In 2016, the company promoted an increased awareness of disaster In addition to donations of uorescent lights, wall clocks, and sport

Social Support Activities For the Community For prevention and con rmed again the cooperativestructure place in for a large-scale earthquake throughthe implementation of a program to ob pital every This year. implemented drill is by the Hospital Kani Tono to sim ulate a large-scale earthquake and then conduct an emergency response in cooperation with employees, arearesidents, and local businesses. serveemergency status reporting with the participation of re ghting teams from Gifu South Plant Headquarters, an emergency evacuation drill using an EVAC+CHAIR (stairway evacuation carrier for injured persons), and a water-discharge exercise. The Gifu South Plant holds a joint comprehensive disaster drill with the nearby Japan Community Health care Organization (JCHO) Hos Kani Tono pany,we are responsible for con tributing to the peaceful educa tionof local children school. in We continuewill our contributions to local societies. hood companies and KMSI. ing equipment, company support included commemorative tree planting and medicaldiagnoses. The children performed songs and dances that they had practiced for this and day, a plaque of gratitude was awarded the elementary school. As a com A support for a local elementary school was provided by the neighbor Appreciative Dance Evacuation Drill using an EVAC+CHAIR (stairway evacuation carrier for injured persons) Social Support Activities

Environmental Conservation Organization of Sagamihara Distribute seedlings on World Environment Day The Environmental Conservation Organization of Sagamihara monitors KCPL (India) changes in the environment during all four seasons of every year in order KCPL independently sponsors the Plant-a-thon on World Environment to prevent pollution, protect the richness of nature, and create a com- Day on June 5 of every year. Through this event, we build an awareness fortable environment. As a member of the organization, KYB partici- of the need to protect the environment. On this day, KCPL set up distri- pates in environmental conservation activities. In FY 2016, we partici- bution booths at major locations in Vadodara City, distributed seedlings pated in a survey of river conditions and riverine biota, observations of to citizens free of charge, and provided information on how to grow the the endangered Aster kantoensis and other riverbed plants, and made seedlings as well. We also conduct afforestation activities. In 2016, we contributions to the maintenance of the riverbed. distributed over 10,000 of Neem and Royal Poinciana seedlings.

Utilize recycled compost to owerbed The leftover food discharged from the cafeteria at the Gifu South Plant and the Gifu East Plant was reduced by garbage disposal machines and then mixed with weeds and plant trimmings from the plant campus and recycled at the plant as good quality fertilizer. This recycled compost is used in owerbeds to produce beautiful owers for 200 meters along the Survey of riverine biota Observation of the endangered Aster kantoensis and other riverbed plants street on the eastern side of the Gifu East Plant. The recycled compost reduces the use of chemical fertil- Set up an exhibit booth at the Industrial Fair in Kani 2016 izer and decreases general waste The Industrial Fair in Kani 2016 was held in October 2016. This fair is a emissions by up to approximately comprehensive exhibition by member companies of the Kani Chamber of 4 tons per year. Commerce and Industry with the goal of contributing to the revitalization of the area. The Fair this year was the tenth anniversary and was attend- Flowerbed in front of the plant ed by 17,220 participants, the highest so far. We exhibited items for automobiles, motorcycles, and hydraulic excavator. As a company located VOICE in Kani City, we will continue to cherish the exchange with local people Persimmon growing up in recycled compost in the future. I would like to introduce another example of the application of recycled compost. Are you familiar with the very delicious Diospy- ros kaki Fuyu (Japanese persimmon) originating in Gifu Prefec- ture? In the green area of the Gifu East Plant, we utilize recycled compost to grow Diospyros kaki Fuyu. The persimmon trees have produced abundant fruit on the branches in the fourth year after seedlings were planted upon completion of the plant, belying the truth to the following the proverb “Peach

A view of the exhibit booth I and chestnut seeds take three years to bear fruit, persimmons take eight.” I don’t think it is inferior to its kind in terms of size and luster even if when displayed in the shop, and the sweetness is outstanding. We look forward to delivering Yoshitake Sakai delicious Diospyros kaki Fuyu to customers General Affairs Division ( resident personnel at visiting KYB and the neighborhood. Gifu East Plant) A view of the exhibit booth II A view of the exhibit booth III

22 Environmental and Social Activity Report 2017 Side by side With Business Partners For the Community With Employees Safety and health Environmental Report Social Report with the customer Management Report 23 - - - - ” In FY 2016, we I just want to do what I can to Environmental and Social Activity Report 2017 Practice running basics The Certi cate of Commendation received - - I want to do something for others. ” or “ Join the blood donation supporters Running class opened by KYB track club refersto companies and organiza tions that actively cooperate in stable blood donations in order to secure bloodnecessary for medi treatment. cal Running training on a slope help people nation, blood donors actively gathered at the venue early to wait long in lines to donate blood. According to the blood donation center, the Kum agaya Plant always achieves the desired blood volume even though the overall number of blood donors declining is each When year. asked why they donate blood, the employees say “ TheKumagaya Plant registeredis asa blood donation supporter*,and blood donated is twice a year at the plant. On the day of the blood do Blood donation supporter: This* Our running class has its thirteenth anniversary this and year, we have many participants from pupils grade in 5 of the Kani Municipal Hiromi Elementary School. First, members of the club showed how to run and then taught basic knowledge of running, such as the position of the head, the gaze, the wayto swing the arms, and breathing method. As a result,the children succeeded running in faster and more easily and enjoyedthe experience of running. The running class also won favor able commentsfrom the teachers at the elementary school. Our mem bers had a valuable experience by teaching and feel that their efforts were worth their time. received a Certi cate of Commendation from the Japanese Red Cross Society for continuous donations for the past 30 years. For those who need blood transfusions, we continue will to cooperate by donating blood the in future. - - - - s activities at ’ Opening game Won the championship in the sixth round Won Cup at the World Mexican Football sponsorship Continue to support the Para-alpine ski national team Suzuki in competition gressively to defeat the opponent without losing a point the in second Thehalf. team advanced to the nals of the tournament and managed to enter the Best 4. In addition, during the league season, we held a PR event sponsoredby KYB, which led to improvement the in awarenessof KYB Mexico. in continue will We to support Club Leon the local level. KYB signed a sponsorship agreement withClub Leonof theMexican FootballLeague, rst division. Although the team competed hard the in rst half of the league tournament game, they played even more ag ra-SkiFederation (Speci ed Nonpro t Organization), the KYB Group develops products and provides technical support for the shock absorb ers on the chair-skis for the Japanese team. In the sixth round of the WorldCup Switzerland in December in 2016, Suzuki, Takeshi membera of KYB, won the championship, and other players had great perfor mances. The KYB Group work will together with the athletes to improve theproduct towin the gold medalat the Pyeongchang Paralympic Games 2018, in and we continue will to contribute to sports as part of our social contributions the in future. As a sponsor and supplier of the Para-alpine ski team of the Japan Pa Press conference With Employees

Human resource utilization and work environment improvement in cooperation Human resource development and technical capability improvement

Basic concept Global engineer training We are engaged in priority initiatives for the development of global hu- We have been conducting global engineer training with the aim of up- man resources, construction of a global platform, and promotion of di- grading skilled manufacturing capabilities at our production bases in oth- versity. These are steps we are taking in order to utilize our diverse hu- er countries since 2006. This training is based on lectures in dialogue man resources to best advantage and to maximize Group capabilities. form, experiential exercises, and study tours of advanced plants, and is Speci cally, we are pursuing investigation of themes such as the conducted on-site with actual equipment and materials for periods of two development of professional human resources, sharing values across weeks to one month. After acquiring basic to applied techniques, trainees the whole Group, strengthening the development of human resources for create proposals for improvements to their own bases and are assigned skilled manufacturing, promoting work-life balance, and managing psy- the implementation of those improvements on return to their countries. chological and physical health. These are to further the creation of a In FY 2016, we had 41 staff members from 14 bases in eleven coun- workplace environment that is easy to work in. tries participating in the measurement and material inspection course, centerless grinding course and KPS course. Hold a life-saving training session We intend to continue conducting these training sessions in the When people become injured or sick, if the bystander gives rst aid future, and will promote strengthening of skilled manufacturing capabil- promptly, the lifesaving rate will improve. Each of the Gifu North Plant, ities at our production bases in other countries. South Plant, and East Plant sponsors a lifesaving training session so that we can save as many lives as possible in an emergency. Training dolls and Automated External De brillator (AED) trainers are employed to practice chest compressions, cardiopulmonary resuscitation, and the actual use of the AED. We also con rm the rules of emergency respons- es at each plant, method of guiding ambulances, and the locations of Study tour of the Plant by grinding course Visit Gifu Castle on off day AED installations. Currently, 23 AEDs are installed in the Gifu area, and participants everyone can use it when neces- sary. We will continue to conduct KYB Global Production and Quality Meeting the training sessions so that many The KYB Global Production and Quality Meeting for FY 2016 was held over a people can perform cardiopulmo- three-day period from November 9 to 11. There were 42 participants from 19 nary resuscitation and use AED overseas bases, and case presentations were followed by enthusiastic

with con dence. Lifesaving training session (South Plant) question-and-answer sessions. On the rst day, a KYB global improvement presentation session was held, and 14 topics related to improvements in Collaboration Agreement with Companies to Make production and quality were presented by 13 bases. KST won the top prize Kani City a Comfortable Place to Live in with its presentation Gold Finding Activity (Contamination Reduction Activi- Kani City is working on the Athrill Working in Kani City Project by regis- ty). We are working to share information and issues related to safety, the tering enterprises tackling the review of working styles and realization environment, quality, and production in each production base; improve the of a work-life balance. The city is also concluding an agreement with respective functional levels; and contribute to future development. outstanding companies that serve as models for other enterprises in this respect and carrying out PR activities inside and outside the city to ensure that the city, residents, and enterprises develop together. As a company actively working to realize a work-life balance, we have concluded the above Collaboration Agree- ment with Kani City.

Signing ceremony of the Collaboration Agreement Gifu Kita Plant manager Hatakeyama Group photograph of participants (at Gifu North Plant)

24 Environmental and Social Activity Report 2017 Side by side With Business Partners For the Community With Employees Safety and health Environmental Report Social Report with the customer Management Report 25 - - - - Kenya IwaiKenya Special cleaning tool The regular muddy cleaning work of sludge came to an end! Koki Ishihara ResourcesHuman CenterTraining - ＝ Environmental and Social Activity Report 2017 rod Nylon brush Piston + Came up with a brushing rod Came up with a special cleaning tool Abolishment of regular cleaning of sludge Suspension Manufacturing Department, Gifu North Plant Everyone is exhausted Abolishment of regular cleaning of sludge Dirt We machineWe to a mirror nish for the sliding surface (outer diame Dirt causes defective products. Clean after weekend production We improvedWe the sludge cleaning work of the grinding process, which has been an issue for a long time. ter)of the pistonrod of theshock absorber with grindstones.The sludge generated during the machining process accumulates the in receiving andjig results scratches in and defective products; therefore, after the weekend production, we get dirty cleaning sludge. It was hard and ex hausting work that took time. After repeated trial and error, we devel oped a special cleaning tool tool (a with a brush attached). The tool turned out to be excellent removing in the accumulated sludge during machining. Thus, the regular cleaning of sludge came to an end. This is an example of an improvement where personnel all pooled their knowl edge to solve a problem under the slogan: the Fight to end and never up. give It was my rst time to participate in the National Skills Competition. I made it through the second preliminaryround and managedto participate in the national competition. It was a very valuable experience leading up to the next competition. The result of the nal competition was not satis factory, so I am practicing for the championship in Competition. Skills National 2017 the - - - Yoshimasa Kagiya Yoshimasa ResourcesHuman CenterTraining - - Ishihara in competition Sample parts for challenge task Kagiya in competition - - - - - 0.02 mm uniformly. uniformly. 0.02 mm Businesses Engaged in QC Circle Activities improvement group (small activities) VOICE Participate in the National Skill Competition Commendation of Excellent Enterprises and In addition, the two staff members are currently engaged training, in The Human Resource Center Training Impressions of contestants I learned from the National Skills Competi tion that it is important to develop my own way of doing work. It does not concern supe riority or inferiority ofperson a but only to do whatcanI to the utmost in work. From now on, I will dedicate myself to the company by taking advantage of my character. The Skill Competition brings together youth up to 23 years old tocompete for the title of the Most Skilled Japan. in At its 54th anniver aiming for participation in FY 2017. talization for many years. were We elected as one of eleven companies from nine branches nationwide. On the date of the commendation cere themony, Gifu North Plant manager, Hatakeyama, director charge in of public relations the in Gifu area, received the Certi cate of Commenda tion and a commemorative plaque from the Union of Japanese Scientists and Engineers as the representative of the company. sary contestants this 1318 year, from pro 41 fessions participated the in competition. A secondpreliminary round was set up the in lathe category,which KYB participated be in cause it the is most popular one at the compe tition.high A degree ofaccuracy required is because the tolerances of the ve parts to be machined are set at ± competition the two in contestants places each year to develop the skills of young technicians and upgrade the level of ma chine work the in company. Yoshimasa Kagiya and Koki Ishihara made it to the nal competition FY in 2016. In the Gifu area, we were commended for being an Excellent Enterprise in the QC circle activities (Small Group Improvement Activity). This award is grantedto companies that have contributed signi cantly to regional revi Employee communication

The 15th KYB Corporate Sports and Cultural The 9th KYB Robot Contest Exchange interactive event The 9th Robot Contest was held at the Gifu North Plant on November 12, The 15th Sports and Cultural Exchange event was held in Mie Prefecture 2016. The competition task this time was the ball-toss game. At the sig- where the KSM plant is located. A total of 992 contestants competed in nal to start, the robot takes a bucket containing balls and throws the 11 categories. All the contestants gathered at the site vigorous, enthusi- balls at the target on the opponent’s court competing for total points. astic, and exciting battles in all competitions. Overseas employees were As in 2016, a total of 24 teams competed with 17 teams from Japan (in- leaders in futsal, and the Spanish team achieved victory over the Vietnam cluding group companies) and 7 from overseas. Spectators and partici- team. Participants enjoyed strolling in Koga City, Shiga Prefecture, where pants together totaled around 600 persons, making it a great success the Takako plant is located. Unique regional competitions, such as the this year. KAC (USA) won the championship and recaptured the throne Shigaraki ware experience, were also enjoyed by the participants. for the rst time in three years. The overseas teams monopolized all of Through sports competition and the top three awards, the cultural exchanges, employees of President's Special Award, the KYB Group can deepen their the Technical Award, the Idea understanding and strengthen Award, and the Maximum ties with colleagues. The compe- Score Award. Robot Contest tition has become a valuable an- 2017 will be held at the Saga- nual event. mi Plant. A view of the competition (after the futsal game)

Members of KAC, the winning team

A view of the opening ceremony (Kagami biraki)

■ Date: September 24 (Saturday) to September 25 (Sunday) ■ Venues: Mie Prefecture/Shiga Prefecture (KSM, Takako) ■ Games: Softball, beach volleyball, futsal, bowling, hard tennis,

sea shing, table tennis, golf, dodgeball, strolling, Hyakunin Isshu Participants and Spectators (the Hundred Poems)

VOICE

Recapture the throne for the rst time in three years at the Robot Contest Our Robot Contest Team practiced on our own course with a simple concept and strategy for victory. The nal game with the Indonesian team was an incredible ght. In 2016, four teams competed at the same time, and the audience and the players were very excited. We won three times over ve years. I de nitely want to defend the title in the 2017 contest. Jon Burris KAC team leader

26 Environmental and Social Activity Report 2017 Side by side With Business Partners For the Community With Employees Safety and health Environmental Report Social Report with the customer Management Report 27 -

Frequency rate, Severity rate 1.2 1.0 0.8 0.6 0.4 0.2 0.0 (FY) 2016 Severity rate 2015 2014 Environmental and Social Activity Report 2017 A view of the training session Lost-worktime frequency rate 2013 2012 2011 Number of occupational accidents SAKURA Project KST (Thailand) Severity rate Severity Participate in the Asia Safety and Health Number of occupational accidents, Frequency rate, 0 80 60 40 20 120 100

(Cases) Number of occupational accidents prove the level of activities and expand the activities to the entire plant, thus making a better social contribution the in future. We participatedWe the in Asia Safety and Health Sakura Project organized by the Japan Industrial Safety and Health Associationfor ve days from 2016.Experts November 7–11, explained KYT, Risk Assessment, and OSHMS, which were very easy to understand. The project included workshopsand study tours of plants, which helped us understand the lectures better. Also, on February we arranged 15, for experts to visit the plant and received speci c advicefrom them. Through this training, we were able to clarify the good points of the activities that we have been working on and points that need improvement. try will We to im ■ Number of occupational accidents Hours) x l,000,000 Working ━ Lost-worktime frequency rate = (Number of employees of lost-worktime/Total Hours) x 1,000 Working lost/Total ━ Lost-worktime severity rate= (Workdays Participants from each company (Patto san from KST is in the middle of the second row) - - - - - as our slogan, the all ” A view of the training session Repeated safety education in KMV textbook Cover of the KYB Safety Basics

Safety Priority Takes Over Everything “ Carry out repeated safety education repeated out Carry Aiming for zero industrial accidents In FY 2016 for the various overseasproduction bases, we expand stillWe have much to do before we reach the target of zero, and

Industrial health and safety Industrial health and Occupational safety and health and safety Occupational Safety health and ty education independently, there was a problem that the contents and methods were inconsistent. Therefore, we gathered the safety of cers from throughout the corporation, summarized management methods and the ba sic concepts about safety and risk assessment, and then created the KYB Safety Basicstextbook. Byadopting thistextbook throughout the KYB group, we were able to start systematic safety education at the same level. The target attendants of the training session are employees whose work experience considered is to be the most dangerous span for occupational accidents. expand will We the scope of the target attendants the in future. In the past, we carried out safety education for new employeesand virtual safety education at each plant. However, because each plant provided safe With KYB companies have been working as one on safety activities since scal year 2012. An Environment and Safety Committee has been established as the KYB group organization chaired by the Executive Of cer for Envi we are committed tocontinuing these activities order in to move to ronmentand Safety, and this focusa is for speci c activities carried on at each KYB business establishment by its Safety and Health Committee. edthe measures of risk assessment; stop, wait; call, repeated safety education; and the safety gate as implemented Japan in the previous scal As year. a result, FY in 2016, we were able to reduce the number of occupational injuries by about compared 12% to FY 2015. ward zero industrial accidents the in future. Safety gate installed at Vietnam Plant (KMV) Management Report Corporate Management

Corporate governance

Principles Corporate governance system Our corporation is committed to ful lling our corporate social responsibili- Our corporation is a corporation with a board of auditors in terms of insti- ty as to contribution to society as well as to meeting shareholders’ expec- tutional design as speci ed by the Companies Act. tations by realizing sustainable and stable growth and increasing corpo- Board of Directors rate value, and to that end we pursue a quick and ef cient management The board of directors consists of seven members, including two outside structure, a highly fair and transparent management supervisory function, directors, and makes decisions on critical matters concerning manage- and continuous effort to strengthen and enhance our corporate gover- ment and supervises the execution of the duties of directors in compli- nance by our corporate philosophy and the basic policies given below. ance with laws, regulations, the Articles of Incorporation, the rules of the board of directors, and other internal regulations. The general meet- Basic Policies ings of the board of directors are held once a month, in principle. Board of Executive Of cers 1. Our corporation shall respect the rights of shareholders, and ensure The board of executive of cers discusses important matters concerning the equal and fair treatment of all shareholders. corporate management from a company-wide viewpoint as a prelimi- 2. Our corporation shall take the bene ts of shareholders and other nary deliberative body for projects submitted to the board of directors. stakeholders into consideration and endeavor to appropriately cooperate with those stakeholders. Other Management Committees 3. Our corporation shall not only engage in information disclosure that The Domestic Af liated Company Management Committee and the is in compliance with the relevant laws and regulations, but shall Global Strategy Committee oversee the management practices of the also actively provide important or useful information to stakeholders domestic and overseas af liated companies on a regular basis. There for their well-informed decision making. are other committees to enhance the monitoring system for KYB Group 4. The Board of Directors shall be cognizant of its duciary responsi- management, such as the Operations Review with the President where bility and accountability to shareholders, and shall appropriately the president of the corporation visits plant worksites and follows im- ful ll its roles and responsibilities in order to promote sustainable portant issues related to manufacturing. and stable corporate growth and increase corporate value, pro t- Audit and Supervisory Board ability, and capital ef ciency. 5. Our corporation shall engage in constructive dialogue with share- The audit and supervisory board consists of four regular auditors, two of holders, and make efforts to obtain shareholders’ support regarding whom are outside auditors. Through audits by outside auditors, we ex- the Company’s Business Policies while also incorporating sharehold- pect effective management supervision and conclude that an effective ers’ opinions and concerns in our efforts to improve management. governance system is in place. In addition, one of the outside auditors is registered as an independent director.

Corporate governance structure

Shareholders’ meeting Elect/Dismiss Elect/Dismiss

Board of Directors Audit & Audit Supervisory Board

Representative Director, Board of Other Management President Exective Of cer Executive Of cers

Audit Dept. Audit Audit Responsible head of ce departments, operational headquarters, Group Companies, Accounting Auditor Branches, Representative of ces

28 Environmental and Social Activity Report 2017 Environmental Report Social Report Management Report 29 ------s initiatives for elim the adherence tolaws, ’ Environmental and Social Activity Report 2017 company contracts, company rules rules company contracts, company for the promotion of healthy business not only as “ ” ” , associated with our business activities, further ” , but also as to “ ” the compliance the corporate ethics TOPICS data the company rules, developed the company rules and estab lished the internal committee. We also have the contact desk to respond inquiries from outside of the company. ination of anti-social power or groups.The KYB Group is working on this matter by con rming in writing that our suppliers have no relationship with anti-social power or groups, in case we need to terminate a contract as we know they do. sessions by job titles and sections, including directors. and suggestion box) covering companies all of the KYB Group. Besides,we have exclusive contact points to accept whistleblow ing and consultation in accordance with the WhistleBlower Pro Act. tection and employees, we have developed Corporate Guiding Principle and are focusing on the establishment of legal compliance and corporate ethics. Compliance allyinnine languages, and our purpose is to have our employees deepen their basic understanding of antimonopoly law in Japan, the United States, Canada, the EU countries, China, and so on, and to realize anew the importance of compliance with antimonopoly law. Compliance educationCompliance e-learning by In light of globalization, we are implementing education (e-learning) on antimonopoly law for employees of the KYB Group working in Japan and other countries.We are implementing this program glob 1. As the rule for the execution of business activities 1. by directors We are implementing the compliance education2. through training We have prepared the whistle-blowing system (Instant3. Report We have set the policy of protection 4. of personal information and There has been a high demand5. for company orders and rules activities. We regardWe “ and agreements, etc more,to “ ------by ” C5 8.Sales C4 9.ASSIST R5 R4 Sales settlement Sales C3 con rmation ” 6. Storing 6. Storing R3 7.ASSIST The person in charge checks up if there is any error with item number, delivery time and quantity. Input the order details according to its contents already con rmed Handle using the sales management system The person in charge con rms the production schedule customers by required Handle using the production information control system Con rm the storing contents after the part arrives from supplier Receive the shipment data Theperson in charge accesses the system and records the sales Tally the sales results Description Operation visualization the production schedule acceptance) 4. Con rmation Con rmation 4. of 5. APISS 5. APISS (Order Internal Control Over Financial Reporting R2 C2 details 2. Input2. of the order acceptance) 3. ASSIST 3. ASSIST (Order C1 Order acceptance/orderOrder placement/shipment E-mail/FAX Self-managing by “ R1 the order details 1. Con rmation of Con rmation of the order details Input of the order details Order acceptance system acceptance Order Con rmation of the production schedule production the of Con rmation Production control system control Production Storing con rmation Storing Shipping system Sales Sales system Sales Title Internal control 1 2 3 4 5 6 7 8 9 Customers Production AdministrationIT/KYBS Dept No. KYB has applied Internal Control Over Financial Reporting pursuant to the Financial Instruments and Exchange Act since April 2008, whereby we promotethe schematic expression and evaluation of operations that af fect our nancial statements. Our business procedures and rules are de ned the in company regulations and instructions, and by representing the ow of business operations more in schematic form, we enable their visualization so that operations that were only understood by the people chargein of them could be made understandable to others. This visualiza tion also makes apparent where business risks exist, and we have incor poratedthis as schemea for self-management to determine how well the checking function that supposed is to reduce risk operating. is following the procedure speci ed the in act to secure the reliability of the nancial reports, as well as ensuring appropriate information disclosure. ance. In order to promote them, we consider that it absolutely is essential tofocus on the development of an internal control system and the en hancement of internal controlcapability. For example, we haveresolved the fundamental policy of internal control system at the board of directors accordancein with the Companies Act, and are promoting several mea sures such as the development of risk control system, group management system, internal compliance system, etc. Also under the Financial Instru ments and Exchange Act, we operate the development and the manage ment assessment of “ Corporate governance functions effectively on the premise of ensuring the reliability of nancial reports, increase of work ef ciency and compli Flow chart of work operation (example) Environmental data compilation

Inuence on environment associated with business activities

KYB uses energy, water, chemicals, and other such diverse resources. In order to make ef cient use of limited resources in production, we take steps to

reduce waste, CO2, and other emissions.

INPUT / OUTPUT Production INPUT activities OUTPUT Raw materials (Metal, non-metal) Development / Design Amount of waste 179,679 t 3,506 t Procurement Energy (Reuse, etc.) (Land ll disposal) Electric power Fuel/Gas 19,056 t 748 t 115,106 MWh 19,668 kℓ Production (Crude oil equivalent) Emission into atmosphere Water Distribution CO2 NOx 1,243 km³ • Development of technologies / products 92,709 t-CO2 20 t such as recycling, energy saving and Chemical substances (PRTR law target substances) safety that are environmentally friendly SOx Dust • Promotion of green procurement t t 315 t • Promotion of modal shift 2 0.3

Recycling inside company Recycling outside company Recycling company • Scraps (Effective utilization in the KYB group) • Metal chips • Waste oil • Waste plastic Production process • Grinding powder • Waste thinner • Paper, cardboard, etc • Deteriorated solution of chrome plating • Cleaning of water used in chrome plating process, etc Scraps Related company

State of ISO14001 certi cation acquisition In order to develop our actions for environment preservation systematically, we are carrying out the introduction and the promotion of ISO14001 environmental management system. We will shift to the 2015 edition sequentially in the renewal examination.

●Japan ●Overseas Certification Certification KYB Certi cation registered year Company name Company name Gifu South Plant (Including Gifu East plant, Production registered year registered year 2000.2 Technology R&D Center, Machining Tool Center, KMS) KMT (Taiwan) 2001.6 TVC (Vietnam) 2007.1 Sagami plant (Including the Basic Technology R&D Center, 2000.12 KSS (Spain) 2001.6 KMB (Brazil) 2007.3 the Electronic Engineering Center) KYBSE (Spain) 2001.12 KIMZ (China) 2009.4 Kumagaya Plant 2000.12 KAC (United States) 2002.5 KMCZ (Czech Republic) 2009.8 Gifu North Plant (Including KYB Kanayama) 2001.12 KYBT (Thailand) 2003.7 KLRC (China) 2010.1 Af liated companies in Japan Certi cation registered year KST (Thailand) 2003.8 KWT (China) 2013.11 KSM Mie Plant 2000.12 PT.KYBI (Indonesia) 2004.11 TAC (United States) 2013.2 Takako Industries, Inc. (Shiga Plant) 2003.2 KMSB (Malaysia) 2005.5 KMV (Vietnam) 2013.5 KYB-YS 2004.4 KSMSB (Malaysia) 2005.5 KAMS (Spain) 2015.6 KYB Trondule Co., Ltd. 2008.11

Editorial Policy We compile this report with reference to environmental reporting guidelines so of human resources, and collaboration with local communities. that information regarding our business operations as relating to the environ- We will try to edit our reports to make them easier to understand. There- ment and society can be conveyed to our stakeholders in readily understandable fore, our stakeholders’ candid opinions will be much appreciated. The content of form. this report has been posted on our website, so please take a look. In the 2017 edition of the report, we introduce numerous speci c cases of new environment-friendly technologies and energy-saving programs, utilization http://www.kyb.co.jp/company/csr.html

30 Environmental and Social Activity Report 2017 Environment-related Data

● CO2 emissions ● Energy consumption ● Waste emissions volume ■ Consumption ● Energy consumption basic unit (㎘/million yen) (t-CO2) ■ Emissions ● Basic unit (t-CO2/ million yen) (㎘) ■ General waste ■ Metal scrap ■ Industrial waste 0.689 0.713 (t) 150,000 1.50 70,000 0.652 0.666 0.654 0.70 1.25 1.27 1.25 1.30 1.26 20,000 18,481 18,923 17,931 60,000 0.60 16,318 16,998 120,000 1.20 50,764 50,000 46,046 46,798 48,664 89,994 93,632 95,081 92,709 96,545 43,951 0.50 15,000 90,000 0.90 40,000 0.40 10,000 60,000 0.60 30,000 0.30 20,000 0.20 30,000 0.30 5,000 3,719 3,585 3,729 3,506 3,469 10,000 0.10 505 523 535 539 504 0 0.00 0 0.00 0 2012 2013 2014 2015 2016 (FY) 2012 2013 2014 2015 2016 (FY) 2012 2013 2014 2015 2016 (FY)

● Water usage/ Wastewater ● Energy consumption for transportation

(km³) ■ Water usage (㎘) ■ Amount as crude oil 1,800 3,000 1,509 1,500 1,401 1,383 2,500 2,304 2,290 2,241 1,243 1,251 1,200 2,000 1,756 1,673 900 1,500 600 1,000 300 500 0 0 2012 2013 2014 2015 2016(FY) 2012 2013 2014 2015 2016 (FY)

Environmental preservation cost The amounts of investment and cost were separately calculated with reference to the Environmental Accounting Guidelines, 2005, presented by the Min- istry of Environment. Unit: million yen Cost type Major contents Invested amount Cost ・Atmospheric pollution and water pollution prevention activities (1)-1 Pollution prevention cost ・Maintenance and inspection of pollution prevention facilities 73.6 118.4 ・Analysis and measurement of atmosphere and water quality (1) Cost within business (1)-2 Earth ’s environment ・Energy conversion area 41.0 15.9 preservation cost ・Energy saving activities ・Recycling of plant wastes (1)-3 Resource circulation cost 85.9 202.2 ・Reduction of industrial wastes (2) Upstream/downstream cost 0 0 ・Maintenance and periodic/ renewal screening of ISO14001 (3) Management activity cost 1.1 71.3 ・Surveillance of impacts on environment ・Environment-friendly product development (4) R&D cost ・ Light-weight products and products containing less hazardous 60.0 94.0 chemical substances ・Support of non-pro t environmental protection (5) Social activity cost 0.2 11.4 ・Afforestation and maintenance of scenery surrounding plant (6) Environmental remediation cost 0.0 0.0 ・Internal environmental conservation (7) Other cost 1,143.6 20.0 ・Welfare conservation Total 1,405.4 533.2 Grand total 1,938.6 Categories and de nitions of environmental preservation costs [ Invested amount ] Expense for the purpose of environmental preservation during the target period with effect that continues for a number of terms and cost running for those periods. (Amount acquired during the current term of the depreciable asset) [ Cost ] Cost or loss generated from expenditure of nance/service for the purpose of environmental preservation.

●Period covered ●Time of publication From April 2016 to March 2017 June 2017 (The next report is scheduled to be published in June 2018, with the (A part of our activities and reports outside of the period are also posted.) previous one published in June 2016.)

●Scope ●Referenced guidelines KYB Corporation and the af liated companies inside and outside of Japan are ■This report was drafted and edited using the Ministry of the Environment included. Regarding environmental data, that of KYB Corporation (Sagami plant, “Environmental Reporting Guidelines 2012” Kumagaya Plant, Gifu North plant, Gifu South plant and Gifu East plant) is shown unless otherwise annotated. ●Notes related to future prospects This report includes our plans and prospects as of the issued date, and future prospects based on our business plans and business policies. We evaluate these future prospects based on information obtained when the report is drafted and thus the prospects may differ depending on changes in various conditions. We appreciate your understanding of the statement above.

Environmental and Social Activity Report 2017 31 Environmental and Social Activity Report 2017

www.kyb.co.jp

Contact KYB Corporation Environment & Safety Control Dept.

World Trade Center Bldg. 4-1, Hamamatsu-cho 2-chome Minato-ku, Tokyo 105-6111 Japan TEL.+81-3-3435-6465 FAX.+81-3-3436-6759