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Kumho Tire Sustainability Report 2013/2014 ABOUT THIS REPORT

Purpose of Report This report is intended to introduce the sustainability management achievements of Kumho Tire Co., Ltd. (‘Kumho Tire’ hereafter) for 2013 in fulfilling its economic, social, and environmental responsibilities. It has placed focus on critical issues in which its stakeholders showed keen interest during the year, together with the company’s unique approaches to sustainability management strategies.

Reporting Period This report covers activities held for the year 2013 from January 1 to December 31. Note, however, that it partially touches on earlier periods only when necessary for readers to understand the larger trend. It also introduces some of the company’s activities and achievements in 2014 for the same reason. This is Kumho Tire’s third sustainability report following the first report submitted in 2006 and the second one prepared in September 2013. The company plans to issue its sustainability report every year.

Reporting Scope and Boundaries This report largely addresses the company’s domestic operations in the economic, social, and environmental aspects – including those of the headquarters and various local manufacturing and business operation sites. Please note, however, that the environmental data are limited to the company’s performance in domestic and overseas sites. Whenever the reporting scope/extent for a certain area needs to differ from the principle, a special note follows the relevant description.

Reporting Principles and Assurance Standards The financial information complies with the Korea International Financial Reporting Standards (K-IFRS) The procedures of and contents in this report have been reviewed by an independent external assurance organization, KMAR (Korea Management Association Registration, Inc.), as described in the enclosed Third-Party Assurance Statement.

Major Changes This report highlights the company’s efforts to normalize operations in the economic, environmental, labor, social, and quality aspects while seeking to become a genuinely sustainable enterprise through second takeoff campaigns. Examples include, compared to the previous years, the increased number of labor-management council meetings and proactive measures to prepare for the country’s implementation of carbon emissions trading scheme in 2015.

Report Distribution and Feedback This report is published in Korean and English. Both versions are available on the company website. The English version is registered with the GRI as well. Stakeholders’ feedback on the report will be made by email, surface mail, fax, company website.

Additional Information For additional information or inquiries, please contact us at the following address.

Cover Story G. Production Planning Team , Kumho Tire Kumho Tires' sustainabilityle 658 Eodeung-daero, Gwangsan-gu, Gwangju, Korea management is about infinite continuity and permanence. Envision a tire running on a Mobius Te l +82 - 62 - 940 - 2207 band - it represents constant Fax +82 - 62 - 950 - 4779 movement, boundless possibilities, and competitive edge unique to E-mail [email protected] Kumho CONTENTS

Sustainability Overview 02 Kumho Tire at a Glance 04 Kumho Tire 2013-2014 Highlights 06 Message from the CEO 08 Company Profile 10 Global Network 12 Brand Portfolio 13 Kumho Asiana Value System 14 Kumho Tire Strategies 15 Stakeholder Engagement 16 Materiality Assessment 18 Implementation Tasks for Sustainability Management Strategies

I. Take Action for Value / Sustainable Competitive Advantage 22 Enhancing Research and Technology Competitiveness 24 Boosting Product Competitiveness 25 Reinforcing Operational Competitiveness 26 Sales Turnaround 28 Building Sustainability Management Governance

II. Take Action for People / Harmonious Personnel Management 32 Boosting Personnel Management Efficiency 33 Securing and Fostering Talented Personnel 36 Building Trust-based Labor/Management Relations 38 Improving Employee Welfare Benefits

III. Take Action for Green & Safety / Management that Values Humans and Nature 42 Global Environmental Management 46 Using High-efficiency, Eco-friendly Energy 48 Climate Change Response System 50 Eco-Friendly Product Development and Market Expansion 54 Safety and Health Management

IV. Take Action for Sharing / Operations of Fulfilling Responsibilities 58 Cultivating a Deep Sense of Ethics 60 Supply Chain Management for Competitiveness Enhancement 62 Fulfillment of Social Responsibilities (Social Contributions) 64 Enhancing External CSR Communication

V. Take Action for Customer / Quality for Customer Value Enhancement 68 Proactive Quality Management 70 Upgrading to Advanced Quality 71 Improving Customer Satisfaction 74 Marketing Promotions

APPENDIX 77 Consolidated Financial Statements 78 GRI G4 Index 82 Third Party’s Assurance Statement 84 Major Awards and Memberships in Associations 85 Stakeholder Survey Sustainability Overview

Kumho Tire at a Glance

What impact does Kumho Tire have on society including its supply chain?

Redistribution of Economic Values In pursuit of shared growth, Kumho Tire aims to redistribute all economic values it acquires through its business activities to its value chain - including its supply chain - and surrounding external environment.

Purchase of Raw Materials

KRW 3.6985 trillion 2013 Sales

Manufacturing MIXING Semi-finished BUILDING goods Sustainability Report 2013 / 2014

KRW 2.3292 trillion KRW 163.5 billion Disposal/Recycling Suppliers Creditors Total amount of raw materials and Total amount of interest paid to service contracts TOTAL KRW financial institutions 2.9557 trillion

KRW 56.5 billion KRW 406.5 billion Government & local communities Employees Total amount of taxes and social Total amount of employee wages, contributions (including support for Pink benefits, and education & training Ribbon campaign and the Vietnamese expenses Expats Association)

Sales/Distribution Curing Inspection Sustainability Overview 2013 Jan. 2013 | Participation in the 2013 Tokyo Auto Salon Kumho Tire took part in the 2013 Tokyo Auto Salon, the largest auto parts exhibition in Japan held in Chiba Prefecture. Based on the ‘Eco-Friendly & Premium’ mantra, the company featured diverse products such as Ecsta V700, which applied the Formula technology, ecowing S, and Ecsta LE Sport, captivating many of the visitors to the fair.

Feb. 2013 | OE Tire Supply for BMW Mini GP Kumho Tire supplied its Ecsta V700 for BMW Mini GP as OE tires in 2013. Ecsta V700 is focused on providing optimal grip force to either amateur racers or speed enthusiasts through the application of racing tire technology. We expect Ecsta V700 to run through all corners of the world together with Mini GP, the fastest Mini ever in history. 04

Sept. 2013 | Aug. 2013 | Opening the Kumho Tire R&D Center Waging a Pink Ribbon Campaign Kumho Tire established the Kumho Tire R&D In 2013, Kumho Tire held a Pink Ribbon Center in Yongin in central Korea with highly campaign for the second year in a row. The qualified researchers and cutting-edge systems event featured various programs aimed at and pledged to take off as a ‘Technology raising awareness of breast cancer. The Powerhouse‘. Banking on its geographical company donated the KRW 100 million advantage and highest-level research collected during the campaign to the Korea infrastructure, the center will become the Breast Cancer Foundation. Meanwhile, company’s hi-tech mecca through intensive Kumho Tire participated Pink Fitters Day, a efforts to develop new products and core fundraising event for breast cancer patients in technologies. Australia, for the fourth straight year in 2013.

Kumho Tire 2013

Oct. 2013 | OE Tire Supply for Benz Nov. 2013 | G- and B- Classes Sponsoring KLPGA Golfer Ha Na Jang Kumho Tire supplied OE tires for Mercedes-Benz In 2013, Kumho Tire reinforced its golf marketing by G-Glass and B-Class. G-Class, a premium SUV, sponsoring KPLGA star player Ha Na Jang. A triple will be equipped with Solus KL21; B-Class, a crown holder during the 2013 season, Ha Na Jang will premium compact, will be fitted with Ecsta HM. wear uniforms and carry golf bags with Kumho Tire The Benz cars are expected to be sold logos. She will be offered air tickets for her golf worldwide. Through its enhanced partnership tournaments. In addition, the company will sign an with overseas premium car makers, Kumho Tire official sponsorship contract with KLPGA and hold the is boosting its global competitiveness most Kumho Tire Women’s Open in 2014 as well. effectively.

Aug. 2014 | May 2014 | • Pink Ribbon campaign for three straight years • Launch of promotional event on the occasion of the 1st • Educational talent donation in motorsports anniversary of the company’s launch of mileage warranty Sep. 2014 | system • Sponsoring Spanish Primera Liga as part of its • Launch of emergency exit information video for the CGV aggressive marketing in Europe multiplex cinema chain • Kumho Tire R&D Center holding a special career fair • Participation in Reifen Essen Tire Fair in Germany Oct. 2014 | June 2014 | • Selection by the Renault Group as excellent supplier • Joint research with Yokohama, Japan on future-oriented tires in terms of quality July 2014 | • Development of tire with reduced noise for the first • Resumption of construction of the manufacturing plant in time in the Korean industry Georgia, USA Sustainability Report 2013 / 2014

Apr. 2013 | Implementation of Mileage Warranty / | Mar. 2013 EV tire supply contract Contracted for the supply of Kia To support customers’ safe driving, Kumho Tire implements Tigers uniforms Mileage Warranty, Korea’s first tire mileage warranty system that Kumho Tire engages in sports marketing to compensates for the difference between actual mileage and enhance its communication with customers. warranty distance when one changes one’s Kumho tire. The In 2013, it executed a uniform sponsorship company signed a contract with Renault Samsung to supply it with contract with Kia Tigers to get closer to WATTRUN, an EV tire brand that has succeeded in realizing both customers through baseball, a national sport light weight and high strength for the first time in Korea. for Koreans. It is planning to expand communication with customers through May 2013 | New Product Launch sports marketing. Kumho Tire launched Ecsta PS91 in Shanghai International Circuit, China through the ’New Product Briefing 2013.‘ About 250 participants including domestic and overseas dealers and members of a customer experience group had experienced the new tire July 2013 | product through a test-drive and enjoyed the CTCC (China Touring KLPGA Kumho Tire Women’s Open Car Championship) sponsored by Kumho Tire. Kumho Tire hosted the KLPGA Kumho Tire Women’s Open at Weihai Point, China. A June 2013 | Implementation of RFID for all Kumho Tires total of 125 professional golfers from Korea For the first time in the world, Kumho Tire applied RFID electronic and China took part in the competition. Kim tags to all its products so that each of them has its own ID. Through Dana (24, Nefs) won the tournament, her the arrangement, the company has been able to systemize the first victory as a professional. entire process ranging from manufacturing to inventory management. Based on such enhanced efficiency, Kumho Tire is fully prepared to offer its customers even better service.

2014 HIGHLIGHT

Dec. 2013 | Strategic alliance with Jan. 2014 | Yokohama Rubber Corporation • Launch of sealant tire for the first time in To enhance its global competitiveness further, Korea Kumho Tire signed an MoU with Yokohama 2014 • Participation in Tokyo Auto Salon, the Rubber Corporation, the world’s eighth biggest largest tuning expo in Asia, for six tire manufacturer. The two companies have straight years joined forces to realize economies of scale and • Implementation of financial support for enhance R&D competitiveness amid the rising multicultural families’ homeland visits competition in the global tire market. Kumho Tire Feb. 2014 | expects to boost its technological • Signed a contract with NBA for official competitiveness as required for its second sponsorship takeoff in the global market through the pact.

Mar. 2014 | • Red Dot Design Awardee for three consecutive years 05 • Sponsorship for “Ecsta Super Challenge 2014” and launch of the Ecsta Racing Team Apr. 2014 | • Launch of the TBR Highway Campaign • Launch of a special career fair by the Kumho Tire R&D Center • Supply of official tires for Auto GP • Signed a support contract with the Vietnamese Expats Association in Korea • Launch of Solus TA 31, a new premium tire Sustainability Overview

Message from the CEO

We at Kumho Tire are striving to become a ‘Beautiful Company’ that fulfills its social

06 responsibilities Sustainability Report 2013 / 2014

Dear Stakeholders, The construction of our Georgia plant is progressing well, with the goal of launching We at Kumho Tire take great pleasure in mass production in January 2016 and securing issuing our annual sustainability report for production capacity of 4 million units upon 2013/2014 following our previous annual completion of the project now looking sustainability report for 2012/2013. attainable. For us, the period 2013-2014 marked the second half of our efforts to streamline our Dear Stakeholders business management practices. To complete our endeavors toward that end, we strove to GRI (Global Reporting Initiative) G4, the global boost our profitability while making essential sustainability reporting guidelines, has investments throughout the period. reinforced indicators related to an organization’s In 2013 in particular, we recorded consolidated performance in the areas of environment, labor, Salesof KRW 3.6985 trillion and operating human rights, society, and governance to profit of KRW 345.9 billion (equivalent to promote fairness and value distribution. As operating profit margin of 9.4%), continuing indicated by such shifts of focus, an enterprise’s the streak of year-on-year operating profits socially responsible business management is since we were forced into workout in 2010. becoming even more important for any firm As a result, in 2013, the debt ratio of our doing business in any part of the globe. headquarters dropped below the 200% threshold, a remarkable improvement In keeping with this trend, global tire compared to the debt ratio of 497% recorded manufacturers are working hard to realize the at the end of 2010. The ratio further declined sustainable development of the tire industry. to below the 150% mark as of the end of As a member of the tire subcommittee of September 2014. WBCSD (World Business Council for Sustainable Development), we are taking Fully aware of the importance of sustainable active measures in sync with other member growth, we at Kumho Tire moved our research companies to address environmental issues center to a new building in Yongin – whose such as tire wear particles, particulate matter, construction cost nearly KRW 100 billion − in and waste tire management. In this report, we at Kumho Tire have tried to September 2013. We have continued to work identify all the material issues for our hard to boost our R&D capabilities with the We at Kumho Tire are also striving to become a stakeholders and to highlight our sustainability goal of hiring up to 1,000 researchers. “Beautiful Company” that fulfills its social business management achievements in those Based on such research infrastructure, we responsibilities and makes significant areas. We will continue to implement all tasks have signed a major contract for technological contributions to society. We are spearheading related to our sustainability management alliance with Yokohama Rubber Corporation, the development of eco-friendly products strategies most faithfully. We will also Japan and successfully implemented through the environment-friendly tires Ecowing endeavor for better governance and expansion technological exchanges and joint research on S and WATTRUN while actively pursuing win- of our sustainability management practices future technologies with the firm. win business management with our partner across the globe. Through this technological alliance, we expect companies. We are also offering extended I look forward to your continued interest in to raise the proportion of our R&D warranty for full customer satisfaction and and support for our efforts. Thank you. investments to our sales from below 3% to striving to expand our social contributions. close to 5% and engage in research and Chang-Kyu Kim At the same time, we are enhancing our development activities comparable to those of President & CEO ethical management system to be recognized the global leaders in the industry. Kumho Tire Co., Inc. Moreover, in the second half of 2014, we as a respectable corporate citizen through the resumed the construction of our new plant in operation of the Ethical Management Georgia, USA, which had been discontinued Committee and Self-Monitoring Corps, in for a while. addition to implementing a whistleblowing 07 system. With additional investment of US$413 million, we will equip the plant with cutting-edge, Dear Respected Stakeholders automated production facilities. We will introduce the concept of “operation We are now publishing our third sustainability innovation” at the construction stage and report in the hopes that we will be able to make the plant the most efficient production communicate with you about all our endeavors facility in the world. most effectively. Sustainability Overview

COMPANY PROFILE

Kumho Tire marked its 54th anniversary in 2014. In spite of a business environment characterized by increasing uncertainty and volatility, the company has continued to increase Sales and improve operating profits. Kumho Tire has succeeded in enhancing its financial stability through advances toward its targeted management normalization. Kumho Tire will emerge as a global top-tier company with its unique organizational passion and devotion propelling its second takeoff.

Company Overview 08

658 Eodeung-daero (Sochon-dong), H/Q Name Kumho Tire Co., Inc. Gwangsan-gu, Gwangju

Foundation Sept. 5, 1960 Te l . +82 - 62 - 940 - 2114

IPO Feb. 17, 2005 No. of outstanding shares 147,811,198

CEOs Sam-Koo Park, Chang-Kyu Kim Capital KRW 739.056 billion

Organizational Chart

CEO

Planning Chinese Management Sales Administration Business

G. Quality Strategic Sales Overseas R&D Process Production China Sales Innovation & Planning Division- Sales Technology Technology Technology Production Division- Inspection Division Korea Division Division Division Division Tech Division China Sustainability Report 2013 / 2014

Shareholders status (Shareholders with more than 5% share)

National Pension Service 10,238,096 | 6.93%

Industrial Bank of Korea Kookmin Bank 27,357,555 shares | 18.51% 8,293,782 | 5.61%

Woori Bank 18,497,105 | 12.51%

※as of Dec. 31, 2013

Business Performance Thanks to its global production facilities – eight tire manufacturing plants in Korea, China, and Vietnam − and a total of 10,976 employees worldwide, Kumho Tire rolls out an annual average of 65 million units a year and exports them to a total of 146 countries through its global sales network.

(unit: KRW 1 million, %) 2011 2012 2013 375,346 4,355,034 345,936 Sales 3,915,876 4,070,644 3,698,542 3,850,889 Operating profit 193,653 375,346 345,936 193,653 3,595,732 Operating margin 4.95% 9.22% 9.35% Net income (loss) -26,854 130,586 100,958 Total assets 4,924,534 4,781,013 4,733,933

Total liabilities 4,355,034 3,850,889 3,595,732 2011 2012 2013 2011 2012 2013 Total capital 569,500 930,124 1,138,201 Operating Profit Total Liabilities

※Please refer to the appendix of this report for the company’s consolidated financial statement

Employees in Korea (unit: person)

Employment Type Classification Gender Full-time Temporary Others Total Total 4,719 224 M 4,679 40 - 4,719 Domestic 4,943 F 224 - - 224

Total 4,903 40 - 4,943 ● Male ●Female

Subsidiaries covered by the consolidated financial statement 1. Kumho Tire USA (including Kumho Tire Georgia Holding and 9. Kumho Tire Tianjin (equity held by Kumho Tire H.K.) Kumho Tire Georgia, Inc.) 10. Kumho Tire Changchun (equity held by Kumho Tire H.K.) 09 2. Kumho Tyre U.K. 11. Kumho Tire Vietnam (equity held by Kumho Tire H.K.) 3. Kumho Tire Europe 12. Kumho Tire Vina (equity held by Kumho Tire H.K.) 4. Kumho Tire Japan 13. Kumho Tire China (Kumho Tire China (Kumho Tire HK and Nanjing 5. Kumho Tire Canada Kumho Tire hold 95.5% and 4.5% of the equity, respectively) 6. Kumho Tire Australia 14. Kumho Tire France 7. Kumho Tire H.K. 15. Kumho Corporate Building Management Co., Ltd. 8. Nanjing Kumho Tire (equity held by Kumho Tire H.K.) Sustainability Overview

GLOBAL NETWORK

Headquartered in Seoul, Kumho Tire has 8 overseas sales corporations and 18 branches and offices, boasting of a global network that covers more than 180 countries across the globe. In addition to its Kumho Tire R&D Center and Gwangju Performance Center, Kumho Tire has maintained a global R&D network with research centers in China, USA, and Germany. Based on such technical competency, the company produces the world’s top-quality tires from its eight manufacturing plants at home and abroad.

10 1. KOREA 2. EUROPE Sales (consolidated) KRW 1.773 trillion Sales KRW 480.2 billion Employees 4,943 Employees 114 Seoul Office R&D Center Kumho Asiana Main Tower KUMHO TIRE EUROPE 115 Sinmun-ro 1-ga, Jongno-gu, Seoul TECHNICAL CENTER R&D Centers Sales Corporations/Offices/Branches KUMHO TIRE R&D CENTER KUMHO TIRE EUROPE GmbH KUMHO TIRE PERFORMANCE CENTER KUMHO TYRE(U.K.) LTD. Plants KUMHO TIRE FRANCE S.A.S GWANGJU PLANT/GOKSEONG PLANT MADRID/MILANO/VIENNA/MOSCOW PYEONGTAEK PLANT

CORPORATION

R&D CENTER

PLANT( PLANNED)

BRANCH OFFICE

TORONTO

Other Regions NORTH AMERICA AKRON

Sales Sales L.A GEORGIA KRW 726.5 billion KRW 725.2 billion

Employees Employees 132 99 Sustainability Report 2013 / 2014

3. NORTH AMERICA 4. ASIA 5. Other Regions Sales KRW 725.2 billion Sales KRW 689.3 billion Sales KRW 726.5 billion Employees 99 Employees 5,688 Employees 132 R&D Center Plants Sales Corporation/Offices/Branches KUMHO TIRE AMERICA TECHNICAL NANJING KUMHO TIRE CO., LTD, KUMHO TIRE AUSTRAILIA PTY., LTD CENTER NANJING KUMHO TIRE CO., LTD.TBR PLANT MEXICO CITY/PANAMA/SAO PAULO/ Sales Corporations/Offices/Branches KUMHO TIRE(TIANJIN) CO., INC. SANTIAGO/DUBAI/ISTANBUL/JEDDAH/ KUMHO TIRE U.S.A., INC. KUMHO TIRE(CHANGCHUN) CO., INC. CAIRO/JOHANNESBURG KUMHO TIRE CANADA., INC. KUMHO TIRE(VIETNAM) CO., LTD. DETROIT R&D Center KUMHO TIRE CHINA TECHNICAL CENTER Sales Corporations/Offices/Branches KUMHO TIRE JAPAN, INC KUMHO TIRE VINA CO., LTD. KUMHO TIRE CHINA CO., INC SINGAPORE/KUALA LUMPUR/BANGKOK

KOREA

Sales EUROPE KRW 1.773 trillion

Sales Employees KRW 480.2 billion LONDON 4,943 FRANKFURT Employees PARIS 114 CHANGCHUN

TIANJIN

TOKYO NANJING SHANGHAI

SEOUL YONGIN PYEONGTAEK ASIA VIETNAM GOKSEONG VINA GWANGJU 11 Sales KRW 689.3 billion

Employees 5,688

Sydney Sustainability Overview

Brand Portfolio

An ultra-high performance tire delivering optimal steering A tire offering little noise and remarkable comfort ride unrivaled capability at high speeds based on Formula Technology by any other general-purpose tire PS91, V720, LE SPORT, 4XII MAJESTY, TA31

A fuel-saving, eco-friendly tire applying cutting-edge SUV-exclusive tire offering the best ride comfort and optimum environmental technologies and new compounds to minimize steering stability in urban cruising circumstances rolling resistance and GHG emissions PREMIUM ecowing S

Classic SUV-exclusive tire perfect for either on- or off-road An alpine winter tire offering excellent performance on icy and conditions snowy roads APT, AT, MT KW27, XW, KW17 Sustainability Report 2013 / 2014

Kumho Asiana Value System

The value system of the Kumho Asia Group is composed of Mission, Vision, Strategy, Kumho Asiana’s Spirit, Leadership, Right People for Kumho Asiana, and Culture. All at the Kumho Asia Group join forces to make another takeoff and build a ‘new Kumho Asiana’ that is strong and powerful yet sophisticated.

Mission Improving the quality of life for all of kumho Asiana's stakeholders

A Beautiful corporation* Vision creating the highest corporate value in each related industry

Strategic Management, Human Strategy Resources Management, Ethical Management, Quality Management

Spirit Passion and Tenacity

Those who are faithful and diligent Right People Those who are studying and researching Those who are serious and active

Leadership Leading by example / Judgment / Decisiveness/Initiative

13 An open community where order and Culture freedom co-exist in harmony

*Beautiful Corporation ▶ The Corporation which earns trust by fulfilling its roles and social responsibilities Contributing to society and acting on its pledges based on irreproachable business practices Sustainability Overview

Kumho Tire Strategies

We have integrated and complemented our previous strategic tasks for sustainability management based on the issues identified through a materiality assessment carried out in 2013 in line with our strategic framework established in 2012.

Mission Customer Value Maximizer 14 Vision To be a global tire brand recognized for its quality and respect for customers

Environmental Strategic Talent Ethics Quality Strategic and Safety Management Management Management Management Direction Management

• Boost product • Improve personnel • Implement global • Build ethics • Implement advance competitiveness management environment awareness self-quality • Enhance research and efficiency management • Implement management technology • Secure and cultivate • Carry out VOC-based Company-wide • Use high-efficiency, sustainable supply competitiveness excellent talents eco-friendly energy chain management quality management Strategic Tasks • Reinforce operational • Develop eco-friendly • Engage in CSR • Upgrade to product competitiveness products and expand activities quality that is on a • Turn-around Active the company’s par with that of sales turnaround market share advanced countries

Strategic Tasks • Implement • Build trust-based • Climate change • Enhance CSR-related • Marketing sustainability labor relations response system external PR promotions for Sustainability management • Improve employee • Health and safety Management governance welfare management

• Intensifying • Diversity and equal • Overall • Ethics and integrity • Increasing needs for competition opportunity (environment-related • Anti-corruption product/services • Accelerating • Increasing expenditures and • Growing importance safety technical importance of investments) of establishing and • Customer safety development recruiting talented • Increasing consumer managing a stable and health • Increasing individuals base that values supply chain • Product and interdependence • Employment health, eco- • Increasing needs for service labeling among countries (gender, new friendliness, and fair trade (tire labeling system) due to globalization recruits, temps) social-friendliness • Local community • Diversifying Sustainability • Expanding • Training and • Energy consumption (social contribution) customer needs Management emerging markets education • Raw materials use • Compliance • Marketing Issues (BRICS, etc.) • Labor relations • Environmental (compliance with communication • Strategies and • Increasing needs for degradation social law) • Growing demand for analyses employee welfare • Wastewater and • Growing demand for customer • Economic and rights waste disposal corporate information security performance (work-life balance) • Products and transparency • Governance services • Easier access to (environmental corporate impact of tires) information • Occupational health (Internet, SNS, etc.) and Safety Sustainability Report 2013 / 2014

Stakeholder Engagement

Kumho Tire maintains diverse communication channels with its stakeholders and reflects their opinions on its management activities.

Stakeholders Communication Channels (Frequency) Key Demands/Issues

Board of directors, shareholder meetings, Sales increase, early graduation from Shareholders, investors overseas conferences, IR, etc. “debt workout”

New product presentation (upon new product launch), Customer Needs for product / Service Individual Customers satisfaction surveys, customer experience groups (annually), SNS Safety, environmental impact operations (regularly)

Employee social contributions, Hansarang Club, Hope-sharing Volunteer Increased local community service Local Communities Corps, motor sports education donation (quarterly), Support for the activities, Customer safety and Vietnamese community in Korea, Pink Ribbon campaigns (annually) health, prevention of discrimination

Improvements in the procurement Joint technology development with suppliers, proposal activities/ Suppliers system, environmental impact of compensation, regular evaluation/questionnaire surveys (annually) tires, anti-corruption measures

Labor-management council, collective bargaining, Occupational Safety Recovery of trust in labor relations, Labor Unions and Health Committee (quarterly), Job Security Labor-Management employee welfare, demand for protection Joint Development Committee of rights, corporate transparency

Marketing communication, Project development seminar/meetings, quality inspection Corporate Customers recovery of normal labor relations, meetings, process inspections raw materials use

We have identified key stakeholders in accordance with the stakeholder identification and engagement procedures of AA1000, GRI, and ISO 26000 and carried out qualitative investigation (in-depth interview) of the stakeholders representing each stakeholder group and worked out our major sustainability issues. The input has been instrumental in the establishment of our sustainability management strategies.

Stakeholders In-depth Interview Selection Criteria Major Opinions

David-SH Kim, Director, •Need to secure stable management rights IR Team; Standard Major institutional investors •Need to make aggressive investments to secure Shareholders, investors Chartered Securities except employees (CEO, etc.) human resources under a stable decision-making Korea Limited system

Bo-Sung Hwang, Major customers (consumers) •Lauds the company’s mileage warranty Individual Customers CEO, Ilsan Songsan-ro using Kumho Tire products and •Wants the company to be recognized as a safe Tire Pro services product manufacturer

•Lauds the company’s employee CSR activities by Hyung-Bae Min, Residents, beneficiaries, or public organizations like “Hansarang” and Mayor of Gwangsan-gu, servants of the relevant authorities Local Communities “Hope-sharing” Clubs Gwangju Metropolitan around the company’s operation sites •Need to promote CSR activities as part of the City or social service areas company’s sustainability strategy 15 Ho-Soon Yun, Managers or executives of the suppliers •Lauds the company’s human-oriented Vice President, OCI involved in Kumho Tire management organizational culture Suppliers Carbon Black Business activities (raw materials and supplies •Lauds the company’s ethics management, Department manufacturing and preservation) freeing suppliers from the burdens of bribery

Young-Chun Park, Head •Genuine communication and recovery of trust of Planning Dept. Kumho between labor and management Labor union leaders committed to Tire Branch, Federation •Need to boost workers’ morale, improve the quality Labor Union improving workers’ welfare of Korean Metal Workers of labor, and pursue shared growth between Trade Unions. workers and managers Sustainability Overview

Materiality Assessment

We have selected our material sustainability management issues based on the materiality test criteria recommended by GRI G4 Guidelines and according to the methodology presented by ISO 26000 and IIRC . This report is centered on those issues, which have also been used as basic data for the company’s strategies for sustainable growth.

Materiality Assessment Process and Results 16 To identify material issues, we have carried out internal and external environment analysis and materiality assessment based on the principles of Stakeholder Inclusiveness, Sustainability Context, Materiality, and Completeness.

As a result of the 2013 materiality assessment, issues related to labor relations have emerged as the most critical issues. That means external stakeholders in particular consider the labor issues at Kumho Tire to be significant. Other issues topping the list include marketing communication and products and services (environmental impact of tires).

Material Issue Identification Procedures

Step 1. Identification We have identified a total of 60 major issues faced by Kumho Tire through survey among employees, analysis of CSR issues of similar companies at home and abroad, reviews of media coverage for the past four years, and in-depth interviews with experts.

Survey among Analysis of issues reported Interviews with Media reports employees by similar companies stakeholders

Conducted a survey among 23 Reviewed the recent CSR issues Looked into 1,995 related articles Conducted in-depth interviews team leaders to identify the CSR faced by five similar companies for the past four years with six persons selected issues considered significant at home and abroad according to the ISO 26000 within Kumho Tire stakeholder identification criteria

Step 2. Prioritization To determine the priority of the 60 issues, we have conducted an online survey among 342 stakeholders and selected a total of 46 material issues (15 trend issues, 21 impact issues, and 10 internal competency issues) accordingly. As for the 21 impact issues (above 4.0 points) wherein Kumho Tire affects society significantly, we have created a matrix, too.

(Unit: person)

Classification Participant Classification Participants Employees 201 Labor unions 6 Internal stakeholders Subtotal 201 Subsidiaries 9 Individual Customers 15 Government 5 External stakeholders Corporate Customers 14 Media 5 External stakeholders Local communities 9 Other* 14 Suppliers 64 Subtotal 141 Total 342 *Other includes the vulnerable class, non-profit organizations, research institutions, and irregular workers/interns. Sustainability Report 2013 / 2014

Trend Issues(15) Impact Issues(21) Internal Competency Issues(10) Stakeholders’ materiality 01. Increasing needs for product/services safety 4.40 01. Funds generated through goods production 02. Diversifying customer needs and service delivery 03. Increasing importance of recruiting talented 02. Devotion and motivation necessary for individuals 4.30 02 continuous improvements (leadership, 04. Growing demand for corporate transparency management, cooperation) 03. Brands and prestige developed by the 05. Increasing needs for employee welfare and 05 rights (work-life balance) 4.20 02 07 01 organization 04 03 06. Accelerating technical development 04. Competency related to ethics management, 13 08 risk management, and governance 07. Intensifying competition 17 4.10 05. Competency to understand and establish 08. Increasing consumer base that values 14 11 12 organizational strategies health, eco-friendliness, and social- 20 15 09 06 06. Intellectual property rights (patents, friendliness 19 10 4.00 copyrights, software, privileges, licenses) 09. Expanding emerging markets (BRICS, etc.) 21 07. Funds obtained through financial activities 10. Environmental degradation (loans, contributions, received subsidies, (air, water, soil pollution) 18 3.90 operating activities, investments) 11. Increasing needs for fair trade 08. Relationship and trust built with major 12. Growing demand for customer information stakeholders such as customers, suppliers, security 3.80 business partners, local communities, 13. Growing importance of establishing and legislature, and regulatory agencies managing a stable supply chain 09. Organization’s facilities designed for 14. Increasing interdependence among 3.70 production and services (buildings, devices, countries due to globalization 3.50 3.70 3.90 4.10 4.30 4.50 4.70 infrastructure, roads, ports, bridges, waste 15. Easier access to corporate information treatment facilities, etc.) Kumho Tire’s materiality (Internet, SNS, etc.) 10. Securing social support for the organization’s business performance ※The matrix consists of 21 critical impact issues.

Step 3. Validation The selected critical sustainable management material impact issues are reflected on this report in association with the company’s sustainability management strategies.

Material Impact Issues Aspect Boundaries Material Issues of previous report Material Issues of this report Contents Page (G4 Aspects) Internal external 01. Accelerating technical development 01. Increasing needs for product/services safety (improvements in braking performance, mileage, etc.) 02. Diversifying customer needs Collective bargaining, Close human ties- 02. Increasing needs for product/services safety 03. Increasing importance of recruiting talented individuals Labor / management based management, Compliance with Labor 01 ● 36, 37 03. Intensifying competition (among companies in the 04. Labor /Management relations relations Laws,Labor-Management Council, Joint industry at home and abroad) 05. Growing demand for corporate transparency Employment Security Committee 04. Intensifying environmental regulation 06. Increasing needs for employee welfare and rights Marketing (energy efficiency rating system, etc.) (work-life balance) 02 ● ● Fair Marketing commercials, sports marketing 74, 75 communications 05. Diversifying customer needs 07. Accelerating technical development 06. Growing demand for corporate transparency 08. Marketing communication Products and services 07. Increasing importance of recruiting talented individuals 09. Intensifying competition 03 (environmental impact of ● Eco-friendly product development 50~53 tires) 08. Increasing consumer base that values health, 10. Product and services (environmental impact of tires) eco-friendliness, and social-friendliness 11. Product and service labeling (tire labeling system) Product and service ▒ Tire labeling system, 09. Increasing needs for employee welfare and rights 12. Ethics and integrity 04 labeling (tire labeling ● 69 Customer Satisfaction Index (work-life balance) 13. Strategies and analyses ▒ system) 10. Labor / Management relations 14. Increasing consumer base that values health, 05 Ethics and integrity ● Ethics management system 58, 59 11. Products and service labeling (Customer Satisfaction) eco-friendliness, and social-friendliness 12. Growing importance of establishing and managing a 15. Expanding emerging markets (BRICS, etc.) ▒ 06 Strategies and analyses ● Message from the CEO 6, 7 stable supply chain 16. Effluents and waste (end of life tire management, etc.) ▒ 13. Easier access to corporate information (Internet, SNS, etc.) 17. Customer health and safety Efflents and waste Water Consumption Management 07 (end of life tire ● Waste Management, Recycling, 43, 44 14. Increasing interdependence among countries due to 18. Traing and education management, etc.) Hazardous chemicals management globalization 19. Economic performance 15. Growing demand for fair competition and shared 20. Occupational safety and health Customer health 08 ● ● Quality Assurance, Mileage Warranty 72 growth 21. Environmental degradation (air, water, soil pollution) and safety 16. Increasing needs for fair trade 22. Increasing needs for fair trade Training Hours per Employee 17. Environmental impact of products and services 23. Growing demand for customer information security ▒ 09 Training and education ● 35 Training for Future Retirees 18. Increasing green purchase (eco-friendly products, 24. Compliance (compliance with social law) ▒ goods with the least environmental impact, etc.) 25. Raw materials use ▒ 10 Economic performance ● Sustainable Economic Performance 27 19. Customer health and safety 26. Growing importance of establishing and managing a Occupational Safety & Health Committee, 20. Compliance with marketing-related rules (fair stable supply chain Occupational health Accident Severity Rate Management, marketing, prevention of deceptive advertising) 27. Overall (environment-related expenditures and 11 ● 54, 55 and safety Work Environment Management, 21. Environmental degradation (air, water, soil pollution) investments) ▒ Improved Employees’ Health 22, Depletion of natural resources 28. Anti-corruption ▒ (rubber, water resources, fossil fuels, etc.) 29. Increasing interdependence among countries due to Compliance (compliance 12 ● No violation 59 23. Economic performance globalization with social law) (profits, pension, government subsidies) 30. Local communities (social contribution) 13 Raw materials use ● Raw materials use, Use of Recycled Rubber 43, 51 24. Increasing SRI (socially responsible investment) 31. Emissions (polycyclic aromatic hydrocarbons) ▒ 25. Contributions through the development of new 32. Governance (decision-making structure) ▒ Overall expertise, functions, and technologies and their 33. Employment (gender, new recruits, temps) ▒ (environment-related 14 ● Environmental Investment and Expenditure 43 application to the local communities 34. Easier access to corporate informations expenditures and investments) 26. Workplace health and safety (Internet, SNS, etc.) 27. Local communities (social contribution) 35. Energy Consumption 15 Anti-corruption ● Online whistleblowing center 59 28. Increasing interest in governance 36. Diversity and equal opportunity ▒ 17 29. Responsible consumption-related education for Local communities(social 16 ● ● Hansarang, Hope Sharing 62 contribution) consumers 30. Employee education and training Emissions (polycyclic 17 ● GHG Emissions, Air Quality Management 44, 49 31. Energy consumption aromatic hydrocarbons) 32. Potential impact on local communities 33. Efforts to support social investments in local Governance Building Sustainability Management 18 (decision-making ● 28, 29 communities Governance structure) 34. Promoting CSR within the corporate spheres of influence Employment (gender, 19 ● Open employment 33 new recruits, temps) Upward Downward ▒ New Trend Issues | Impact Issues | General Issues 20 Energy consumption ● Energy Consumption 46, 47 Diversity and equal 21 ● Current Employee Status 32 opportunity Sustainability Overview

Implementation Tasks for Sustainability Management Strategies

Material Issues Management Policies Strategic Tasks for Sustainability Management Implementation Tasks Short-term Implementation Tasks (2014-2015) 18 Strategic Building sustainability management Operation of the Integrated Sustainability Management Committee •Consider the establishment of a new committee 1 Governance management governance Building infrastructure for sustainability management •Form a working-level TFT for CSR •Expand interactive communication channels Expanding labor-management communication channels •Expand the implementation of joint study organizations Building trust-based labor/ 2 Labor/Management relations •Engage in joint labor-management social services management relations Talent Expanding employee satisfaction programs designed to promote •Conduct surveys among all employees management loyalty to the company •Expand employee welfare facilities Increasing needs for employee welfare 3 Improving employee welfare benefits Activities to realize the company’s vision •Create a platform for sharing the company’s long-term vision and and rights (work-life balance) strategies •Upgrade the infrastructure required for performance management in Overall Introduction of a global environmental information system 4 (environment-related expenditures Global environmental management global environmental management and investments) Updating and expanding the environmental performance evaluation system •Develop performance indices related to clean production Optimization of manufacturing and utility facility operation (clean production) •Connect indices related to process improvement to KPI Implementation of compensation system for •Implement a compensation system for energy efficiency performance 5 Energy consumption, raw materials Using high-efficiency, eco-friendly energy energy efficiency achievements •Introduce a platform for sharing energy conservation items Enhancing technical research for resources conservation and •Work out a roadmap for the development of clean production raw materials recycling technologies

6 Environmental degradation •Complete the establishment of a mid- to long-term strategy for Establishing mid- to long-term strategies for climate change response cap and trade 7 Effluent and waste •Work out a reduction plan including reduction potential assessment Environment & Climate change response system 8 Emissions safety •Implement the cap & trade education company-wide management Completion of establishment of a climate change response system •Finish upgrading the relevant organizations Products and services 9 •Complete the establishment of an electronic system (environmental impact of tires) Increasing the consumer base that Eco-friendly product development and 10 values health, eco-friendliness, Introduction of review processes of product impact on the environment •Establish review criteria for the product impact on the environment market expansion and social-friendliness •Prepare a roadmap regarding accident rates Enhancement of safety prevention management system •Introduce training and management programs for process safety experts 11 Occupational safety and health Safety and health management •Expand safety education in terms of employee numbers and frequency Expansion of a voluntary safety management system •Implement awareness enhancement events •Improve environmental safety through TPM Enhancement of employee healthcare •Promote communication between employees and healthcare experts Development of domestic exclusive social contribution programs •Hold public contests on ideas for Kumho Tire’s social Growling demand for corporate 12 (the disadvantaged, etc.) contribution programs transparency Ethics Enhancing external CSR communication Expand sustainability reporting to the global level •Expand the sustainability vision and strategies to the global dimension management Easier access to corporate information •Develop and update the customer counseling manual 13 Improvement of customer communication methods (Internet, SNS, etc.) •Work out a damage compensation system 14 Marketing communication Quality Implementation of CSR publicity in connection with •Implement a marketing campaign dubbed Growing demand for customer Marketing promotions 15 management its mileage warranty ‘Mileage Warranty and Driving Safety’ information security

※Other material issues are omitted here because they are the same as the traditional company-wide strategic tasks. Sustainability Report 2013 / 2014

We have come up with 10 strategic sustainability issues based on our material issues as identified through a materiality assessment and worked out implementation tasks accordingly. We will fulfill our corporate social responsibilities and grow as an enterprise genuinely trusted by our stakeholders through sustainability management, accomplishing the identified tasks throughout our management activities.

Material Issues Management Policies Strategic Tasks for Sustainability Management Implementation Tasks Short-term Implementation Tasks (2014-2015)

Strategic Building sustainability management Operation of the Integrated Sustainability Management Committee •Consider the establishment of a new committee 1 Governance management governance Building infrastructure for sustainability management •Form a working-level TFT for CSR •Expand interactive communication channels Expanding labor-management communication channels •Expand the implementation of joint study organizations Building trust-based labor/ 2 Labor/Management relations •Engage in joint labor-management social services management relations Talent Expanding employee satisfaction programs designed to promote •Conduct surveys among all employees management loyalty to the company •Expand employee welfare facilities Increasing needs for employee welfare 3 Improving employee welfare benefits Activities to realize the company’s vision •Create a platform for sharing the company’s long-term vision and and rights (work-life balance) strategies •Upgrade the infrastructure required for performance management in Overall Introduction of a global environmental information system 4 (environment-related expenditures Global environmental management global environmental management and investments) Updating and expanding the environmental performance evaluation system •Develop performance indices related to clean production Optimization of manufacturing and utility facility operation (clean production) •Connect indices related to process improvement to KPI Implementation of compensation system for •Implement a compensation system for energy efficiency performance 5 Energy consumption, raw materials Using high-efficiency, eco-friendly energy energy efficiency achievements •Introduce a platform for sharing energy conservation items Enhancing technical research for resources conservation and •Work out a roadmap for the development of clean production raw materials recycling technologies

6 Environmental degradation •Complete the establishment of a mid- to long-term strategy for Establishing mid- to long-term strategies for climate change response cap and trade 7 Effluent and waste •Work out a reduction plan including reduction potential assessment Environment & Climate change response system 8 Emissions safety •Implement the cap & trade education company-wide management Completion of establishment of a climate change response system •Finish upgrading the relevant organizations Products and services 9 •Complete the establishment of an electronic system (environmental impact of tires) Increasing the consumer base that Eco-friendly product development and 10 values health, eco-friendliness, Introduction of review processes of product impact on the environment •Establish review criteria for the product impact on the environment market expansion and social-friendliness •Prepare a roadmap regarding accident rates Enhancement of safety prevention management system •Introduce training and management programs for process safety experts 11 Occupational safety and health Safety and health management •Expand safety education in terms of employee numbers and frequency Expansion of a voluntary safety management system •Implement awareness enhancement events •Improve environmental safety through TPM Enhancement of employee healthcare •Promote communication between employees and healthcare experts Development of domestic exclusive social contribution programs •Hold public contests on ideas for Kumho Tire’s social Growling demand for corporate 12 (the disadvantaged, etc.) contribution programs 19 transparency Ethics Enhancing external CSR communication Expand sustainability reporting to the global level •Expand the sustainability vision and strategies to the global dimension management Easier access to corporate information •Develop and update the customer counseling manual 13 Improvement of customer communication methods (Internet, SNS, etc.) •Work out a damage compensation system 14 Marketing communication Quality Implementation of CSR publicity in connection with •Implement a marketing campaign dubbed Growing demand for customer Marketing promotions 15 management its mileage warranty ‘Mileage Warranty and Driving Safety’ information security Sustainable Harmonious Personnel Management that Values Operations of Fulfilling Quality for Customer Value Competitive Advantage Management Humans and Nature Responsibilities Enhancement

KRW 3.69 trillion 20

Take Action for Value

Enhancing “Kumho Tire seems to need to stabilize its management research and interview technology first to maintain sustainable growth. When a company can Boosting competitiveness make aggressive investments in securing human capital product under a solid decision-making framework, it can expect to competitiveness Building Company Sustainability sustainability have more creative ideas and ultimately financial stability, -wide management management which in turn enables hiring more people and making strategies strategies governance contributions to society.” Reinforcing operational David-SH Kim competitiveness Sales Director, Standard Chartered Securities Korea Limited turnaround Enhancing Research and Boosting Product Reinforcing Operational Building Sustainability Sales turnaround Technology Competitiveness Competitiveness Competitiveness Management Governance

Sustainable Competitive Advantage

KRW 394.8 billion KRW trillion 3.69 Operating cash flow Sales

9.35% Operating profit

Progress Issues • Technology level-up activities (technology roadmap, IT-based • Intensifying competition product development system, joint research with external • Accelerating technical development institutions) • Growing interdependence among countries due to globalization • Technology development for future-growth products • Expanding emerging markets (BRICS, etc.) (EV exclusive, sealant, noise reduction, S-UHP tires) • Strategies and analyses • Strategic technical alliance with Yokohama Rubber • Economic performance • Enhancing researchers and lab facilities • Governance • Market-customized product planning and product comparison fairs • TPM, investment management • Global economic turnaround • Improvements in the financial structure • Distribution of sustainable economic performance

Performance 3,948 Description (KRW 100M, %) 2011 2012 2013 765 Sales 39,159 40,706 36,985 21 414 Operating profit 4.95% 9.22% 9.35% 316 1,031 (Separate) 1,031 799 3,948 799 Operating cash flow Consolidated debt-to- 765% 414% 316% equity ratio (Separate) 2011 2012 2013 2011 2012 2013 382% 218% 169% Debt-to-equity ratio Separate operating cash (KRW100M) Consolidated debt-to-equity ratio (%) Sustainable Harmonious Personnel Management that Values Operations of Fulfilling Quality for Customer Value Competitive Advantage Management Humans and Nature Responsibilities Enhancement

Enhancing Research and Technology Competitiveness

Kumho Tire is enhancing its competitiveness in fiercely competitive markets based on its higher 22 technological prowess and better product quality. Going a step further, the company opened in September 2013 the Kumho Tire R&D Center equipped with more research personnel and cutting-edge lab facilities; thus boosting the company’s research and technology development competency even more.

way. The system involves the utilization of a super computer to analyze Context comprehensively information on tire markets and competitors’ prod- Tire manufacturers competing in the global markets are each ratch- ucts and subsequently forecast new tire features. Such shortens the eting up their technical level. As such, competition is bound to inten- period required to develop new products. sify over time. To cope with the situation, Kumho Tire focuses its investments in research and development. Moreover, through the Joint Research with External Institutions strategic technological alliance with Yokohama Rubber, it is further Kumho Tire is carrying out joint research with academic and industrial enhancing its prestige as a global powerhouse in tire technologies. research institutions for more effective and efficient R&D amid the increasingly competitive business environments. The company implements research projects intended to enhance its product features and improve its basic technological prowess in partnership with automak- Progress ers like Hyundai Motor Company, companies specializing in raw materials, components, and IT system development, and major universi- T echnology Level-Up Activities ties and commercial research institutions in Korea. The company plans Promotion of a T echnology Roadmap to expand its R&D network to overseas universities and research labs in the relevant industries and take the lead in the development of new Kumho Tire has established a mid- to long-term technology roadmap tire technologies. to launch in a timely manner new products that meet the expectations of automakers and consumers. Based on the roadmap, the company has already secured the technology required for the development of T echnical Development of Future-Oriented future-oriented products such as sealant tires and noise reduction Products tires. It is now working hard to develop new technologies required to Kumho Tire secures engines for continuous growth through the devel- make improvements in wear, braking, weight, rolling resistance, and opment of future-oriented technologies and maintains its leadership in steering. We will continue to cope with changes in the markets by the domestic tire industry through the development of high value-add- flexibly launching market-leading products ahead of our competitors. ed technologies and related products.

Building an IT-based Product Development S ystem Kumho Tire uses the IT-based system it has built through the product EV Tires Sealant Noise S-UHP development process to improve the accuracy of tire product designs Tires Reduction Tires Tires and shorten the new product development period in a revolutionary

T echnology Roadmap PRM(Product Road Map) TRM Facility Investment Plan

Market Product Portfolio Technology Manufacturing

Marketing/ R&D & Technology- Sales-centered RPM Market Driven Planning centered PRM Establishment Establishment Technology Driven Planning Connection of Business, Connection of Markets Reflection of Market Changes Technologies, and and Products through Regular Updates Facilities Enhancing Research and Boosting Product Reinforcing Operational Building Sustainability Sales turnaround Technology Competitiveness Competitiveness Competitiveness Management Governance

EV Tires S-UHP Amid the increasing interest in electric vehicles, an eco-friend- Kumho Tire has launched ECSTA PS91, a tire for super cars (S-UHP: ly means of transportation for the future, Kumho Tire is striving Super UHP) and which outperforms UHP (Ultra-High Performance), to develop more advanced EV-exclusive tires. For EV tires, the the company’s super-high function tire. Equipped with Formula Tech- company applies high-inch sizes for lower rolling resistance nology applied to F3 tires, ECSTA PS91 boasts of remarkably im- and better operation performance as well as narrow treads to proved grip force and brake power; thus, it can demonstrate the best reduce air resistance during travel. performance at high speeds at circuits. Development of EV Tires Strategic Technology Alliance Joint R&D agreement with Yokohama Rubber Kumho Tire has signed a joint future-oriented tire R&D agreement with Japan’s Yokohama Rubber, the world’s eighth largest tire manufacturer. The two companies are committed to working together to develop futuristic tires such as super-light tires and new-concept tires. Low Rolling Low Noise Better Steering Resistance Wheel Control Both companies expect to raise their R&D-to-sales ratio to the 5% level while enhancing their quality competitiveness through the exchange of know-how including manufacturing technologies and quali- Sealant Tire ty assurance techniques. Kumho Tire seeks to secure research com- Kumho Tire has launched Majesty SOLUS, the country’s first sealant tire petency comparable to that of the world’s top 3 manufacturers wherein, when part of the tire tread punctures, the sealant within the tire through the successful implementation of the technology alliance. seals the damaged part and maintains air pressure in the tire so that the driver can operate the vehicle in normal conditions. Thus, driver’s safety is secured in emergencies and fuel efficiency is improved since the total vehicle weight decreases without spare tires. Sealant tires will reduce environmental impact because of decreases in spare tire production/disposal. Driv- Joint R&D agreement with ers can use more of the trunk space for productive purposes, too. Yokohama Rubber Enhancing Researchers and Lab Facilities Kumho Tire is now working on the refurbishment of its testing & research facilities and Performance Center for Evaluation and Quality Moni- toring of Finished Products for better R&D results, guided by the principle of concentrated investments in research and development. The number of its global researchers increased by more than 30% between 2011 and 2014, from 540 to 715. The company plans to increase such number to 1,000 by 2016. Its R&D-to-sales ratio stood at 1.9% in 2011, rising to 2.9% in 2013. The company plans to maintain the ratio at above the 3%

Sealant Tire level so as to upgrade its R&D environment to the world’s best. Technology Prowess NEW R&D CENTER Second Takeoff Tier-up 2013 - 2014 2015 - 2016 Noise Reduction Tire* 2017 - 2018 Approximately 20-30% of automobile noise comes from tires. Kumho •Build the foundation for •Realize quantitative •Grow Kumho into a competition expansion and technology powerhouse Tire has developed technology that reduces tire noise by 8% compared •Open the Kumho Tire qualitative growth •Complete the building to traditional premium tires through the attachment of porous polyure- R&D Center •Complete the building of a productive •Make Catch-up of R&D infrastructure organization thane form (acoustic absorbent) to tire interiors. The development was Investments in R&D - Phase 1 •Develop market-leading enabled by the application of the K-silent system, leading to the forma- Infrastructure •Secure talented people products •Revolutionize product and foster them into key •Secure exclusive rights tion of acoustic absorbent and optimization of tire materials. development processes personnel to core technologies * Tire noise is caused by the vibration of air inside tires as their bottom •Enhance basic/ fundamental technology 23 . continuously comes in contact with road surfaces research

Next Step Kumho Tire will continue to upgrade its R&D environment by increasing its research personnel and enhancing its testing facilities so as to develop goods that fulfill customers’ needs in terms of both performance and quality. The company will implement its technology roadmap to secure Noise Reduction Tire future growth engines and deliver market-leading goods to customers. Sustainable Harmonious Personnel Management that Values Operations of Fulfilling Quality for Customer Value Competitive Advantage Management Humans and Nature Responsibilities Enhancement

Boosting Product Competitiveness

To secure competitiveness in the global tire market, Kumho Tire conducts market analysis for major regions and reflect customers’ needs and develop better-performing products. 24

Context Product Development according to the Characteristics of Major Markets Delivering the best products to customers is the basic premise for Kumho Tire to maintain its sustainable competitive Advantage. To boost its product competitiveness, the company also focuses on launching products customized to the characteristics of its major markets like North America and Europe on the one hand and China on the other, for instance. Wear and four-season Braking power & performance steering performance

USA EUROPE

Progress Market-Tailored Product Planning Specialized products according to market size Kumho Tire develops new products by taking into account the charac- and characteristics teristics of its five major markets: Korea, China, USA, Europe, and emerging countries. For the Korean market, focus was traditionally Emerging placed on noise reduction and ride comfort but has recently shifted to Markets driving efficiency as domestic and overseas carmakers launch high- performance vehicles in the local market. For the Chinese market, durability and wear performance are enhanced considering the regional characteristics and road conditions. The US market is seeing an in- Drive and noise Durability & wear creased demand for high performance in snow and strong wear per- performance performance formance. On the other hand, the European market focuses on braking power and steering performance for stability at high speeds. The company also pays attention to the emerging markets and develops KOREA CHINA products tailored to the size and characteristics of particular emerging markets in line with the rising demand for the company products. Ev- ery year, Kumho Tire carries out comprehensive comparison and evaluation of its major products with its competitors’ goods in terms of performance and appearance for each of the major markets to enhance company’s product leadership in such markets.

Next Step Kumho Tire plans to keep monitoring the trends of automotive and tire industries, develop products tailored to the regional characteristics, and launch competitive products that fulfill the needs of its major markets worldwide. Enhancing Research and Boosting Product Reinforcing Operational Building Sustainability Sales turnaround Technology Competitiveness Competitiveness Competitiveness Management Governance

Reinforcing Operational Competitiveness

Production management and investment management are keys to the productivity of the manufacturing sector. To boost its operational competitiveness, Kumho Tire promotes TPM activities (company-wide production innovation activities) and investment management activities at the group level.

• Facility restoration at Tianjin Plant Context • Company-wide TPM education 2012 • Kick-off For the tire industry, a labor-intensive industry, facility productivity is Step 0~1 • Improvements in welfare facilities critical. Through TPM* activities, the company carries out company- • Evaluation by HQ during 2Q & 3Q • Inventory management wide facility management to realize zero facility breakdown, zero product deficiency, and zero safety accidents. • Concentrated management of transportation gear and forklifts • TPM education for 4 Chinese plants It also runs a reasonable investment management process linked to • Education on the suggestion management system 2013 • Reflection of TPM performance in KPI (executives and managers) the Kumho Group investment management and review scheme. Step 1~2 • Regular implementation of events * TPM: Total Productive Maintenance • Quarterly evaluations (best practice sharing, issue reviews, etc.) • Participation by suppliers

• Implementation of TPM activation measures - increased managers’ interest including reinforced functions of the head 2014 of the Production Tech Division, managers’ obligatory participation in Step 2~3 TPM activities, and reinforced reporting to management - Guidance tailored to the facility characteristics depending on the Progress operation hours and facility sophistication - Enhancement of production site management through daily site inspections, retraining on production circle activities, and reinforced TPM Activities management of suppliers Kumho Tire introduced TPM activities in 2012 for company-wide pro- • Company-wide TPM implementation duction innovations, and it plans to expand the initiative, which is cur- Investment Management Activities rently at the early stage. The company will enhance education and For more strategic and consistent global investment activities, Kumho Tire training, build a technical training center, train technical instructors, and is enhancing its investment management process. Since 2013, the com- foster scene preservation experts. pany has expanded its scope of investment management from domestic Through the measures, Kumho Tire intends to reduce facility malfunc- to overseas sites so that investment decisions for some of its overseas , , , tion improve tire quality cut down industrial accident rates increase business sites will be reviewed and evaluated as to their consistency with manufacturing yield, and ramp up general facility efficiency. the headquarters’ policies. In accordance with the group investment policies, the company has allocated investments in research, IT, education, social contributions, and advertising as its five central investment areas besides its routine investments, checking investment implementation against investment goals regularly. Furthermore, the company inspects regularly whether its investment budgets have been spent in accordance with the original investment intentions across the globe.

Next Step 25 Kumho Tire will focus on laying the foundation for implementation across the globe while promoting plant-specific TPM activities in 2015. The company will also expand the relevant education and manage indices for each facility and plant during the year. For 2016, it plans to offer education by external experts and promote factory-to-factory benchmarking for purposes of enhancing facility management capabilities and implementing TPM activities intensively. In 2017, it will promote TPM process computerization and standardization while building the relevant academy. Sustainable Harmonious Personnel Management that Values Operations of Fulfilling Quality for Customer Value Competitive Advantage Management Humans and Nature Responsibilities Enhancement

Sales Turnaround

Kumho Tire has selected sales expansion as one of its key tasks, and it is implementing comprehensive sales competitiveness enhancement activities for each region and division. 26

Context Improvements in the Financial Structure Since the debt workout decision in December 2009, the compa- Sales expansion is the most fundamental element for a company’s ny has continued to improve its financial structure through vari- continuous growth. Thus, Kumho Tire is carrying out diverse activities ous measures such as reduction of share capital, debt-equity designed to expand its overseas sales in advanced markets and swap, and profit creation. It currently has an external professional emerging markets, domestic sales in China and Korea. institution carrying out the analysis required for the review of the potential for graduation from debt workout at the end of 2014.

799 Separate cash flow for operation (100M) Progress 1,031 3,948 2,398 Global Turnaround Project Consolidated The company’s market share in Korea’s RE* market including TBR** debt ratio (%) continues to expand. Kumho Tire is expanding its global distribution 765 414 316 276 network through activities designed to reinforce its sales competency in China along with market-tailored activities aimed at enhancing its 218 149 sales competencies in both advanced and emerging markets world- Separate debt ratio wide. 382 169 * RE: Replacement Equipment ●2011 ●2012 ●2013 ●1-3Q 2014 ** TBR: Truck and Bus Radial Tire Source: Public disclosure, Korea Investors Service, Inc.

Global Turnaround Project

1st Project 2nd Project

Period: Sept. 2013 – Jan. 2014 Period: May – Nov 2014 Areas: Overseas Sales Division and 5 overseas corporations Areas: Overseas Sales Division and 4 overseas corporations and (USA, Germany, UK, Canada, and Japan) branches (Australia, Russia, Mexico, and Brazil) Contents: Establishment of company-wide directions and Contents: Support for the implementation of core tasks strategies for overseas tire sales in each region •Support for the enhancement of pricing/MI* operation competency •Working out action plans on the directions and strategies •Support for the enhancement of direct sales competency •Identifying ways to build and operate effective organizations •Reorganization of the business planning system and process to matching the directions and strategies increase opportunities for success at the national level •Increasing opportunities for success in the four overseas corporations and branches

*Pricing Policy and Market Information Enhancing Research and Boosting Product Reinforcing Operational Building Sustainability Sales turnaround Technology Competitiveness Competitiveness Competitiveness Management Governance

Sustainable Economic Performance G4-EC1 Government Financial Support G4-EC4 Total distribution amount was KRW 2.9557 trillion out of the Kumho Tire is undertaking four government R&D projects con- total sales amount of KRW 3.6985 trillion. cerning the development of next-generation, eco-friendly tires, among others. In 2013, the company’s sales stood at KRW 3.6985, and economic performance distributed to stakeholders was KRW 2.9557 trillion: KRW 2.392 trillion for suppliers, KRW 56.5 billion for governments Government R&D Projects and local communities, KRW 163.5 billion as interest expense, and

KRW 406.5 billion for employees. Allocated R&D Expenditures (Unit: KRW 100 million) Project Name Project Period (Unit : KRW 100 Distributed Stakeholders Details million) Value Total amount of raw materials and Suppliers 23,292 service contracts Development of Total amount of taxes and social Governments next-generation, contributions (including support for and Local 565 low-carbon, ’11 .08~’16.04 Pink Ribbon campaign and the Viet- Communities abrasion-resistant, 35.0 namese Expats Association) eco-friendly tires Total amount of interest expenses Creditors 1,635 paid to financial institutions Total amount of employee wages, Development of used Employees 4,065 benefits, and education & training tire refabrication ’12.06~’17.05 expenses technology for 3.5 Total 29,557 commercial vehicles

2011 2012 2013 Development of fuel-saving, highly Interest expenses 1,996 1,876 1,635 abrasion-resistant, Purchase of raw super-single tires for ’12.08~’17.05 materials and service 23,739 21,514 23,292 large-sized commercial 17.3 contracts vehicles that travel 3.5 long distances Income taxes(profit) 478 (442) 473 Taxes + utility fees 115 97 86 Development of a tire Donations + social 3 8 6 tag-enabled MLM contributions (Manufacture, ’12.04~’13.12 Wage + bonus Logistics, & Marketing) 3,830 4,269 3,905 21.5 payments Tracking System Welfare & benefits 100 102 107 Employee education 38 47 53 expenses ※On a company-wide level; welfare & benefits expenses are based on Korean business sites.

Defined Benefit Retirement Pension G4-EC3 Next Step 27 As of 2013, Kumho Tire implements the defined benefit retirement Kumho Tire has set ’sales expansion‘ as its business management pension system. The company’s defined benefit debt is disclosed goal for 2015. It is striving to increase sales across the board. The through an audit report. It is posted as debt in the account books, company will make sure that its company-wide efforts to enhance with the basic debt added by the current-term basic amount and in- sales competency translate into tangible results in 2015. From the terest expense. After reflecting positive/negative remeasurement el- medium- to long-term perspective, the company plans to record ements, actual pension payment is deducted from the balance and an annual sales growth rate higher than the market growth rate in handled as debt at the end of the fiscal year. its major markets. Sustainable Harmonious Personnel Management that Values Operations of Fulfilling Quality for Customer Value Competitive Advantage Management Humans and Nature Responsibilities Enhancement

Building Sustainability Management Governance

Kumho Tire runs its decision-making organizations in compliance with the relevant laws to ensure its top 28 management’s reasonable decision making with regard to the company’s key decisions and the transparency of all the processes involved.

Context With reference to its sustainable development, Kumho Tire has been required by its stakeholders to work on its decision-making processes. Thus, the company strives to build sustainability governance as a means of securing sustainable competitiveness in the long run.

Progress Kumho Tire Seoul Office Governance (BOD) Composition G4-36,40,49

The BOD makes decisions on matters stipulated in laws and articles of Committees Established within the BOD G4-34 association, issues delegated by shareholders’ meetings, and basic (as of Mar. 31, 2014) policies for the company management and their implementation. Key Names of Committee management issues are reviewed by the BOD first - considering the Committee Name Composition Members members’ expertise and experiences - before they can be discussed Sang-Min Shin Three and resolved at shareholders’ meetings. Critical matters in terms of Audit Committee Woo-Yang Park external directors environmental or societal impact continue to be monitored on a daily Hae-Chun Park basis so that they can be reported to and discussed by management External Director Chang-Kyu Kim One resident director effectively. Recommendation Sang-Min Shin Two external directors Committee Dong-Hyuck Shin

BOD Composition (as of Mar. 31, 2014) G4-38

Directors Name Position / Organization Gender Appointment Date Tenure Area of Specialization Representative Director Chairman, Sam-Koo Park M 2012.03.30 3 yrs Kumho Asiana Group

Representative Director / Overall control Chang-Kyu Kim M 2012.03.30 3 yrs Internal President & CEO Kumho Tires Co. Inc. and company representation Se-Chang Park Director, Planning & Management M 2013.03.29 3 yrs Jae-Suk Cho Director, Sales M 2013.03.29 3 yrs Dong-Hyuck Shin Former Chairman of the Korea Federation of Banks M 2011.03.25 6 yrs Finance Former CEO of Korea Economic Daily, Sang-Min Shin M 2012.03.30 3 yrs Economy Current Chairman of FnPricing Former CEO of Bumin Savings Bank, External Woo-Yang Park M 2013.03.29 3 yrs Economy Current KDB Director J. Roberto C. Delgado Transnational Diversified Group CEO M 2012.03.30 3 yrs Economy Former Chairman and CEO Hae-Choon Park M 2014.03.27 3 yrs Economy of the National Pension Service Enhancing Research and Boosting Product Reinforcing Operational Building Sustainability Sales turnaround Technology Competitiveness Competitiveness Competitiveness Management Governance

Major BOD Activities for 2013 Roles of Governance Organizations G4-42,44~46,48 Kumho Tire held a total of 7 board meetings in 2013 and handled 23 The top management of Kumho Tire approves matters related to the major agenda items related to corporate business operations. corporate objectives, values, mission statement, and development of Major BOD Activities for 2013 strategies, policies, and goals. Financial risks are handled by the Fi- (as of Mar. 31, 2014) nance Team, with the results reported to the top management. Fur- thermore, the Finance Team handles market risks, credit risks, and li- Date of Meeting Agenda Approval quidity risks so that each business unit of the company can yield Offering payment guarantee for overseas 2013.02.07 Approved positive management results on a stable, continuous basis. The top corporations, 3 others management of the company also receives comprehensive informa- Approval of appointment of External tion on the company performance through sustainability reports. 2013.03.13 Director Recommendation Committee Approved members Convening the 10th General Shareholders’ G4-51~55 2013.03.13 Approved Governance Compensation Meeting, nine others High-level managers belonging to the top decision-making body are Offering payment guarantee for overseas 2013.05.09 Approved compensated according to the consensus of the BOD and approval by corporations, two others a shareholders’ meeting. Currently, the total amount of compensation Offering payment guarantee for overseas 2013.08.08 Approved corporations, one other for the nine directors is KRW 1.8 billion as approved by the sharehold- Offering payment guarantee for overseas ers’ meeting.* Decisions on the compensation for top executives shall 2013.11.07 Approved corporations, one other not be affected by stakeholders’ opinions. Neither shall they reflect the Approval of strategic alliance with company’s environmental, and societal performance from the short- 2013.11.29 Approved Yokohama Rubber term perspective. Executives’ pay consists of basic pay and bonus. The annual pay for the highest paid person in Kumho Tire in 2013 was G4-39,41,50 5.24 times that of the company’s average employee for that year. Sala- The BOD chairman serves as the company’s chief executive offi- ry increase rate for the highest paid person is 3.75% lower than aver- cer as well. Internal directors must obtain recommendation from age employees’ increase rate. To ensure the external directors’ inde- the BOD. Candidates for external directors must be fully recom- pendence and expertise in decision making, Kumho Tire does not base mended by the External Director Recommendation Committee. their pay on the results of its evaluation of their performance. Shareholders and stakeholders are notified through public notice *For details of the executives’ average pay, please refer to ’Executives’ Pay‘ on of the personal data of the candidates for directorship prior to p. 92 of Business Report 2013 (May 2014). shareholders’ meetings as required by the relevant regulations. In accordance with the BOD operation rules, directors with vested interest in the BOD agenda items cannot exercise their voting rights. Workers’ grievances are reported to the Ombudsman, which can either deal with the issues or ask the Labor-Manage- ment Council to address them. Next Step Kumho Tire will continue to select its external directors through the external director recommendation procedures stipulated in the relevant laws as the surest way of ensuring their independence and expertise. In addition, the company will set up an In- tegrated Sustainability Management Committee and continue to build a strong foundation for sustainability management.

29 Sustainable Harmonious Personnel Management that Values Operations of Fulfilling Quality for Customer Value Competitive Advantage Management Humans and Nature Responsibilities Enhancement

Take Action for People

interview Boosting Building Trust- Personnel based Labor/ “I believe that transparent, sincere communication between labor and Management Management management will enable us to build trust and ultimately develop reasonable Efficiency Relations Company labor relations. I want labor and management to pursue a win-win situation Sustainability -wide management in terms of boosting employees’ morale and improving employment/quality. strategies strategies The reason is that it is leveling up the quality of labor, which can serve as the Improving Securing and Employee window for the return of profits to the local communities.” Cultivating Welfare High-caliber Yeong-chun Park, Head of Planning Dept. Kumho Tire Branch, Benefits Personnel Federation of Korean Metal Workers Trade Unions. Boosting Personnel Securing and Cultivating Building Trust-based Labor/ Improving Employee Management Efficiency Talented Personnel Management Relations Welfare Benefits

Harmonious Personnel Management

Collective Bargaining (once)

Labor-Management Council (twice)

Joint Employment Security Committee (once)

Progress Issues • Open employment • Diversity and equal opportunities • Researcher-tailored talent cultivation • Growing importance of talent recruitment • Role- and competency-centered ranking system • Employment (gender, new recruits, temps) • Fair performance management and compensation system • Education and training • Close human ties-based management • Labor/Management relations • Agreement on zero disputes in labor relations • Increasing demand for employee welfare and rights • Operation of key labor-management organizations (work-life balance) (Labor-Management Council, collective bargaining, Joint Employment Security Committee, Occupational Safety & Health Committee, etc.) • Diverse welfare benefits (medical checkups for all employees, prenatal and postnatal leaves, childbirth support, childcare support)

Performance • Agreement on zero disputes in labor relations in 2013 • Operation status of labor-management organizations in 2013 11,546 21 20 20 11,214 31 Category Frequency Time 10,976 Labor-Management twice 2013.3~4 / 2013.11~2014.3 Council Collective Bargaining once 2013.5 Joint Employment once 2013.8 Security Committee Occupational Health & 2011 2012 2013 2011 2012 2013 once 2013.8 Safety Committee No. of Employees Parental Leaves Sustainable Harmonious Personnel Management that Values Operations of Fulfilling Quality for Customer Value Competitive Advantage Management Humans and Nature Responsibilities Enhancement

Boosting Personnel Management Efficiency

As a global company hiring personnel with diverse backgrounds, Kumho Tire does its very best to manage its human resources with diverse backgrounds efficiently through its personnel management system. 32

Context Employees by Employment Type Kumho Tire’s employees are categorized into office workers and pro- Stakeholders of Kumho Tire demand that the company make the best duction workers. The ratio of production workers is higher due to the use of its personnel with diverse backgrounds efficiently for the organi- characteristics of the labor-intensive tire industry. zation’s sustainable growth. Thus, the company not only tries to recruit human resources with diverse capabilities but also manages them ef- (unit: person, %) ficiently through a well-planned personnel management system. 2011 2012 2013 Category Number Ratio Number Ratio Number Ratio Office 1,176 23.6% 1,222 24.6% 1,245 25.2% Workers Production 3,698 74 .1% 3,606 72.4% 3,512 71.0% Progress Workers Global Personnel Management Others 116 2.3% 147 3.0% 186 3.8% Total 4,990 100.0% 4,975 100.0% 4,943 100.0% Kumho Tire clearly identifies its human requirements for implementing ※The company does not engage in any major business with external sole business strategies and builds a systematic management platform for proprietors or seasonal employment of undocumented foreign workers. the alignment of strategies and organizational competency. Through the establishment of short- and long-term personnel management Employees by Gender (Korea) plans and employee competency enhancement schemes, the company attempts to predict the appropriate level of employment on a global Kumho Tire has a higher proportion of male workers, which can be scale and minimize the career disruption of office workers. attributed to the manufacturing industry’s characteristics. ( : , %) (unit: %) unit person 2014 Achieve- Comparison 2013 2011 2012 2013 Category 2014 plan Performance ment with 2013’s Category performance (estimated) Rate Performance Number Ratio Number Ratio Number Ratio Domestic 98.8 100.0 97.7 102.3 101.1 Male 4,767 95.5% 4,74 7 95.4% 4,719 95.5% Overseas 103.9 101.1 101.0 100.1 102.8 Female 223 4.5% 228 4.6% 224 4.5% ※Employment ratio against T/O Total 4,990 100.0% 4,975 100.0% 4,943 100.0% (Domestic – regular workers: Overseas – production corporations)

Current Employee Status

Employee Data (Total Employees) G4-LA12 Kumho Tire’s employees are managed under two categories: domestic and overseas. The ratio of overseas staff exceeds that of domestic staff at present. (unit: person, %) 2011 2012 2013 next Step Category Number Ratio Number Ratio Number Ratio The core of a company is people. Kumho Tire’s HR management Domestic 4,990 43.2% 4,975 44.4% 4,943 45.0% philosophy is summed up in one sentence: ‘A company is an Overseas 6,556 56.8% 6,239 55.6% 6,033 55.0% aggregate of human power.’ Guided by such belief, it will continue Total 11,546 100.0% 11,214 100.0% 10,976 100.0% to strive to build the most reasonable, fairest HR management ※The employee figures above are as of year-end and are inclusive of system. contract workers. Boosting Personnel Securing and Cultivating Building Trust-based Labor/ Improving Employee Management Efficiency Talented Personnel Management Relations Welfare Benefits

Securing and Cultivating Talented Personnel

To achieve a second takeoff and create values, Kumho Tire has equipped itself with the processes required to recruit excellent talents through open employment and cultivate them into specialists.

Context Talent Fostering Researcher-Customized Talent Fostering It is critical for a company to be able to secure prominent talents continually for sustainable growth. Kumho Tire implements the policies Kumho Tire offers its researchers opportunities to work at overseas needed to hire top-class talents through open employment and research centers in the USA, Europe, and China. It helps them grow into cultivate them. global talents through overseas graduate and post-graduate course support programs. Through a systematic job rotation program, researchers can accumulate diverse research experiences and grow as specialists with expertise across the convergent tire industry landscape.

Role- and Competency-centered Ranking System Progress To intensify its organizational immersion in job performance, Kumho Tire Open Employment G4-LA1 separates its title system relevant to the employees’ social status from its new ranking system that focuses on employees’ actual roles at work. Kumho Tire’s ideal employees are faithful and diligent, earnest and Promotion to the next rank is made considering both past performance aggressive, and studious and hardworking. The company does its very and future potential of employees at new posts. Kumho Tire offers best to recruit people who meet the criteria. Kumho Tire opens its graduation qualification from the present rank to those with excellent doors to career employees in addition to the employment of new performance and competency improvement records and admission recruits at the group level. It values the diversity that they could bring qualification to the next rank to those who have passed an evaluation to the organization. concerning their potential to perform their future tasks successfully. Diversification of Employment (unit: person) General Team leader / 2011 200 manager /Chief Expert in 20 180 researcher specific area

2012 183 20 163 Deputy gen- 2013 155 Implementation of eral manager/ non-standard, high Senior researcher/ 14 141 value-added tasks Manager Junior Perform the ●Female ●Male ●Total researcher assigned tasks ※The figures above include new and career employees except those independently dispatched from other subsidiaries. under their own Implementation Assistant responsibility Employee Turnover of relatively manager/ 33 (unit: person) clearly defined Associate tasks researcher Category 2011 2012 2013 Male 110 91 87 Female 11 12 5 Perform standard Staff/ Total 121 103 92 routine, repetitive Researcher tasks ※The figures above do not include retirement or transfer/dispatch to other subsidiary companies. Sustainable Harmonious Personnel Management that Values Operations of Fulfilling Quality for Customer Value Competitive Advantage Management Humans and Nature Responsibilities Enhancement

Manager Ranking Researcher Ranking Definition Overall control of all tasks carried out by the unit, taking responsibility for its performance; performing a General manager Chief researcher specific specialized task assigned by the Kumho Group 34 Deputy manager Senior researcher Perform the assigned tasks with your special Having the ability to perform non-standard, high knowledge, technology, or experiences in the value-added tasks and lead assistant managers / Manager Junior researcher relevant areas under your own responsibility associate researchers independently or as the leader of a small group/ Having the ability to accomplish relatively clearly Assistant manager Associate researcher unit. defined tasks independently Carry out standard routine, repetitive tasks under the superiors’ guidance or according to various Staff Researcher guidelines - including the supply of information within an organization - or assist in task implementation by superiors or other team members

Performance Management System G4-LA11

Kumho Tire’s performance management system consists of capability assessment - which measures and evaluates an employee’s knowledge, skills, and behavioral characteristics as shown in the employee’s task implementation processes – and performance assessments that measure and evaluate the employee’s performance outcomes and procedural efficiency/effectiveness.

Kumho Kumho Tire Group Job Leadership common Outcomes common competency competency competency

Competency Performance

Measure an employee’s knowledge, skills, and Measure an individual’s or an organization’s level of behavioral characteristics as shown in the employee’s performance outcomes as created through the knowledge, task implementation processes skills, and actions of such individual/organization

Compensation System Kumho Tire’s compensation system aims to present clear goals at the company, team, or individual level within the bounds of the employees’ discretion and to differentiate the level of employees’ annual salary in accordance with the outcomes achieved by organizations or individuals. The company’s annual salary scheme is designed such that even low-ranking employees are compensated at a level that is on a par with that of higher-ranking counterparts in accordance with their performance outcomes.

Compensation System

Salary sections Deputy general General manager/ Assistant Redundant manager/Senior Chief Researcher manager/ sections researcher Manager, Staff/ Associate junior researcher Researcher researcher

Ranks Boosting Personnel Securing and Cultivating Building Trust-based Labor/ Improving Employee Management Efficiency Talented Personnel Management Relations Welfare Benefits

Talent Fostering System requirements. Over the past three years, this program has successfully nurtured numerous quality experts - 283 in 2011, 301 in 2012, To maximize its business outcomes, Kumho Tire strategically fos- and 282 in 2013. ters talented individuals with top-notch performance capabilities, nurtures experts in their respective areas, helps accelerate Company-wide Specialized Quality Training change and innovation, establishes a corporate identity through the sharing of values, and develops an organizational culture of Kumho Tire has developed and offered the ‘Company-wide Spe- field-oriented, self-initiated learning. cialized Quality Training’ to all of its employees on a quarterly basis to help them understand the latest quality issues and build an Kumho Asiana MBA Program advanced quality mindset. This training program was completed by 2,365 employees, 5,210 employees, and 4,649 employees in This program offers our employees an opportunity to learn pro- 2011, 2012, and 2013, respectively fessional management knowledge to enable them to adapt proactively to rapidly changing business environments while helping Process Quality Training us foster talents with specialized and outstanding qualifications to promote quantitative and qualitative growth at the group level. We at Kumho Tire provide year-round ‘process quality training’ to en- These MBA courses were established as master’s courses in able employees to discuss process-related quality issues, look for al- business administration at prestigious universities in Korea. ternative solutions, and lay the foundation for the production of high- quality products required by clients. This training program was Overseas MBA Program completed by 4,265 employees in 2011, 5,468 employees in 2012, and 7,573 employees in 2013. The company plans to work out ways to Employees admitted to world-renowned graduate schools in the make improvements through quality index analysis and courses espe- US, China, and Europe are eligible for our overseas MBA program. cially designed for preventing the recurrence of mistakes. These employees are provided with financial support to help them settle in the overseas country concerned, including books Social Adjustment Education for Future Retirees G4-LA9,10 and housing arrangements, in addition to their monthly wages. Kumho Tire’s social adjustment education for future retirees in- Domestic MBA Program (Evening School Program) tends to help retirees address anxiety regarding retirement and to gain confidence in a new retirement life with new opportunities to This program seeks to select outstanding talent for evening MBA challenge themselves. Offered once a year for five days (40 courses to nurture the company’s key leaders systematically. hours), this education program addresses topics such as outplace- ment, financial planning, and health care as well as the four differ- Development of Global Talents ent major insurance programs and social adjustment. It also fea- We at Kumho Tire assist our employees in developing basic-level tures events to enhance harmony in the family. skills to enhance their global capabilities through the Chinese lan- (unit: person) guage expert program and in-house foreign language courses. Category 2011 2012 2013 Job Level-Specific Courses Trained Quality Experts 283 301 282 Specialized Quality Training for All General education courses are provided to help those who have 2,365 5,210 4,649 Employees been or who are to be promoted to new positions, so that they Process Quality Training 4,265 5,468 7,573 can improve their qualifications and capabilities and fulfill their Training for Future Retirees 68 91 95 role within the organization. Training Hours per Employee 14 15 6 External Job-related Specialized Courses To ensure that individual employees develop better job capabili- 35 ties, we at Kumho Tire assist them in taking external job-related specialized courses to foster their professional capabilities. next Step Educational Systems Through the establishment of an open employment system, Kumho Tire will recruit prominent individuals with diverse compe- Quality Improvement Course tencies and qualifications and whom it hopes will function as the Kumho Tire’s ‘Quality Improvement Course’ is intended to develop driving force behind the company’s efforts to achieve a second and operate educational programs to satisfy customers’ quality takeoff. Sustainable Harmonious Personnel Management that Values Operations of Fulfilling Quality for Customer Value Competitive Advantage Management Humans and Nature Responsibilities Enhancement

Building Trust-based Labor/ Management Relations

Committed to building mutual trust between labor and management, we are undertaking various initiatives 36 to build genuine consensus between the two; these endeavors are supported by our corporate systems.

Context Compliance with Labor Laws We comply with labor regulations, and all our employees are free to We are fully aware that building trust between labor and man- engage in labor union activities in congruence with the legally per- agement is very crucial in overcoming challenging internal/exter- missible boundary. In accordance with the paid time-off scheme nal conditions. Thus, we strive to establish trust-based labor re- that took effect in July 2010, seven union members were chosen to lations through concessions and compromises. commit themselves fully to labor union operations, with the number of unionized members and their operational scope defined. Further- more, we currently have two labor unions under the relevant government act. Each of them adheres to the labor regulations and engages in healthy competition to deliver better work conditions and Progress promote labor rights. Union membership accounts for 64.0%. Collec- tive bargaining agreements apply to all regular employees regardless Building Closer Ties between Labor and of their union membership. Management We are developing and undertaking wide-ranging programs to promote communication with workers on the ground, through which we strive to build the groundwork for trust between labor and management, boost fellowship among employees, and foster a great workplace.

Category Activities

Hold briefings on the management status Issue the newsletter ’Tongtongtong (‘Communicate’)‘Weekly Trust Distribute the Weekly Report Labor-Management Joint Volunteering Engage in labor-management joint volunteering

U-Square cultural activities Going out with Daddy Delivery of birthday cakes for spouses Pride Pink Ribbon Campaign Cheer employee’s children who will take college scholastic ability tests

Let’s compliment Birthday celebration at the process unit level Manager’s canteen food-serving service Fun Watch professional baseball games together Going out with Daddy Stage special events during scorching/ (clockwise: attending a relative’s freezing seasons celebration, watching a performance, Gifts on Valentine’s Day / White Day enjoying a Youngam cart race) Boosting Personnel Securing and Cultivating Building Trust-based Labor/ Improving Employee Management Efficiency Talented Personnel Management Relations Welfare Benefits

Status of Labor Union Operations Labor-Management Consultation System At the beginning of 2013, labor and management reached a tentative Category Labor Union 1 Labor Union 2 CBA without disputes for the first time in three years. Throughout Kumho Tire Office of the Gwangju & Kumho Tire , Name South Jeolla branches of the Korean 2013 the company attempted to solve major pending issues through Labor Union Metal Workers’ Union key labor-management consultation organizations such as Labor- Date of Management Council, collective bargaining negotiations, Joint Em- 1973. 6. 12 2011. 7. 15 Establishment ployment Security Committee, and Occupational Safety & Health Korean Metal Workers’ Union under the Committee. Korean Confederation of Trade Unions •Joined the Chemical and Textile Umbrella Operation of Key Consultation Organizations Workers’ Federation under the Korean N/A Organization Confederation of Trade Unions in 1995 Organiza- Period Consultation Contents •Restructured into the Korean Metal tion Name Workers’ Union on June 16, 2007 March- Labor- 2012 performance results distribution, (unit: person, %) April Management welfare support, retirement pension, family 2013 Council event regulations, Wi-Fi installation, etc. No. of No. of Ratio of Category Unionized Non-unionized Total Unionized Kumho Tire’s future vision, reflection of regulation changes, incentives, Workers Workers Workers Collective May-July reinstatement of discharged employees, Gwangju Plant 1,529 356 1,885 81.1% bargaining 2013 collective bargaining with Kumho Tire Gokseong Plant 1,516 250 1,766 85.8% agreement Office of the Korean Metal Workers’ Pyeongtaek 34 99 133 25.6% Union branch, etc. Plant

R&D Centers 67 402 469 14.3% Joint Aug. Employment Investment in facility (refurbishment), Seoul Office 0 666 666 0.0% 2013 Security relocation of the Yongin Research Center, etc. Total 3,146 1,773 4,919 64.0% Committee Occupational Labor Union’s Organizational Status Improvements in plants’ working environments Aug. Safety & in summer, securing alleys for process units, Category Labor Union 1 Labor Union 2 2013 Health facility replacement for the units Officer Director Committee Gwangju Office Chief Deputy Director Chairman Debt work graduation schedule, Kumho Tire (Head Office Unit) Gwangju Secretary General coupons, welfare facilities, refurbishment of Gokseong Office Director welfare building lobby, work uniform Gokseong Office Gokseong Office Deputy Director N/A improvement, comfort business trips for Gokseong Secretary General Nov. 2013 Labor-Man- retirees, resort accounts and expanded Pyeongtaek Branch Pyeongtaek Branch Director N/A – Mar. agement weekend availability, adjustment of business 2014 Council trip supports, reinstatement of discharged employees, increased number of commuter buses, pre-maturity partial withdrawal of G4-LA4 Joint Employment Security Committee retirement pension, compensation for Our ‘Joint Employment Security Committee’ was established to pro- long-term service, etc. mote job security at our domestic plants. When major changes occur in our business operation, we are obliged to serve prior notice to our labor unions as stipulated in our collective bargaining agreements.

Collective Bargaining Contents Agreement(CBA) Stipulations Management shall serve a 60-day prior Article 40 notice to labor unions and reach (Corporate splits, mergers, agreements with them. Employment, or transfers of business length of service, collective agree- operations) ments, and labor unions should be handed over as they are. next Step 37 Article 41 Management shall serve a 60-day prior (Corporate liquidation, relocation, notice to labor unions and reach an Based on the dispute-free agreement between labor and manage- or conversion of business) agreement with them prior to execution. ment, we at Kumho Tire are going to expand the operation of the Management shall serve a 90-day notice Joint Learning Organization and increase joint labor-management to labor unions and reach an agreement volunteering as a means of boosting labor-management communi- with them regarding any and all unionized Article 44 cation, among others. We will also conduct a survey on employee employee-related changes in production (New plants) volume and employment when the satisfaction throughout the company to reflect employees’ input on company wishes to establish a new the company’s future employee welfare programs so as to boost corporation in Korea. employees’ satisfaction and loyalty to the organization. Sustainable Harmonious Personnel Management that Values Operations of Fulfilling Quality for Customer Value Competitive Advantage Management Humans and Nature Responsibilities Enhancement

Improving Employee Welfare Benefits

We provide a wide spectrum of diverse welfare and benefits programs to contribute to a higher quality of life for our employees and to lay the foundation for a maximized competitive edge among individual employees. Our diverse welfare programs include employee healthcare systems and female employee 38 childbirth promotion programs.

Context Employees’ work-life balance is critical in the company’s efforts to become a sustainable organization, since employees’ increased satisfaction serves as the driving force behind corporate development.

Progress An Employee’s Birthday Party prepared by the Process Unit Concerned Welfare and Benefits: Wage and Incentives G4-LA2

Life & House Health & Family Culture & Leisure

• Livelihood support (employees’ illness or • Tuition support for employees’ children (including • Operation of Employee Association occupational injuries) college education) • Presentation of tire discount coupons • Financing for employees’ housing (house • Employee health checkups • Implementation of summer vacations and purchase, annual housing deposit, marriage • Gifts for employees’ family events(traditional subsidy of summer vacation expenses funds, funds for stable livelihood) Korean holidays, Labor Day, employees’ birthdays) • Discounts on Kumho Asiana Group products • Operation of corporate dormitories and • Rewards for long-tenured employees (Asiana Airlines, KT Kumho Rent-a-Car, Kumho employeeapartments (plant workers) Bus Lines, Kumho Resort, etc.)

Healthcare and Safety Management: Health Care for the Entire Staff

Our in-house medical and dental clinics have been in operation since they sive checkups every three years, and that employees younger than 39 were opened in 1982 to serve all our employees and their families. All and who have worked for the company for more than five years are enti- our employees undergo medical checkups every year. In addition, a brain tled to gastrointestinal series or gastroscopy every two years until they and cardiovascular disease prevention and management program operat- reach the age of 39. This allows us to offer our full support to employees ed by a professional medical organization was newly added in 2010 to in checking and managing their current health conditions. Meanwhile, our evaluate and classify all employees by level of brain and cardiovascular in-house psychological counseling center is in operation to help employ- disease risks. Our collective bargaining agreement stipulates that em- ees who require counseling services with regard to job-related or per- ployees and their spouses older than 39 years are entitled to comprehen- sonal stress. Boosting Personnel Securing and Cultivating Building Trust-based Labor/ Improving Employee Management Efficiency Talented Personnel Management Relations Welfare Benefits

Work-Life Balance G4-LA3

We at Kumho Tire place top priority on work-life balance and consequently encourage our employees to make full use of their maternity (prenatal and postnatal) and Parental leaves. We also provide them with childbirth and childcare subsidies to help solve the country’s declining birth rate. We strive to foster a family-friendly workplace culture.

(unit: person) Year Leave Seoul Gwangju R&D Gokseong Total Maternity 2 0 4 0 6 2011 Parental 2 2 2 9 15 Total 4 2 6 9 21 Maternity 6 3 1 1 11 2012 Parental 2 0 2 5 9 Total 8 3 3 6 20 Maternity 1 4 2 0 7 2013 Parental 2 4 3 5 13 Total 3 8 5 5 20

Total Maternity Leave Total Parental Leave (unit: person) (unit: person)

6 11 7 15 9 13

2011 2012 2013 2011 2012 2013

Use of Childcare Facilities (unit: person)

2011 192 37 155

2012 183 45 138

2013 138

32 106 ●Gokseong ●Gwangju ●Total Kumho Childcare Center 39

next Step For better employee welfare benefits, we will expand our employee welfare facilities and build a platform wherein an increased number of employees share the company’s long-term vision and strategies while enjoying the company’s diverse welfare benefits. Sustainable Harmonious Personnel Management that Values Operations of Fulfilling Quality for Customer Value Competitive Advantage Management Humans and Nature Responsibilities Enhancement

Take Action for Green & Safety

Global interview Environmental Climate Management Change “The biggest task for the sustainability of society and enterprises and even Response System the survival of mankind is environmental protection. Kumho Tire thus seeks Use of Company Sustainability eco-friendliness in its systems, products and a whole range of its corporate high-efficiency, eco-friendly -wide management activities. It also works hard to prepare itself for the emisison trading system energy strategies strategies set to be implemented in Korea soon. Besides, safety is a critical issue Eco-friendly Safety in the tire manufacturing industry, something that must be managed by product and health development management manufacturers on a continual basis.” and market expansion Global Environmental Using High-Efficiency, Climate Change Eco-Friendly Product Safety and Health Management Eco-Friendly Energy Response System Development and Market Expansion Management

Management that Values Humans and Nature 934 Environmental Investment (KRW million) 342,890 Raw Material Consumption (ton)

5,961 Energy Consumption (TJ) 315,594 GHG Emissions (tCO2e)

(as of 2013)

Progress Issues • Operation of Kumho Tire Environment, • Overall (environment-related expenditures and investments) Safety, and Health(KESH) system • Increasing number of consumers who value health, • Response to environmental regulation eco-friendliness, and social-friendliness • Increased investments in environmental facilities • Energy consumption • Environmental impact assessment • Use of raw materials • Development of eco-friendly tires and EV-exclusive tires • Environmental degradation • Building FEMS (Factory Energy Management System) • Effluents and waste • Installation of facilities to conserve energy • Emissions • Establishing an organization dedicated to responding to the • Products and services (environmental impact of tires) implementation of emissions trading • Occupational safety and health • Upgrading the manual on disasters and emergency measures and building a fire prevention system • Measurement and management of hazardous materials at operation sites • Holding a ceremony to declare win-win cooperation with suppliers and securing their commitment to safety management

Performance Category 2011 2012 2013 934 Raw material consumption (ton) 376,804 358,399 342,890 320,046 Wastewater discharge (㎥) G4-EN22 155,348 234,917 202,095 319,260 41 Water pollutant discharge (ton) 4.015 7.495 6.841 820 Air pollutant emissions (ton) 408 338 355 315,594 799

GHG emissions (tCO2e) 320,046 319,260 315,594 Energy consumption (TJ) 5,924 5,966 5,961 Waste generation (ton) 15,615 16,430 16,195 Environmental investment (KRW 1M) 820 799 934 ※The total volumes of the company’s water pollutant discharge and air pollutant 2011 2012 2013 2011 2012 2013 emissions were recalculated according to the country’s Environmental Information Disclosure System. GHG emissions (tCO2e) Environmental investment (KRW 1M) Sustainable Harmonious Personnel Management that Values Operations of Fulfilling Quality for Customer Value Competitive Advantage Management Humans and Nature Responsibilities Enhancement

Global Environmental Management

For the first time in the industry in Korea, Kumho Tire has acquired ISO 14001 certification, an international standard for environmental management systems. It consolidates its environmental management system through the approach to the PDCA process. The company establishes its environmental management plan 42 on a yearly basis, evaluates its performance, and promotes improvements.

Context

The sustainability of Earth is being challenged by climate changes, abnormal extreme weather, depletion of natural resources, and environmental pollution. Kumho Tire operates an environmental management system based on international standards for purposes of enhancing environmental values for future generations as well as its corporate values through eco-friendly management. It strives to minimize the burden on the environment within and outside the organization.

KESH(Kumhotire Environment Safty & Health mangement) System Progress Building Eco-friendly Business Sites Response to Environmental Regulation Global Environmental Management System Kumho Tire is affected by diverse environmental regulations related to air and water quality, waste, hazardous chemicals, and energy. It Kumho Tire runs KESH, a comprehensive information system on attempts to minimize environmental risks through compliance with environment, safety, and health, to prevent environmental safety laws and implementation of internal inspections to address the re- accidents; it shares progress and performance among the rele- cently intensifying environmental restrictions. For new business vant departments in real time. sites, the company performs internal infrastructure inspections according to the relevant legislation and issues approval accordingly.

Departments Dedicated to Global Environmental Management

Production Environmental Plant General Environmental CEO Technology Safety Team Manager Protection H/Q Leader

G. Production Environmental Safety/ Planning Team Management Health/ Leader Chief Firefighting Global Environmental Using High-Efficiency, Climate Change Eco-Friendly Product Safety and Health Management Eco-Friendly Energy Response System Development and Market Expansion Management

Environmental Investment and Expenditure G4-EN31 Water Consumption Management Kumho Tire implements a mid- to long-term investment plan Kumho Tire supplies water from waterworks and four water designed to minimize the environmental impact of its industrial wells. To conserve water, it purifies and recycles wastewater as and business activities. In 2013, it invested KRW 934 million - or well as the water used for its air pollution prevention facilities. % - 17 more than the investment during the previous year in the Water Usage expansion of wastewater prevention facilities and air emissions (unit: m3) reduction facilities and inspection fees and expenses. 2011 1,724,257 Environmental Facility Investments (unit: KRW 1,000) 429,949 1,294,308 2011 2012 2013 2012 1,713,732 Discharge Fees 84 0 0 407,048 1,306,684 Investments in Wastewater 172,332 197,036 185,650 Leak Prevention Facilities 2013 1,424,082 Investments in Air 636,731 599,259 74 2 ,183 173,604 1,180,426 Emissions Facilities Others(inspection fees and ●Waterworks ●Groundwater ●Total Water Consumption 11,318 3,086 6,649 expenses) Total Water Usage Total 820,465 799,381 934,482 3 (unit: m )

Total Investments in Environmental Facilities (unit: KRW 1,000) 934,482 820,465 799,381 1,724,257 1,713,732 1,424,082

2011 2012 2013

2011 2012 2013 Water Quality Management For water quality management in and around its business sites,

Performance in the Operation of Kumho Tire minimizes the discharge of pollutants through the instal- Eco-Friendly Business Sites lation of optimal prevention facilities and removal of oil from wastewater by means of flotation. The company controls its water quality Kumho Tire evaluates the performance of all its business sites at according to its strict internal standard, i.e., less than 30% of the le- home and abroad in the areas of raw and subsidiary materials and gally allowed levels of pollution. discharge of pollutants and reflects the results on its improvement plans. Discharge of Water Pollutants (unit: ton)

Raw Material Management G4-EN1 2011 4.015 We use natural rubber, carbon black, and tire cords for the manufac- 1.528 2.487 ture of tires. In 2013, we used 342,890 tons of raw materials - or 5% less than the quantity we used in 2012 - due to a reduction in tire 2012 7.495 production. 2.576 4.919 (unit: ton) 2013 6.841 376,804 1.865 4.976 358,399 43 342,890 ●SS* ●COD** ●Total * SS: Suspended Solid ** COD: Chemical Oxygen Demand

2011 2012 2013 ※Based on the quantities used in domestic operation sites including natural rubber, synthetic rubber, carbon black, tire cords, etc. Sustainable Harmonious Personnel Management that Values Operations of Fulfilling Quality for Customer Value Competitive Advantage Management Humans and Nature Responsibilities Enhancement

Air Quality Management G4-EN21 Total Waste and Recycling Ratio Kumho Tire continues to expand facilities designed to prevent air 16,430 16,195 pollution to manage the quality of air in and around its business 15,615 sites. The company detects environmental accidents early . through security cameras It also minimizes environmental dam- Total Waste age from odor by applying odor eliminator to processes. (unit: ton) 2011 2012 2013

Air Pollutant Emissions 44 (unit: ton) 83.3 82.5 84.0

2011 408

115 160 133 Waste Recycling Ratio (unit: %) 2011 2012 2013 2012 338

87 137 114 Waste Treatment Status G4-EN23 (unit: %) 2013 355 2011 2012 2013 88 142 125 Commissioned landfilling 673 718 672 ● ● ● ● Dust NOx SOx Total Commissioned 1,939 2,154 1,991 incineration Commissioned recycling 13,003 13,558 13,532 Hazardous Chemicals Management G4-EN24 General waste 13,703 14,451 14,538 Kumho Tire conducts surveys on its discharge of chemicals each Designated waste 1,913 1,978 1,657 year to minimize emission into its neighboring communities. It continues to work hard to replace its chemicals with eco-friendly materials. The company also performs joint drills with the relevant authorities to improve its ability to respond to spill accidents Management of Ozone-Depleting Substances(ODS) G4-EN20 early. Thanks to such efforts, the company recorded zero hazard- Fully aware of the impact of ODS, Kumho Tire strives to minimize ous material spill accidents in 2013. ODS generation. It largely uses steam-based absorption refrigeration for refrigerant and CO as fire-extinguishing agent. The company Consumption of Hazardous Chemicals 2 (unit: ton) uses ODS in a highly restricted manner and only on the grounds of safety. 2,825 2,711 2,630 (unit: tonCFC-11) 2011 2012 2013 HCFC-22 0.023 0.149 0.172 HCFC-123 0.008 0.075 0.020 Halon-1211 - - - Halon-1301 0.230 - - 2011 2012 2013 ※Based on 1 ton of CFC-11 equivalent and charging amount ※Hydrochloric acid, sodium hydroxide, K-13, etc.

Waste Management G4-EN25 Environmental Impact Assessment To reduce its waste generation, Kumho Tire manages its defective In 2013, Kumho Tire conducted an environmental impact assessment products and scrap, continues to improve its production processes, for all its processes in nine areas (air pollution, water quality, waste, and makes progress in resources conservation and productivity work environment, soil contamination, noise, energy consumption, improvement. As for the transport of waste including scrap tires resource consumption, and impact on ecology) for the purpose of referred to in the attachments to the Basel Convention, more than minimizing the direct and indirect impacts of its business activities 80% of the company’s waste is handled by outside professional on the environment. The company also built a professional education recycling businesses. and associated systems for systematic environmental impact assessment. It has reflected them on its environmental management plan, making improvements continually. Global Environmental Using High-Efficiency, Climate Change Eco-Friendly Product Safety and Health Management Eco-Friendly Energy Response System Development and Market Expansion Management

Eco-friendly Communication Activities One-Company-One-Mountain-One-Stream Clean-up Activities In recognition of the impact of the tire manufacturing industry on the environment, Kumho Tire has designated Mount Eudeungsan and Hwangryong River in Gwangju and Mount Cheonggye and Seomjin River as the sites of its intensive clean-up activities. Through its regular clean-up campaigns , it intensifies its community engagement and promotes a culture of environmental protection in the areas.

Clean-up activity along Clean-up activity along Hwangryong River (Mar. 28) Hwangryong River (Oct. 29)

Clean-up of a community near its plant Clean-up along Seomjin River Clean-up of a stream (June 30) (Mar. 21) in Mount Cheonggye

Surveys on Environmental Pollution Creation of Natural Environment Park in Gokseong Plant around Kumho Plants G4-EN26 In 2001, Kumho Tire built the area surrounding the wastewater treat- To prevent the environmental pollution of the communities around its ment facility of Gokseong Plant into an environmental park, growing manufacturing plants, Kumho Tire conducts surveys on air and water trees and lawns, creating a fish farm, and raising deer. The park serves quality and noise and odor levels regularly. In 2013, the company mea- not only as a place to relax for employees but also as an environmental sured the noise level in areas adjacent to Gokseong Plant. Further- education site for students and residents. more, to identify the impact of the plant’s wastewater on water quality, it designated eight spots along the Seomjin river streams and checked the water quality of the areas intensively. Gokseong Plant discharges its wastewater directly into nearby streams. To minimize the impact on the water ecology, the company checks the ecotoxicity regularly. For the past two years, it maintained the level within 30% Next Step of the legally allowed toxicity. G4-SO1,2 Kumho Tire will continue to implement its mid- to long-term plan 45 Category Time Place according to its environmental management strategies to introduce a Stream Pollution 8 spots along the stream global environmental information system and upgrade and expand its Jan. 14 Survey close to Gokseong Plant environmental performance evaluation system. Through such efforts, Areas adjacent to the company will address rapidly changing international environmental Noise Surveys Jan. 14 and Nov. 26 Gokseong Plant regulations while taking the lead in reducing the generation of environmental pollutants due to business activities. Sustainable Harmonious Personnel Management that Values Operations of Fulfilling Quality for Customer Value Competitive Advantage Management Humans and Nature Responsibilities Enhancement

Using High-Efficiency, Eco-Friendly Energy

For improvements in energy efficiency, Kumho Tire upgrades its energy consumption monitoring system, introduces facilities characterized by high-efficiency energy consumption or use of new and renewable energy, and attempts to increase its overall use of eco-friendly energy. 46

Context Using High-Efficiency Facilities Replacement with LED Lights Across the world, business activities have been associated with serious Kumho Tire has replaced its lighting for all its plants with LED concerns over issues of depletion of natural resources and pollution of lamps to reduce its electricity consumption. The total of 53,323 the environment. To help alleviate such concerns, Kumho Tire has intro- lights were replaced and we expect to use 4,963MWh less elec- duced a cutting-edge energy management system for all its manufac- tricity each year. turing plants, promoted systematic efforts to reduce its energy consumption, and increased the proportion of new and renewable energy in Energy conservation through Boiler Exhaust Gas Economizers its energy portfolio. It seeks to transform into a global leader in energy Gokseong Plant has installed boiler economizers that use ex- management. haust gases from boilers to preheat cold water and improved the efficiency of its boilers by around 5.32%. The savings are equal to approximately 500,000N㎡ annual reduction of LNG, cutting down the emission of NOx as well.

Progress Using Eco-friendly Energy Efforts for Improved Energy Efficiency Photovoltaic Power Generation Kumho Tire takes the lead in photovoltaic power generation as a Building FEMS (Factory Energy Management System) means of easing its dependency on fossil fuel-based electricity To reduce GHG emissions and energy consumption, Kumho Tire generation. Gokseong Plant installed in 2008 a 30kW class solar has been building an energy management system. The company power facility that has supplied a total of 142MWh of electricity. finished the work for Gokseong Plant in 2009 and that for Py- The Yongin Research Center generates 388kW of solar energy or eongtaek Plant in 2011. For Gwangju Plant, it is expanding and 3.6% of its total energy consumption through the 1st-phase, complementing the existing energy management system in 120-panel project in 2013 and the 2nd-phase, 276-panel project stages between 2014 and 2015. Through such efforts, Kumho in 2014. Tire will figure out the optimal energy consumption for each of its production facilities to optimize its energy efficiency.

Water Inlet: 110°C

Water Outlet :148.4°C Feedwater Tank LNG Boiler 30ton Exhaust Gas Exhaust Gas Inlet :148.4°C Outlet :130°C

Chimney

Air Supply 40°C Economizer Air Fan

LED Lamps in Gwangju Plant LED Lamps in Gokseong Plant Boiler Exhaust Gas Economizer Global Environmental Using High-Efficiency, Climate Change Eco-Friendly Product Safety and Health Management Eco-Friendly Energy Response System Development and Market Expansion Management

Solar Power Generation Energy Consumption by Basic Unit G4-EN5 (unit: kWh/GJ) (unit: TJ, ton)

Location 2011 2012 2013 Total Category 2011 2012 2013 , , , , Gokseong Plant 31 897 39 779 33 929 105 605 Production Power 417,886 397,302 385,373 Kumho Tire (ton) Generation 14,160 14,160 R&D Center (kWh) LNG 0.0025 0.0028 0.0029 , , , , Total 31 897 39 779 48 089 119 765 Bunker C 0.0023 0.0024 0.0024 , Oil Gokseong Plant 306 382 326 1 014 Basic Unit Energy Kumho Tire (TJ/ton) Others 0.0002 0.0002 0.0002 Replacement 0 0 136 136 R&D Center (GJ) Electricity 0.0093 0.0098 0.0102 , Total 306 382 462 1 150 Total 0.0143 0.0151 0.0156

Total PV Power Generation ※Based on the total figures of three plants 48,089 (unit: kWh) (Gwangju, Gokseong, and Pyeongtaek 39,779 31,897 Energy Conservation Activities G4-EN6 Kumho Tire has engaged in energy conservation projects since 2012 with focus on areas with higher GHG reduction effects. In 2013, the company saved 13TJ of energy through the replace- 2011 2012 2013 ment of air compressors and water treatment pumps with high- efficiency devices and a steam condensate recovery project

(unit: No. of cases, TJ, KRW 1 M)

Category 2011 2012 2013 No. of Projects N/A 19 18 Energy N/A 20 13 Conservation (TJ) Investments (1M) N/A 538 2,973 Solar Panels in Gokseong Plant Solar Panels at the Kumho Tire R&D Center Savings (1M) N/A 364 189 Energy Consumption

Use of Raw Materials and Energy G4-EN3 Kumho Tire pursues an eco-friendly energy mix including an increased proportion of environment-friendly energy LNG and a decreased ratio of environment-polluting bunker C oil. Recently, the company’s energy basic unit has risen somewhat, largely due to reduced production caused by the economic slowdown. The company strives to prevent the overall energy consumption from rising despite the increased energy demand for cooling and heat- ing owing to extreme weather. Energy Consumption by Energy Type (unit: TJ)

Category 2011 2012 2013 LNG 1,044 1,098 1,101 Next Step 47 Direct Bunker C 976 968 931 Kumho Tire plans to improve its energy management level Energy Oil through the establishment of an energy management system in Others 73 65 71 all of its plants and continuous improvements in its eco-friendly Indirect energy portfolio including the introduction of new facilities run by Electricity 3,891 3,881 3,921 Energy new and renewable energy. It will also optimize the operation of Total - 5,984 6,012 6,024 its manufacturing and utility facilities, implement an energy efficiency compensation system, and intensify its R&D on resources ※The figures above are the total quantity for 31 business sites; based on conservation and raw materials recycling. third-party assurance of the goal management system Sustainable Harmonious Personnel Management that Values Operations of Fulfilling Quality for Customer Value Competitive Advantage Management Humans and Nature Responsibilities Enhancement

Climate Change Response System

To cope with climate change and respond to the country’s implementation of the cap-and-trade system, Kumho Tire has established a mid- to long-term goal for actions on climate change. It continues to ameliorate its GHG emissions management system and swaps its traditional fuel 48 for eco-friendly fuel as part of its diverse efforts to reduce GHG emissions.

Context Actions on the Emissions Trading System G4-EC3 Companies are expected to pay an increasing amount of money to As a leader in responding to climate change, Korea is actively try- purchase emissions rights starting 2015 in line with the country’s im- ing to reduce its GHG emissions through the implementation of plementation of the cap-and-trade system. Kumho Tire plans to re- the cap-and-trade system. In line with such policy, Kumho Tire has form its organization so that it can implement systematic climate established an accompanying mid- to long-term plan including the change response strategies and build an efficient carbon asset man- establishment of a GHG management system and the implemen- agement system for the purpose of seizing the opportunity to secure tation of GHG emissions reduction activities. emissions rights and create revenues in the area of GHG emissions reduction. This way, the company will be able to establish a virtuous circle of improved GHG basic unit and reinvestment.

Cap-and-trade Response Organization Progress

Trade Dept. Government Calculating Dept. Establishment of Climate Change Regular Trading of Managing the Response System Emissions Rights Quantity of Mid- to Long-term Goal and Strategies for Business Site Emissions Responding to Climate Change To respond proactively to the country’s cap-and-trade system, Kumho System Overall Monitoring Dept. Management Control Dept Tire has improved its traditional GHG emissions management system Controlling Dept. •Response to Discharge and taken various measures, including companywide education and Government Measures Building Facilities creation of an online management system with the goal of establishing Computerized •Developing Strategies •Internal Audit Running a a comprehensive global climate change response system. Systems Computerized System

Mid- to Long-term Goals for Climate Change Responses

Present Mid- to Long-term Goals Promotion Effects

Short term Mid Term Long Term Improvements in Management Relevant Organization and Systems Organization R&R Systematic Establishment of Strategies for Adaption to the GHG Emissions Emissions Rights System Cost Reduction Management Improvements in Management Implement for All Persons in Charge Organization and Systems Employees Effective Efficient Response to Carbon Asset Improvements in Reduction Mid- to Long-term DB Identify Suppliers’ GHG Emissions Capabilities Roadmap Building Management Reduction Restriction Building a Computerized Pre-surveys System Building Active System Promotion of Green Company Global Calculation Trends Monitoring Overseas Build an Integrated Image Management & Channel Building Dissemination of Domestic System Global System Global Environmental Using High-Efficiency, Climate Change Eco-Friendly Product Safety and Health Management Eco-Friendly Energy Response System Development and Market Expansion Management

Status of GHG Emissions Efforts to Reduce GHG Emission Kumho Tire measures GHG emissions from its business activities Reduction of GHG Emission through the establishment of GHG emissions goal according to its Our three GHG emissions reduction initiatives - undertaken volun- goal management standard and ensures the transparency of its tarily at Kumho Tire concerning the installation of fuel economizers, emissions performance through third-party assurance. The compa- transition of boiler fuel to LNG, and remodeling of vulcanizers - were ny’s GHG emissions for 2013 stood at 319,095 tCO2e. According registered and certified as GHG emissions reduction projects for five to an analysis, the proportions of indirect and CO2 emissions were years between 2008 and 2012. This way, the progress we made in higher, and the basic unit somewhat rose following reductions in curbing our GHG emissions was officially recognized. the product, but the absolute quantity of GHG emissions dropped. GHG Emissions Reduction through the Five-Year GHG Emissions GHG Emissions (by scope) G4-EN15,16 Reduction Project* in Korea G4-EN19

(unit: tCO2e) (unit: tCO2e) Installation of Fuel Fuel Transition Remodeling of Total 2011 319,390 Economizers to LNG Vulcanizers 130,403 188,987 1,519 7,806 4,014 13,339

2012 319,273 *GHG emissions reduction project: This program aims to evaluate self-initiated GHG emissions reduction projects undertaken in Korea based on 130,776 188,497 objective criteria. Reduction targets are registered, and progress is veri- 2013 319,095 fied and certified during the project period, during which the final reduction outcomes are certified. 128,639 190,456

●Scope1 ●Scope2 ●Total Transition to LNG To replace bunker C oil with clean energy, Kumho Tire has imple- GHG Emissions (by GHG type) mented the fuel transition to LNG for 8 out of 10 steam boilers in- (unit: ton) stalled in its Gwangju and Gokseong Plants; thus reducing its GHG

Category 2011 2012 2013 emissions by as much as 36,239tCO2e for the past three years.

CO2 317,335 318,486 318,321 GHG Emissions Reduction through Fuel Transition to LNG

(unit: tCO2e) CH4 8 8 8 Category 2011 2012 2013 Total N2O 2 2 2 HFCs 0 0 0 Gwangju Plant 11,233 12,305 9,513 33,051 PFCs 0 0 0 Gokseong Plant 0 0 3,188 3,188 SF6 0 0 0 Total 11,233 12,305 12,702 36,239

※The figures above are the total quantity for 31 business sites; based on third-party assurance of the goal management system; for consistency, the national calorific value at the end of 2011 has been applied to all the measurements above.

GHG Emissions in Basic Unit G4-EN18

Category Unit 2011 2012 2013 Production ton 417,886 397,302 385,373

GHG tCO2e 315,891 316,665 315,594 LNG Governor Boiler Refurbishment

Basic Unit tCO2e/ton 0.7559 0.7970 0.8189

※ The total figures for the company’s three plants (Gwangju, Gokseong, and Pyeongtaek) 49

Next Step Kumho Tire will continue to reduce its GHG emissions through the implementation of its mid- to long-term strategies including systematic response to the country’s cap-and-trade system. Sustainable Harmonious Personnel Management that Values Operations of Fulfilling Quality for Customer Value Competitive Advantage Management Humans and Nature Responsibilities Enhancement

Eco-Friendly Product Development Climate Change Response System and Market Expansion Kumho Tire applies diverse design technologies to develop eco-friendly products and uses environment- 50 friendly materials. As a result, it continues to acquire environmental certification. Kumho Tire has developed high-fuel efficiency tires and EV tires for the first time in the industry. It plans to expand its presence in the eco-friendly product markets continually.

Context KUPAS, a Low-Noise Tire Design Technology Kumho Tire uses KUPAS, a low-noise tire design technology, to pre- Stakeholders’ interest in eco-friendly goods continues to grow in line dict pattern noises from the initial tire design phase. In addition, the with increasing concerns over the depletion of natural resources, cli- company utilizes the ABAQUS FEM program to measure the impact mate change, and environmental degradation. Kumho Tire contrib- of tire pattern noise and SYSNOISE program to analyze tire-radiated utes to the minimization of environmental impact through the devel- noise. opment and marketing of eco-friendly products created through the combination of its product development technologies and the use of raw materials containing little or no hazardous substances.

Progress

Development of Eco-Friendly Products G4-EN27 ICOS(Integrated Component Optimization System) Using a super computer, Kumho Tire applies ICOS at the design stage so that it can predict the stress and strain rates of each component to be incorporated into a product and ensure that the component delivers optimal performance. ICOS allows us to optimize the combined performance of tire structure, profile, and materials through the application of finite element analysis and ETOPS (Environmental Technolo- gy-Oriented Performance Simulation), a genetic algorithm technique. The application of the ETOPS design analysis technique enables opti- mizing the performance of the new eco-friendly tires in the areas of KUPAS (Kumho Pattern Analysis System) enables pattern noise prediction noise, rolling resistance, abrasion, and traction through precise predic- and radiated noise analysis. tion of the features at the design stage.

ICOS (Integrated Component Optimization System) ETOPS(Environmental Technology Oriented Performance Simulation)

Internal Durability Temperature Improvement

Rolling Mileage Noise Rolling Resistance Resistance Improvement ETOPS

ICOS

Friction Anti-abrasion Energy Improvement Abrasion Traction Global Environmental Using High-Efficiency, Climate Change Eco-Friendly Product Safety and Health Management Eco-Friendly Energy Response System Development and Market Expansion Management

Tire Structural Design Technology The company also strives to refrain from using raw materials containing Kumho Tire makes improvements in both mileage and anti-abrasion heavy metals that are hazardous to the environment and human body +6 performance with the data obtained through its tire performance pre- (Pb, Cd, Cr and Hg) and replace the solvent used in manufacturing diction technologies and tire structural design through its tire design processes with benzene-free solvent to make improvements in its technologies. Thus, it can develop eco-friendly tires that demonstrate work environment and eliminate environmentally hazardous elements outstanding durability and braking capability even in harsh conditions. Rate of Substitution with Low PAHs As for rubber materials, the company applies functional silica rubber – (unit: %) which reduces rolling resistance with increased rebound elasticity - to Location 2011 2012 2013 develop eco-friendly products. It expands the application of the tech- Korea 96 98 100 nology to the development of new products. Kumho Tire makes continuous progress in both R&D and commercialization of new material belts, high-strength carcass,* and bead parts*. Use of Silica Structural Design Technologies The replacement of carbon black – which is used as stiffener for tire tread compound - with silica reduces tire rolling resistance and con- Application of Endless Full Application of Asymmetrical sequently improves the vehicle’s fuel efficiency. Kumho Tire has suc- Cap ply* Tread* Profile

•Improved Fuel Efficiency •Improvements in Wet Braking cessfully carried out research on how to realize the optimal physical and Braking Power and Fuel Efficiency through properties and tire performance through the use of silica. It has in- improved ground contact creased the proportion of the use of eco-friendly silica compared to pressure and ground contact the traditional stiffener carbon black. The company mostly uses silica patterns compound for its new tires. In 2013, the company’s use of all-silica compound (containing more than 75% silica component) rose 35% compared to 2012. Furthermore, the company has improved its tire performance in the areas of wet braking and high-speed driving in winter through the application of high-dispersion, multi-purpose silica compound.

Application of high-strength carcass* •Improvements in durability and stability in vehicle steering

Application of new material belt* cords •Improvements in fuel efficiency and Application of Silica stability in vehicle steering high-strength beads*

* Tread: Tire part that actually comes in contact with the ground * Carcass: The combination of plies and bead parts, which, together, constitute the main structure of a tire, supporting the weight and absorbing shock * Bead: Edge of a tire connecting the tire to its rim High-dispersion, Multi-purpose Silica Compound * Belt: Part inside a tire, absorbing shock and supporting the treads that come in contact with the road to ensure vehicle safety * Cap ply: Special cord sheets bonded to tire belts, improving tire Use of Recycled Rubber G4-EN2 performance in driving while preventing belt separation Recycled rubber refers to rubber made of tires and tubes through the elimination of impurities followed by desulfurization and pul- . Use of Eco-friendly Materials verization The company has utilized recycled rubber since 2006 51 for the conservation of natural resources. In 2013, it used 2,426 Replacement of Hazardous Materials tons of recycled rubber. The company uses recycled rubber in a In line with the principle of precautionary approach to the Rio restricted manner, taking into account its product quality and Declaration, Kumho Tire has reduced the use of raw materials performance. containing PAHs in oil since 2006. In 2013, the company substi- (unit: ton) tuted - with low-PAHs oil - the oil used in all its plants in Korea. Category 2011 2012 2013 *PAHs (Polycyclic Aromatic Hydrocarbons): Hydrocarbons containing multiple benzene rings that have been identified as largely toxic and even Recycled Rubber 3,851 3,069 2,426 carcinogenic in some cases Sustainable Harmonious Personnel Management that Values Operations of Fulfilling Quality for Customer Value Competitive Advantage Management Humans and Nature Responsibilities Enhancement

Use of Packing Material G4-EN28 Criteria for Eco-friendly Product Tire packing material (wrapping paper) cannot be recycled. Thus, Requirements Kumho Tire made a “Declaration of Tire Wrapping Prohibition” for the first time in the industry in 2010. Climate Conservation Use of Change of natural eco-friendly User Safety / Protection resources resources Pleasantness

52 •Reduced •Optimal •Increased Use •Outstanding Rolling Structure of Natural Performance Resistance Resources on Wet • Use of Surfaces Eco-friendly •Low Noise Materials Tire Wrapping Wrapping Waste

Ways to Meet the Requirements

Certification of Eco-friendly Products Expanded Markets for Eco-friendly Products Kumho Tire obtained an Eco-Label and a Carbon Label from the Kumho Tire has continued to increase its portfolio of eco-friendly Korea Environmental Industry & Technology Institute under the Min- products that meet the criteria for green product certification. The istry of Environment for the first time in the industry. Currently, it company has launched an ecowing series, the cutting-edge, eco- holds certification for four products. To meet the requirements of friendly tire with the government’s Class 1 energy consumption effi- external agencies and institution for the production of eco-friendly ciency rating, for the first time in the industry. It has applied eco- tires, Kumho Tire will continue to strive to expand its portfolio of friendly technologies to the company’s high-performance products certified eco-friendly products. like SOLUS TA31. In addition, Kumho Tire expands its market further through the development of eco-friendly products such as the exclu- Carbon Label (certification sive-for-electric vehicle WATTRUN VA31. Category Eco-Label for products with low-carbon footprint) •SOLUS Xpert Eco-label is given to products •ECSTA LX Certified showing improvements in The carbon label contributes •KRA01 Eco-friendly “eco-friendly performance” to the expansion of •KCA01 Tires against those of competitors market-driven, low-carbon and which serve the same consumption culture by Meeting the Criteria for Green Product Certification purpose. This offers customers indicating the CO emissions Definition 2 information on eco-friendliness converted from the GHG - and promotes consumers’ emissions generated Improvements in Eco friendly Technologies preference for products with throughout the entire the label and companies’ manufacturing process of a development of eco-friendly given product. products. Cutting-edge, Eco-friendly •ecowing S Tires

Certification Class 1 Energy Consumption Efficiency Rating Mark

Creating Markets for Expansion of Eco-friendly Eco-friendly Tires Technologies ecowing S, 205/65R15 Certified ecowing S, 195/60R14 ecowing S, 215/60R16 Products KCA11, 11R22.5

EV Tire HP*Tire

Photos of Certified Application of high-fuel Narrow & Toll Products efficiency technologies •WATTRUN VA31 •SOLUS TA31 *HP: High Performance Global Environmental Using High-Efficiency, Climate Change Eco-Friendly Product Safety and Health Management Eco-Friendly Energy Response System Development and Market Expansion Management

‘WATTRUN’ Exclusive for Electric Vehicles Execution of MoU to Expand EV Supply In April 2013, Kumho Tire launched WATTRUN, an EV-Exclusive Tire In March 2013, Kumho Tire signed a ‘Memorandum of understand- brand, for the first time in the industry in Korea after approximately ing to expand the supply of electric vehicles’ with the Ministry of two years of R&D. It is equipped with low-noise and comfort tech- Environment, Korea Electronic Vehicle Industry Association, and nologies tailored for EVs. In terms of material, the tire has realized five companies (Kumho Tire, LG Chem, POSCO, City Car, and both high strength and light weight. WATTRUN is slated to be sup- LSIS). Various business models are expected to be developed in plied exclusively to Renault Samsung for its 100% pure EV car SM3 Z.E the market including EV car sharing, rent-a-car, and taxi services. for five years from 2013 to 2018. Currently, the tire is being supplied for the Soul EV launched by Kia Motors, Korea.

WATTRUN, EV-Exclusive Tire Signatories to the MoU for the Expanded Supply of Electric Vehicles

Next Step To open up new markets for its green tires, Kumho Tire will focus on the development of premium tires equipped with cutting-edge, eco-friendly technologies backed by the company’s proprietary tire design know-how and continuous technical development in the area of electric vehicles as a new paradigm for the automotive industry.

*HP: High Performance Sustainable Harmonious Personnel Management that Values Operations of Fulfilling Quality for Customer Value Competitive Advantage Management Humans and Nature Responsibilities Enhancement

Safety and Health Management

Healthy employees of Kumho Tire and its suppliers form the company’s competitiveness. Kumho Tire strives to reinforce its safety and health management to ensure that all of its personnel can work in a safer, more pleasant environment. 54

Occupational Safety and Health Committee meetings at the re- Context quest of the joint labor-management chairmanship of the com- In line with society’s increasing focus on companies’ responsibili- mittee to exert all-out efforts in continuing to improve employ- ty for safety, Kumho Tire has worked out a company-wide policy ees’ work environments. on safety and health. Aware that a company’s safety and health Activities of the Occupational Safety and Health Committee management ends up being the driving force behind the company’s sustainable growth, the company strives to eliminate ele- • A professional industrial ventilation institution carried out an assurance test on the current ments detrimental to the promotion of employees’ safety and Work ventilation status at the curing process. health. Environment • Kumho Tire took actions based on the institution’s recommendations.

• The company adjusted the height of reflectors Safety and installed in the main alleys of the casting process Progress Health to secure sufficient space for pedestrians. • The company marked boundaries for pedestrians’ Compliance with the International Standard safe passage. for Health and Safety Management In October 2013, the company acquired Accident Severity Rate Management G4-LA6 OHSAS 18001 certification, an interna- Kumho Tire continues to increase investments in the introduc- tional occupational health and safety tion of new facilities and functional improvements in existing fa- management system, as a result of its cilities to improve its work environments while promoting a cor- efforts to upgrade occupational health porate culture that places top priority on employees’ voluntary and safety management to an interna- compliance with the safety regulations. To that end, the company tionally recognized level. Jointly devel- takes various actions to prevent workplace accidents - such as oped by 13 European countries including occupational accident prevention campaigns and education on the UK, the international health and safe- safety and health - in addition to counseling services for work ty management system certifies that an accident victims. Labor and management join forces to come up organization is equipped with a system with practical measures to minimize occupational accidents and conducive for the identification of risk factors and the implemen- implement them most effectively. tation of precautionary actions to manage the risks on its own. (unit: case, %) Operation of the Occupational Safety and Category 2011 2012 2013 G4-LA5, 8 Health Committee No. of Occupational 263 267 222 Kumho Tire holds a quarterly meeting of the Occupational Safe- Accidents ty and Health Committee consisting of 7 representatives each Accident Severity 2.81 2.76 2.30 of the union and management to discuss the overall safety and Rate* health situations of its business sites on the ground, identify any Accident Rate** 6.01 6.10 5.28 and all risk factors, and figure out solutions in accordance with *Severity rate = Working days lost (based on recuperation days) / the agreement between labor and management. Furthermore, Working hours x 1000

the company holds Integrated Occupational Safety and Health **Accident rate = No. of accidents / Total employees x 100 Committee meetings twice a year in addition to the temporary Global Environmental Using High-Efficiency, Climate Change Eco-Friendly Product Safety and Health Management Eco-Friendly Energy Response System Development and Market Expansion Management

Work Environment Management sure gas). Every year, the company launches a company-wide emergency drill according to a carefully prepared scenario. It Measurement and Management of Hazardous continues to update the manuals. Through regular education, Materials at Worksites the company has in place the necessary system to take proac- To prevent occupational diseases, Kumho Tire performs biannual in- tive measures against emergencies of various natures. spections of its work environment in the presence of labor representatives each year to find out the level of employees’ exposure to hazard- Establishment of Fire Prevention System ous materials and maintain the level below that of its standard. The To prevent fire accident, Kumho Tire operates an internal fire de- company has installed a number of local ventilation systems in its partment whose members operate fire engines and ambulances plants to remove dust and fumes. It ensures that they operate in opti- while engaging in fire prevention inspections and offering fire mal condition by making it mandatory for sections using ventilators to prevention education regularly. Through continuous investments check them on a monthly basis and for the plumbing department to in automatic fire detection facilities, among others, the company perform an engineering diagnosis of the facilities once a year. enhances its ability to prevent fire.

MSDS (Material Safety Data Sheets) Computerization Suppliers’ Win-Win Cooperation and Safety Management In line with the increasing attention paid to the safety of chemi- Kumho Tire promotes safety management activities with its suppliers, cals, Kumho Tire is planning to promote the computerization of aiming for shared growth with them. In December 2013, the company its MSDS and set up a constant monitoring system. Moreover, held the ‘Win-Win Cooperation and Safety Management Declaration Kumho Tire plans to upgrade the system that can offer employ- ceremony’ with more than 40 people in attendance including its sup- ees and other stakeholders useful information in real time. pliers’ representatives and the company’s persons in charge of safety and health. Suppliers signed the ‘Declaration on Safety Management’ Implementation of Safety Education and read it aloud at the ceremony as a sign of their commitment to To raise employees’ awareness of safety and health, Kumho Tire making their operation sites safe and pleasant while cooperating with offers education on the subject by outside professionals every Kumho Tire in minimizing occupational accidents. quarter. In 2013, the company implemented postal correspon- dence training on safety and health for all its supervisors, conducted safety and health campaigns twice a month, and launched public contests for mottos, posters, and UCCs wherein employees’ families were invited to join as well.

Improved Employees’ Health G4-LA7 Kumho Tire requires all its employees to undergo checkups on an annual basis, with those with abnormal findings receiving regular medical care. For those with musculoskeletal diseases, the company arranges for them to get treatment at its rehabilitation centers. It runs hearing preservation programs to prevent the oc- currence and worsening of hearing impairment. It also takes actions to improve the work environment for worksites showing an unusual level of noise or exceeding the company’s own standard during evaluations of its work environment. With occupational cancer getting plenty of attention, the company conducts carcin- ogen risk evaluations regularly and replaces carcinogenic materials. Moreover, through tumor marker tests, the company ensures Next Step that its employees can detect cancer early on and get medical care as early as possible. To enhance its safety prevention management system further, Kum- ho Tire will prepare an accident rate roadmap and introduce the Pro- 55 Upgrading the Emergency Response System cess Safety Management specialist training and management programs. The company will also upgrade its voluntary safety Manual for Disaster Emergency Response management system to increase the number of employees who In recognition of diverse operation risks such as fire and natural have to go through safety education and the frequency of the train- disasters including floods, Kumho Tire strives to minimize dam- ing. It will stage events designed to raise awareness. In addition, it age from the risks. It has arranged for each of its plants to will seek improvements in its environmental safety facilities through come up with a ‘Disaster Emergency Response Manual’ in five TPM. As a means of enhancing employees’ health management, the areas: storms/floods, earthquakes, snowstorms, fire, and envi- company will promote more active communication between employ- ronmental pollution (air, water, toxic materials, and high-pres- ees and healthcare professionals. Sustainable Harmonious Personnel Management that Values Operations of Fulfilling Quality for Customer Value Competitive Advantage Management Humans and Nature Responsibilities Enhancement

Take Action for Sharing

Supply Chain Implementation Cultivating a Company Sustainability Enhancing Management for of Social Deep Sense of Responsibilities External CSR Competitiveness -wide management Ethics (Social strategies Communication Enhancement Contributions) strategies

“The core factor in a company’s sustainability “I am impressed with Kumho Tire’s corporate culture. interview strategies is COMMUNITY. It is crucial that a interview From Kumho Tire personnel whom I have dealt with company secure the full trust and support of the local for a long time, I have seen humanity and warmth. I community in order to take off as a global company. have also realized that they really love their company. Only a company deeply rooted in the community It has somewhat come as a surprise that they can can withstand the global economic turmoil. I see maintain such high level of ethical standards in dealing a bright future for Kumho Tire in its employees’ with their suppliers’ employees. I believe such ‘positive volunteer groups such as “ ‘Hansarang’ and ‘Hope aspects’ of Kumho Tire will come together and play Sharing.’ Hansarang maintains warm relations with the role of a driving force behind the company’s the community through sharing, whereas Hope sustainable corporate culture. I hope the company Sharing focuses on talent donation and improvements will continue to gather momentum and emerge as an in residents’ residential environments. I would like to even more competitive company.” propose that Kumho adopt Creating Shared Value as Ho-Soon Yun, one of its sustainability strategies. I truly hope that Vice President, Kumho Tire will continue to develop into an enterprise OCI Carbon Black Business Department that the community wants to protect and which Gwangsan-gu residents are proud of.” Hyung-Bae Min, Mayor of Gwangsan-gu, Gwangju Metropolitan City Cultivating a Deep Supply Chain Management for Fulfillment of Social Responsibilities Enhancing External CSR Sense of Ethics Competitiveness Enhancement (Social Contributions) Communication

Operations Fulfilling Responsibilities 107 Employees who took courses on ethics management (no. of persons) 6,398 Beneficiaries of Hansarang volunteering (cumulate no. of persons)

1,393 Employees who took the sexual harassment prevention education 81.4 (no. of persons) Satisfaction determined through supplier surveys

Progress Issues • Operation of an ethics management system (Code of ethics / • Ethics awareness and integrity Self-analysis of ethical performance / Ethics management • Anti-corruption implementation programs) • Growing importance of establishing and maintaining a stable • Operation of an online whistleblowing center supply chain • Promotion of ethics management, talent cultivation and training, • Growing need for fair trade joint technology development, and suggestion programs for • Local community (social contributions) suppliers • Compliance (social) • Regular supplier surveys, awards ceremonies, and improvements • ncreasing demand for corporate transparency in payment systems • Easier access to corporate information (Internet, SNS, etc.) • Employees’ volunteer services (Hansarang Club / Motorsports talent donation / Pink Ribbon campaigns) • Support for the Vietnames community in Korea and overseas social contribution programs • Customer experience group • Communication through call center, SNS, and website

107 6,398 Performance 103 57 Category (Person, %) 2011 2012 2013 6,037 102 5,698 No. of persons who took ethics 103 102 107 management courses No. of employees who took the sexual 2,056 1,109 1,393 harassment prevention education Satisfaction determined through 74.4 74.9 81.4 supplier surveys (%) 2011 2012 2013 2011 2012 2013 Beneficiaries of Hansarang . 5,698 6,037 6,398 No of persons who took ethics Beneficiaries of Hansarang volunteering (cumulate no. of persons) management courses volunteering (cumulate no. of persons) Sustainable Harmonious Personnel Management that Values Operations of Fulfilling Quality for Customer Value Competitive Advantage Management Humans and Nature Responsibilities Enhancement

Cultivating a Deep Sense of Ethics

According to Kumho Group’s ethics management policies, Kumho Tire is armed with an ethics management system, an anti-corruption management system, and an online whistleblowing center. Thus, the company self-checks the level of its ethics management and continues to boost employees’ awareness 58 of work ethics.

Context Promotion Strategies for Kumho Asiana Group’s Ethics Management

Ethics management is crucial for Kumho Tire to become a sustainable Introduction • Asset auditing, ISO index management company. To meet its stakeholders’ expectations of a company trust- Stage 2002~2004 • Establishment and declaration of code of ethics and rules ed and loved by society, Kumho Tire promotes ethics management systematically. • Launch of ethics management website System • Survey on employees’ ethics awareness Stabilization • Evaluation of ethics management index Stage • Evaluation of asset management status index 2005~2008 • Evaluation of environment & safety management • Implementation of BCI evaluation Progress • Improvement in BCI evaluation Corporate • Incorporation of the implementation of seven tasks as part Operation of Ethics Management System Culture Stage 2009~ of the corporate culture Kumho Tires also accomplishes the business group’s seven im- • Development of ethics management implementation plementation tasks to become a beautiful company: (1) Business programs management that is free of criticism; (2) Win-win business • Building an information security system Company • Enhance the corporate image through theme building for management with suppliers; (3) Support for the disadvantaged looking ahead social contribution activities at the next including the disabled; (4) Participation in blood donation; (5) • Active response to ISO 26000 500 years Support for culture and arts; (6) Beautiful labor-management culture, and; (7) Environment & safety management. The Kumho Asiana Group has developed BCI (Beautiful Company Index) for In line with the Kumho Asiana group’s ethics management strategies, the effective promotion of the seven implementation tasks. By Kumho Tire organized the Ethics Management Committee and Auton- using the index in its evaluation of subsidiaries, the group boosts omous Monitoring Group in 2012. It holds monitoring group meetings its ethics management level as a whole. regularly. The company has also enacted ethics rules, procedures, and bylaws, amended the relevant internal regulations, declared the code of ethics, and checked the organization’s ethical levels through a working-level ethics self-diagnosis test system.

Code of Ethics G4-56

To grow into a company that creates world-class value, a company that goes hand-in-hand with its employees, and a company loved by its neighbors as stipulated in the Kumho Asiana Group’s business philosophy, Kumho Tire declares the following Code of Conduct as a means of setting the right criteria for the desired behavior and value judgment of each and every one of its employees: •We build shareholder and investor relationships based on mutual trust while maximizing shareholder interest. •We, together with our employees, do our best to ensure the satisfaction of our customers and gain their trust through high-quality products and services. •We and our employees conduct business based on trust and diligence, comply with legal regulations, and respect any and all customs concerning business transactions. •We contribute to the development of society through our corporate philanthropic initiatives and strive for environmental protection. •We, together with our employees, commit ourselves to creating the “ideal workplace” that is jointly developed based on respect for human dignity. •We offer equal opportunities to all our employees as well as fair, equitable treatment in accordance with their capabilities and performance. •Our employees maintain the honor of the Kumho Asiana Group and their individual dignity while behaving in a way that earns the respect and trust of our customers and business partners. •Our employees neither require nor receive any type of financial or non-financial gains from stakeholders in relation to their business operations. •Our employees do not take advantage of corporate assets for their own personal interest; rather, they put the interest of the company before their own if any conflict arises between the two while conducting their business. •Our employees consistently pursue self-development so as to meet the requirements for becoming an ideal Kumho Asiana Group employee. Cultivating a Deep Supply Chain Management for Fulfillment of Social Responsibilities Enhancing External CSR Sense of Ethics Competitiveness Enhancement (Social Contributions) Communication

G4-57, 58, SO5 Self-Diagnosis of Ethics Level Operation of Anti-corruption Management System and Online Whistleblower Program

1.Reciprocity Kumho Tire has spun off the Ethics Audit Department, which used Will it be okay if others do what I am going to do unto me? to be part of the Overall Planning Management Division under the Vice President, as an independent entity carrying out regular and special audits as well as employee irregularity investigations. 2.Disclosure (unit: No. of audits) Will it be okay if what I am going to do will be reported in the newspapers? Category 2011 2012 2013 Ethical Audits 24 20 25

3.Family Honor , ( :// Will it be okay if my family finds out what I am going to do? In addition we are operating an online whistleblowing center http ethics.kumhoasiana.com) aimed at eliminating any and all unfair business operations among our employees or unethical practices undertaken at the organizational level. The center offers wide-rang- 4.Universality ing confidentiality and whistleblower protection schemes to encour- Will it be okay if anyone does what I am going to do? age whistleblowers to raise any and all issues they may have. Spe- cifically, the confidentiality principle is strictly upheld to ensure that whistleblowers do not suffer the consequences of their whistle- 5.Compliance with Laws and Regulations blowing. For easier access to the center, whistleblowers can file Is what I am going to do compliant with the company’s their reports via the internal system, e-mail, telephone, facsimile, or employee code of conduct? surface mail. The company is working on foreign language versions of the online whistleblowing center service for those working at overseas operation sites. Kumho Tire offers new recruits and those Ethics Management Initiatives assigned to overseas posts ethics management education including , As part of its ethics management initiatives Kumho Tire has put code of ethics, ethics-related regulations, and corruption and irregu- into practice the following implementation programs: larity cases as well as how to respond to them. G4-SO4 • Improving on the Practice of Receiving Cash Gifts or Condola- tory Money from Suppliers - Our employees are prohibited from notifying suppliers of their family events, including congratulatory and condolatory ones. If they do receive cash gifts or condolatory money from suppliers, it should not exceed the socially acceptable level commonly recognized as part of our traditional culture of helping each other in times of need. • Inspecting the Supplies Taken by Retiring Executives - To prevent any leak of our trade secrets and minimize losses, designated Online whistleblowing center employees take the responsibility of inspecting the supplies taken by our retiring employees. • Clean Holiday Campaign - To enhance our image as a Beautiful Compliance with the Relevant Rules G4-SO4 Company that champions the cause of ethics management aware- Kumho Tire is classified as an enterprise group with total assets of ness, we launch an annual campaign to prevent our employees more than KRW 2 trillion, subject to restrictions on investments be- from receiving holiday gifts or cash gifts from our suppliers. During tween its affiliates as per the Monopoly Regulation and Fair Trade Act. the campaign period, the gift return center is in operation, and let- Specifically, the company is bound by debt guarantee limit, mutual in- ters are sent to our suppliers urging them to join the campaign vestment restriction, and ceiling on the total amount of shareholding. and cooperate with us in implementing ethics management. As Kumho Tire has never violated any of the above. part of our programs and training to expand the culture of ethics 59 management, employees took ethics management courses and a sexual harassment prevention course as follows.

(unit: person) next Step Category 2011 2012 2013 Kumho Tire will continue to improve its business performance for an- Ethics Management other takeoff while fulfilling its social responsibilities as a ‘Beautiful 103 102 107 Education Company.’ In connection with the goals, the company will continue Sexual Harassment enhancing its employee education on ethics management and ex- 2,056 1,109 1,393 Prevention Education panding its courses on the prevention of sexual harassment at work. Sustainable Harmonious Personnel Management that Values Operations of Fulfilling Quality for Customer Value Competitive Advantage Management Humans and Nature Responsibilities Enhancement

Supply Chain Management for Competitiveness Enhancement We firmly believe that a healthy partnership with our suppliers directly translates into the enhancement 60 of our competitive edge. Guided by this belief, we support training and joint technology development for our suppliers while proactively gathering their opinions and suggestions to integrate them into our own business conduct.

Status of Educational Assistance for Suppliers in 2013 Context (unit: session, person) No. of No. of It is absolutely critical for a company to maintain good relations Course Frequency Remarks Sessions Trainees with its suppliers and cooperate with them. To enjoy continuous General growth amid the rapidly changing global business management Quarterly 7 79 Consortium training Course environment, a company must maintain good relations with its Busan International Fair suppliers for close cooperation. Kumho Tire has built with its sup- Yearly 2 31 Machinery Fair Participation pliers an open network accessible through diverse channels and Korea Metal Week operates various support programs designed to enhance their Total 9 110 competitiveness. Joint Technology Development We engage in joint technology development with our suppliers for improvements in our overall technological level. This way, our suppliers establish sales channels for their products and guarantee Progress their operational stability, and our company improves the quality Facilitation of Shared Growth of our products and pursues productivity gains through the local- ization of technologies and development of new raw and subsid- Suppliers’ Ethics Management iary materials and facilities and machines. This ultimately contrib- Kumho Tire enhances alliance with its suppliers through roundtable utes to shared growth. meetings. In January 2014, the company held a roundtable meeting on ethics management with 24 suppliers. The company introduced its Partnership Enhancement policies on ethics management and had a question and answer ses- Suppliers’ Suggestions sion with them, with the meeting ending with pleas for their continuous cooperation in the area to facilitate the realization of visions of all We also promote improvements in quality and productivity the parties concerned. through suppliers’ suggestions, with the chosen suggestions re- warded. The system is instrumental in the company’s efforts to enhance the company’s product competitiveness.

Fostering Talent and Offering Education for Suppliers We provide training assistance and talent promotion programs to help our suppliers build enhanced competitive edge and capabilities. In 2013, a total of 110 suppliers’ employees took the general and specialized training courses that we provided. Cultivating a Deep Supply Chain Management for Fulfillment of Social Responsibilities Enhancing External CSR Sense of Ethics Competitiveness Enhancement (Social Contributions) Communication

Regular Supplier Surveys Suppliers in the area of Purchasing We conduct annual supplier surveys to identify the levels of satisfaction with our supplier policies and initiatives to collect suppliers’ suggestions. Once issues are identified, improvement measures are defined and fully integrated into our mutually beneficial Raw and Subsidiary management policies. In 2013, we conducted a survey of 150 Materials suppliers and secured their feedback on a total of 31 questions in 5 areas such as our policies, purchasing practices, mutually bene- Suppliers Major Items ficial management, and purchasing processes. Over 100 companies including Synthetic rubber, carbon black, Results of Supplier Surveys for the Past Three Years LG Chem, Hyosung, and Kolon and chemicals (unit: %) Category 2011 2012 2013 Average 74 .4 74 .9 81.40 Satisfaction with 79.4 78.9 83.00 Kumho Tire Satisfaction with mutually beneficial 74 .1 73.9 81.70 Facilities and Materials management Satisfaction with 79.6 79.7 82.90 purchasing teams Suppliers Major Items Satisfaction with 64.4 67.2 79.60 purchasing processes Over 280 companies including Mechanical, electrical, plumbing, ServeOne, Sehwa, Simpac, Kumho Tire Work mold, and MRO - - 79.60 and Hanil Machinery Environment

Business Collaboration Day Improvements in Payment Terms We award our suppliers on a yearly basis to express our gratitude for SME Suppliers for their endeavors and cooperation in contributing to the develop- , ment of Kumho Tire and to share our vision, management princi- Following its debt workout that started in 2009 Kumho Tire paid . , ples, and mid/long-term plans. In 2013, a total of 16 outstanding to small suppliers via promissory note Nonetheless the compa- suppliers – including Hyosung, Kolon, OCI, and LG ServeOne - ny does its very best to change the payment terms to cash to - were chosen and given a tour of our overseas plants. minimize the burden on the suppliers’ finances and pursue win win business relationships with them.

next Step To build transparent, trust-based relations with its suppliers, Kum- ho Tire will implement ethics management−through investigations 61 of their management systems in relation to the environment, safety, health, human rights, labor, and anti-corruption measures – and promote CSR activities and realize shared growth with them on a continual basis. Sustainable Harmonious Personnel Management that Values Operations of Fulfilling Quality for Customer Value Competitive Advantage Management Humans and Nature Responsibilities Enhancement

Fulfillment of Social Responsibilities (Social Contributions) To become a ’Beautiful Company‘ as stipulated in the Kumho Asiana Group’s value system, we are 62 fully committed to undertaking strategic social contribution initiatives based on the recognition that such initiatives are an essential part of our corporate operation.

Context Volunteer Activities G4-SO1 Location Organizer Main Activities To contribute to social development while boosting corporate Seoul Management Sales service at ’Beautiful Stores‘ and value through CSR activities, Kumho Tire selects beneficiary- Office Support Team ’Donate your Stuff‘ for all employees centered social contribution themes and promotes them through Stream cleanup, assistance for flood Gwangju Gwangju employees’ voluntary participation. victims, and support for services by Plant Admin Team Gwangju Plant volunteer groups Gokseong Street beautification, stream Gokseong Admin clean-up, and assistance for flood Plant Sub-Team victims

Progress In-House Volunteer Groups (unit: person) Social Contribution Programs Social Welfare Sector: Employees’ Voluntary Services Sharing Club Banseok Club Bitgoeul Club Saem Club Kumho Tire has a number of employee volunteer groups that offer 246 15 67 48 regular assistance to seniors who live alone, orphaned children, and Hansarang Hallelujah Travel Love Hanuri Club other less-privileged populations in our society, such as Hansarang Club Club and Hope Sharing. Furthermore, they engage in the project. Every quarter, they offer severely disabled people opportunities to experience ordinary people’s lives Support for the Underprivileged by Hansarang Club (cumulative total) through the ‘Social Experience Programs for the severely disabled.’ (unit: person, KRW 1,000) They also hold the ‘Sharing Safety Campaign’ on the ‘Day of Persons with Disabilities’ every year. Category 2011 2012 2013 Beneficiaries 5,698 6,037 6,398 Amount 736,143 7 74 ,732 815,029

Sharing hope through house building Social experience for people with severe disabilities Employees’ service at local welfare facilities Cultivating a Deep Supply Chain Management for Fulfillment of Social Responsibilities Enhancing External CSR Sense of Ethics Competitiveness Enhancement (Social Contributions) Communication

Academic Education Sector: Donation of Motorsports Education Support for the Vietnamese Community in Korea We have operated – for four times a year since 2012 − the program for students from low-income families as Korea, a social issue that is receiving growing social attention an educational donation initiative that can be exclusively undertaken nowadays. Thus, we are offering a home-visit program for these by motor sports-related companies in accordance with the MoU we families formed by international marriages between Korean men signed with the Ministry of Education. We also participate in the Edu- and Vietnamese women. We have been supporting the Vietnam- cational Donation Exhibition hosted by the ministry to promote our ese community in Korea through MoU signed with the Embassy educational donation programs and provide students with an opportu- of Vietnam in Korea since 2011. nity to experience motorsports.

Motorsports Experience Support for the Vietnamese Community in Korea

Exchange Sector: Pink Ribbon* Campaigns Overseas Social Contribution Initiatives Our Pink Ribbon Campaign was initiated in 2012 to raise female Our social contributions are being carried out by our overseas drivers’ awareness of breast cancer risks. Under the sponsorship corporations. For instance, our Nanjing plant and Nanjing TBR agreement signed with the Korea Breast Cancer Foundation, we plant in China choose beneficiaries from underprivileged popula- raise funds through the campaign and donate them to the foundations in their vicinity and offer them various daily supplies. These tion. Our ‘TIRE PRO’ stores (tire retailers specializing in Kumho plants also join the ‘Year-end Nanjing City Charity Fair’ to make Tire products) nationwide encourage customers to make voluntary donations and engage in wide-ranging fund-raising events. Em- donations; customers who purchase our premium UHP or high-fu- ployees at our Changchun plant regularly visit an orphan school el efficiency, eco-friendly ecowing S tires receive pink ribbon valve in Jilin Province to donate books and play games and talk with caps as a gift to make them recognize the meaning and impor- students to build closer ties with them. On the other hand, our tance of women’s health. Australian corporation has taken part in ‘Pink Fitters Day’, the In addition, employees participate in the ‘Pink Ribbon Love Mara- counterpart of Korea’s Pink Ribbon Campaign, for five straight thon’ and ‘Pink Tour’ to get new perspectives on health and recog- years in 2013. nize its importance. *Pink ribbons originally appeared to replace the corsets that excessively compressed a woman’s breasts. Instead, two sheets of silk handkerchief and pink ribbons were used to wrap women’s breasts, coming to repre- sent the beauty and health of women as well as the freedom of comfort- able movement.

Pink Fitters Day

next Step Kumho Tire will continue its voluntary social contribution activities, expanding its engagement in both sectors and regions. Pink Ribbon Campaign Sustainable Harmonious Personnel Management that Values Operations of Fulfilling Quality for Customer Value Competitive Advantage Management Humans and Nature Responsibilities Enhancement

Enhancing External CSR Communication

To step up its external communication with customers, Kumho Tire carefully listens to its customers’ voices as heard through customer experience groups, call center, and social media. The feedback translates into improvements in Kumho Tire’s products and services. 64

Response to Customer Complaints – Context Call Center, SNS, Website Customers demand that Kumho Tire become a socially respon- Once a customer complaint is filed with the Customer Satisfac- sible enterprise. Kumho Tire strives to meet their increasingly tion Call Center, the tech staff immediately respond to them by sophisticated needs while growing as a socially responsible cor- solving issues over the phone or online or inviting them to visit porate citizen. one of the company’s 350 after-sales service centers across the country for maintenance services. The company always explains the cause of a problem to the customer. In case the customer’s issue is a manufacturing problem, it makes compensation to the customer according to its compensation principles. Progress When any major issue is involved in a particular problem, such is addressed in the company’s regular quality meetings. The compa- Communication Programs ny makes quality improvements through collaboration among all relevant departments until the issue is resolved once and for all. Customer Experience Groups Compared to 2012, the number of compensation cases decreased

Kumho Tire runs customer experience groups as a bridge be- but the number of complaints filed with the Call Center rose

tween the company and its clientele and reflects their actual ex- (2,075 → 2,885) in 2013.

periences with its tire products on its research and development Such increase is considered to be largely due to the widespread . , efforts In June 2012 the first customer experience group was information on tires available to the increasingly knowledgeable . launched They undertook various activities including participation public whose expectations with regard to tire quality and after- . in new product presentations and motorsports events The sec- sales services have risen. The company actively reflects their re- , ond group embarked on their activities in June 2013 and it will quests together with market research findings on the develop-

take part in various tire performance tests as well as attend regu- ment of new products. Moreover, the company has boosted . lar meetings until June 2014 communication with its customers through blogs, Facebook, and Twitter. It now responds to customers’ complaints and takes actions in real time.

next Step To shore up its external CSR communication, Kumho Tire will develop social contribution programs tailored for its major markets, publish expanded sustainability reports for global readers, and strengthen its communication with customers further. Most nota- bly, it will diversify the features of its website SNS link (social pl- ugins) to expand its real-time response to customer complaints and feedback on the company’s after-sales services. Customer Experience Groups Cultivating a Deep Supply Chain Management for Fulfillment of Social Responsibilities Enhancing External CSR Sense of Ethics Competitiveness Enhancement (Social Contributions) Communication

65 Sustainable Harmonious Personnel Management that Values Operations of Fulfilling Quality for Customer Value Competitive Advantage Management Humans and Nature Responsibilities Enhancement

Take Action for Customer

“Kumho Tire’s ‘mileage warranty’ involves regular Proactive interview Quality maintenance as advertised. In that sense, it is a Management very good arrangement. It can enhance safety, which our society badly needs. I believe producing Company Sustainability good, safe products is an important part of the Marketing Upgrade -wide management Promotion fulfillment of CSR. I hope Kumho Tire is recognized strategies strategies by the public as a company delivering safe products.” Improvements Bo-Sung Hwang in Customer Satisfaction CEO, Ilsan Songsan-ro Tire Pro Proactive Quality Upgrading to Advanced Improving Customer Marketing Management Quality Satisfaction Promotions

Quality for Customer Value Enhancement

75.8(1st) KCSI Score and Ranking

45.1(1st) KNPS Score and Ranking

Progress Issues • Operation of quality management system • Growing need for safe products and services • Product design using VPD(Virtual Product Development) system • Customer safety and health • Integrated global process quality monitoring • Product and service labeling(tire labeling system) • Highway safety check campaigns • Diversifying customer needs • Mileage warranty program • Marketing communication • Ranked 1st by KCSI and KNPS for nine and six years • Increasing demand for customer information security • Prestigious overseas design awards • New product presentation(ECSTA PS91) • Sports marketing (sponsorship for Primera Liga, NBA, KLPGA, and Kia Tigers) • Compliance with laws regarding fair product supply • Customer information security 75.8(1st) 45.1(1st) 70.6(1st) st 69.9(1 ) st 35.3(1 ) 67 32.3(1st) Performance

Category 2011 2012 2013

st st st KCSI Score and Ranking 69.9(1 ) 70.6(1 ) 75.8(1 ) 2011 2012 2013 2011 2012 2013 st st st KNPS Score and Ranking 35.3(1 ) 32.3(1 ) 45.1(1 ) KCSI Score and Ranking KNPS Score and Ranking Sustainable Harmonious Personnel Management that Values Operations of Fulfilling Quality for Customer Value Competitive Advantage Management Humans and Nature Responsibilities Enhancement

Proactive Quality Management

For sustainable growth, Kumho Tires undertakes company-wide, systematic quality management. Through real-time, all-process monitoring system, the company predicts and prevents elements that might cause inconsistency in quality. It maintains quality consistency through such strict quality management system. 68

Context Quality Strategy Chart A global tire brand recognized for its Vision Proactive quality management is emerging as a critical factor for a respect for quality and customers company’s sustainable development. Kumho Tire has achieved remarkable growth in the tire industry through proactive quality man- Management Building a global management system agement based on advanced technologies and manufacturing Goal know-how targeting the global market. It strives to maximize customer value with top-tier product quality. Sector Goal Global Single Quality & Tier-up

Enhance Enhance Secure Develop Product Customer Labeling Quality Focus Competitive- Satisfaction Competitive- System Progress ness ness Operation of the Quality Management System

To build a global tire brand recognized for its respect for quality Quality Strategy Chart and customers, Kumho Tire has set “Global Single Quality & Ti- nd er-up” as its goal; it implements a mid/long-term roadmap Secure Basic Improve Quality Secure 2 -Tier Competitiveness Competitiveness Quality aimed at securing the best quality competitiveness. The company carries out company-wide quality management that ensures Step.05 Step.01 Step.03 quality assurance for the entire process ranging from design to 2015 2013 manufacturing, inspection, and logistics. In 2013, it promoted 2011 ~ 2016 “quality competitiveness improvement” in all of its eight plants at home and abroad. It is undertaking a quality roadmap aimed at “establishing 2nd-tier quality” by 2015. To this end, we at Kumho Step.02 Step.04 2012 2014 Tire are building a competitive edge with our products, reinforcing prior quality assurance, building a competitive edge to respond to labeling programs, and advancing our quality system as Lay the Foundation Improve Quality a means of improving quality competitive edge. In addition, we for Upgrades Competitiveness deliver top-notch product quality to customers through the establishment of a life cycle quality assurance system.

Company-wide Quality Reform chart

Global Single Quality & Tier-up

Quality Assurance System for the entire process

Verify the Secure Verify the quality Set design of initially Post-field Prior Quality design manufacturing Post-Quality quality goals mass-produced quality

quality quality items Proactive Quality Upgrading to Advanced Improving Customer Marketing Management Quality Satisfaction Promotions

Virtual Product Development System To meet the market demand for timely development and quality improvements of tire products, Kumho Tire applies Virtual Product Development (VPD) to its tire development process. Through the application, the company can predict the product functions at the design stage; such translates into shorter development period, improved product quality, and reduced development costs. VPD System Website Process Changes Realized through the VPD System Application

As-is Product Development Process: Test-based Product Development

Target Performance Design Simulation Pilot Tire Evaluation Specification Production

Improve Application of VPD Function Reduce Prediction System Tire Quality Time & Cost

Design & Target Performance Pilot Tire Verification Specification Production Simulation

To-be Product Development Process: Prediction-based Product Development

Global Process-Quality-Integration Tire Labeling Programs G4-EN7, PR3,4 Monitoring System drop in tire rolling resistance improves vehicle fuel efficiency by 1.74 % A human-centered management system has given way to a sys- and realizes carbon emissions reduction equivalent to planting 34 tem-based management system. Securing the objectivity/reli- trees a year. This is why countries across the globe are launching ability of quality information has gained importance along with their own tire labeling programs (energy efficiency grading systems) enhancing the transparency of quality management. That is why as part of their efforts to regulate vehicle-induced carbon emis- Kumho Tire is promoting the establishment of an integrated sions. Such programs are mandatory in Europe, Turkey, Israel, and monitoring system for its global manufacturing process quality. Korea, whereas China, Japan, US, Middle East, and Brazil are volun- For its Gwangju and Gokseong plants, the company finished tarily or partially implementing them or reviewing the relevant bills. building the system in 2014. It plans to complete system estab- We at Kumho Tire are introducing eco-manufacturing processes to lishment for Pyeongtaek Plant in Korea and its plants in China in all our products so as to develop energy-efficient products while 2015, followed by system construction for its Vietnam and US seeking to make improvements in the energy efficiency of the exist- plants in 2016. Through the application of the real-time monitoring products. The company is currently producing only products that ing system for all its manufacturing processes, the company can meet the legally required level of energy efficiency in Korea and Eu- identify causes of quality degradation early on, make improve- rope. Thus, it has never violated any regulation in this regard. ments, and consequently predict and prevent elements that might cause a deterioration of product quality in advance. To se- What is a labeling system? cure consistency in its product quality and prevent any unsuit- A labeling system measures the performance of a tire in the areas of rolling resistance, wet grip, and noise, which determine a tire’s fuel efficiency able subsidiary material from being incorporated into its finished level, and indicates the tire grades on products to help consumers choose goods at the source, the company expands the application of a high-efficiency tires. system that it has dubbed ‘Foolproof’ system.

What is the Integrated Process Quality Monitoring System? 69 It is a system that delivers to users in real time information on the real-time trend analysis of ‘Core Quality and Process Parameters’ and analysis information based on statistical approaches to each of the next Step company’s manufacturing processes. • Core Quality: what governs the quality of the next process while rep- For sustainable growth, Kumho Tire will further enhance its global resenting the quality of the relevant process quality system based on its proactive product development capabili- • Process parameter: variable that dominates changes in the core quali- ties, cutting-edge technologies, and outstanding product competi- ty, such as operation of manufacturing facilities, control conditions, tiveness. It will continue to work hard to deliver the best-quality and standard management items tires to consumers as a global tire company. Sustainable Harmonious Personnel Management that Values Operations of Fulfilling Quality for Customer Value Competitive Advantage Management Humans and Nature Responsibilities Enhancement

Upgrading to Advanced Quality

Kumho Tire has engaged in intensive efforts for research and development on a continual basis. It has led the development of the industry as a driving force behind the technological innovations in the industry. It is the undisputed leader in technological prowess and product quality thanks to the global standardization of 70 its production process technologies and consistent production of high-quality goods in its global plants.

Context Development of Multi-Tread Processing Technology The tread of a tire refers to the rubber on its circumference that As a global tire supplier, Kumho Tire is equipped with the world’s comes in contact with the ground. Traditionally, a single type of rub- top-tier technological capabilities through its own development of ber was used; thus, it was impossible to make improvements in all new technologies and its introduction of the world’s leading tech- of the mutually exclusive features like braking, abrasion, and rolling nologies in production and manufacturing processes. resistance. ‘Multi-Tread’ refers to new technology enabling the use of different types of rubber materials for those tire parts that come in contact with the road to overcome the aforesaid limitations. Current- ly, the company is working on the design of a quadruplex head type of extrusion facilities for the mass production of Progress multi-tread tires. It is planning to build the facilities in its Gok- seong and Gwangju plants in Korea by the end of 2015. Advanced Processing Technologies RFID Ta g -enabled MLM TS Standardization of Global Production (Manufacture, Logistics, Marketing Tracking System) Technologies Through its RFID tag-enabled MLM TS, Kumho Tire manages indi- Through the standardization of its global production technolo- vidual tires and quality information. Through an RFID tag attached to gies, Kumho Tire conserves energy, increases the proportion a tire, the MLM TS allows customers to trace the distribution history of eco-friendly energy, and upgrades its tire quality. Moreover, of the product and find out whether it is an authentic product or not. the company can optimize each manufacturing process and identify The tire tracking system also lets customers know the tire perfor- and solve any quality issue promptly through constant quality moni- mance, status of abrasion, etc., at a glance. Each tire with an RFID toring. Starting 2014, the company will exchange production technolo- tag is given an ID. Through the tag, Kumho Tire’s headquarters re- gies and know-how with Yokohama Rubber through technological al- cords on its computer database everything about the tire including liance with the company. Kumho Tire will apply new technologies its quality, performance, distribution, and final sales. and know-how to its plants across the world during the year, including its globally standardized manufacturing processes to all of its new plants and any of its plant expansion or upgrade projects at home and abroad as the trailblazer for the global tire industry.

RFID Tag

• Establishment of MLM TS for domestic TBR plants, Progress logistics, and sales in 2014 • Trial operation for domestic logistics centers together with expanded application to sales and overseas plants next Step Kumho Tire will continue to work hard to make universal improve- • Expanded application of MLM TS to overseas plants Plan for ments in its tire products − regardless of the location of its manu- 2015 • Lateral performance of MLM TS for domestic logistics facturing plants − through the standardization of high-quality tire centers manufacturing processes. Through the benchmarking of Yokohama Rubber’s production technologies, Kumho Tire will continue to up- Investment grade its process standardization. It plans to apply new technolo- • KRW 8.56 billion to be saved upon completion Effects of MLM TS for all plants in Korea gies and know-how to its existing plants as well as its Nanjing plant in China, which is scheduled to be relocated in 2015. Proactive Quality Upgrading to Advanced Improving Customer Marketing Management Quality Satisfaction Promotions

Improving Customer Satisfaction

To make improvements in customer satisfaction, Kumho Tire holds diverse events to meet its customers in person or online including various safety inspection campaigns, in addition to regular contact with them according to its quality assurance system. As a result, the company has always been ranked high in customer satisfaction evaluations. Design awards from prestigious overseas institutions attest to the company’s efforts as well.

Context Highway Safety Check Campaigns We conduct safety check campaigns for our motorist customers Nowadays, customers’ demand for safety is gaining traction. In traveling on highways including drivers of cars, trucks, and buses. fact, tire safety is the premise of the company’s sustainability. Our free tire services are inclusive of inspections of tire air pres- Kumho Tire will continue to strive to boost its customers’ satisfac- sure, wheel alignment, and tire balance adjustments and are tion with its tire products through diverse safety inspection oppor- aimed at preventing highway safety accidents. tunities, too, according to its quality assurance policies.

Progress Customer Contact To ensure customer safety through regular tire safety inspections, Kumho Tire offers free tire safety inspection services via the ‘Let’s TBR Highway Campaign meet neighbors’ campaign, ‘Let’s meet disabled customers in social welfare foundations’ campaign, and ‘Let’s meet customers in government offices’ campaign. Moments of Truth Services Service Centers We operate service centers and counseling offices in six major locations nationwide: Seoul, Incheon, Daejeon, Gwangju, Daegu, and Busan. In July 2013, we remodeled the Daejeon service center in Central Korea with new equipment for cutting-edge customer services. Our customer call center (T.1588-9582) aims to handle customer inquiries and meet diverse customer needs. Our customers may submit their inquiries concerning product purchase, product in- Let’s meet customers in Let’s meet disabled customers in formation, or complaints related to product use, if any. government offices social welfare foundations

71 Sustainable Harmonious Personnel Management that Values Operations of Fulfilling Quality for Customer Value Competitive Advantage Management Humans and Nature Responsibilities Enhancement

After-Sales Service Centers 2013 to compensate our customers for the difference between their We operate 347 Kumho Tire dealers nationwide as our after-sales actual mileage and the warranty mileage (up to 60,000km) when service centers to handle customer inquiries and complaints warranty tires are completely worn down to the abrasion limit 72 promptly. In addition, the staff at these after-sales service centers (1.6mm). This program was designed to offer sufficient warranty ben- are trained regularly to improve their service capabilities. We will efits considering the declining tire lifespans caused by repetitive continue to expand the number of these currently available service braking and sudden stops attributed to the unique traffic conditions centers to deliver truly impressive customer services. in Korea. Thanks to such efforts, Kumho Tire has never violated the Product Liability Act; neither has it been slapped with any fine or pen- Customer Satisfaction alty during the reporting period. G4-PR2

Quality Assurance System G4-PR1 The Highest Recognition by KCSI and KNPS G4-PR5 As part of its customer satisfaction management, Kumho Tire In recognition of its diverse proactive customer satisfaction activi- offers its customers a premium warranty program and mileage ties, Kumho Tire was honored with the highest KCSI (Korean warranty program in addition to a general warranty program. Customer Satisfaction Index) award in the field of car tires for the The general warranty program covers defects in manufacturing ninth year in a row (a total of 10 highest awards) in 2013. The processes for six years from the date of manufacture as long company was also selected as the most admired company by as the residual value rate is over 20%. The premium warranty customers in the area of car tires according to KNPS (Korean Net program offers free tire exchanges for 12 different models in Promoter Score) for six straight years. The two awards are given case of tire cord breakage due to customer’s carelessness (ex- by Korea Management Association Consulting, Inc. ternal shock) while driving. The mileage warranty program, the first of its kind in Korea, was initiated in April.

Car Maker (C/M) Satisfaction Premium Warranty Program Covering 60,000km We have supplied OE tires to global car makers and earned recognition for our technological excellence. Our global OE partners include DAIMLER, VOLKSWAGEN, BMW, RENAULT, CHRYS- LER, GM, FORD, and HYUNDAI MOTOR GROUP. Our OE partners in China range from Beijing Hyundai to Dongfeng Yueda Kia, Great Wall Motors, Dongfeng Peugeot-Citroen, Shanghai Majesty SOLUS CRUGEN Premium SOLUS TA31 Dongfeng Motor, First Automobile Works, BYD, GEELY, LIFAN, (former CITY VENTURE Premium) and Zotye Auto.

In 2014, in recognition of its technological prowess, Kumho Tire was selected and awarded as excellent supplier in the area of product quality by Renault-Nissan Alliance. The alliance awards prizes to outstanding suppliers in the fields of quality, innova- SOLUS XC SOLUS Xpert ecowing S tion, and social contributions. Kumho Tire currently supplies tires for a total of nine brands of the alliance including SM5, SM7, QM3, and Rogue. The company also provides its EV-Exclusive Tires for the alliance’s SM3 Z.E. Kumho Tire is the key supplier for Renault Samsung Motors.

CITY VENTURE APT SUPER MILE Proactive Quality Upgrading to Advanced Improving Customer Marketing Management Quality Satisfaction Promotions

Receiving Design Awards We have been repeatedly honored with global design awards that Germany’s iF and Red Dot Design Award in 2014 enhance our design competitiveness and boost the value of Kumho Following its recognition in 2013, Kumho Tire received the Red Tire brand. Dot Design Award for the third straight year in 2014, a first in the industry in Korea, for a total of three models - ECSTA PS91 (S- Germany’s Red Dot Design Award in 2013 UHP tire), WATTRUN VA31 (EV tire), and WINTERCRAFT Wi61 Kumho Tire was awarded a Red Dot Design Award – one of the (winter tire). In addition, the company won the IF Product Design world’s top 3 design awards - for its ecowing ES01 in the category Award for its ECSTA PS91 (S-UHP tire) and ECSTA HS51 (Har- of product design for the second year in a row in 2013. mony Sport tire).

ECSTA PS91 WATTRUN VA31 S-UHP tire characterized by dynamic design: Winners of both Red Dot Korea’s first EV tire: Stylized air bubbles on the tire walls: and iF Design Awards Exclusive supply for SM3 Z.E model supply for SM3 Z.E model

WINTERCRAFT Wi61 ECSTA HS51 Winter tire: Luxurious tire wall markings shaped like ice crystals and Harmony Sport tire: Successful symbolization of its speed and premium mountains look with shadow knurling

next Step

Kumho Tire plans to launch campaigns for safe driving by publi- 73 cizing its CSR efforts in connection with its mileage warranty program. It will continue to boost its customer satisfaction through increased direct contact with its customers. The company will also strive to upgrade its technological level to meet its car makers’ rising demand for hi-tech. In addition, the company will develop strong brand identity with the aim of winning the Korea Design Grand Prix 2015. Sustainable Harmonious Personnel Management that Values Operations of Fulfilling Quality for Customer Value Competitive Advantage Management Humans and Nature Responsibilities Enhancement

Marketing Promotions

Kumho Tire offers its customers a host of marketing programs to deliver maximum brand value and, through them, actively publicizes its high-performance tire technologies across the world. 74

Context New Product Presentations In June 2013, our ultra-high-performance tire model ECSTA It is crucial for Kumho Tire, which does business across the globe, PS91 made its debut in keeping with Round 2 of the China to maintain consistency in the delivery of its brand images. The Touring Car Championship (CTCC), which we officially sponsor company undertakes diverse advertising campaigns with the aim and which was held at the Shanghai Tianma F1 Circuit. For the of further expanding its contact with customers and markets. new product launch staged overseas, the company invited more than 250 people including dealers at home and abroad and customer experience group members.

Progress Marketing Programs Advertising To get closer to consumers, Kumho Tire launches various adver- tisements under the theme of ’Move Your Thoughts‘ on TV and cinema screens. Furthermore, the company unveils a corporate brand ad focused on the ’Mileage Warranty Program,‘ an ad for its exclusive tire dealers, and ’Tire Pro‘, an emergency exit ad for cine- mas featuring ad character ’TORO‘; thus delivering the company’s philosophy on safety to the public.

Corporate Brand Ad Tire Pro Ad Emergency Exit Ad for CGV Multiplex Cinema Chain Proactive Quality Upgrading to Advanced Improving Customer Marketing Management Quality Satisfaction Promotions

Sports Marketing Fair Marketing

Kumho Tire enhances communication with its customers through Prevention of Exaggerated Advertising G4-PR7 diverse sports sponsorships around the world. Kumho Tire engages in diverse marketing campaigns including In Europe, we signed a sponsorship contract with Manchester commercials, sports marketing, and new product presentations. United FC, a world-renowned football club playing in the Premier The company has not violated any of the rules and regulations or League, UK. In 2011, we executed sponsorship contracts with standards in this regard. the Hamburger SV of Bundesliga and Rapid Wien of Austrian

Football Bundesliga. In 2014, we began ads on Primera Liga ad- Fair Product Supply G4-PR6 vertising boards. Kumho Tire delivers its tires to customers only through its dealers In the United States, we sponsored LA Lakers, a prominent NBA and Tire Pro shops. It complies with the Fair Transactions in Fran- team, for three seasons. In 2014, we signed a sponsorship con- chise Business Act to ensure fairness in its franchise business tract with NBA to support the entire league for three years until and product supply to markets. The company has never been in- 2016. During the period, as an official NBA sponsor, Kumho Tire volved in controversial product sales. will be publicized all across North America through global broad- cast channels like TNT, ESPN, and ABC. Customer Information Security In accordance with its enhanced personal information handling In China, Kumho Tire holds a golf tournament, expanding its clout policies, Kumho Tire complies with the rules on personal informa- and enhancing its premium brand image in the country. In Korea, tion protection while collecting customer information on its web- the company has signed a sponsorship contract with Kia Tigers, a site. Through a dedicated in-house organization, the company professional baseball team, to step up interaction with its cus- constantly checks the company’s performance in the area as well tomers. as that of the employees responsible for the collection of personal information. The company has also reinforced the security of its website by fixing its previous security vulnerability. It has not received any complaint of violation of customers’ personal information protection or loss of customer data.

Kumho as Official Sponsor for Sponsorship Signing Ceremony with NBA League Pro Golfer Ha-Na Jang

next Step 75 Kumho Tire will continue to publicize the prominence of its product quality to its customers around the world and boost its global brand power through diverse advertising campaigns and prestigious sports marketing events. Sponsorship Signing Ceremony with Kia Tigers APPENDIX

• Consolidated Financial Statements • GRI G4 Index • Third-Party Assurance Statement • Major Awards and Memberships in Association • Reader Questionnaire Survey Consolidated Financial Statements APPENDIX

Consolidated Income Statement (unit: KRW million)

Category 2011 2012 2013

Net Sales 3,915,876 4,070,644 3,698,542

Cost of Sales -3,109,732 -3,039,092 -2,719,712

Gross Profit 806,144 1,031,552 978,829

Selling and Marketing Expenses -612,490 -656,205 -632,894

Operating Income 193,653 375,346 345,936

Non-operating Income 145,211 107,113 140,427

Non-operating Expenses -317,955 -396,099 -338,108

Earnings before interest and taxes 20,909 86,360 148,255

Income tax profit(expenses) -47,763 44,226 -47,297

Consolidated net income (net loss) for the year -26,854 130,586 100,958

Consolidated Statements of Financial Position (unit: KRW million)

Category 2011 2012 2013

Current Assets 1,879,816 1,784,134 1,730,614

Non-current Assets 3,044,718 2,996,879 3,003,319

Total Assets 4,924,534 4,781,013 4,733,933

Current Liabilities 2,798,857 2,264,507 3,337,853

Non-current Liabilities 1,556,177 1,586,382 257,879

Total Liabilities 4,355,034 3,850,889 3,595,732

Dominant Firm’s Owners’ Equity 448,768 810,353 1,017,228

Capital Stock 531,785 631,288 739,056

Retained Capital Stock 119,631 234,831 235,594

Other Equity (19,538) (19,538) (19,538)

Accumulated Other Comprehensive Loss (13,008) 26,382 26,566 77 Retained Earnings (Loss Carried Forward) (170,102) (62,610) 35,549

Non-controlling Interest 120,732 119,771 120,973

Total Equity 569,500 930,124 1,138,201

Total Liabilities and Equity 4,924,534 4,781,013 4,733,933 GRI G4 Index

GENERAL STANDARD DISCLOSURES External Strategy and Analysis Page Assuarance Provide a statement from the most senior decision-maker of the organization (such as CEO, chair, or Strategy and G4-1 equivalent senior position) about the relevance of sustainability to the organization and the organization’s 6,7 ● Analysis strategy for addressing sustainability. G4-2 Provide a description of key impacts, risks, and opportunities. 6,7 ● Organizational Profile G4-3 Report the name of the organization 8 ● G4-4 Report the primary brands, products, and services. 12 ● G4-5 Report the location of the organization’s headquarters. 8 ● Report the number of countries where the organization operates, and names of countries where either the organi- G4-6 10,11 ● zation has significant operations or that are specifically relevant to the sustainability topics covered in the report. 78 G4-7 Report the nature of ownership and legal form. 9 ● Report the markets served G4-8 10,11 ● (including geographic breakdown, sectors served, and types of customers and beneficiaries). Report the scale of the organization, including: - Total number of employees - Total number of operations G4-9 9 ● - Net sales (for private sector organizations) or net revenues (for public sector organizations) - Total capitalization broken down in terms of debt and equity (for private sector organizations) Organizational - Quantity of products or services provided Profile a. Report the total number of employees by and gender. b. Report the total number of permanent employees by employment type and gender. c. Report the total workforce by employees and supervised workers and by gender. d. Report the total workforce by region and gender. G4-10 e. Report whether a substantial portion of the organization’s work is performed by workers who are legally ● recognized as self-employed, or by individuals other than employees or supervised workers, including employees and supervised employees of contractors. f. Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries). G4-11 Report the percentage of total employees covered by collective bargaining agreements. 36,37 ● G4-12 Describe the organization’s supply chain. 60,61 ● Report any significant changes during the reporting period regarding the organization’s size, structure, G4-13 - ● ownership, or its supply chain, including: Organizational Profile: Commitments to External Initiative G4-14 Report whether and how the precautionary approach or principle is addressed by the organization. 51 ● List externally developed economic, environmental and social charters, principles, or other initiatives to which G4-15 - ● the organization subscribes or which it endorses. Organizational List memberships of associations (such as industry associations) and national or international advocacy Profile: organizations in which the organization: Commitments to - Holds a position on the governance body External Initiative G4-16 84 ● - Participates in projects or committees - Provides substantive funding beyond routine membership dues - Views membership as strategic Identified Material Aspects and Boundaries a. List all entities included in the organization’s consolidated financial statements or equivalent documents. G4-17 b. Report whether any entity included in the organization’s consolidated financial statements or equivalent 9,77 ● documents is not covered by the report. a. Explain the process for defining the report content and the Aspect Boundaries. G4-18 16,17 ● b. Explain how the organization has implemented the Reporting Principles for Defining Report Content.” G4-19 List all the material Aspects identified in the process for defining report content. 17 ● For each material Aspect, report the Aspect Boundary within the organization, as follows: * Report whether the Aspect is material within the organization * If the Aspect is not material for all entities within the organization (as described in G4-17), select one of G4-20 the following two approaches and report either: 17 ● Identified Material - The list of entities or groups of entities included in G4-17 for which the Aspect is not material or Aspects and - The list of entities or groups of entities included in G4-17 for which the Aspects is material Boundaries * Report any specific limitation regarding the Aspect Boundary within the organization For each material Aspect, report the Aspect Boundary outside the organization, as follows: - Report whether the Aspect is material outside of the organization - If the Aspect is material outside of the organization, identify the entities, groups of entities or elements for G4-21 17 ● which the Aspect is material. In addition, describe the geographical location where the Aspect is material for the entities identified - Report any specific limitation regarding the Aspect Boundary outside the organization Report the effect of any restatements of information provided in previous reports, and the reasons for such About This Report G4-22 ● restatements. 41 About This Report G4-23 Report significant changes from previous reporting periods in the Scope and Aspect Boundaries. ● 41 Stakeholder Engagement G4-24 Provide a list of stakeholder groups engaged by the organization. 15 ● G4-25 Report the basis for identification and selection of stakeholders with whom to engage. 15 ● Report the organization’s approach to stakeholder engagement, including frequency of engagement by type Stakehlder G4-26 and by stakeholder group, and an indication of whether any of the engagement was undertaken specifically 15 ● Engagement as part of the report preparation process. Report key topics and concerns that have been raised through stakeholder engagement, and how the G4-27 organization has responded to those key topics and concerns, including through its reporting. Report the 15 ● stakeholder groups that raised each of the key topics and concerns. APPENDIX

Report Profile G4-28 Reporting period (such as fiscal or calendar year) for information provided. About This Report ● G4-29 Date of most recent previous report (if any). About This Report ● G4-30 Reporting cycle (such as annual, biennial). About This Report ● G4-31 Provide the contact point for questions regarding the report or its contents. About This Report ● Report Profile: GRI Content Index a. Report the ‘in accordance’ option the organization has chosen. b. Report the GRI Content Index for the chosen option (see tables below). About This Report G4-32 c. Report the reference to the External Assurance Report, if the report has been externally assured. GRI 78~81 ● recommends the use of external assurance but it is not a requirement to be ‘in accordance’ with the 82~83 Report Engagement Guidelines. Report Profile: Assurance a. Report the organization’s policy and current practice with regard to seeking external assurance for the report. b. If not included in the assurance report accompanying the sustainability report, report the scope and basis of G4-33 any external assurance provided. 82~83 ● c. Report the relationship between the organization and the assurance providers. d. Report whether the highest governance body or senior executives are involved in seeking assurance for the organization’s sustainability report. Governance Report the governance structure of the organization, including committees of the highest governance body. G4-34 28 ● Identify any committees responsible for decision-making on economic, environmental and social impacts. Report the process for delegating authority for economic, environmental and social topics from the highest G4-35 N/A ● governance body to senior executives and other employees. Report whether the organization has appointed an executive-level position or positions with responsibility for G4-36 economic, environmental and social topics, and whether post holders report directly to the highest 28 ● governance body. Report processes for consultation between stakeholders and the highest governance body on economic, environmental and G4-37 N/A ● social topics. If consultation is delegated, describe to whom and any feedback processes to the highest governance body. Report the composition of the highest governance body and its committees by: - Executive or non-executive - Independence - Tenure on the governance body - Number of each individual’s other significant positions and commitments, and the nature of the G4-38 28 ● commitments - Gender - Membership of under-represented social groups - Competences relating to economic, environmental and social impacts - Stakeholder representation Report whether the Chair of the highest governance body is also an executive officer (and, if so, his or her G4-39 29 ● function within the organization’s management and the reasons for this arrangement). Report the nomination and selection processes for the highest governance body and its committees, and the criteria used for nominating and selecting highest governance body members, including: - Whether and how diversity is considered G4-40 - Whether and how independence is considered 28 ● - Whether and how expertise and experience relating to economic, environmental and social topics are Governance considered - Whether and how stakeholders (including shareholders) are involved Report processes for the highest governance body to ensure conflicts of interest are avoided and managed. Report whether conflicts of interest are disclosed to stakeholders, including, as a minimum: - Cross-board membership G4-41 29 ● - Cross-shareholding with suppliers and other stakeholders - Existence of controlling shareholder - Related party disclosures Report the highest governance body’s and senior executives’ roles in the development, approval, and updating G4-42 of the organization’s purpose, value or mission statements, strategies, policies, and goals related to economic, 29 ● environmental and social impacts. Report the measures taken to develop and enhance the highest governance body’s collective knowledge of G4-43 N/A ● economic, environmental and social topics. a. Report the processes for evaluation of the highest governance body’s performance with respect to governance of economic, environmental and social topics. Report whether such evaluation is independent or not, and its frequency. Report whether such evaluation is a self-assessment. G4-44 29 ● b. Report actions taken in response to evaluation of the highest governance body’s performance with respect to governance of economic, environmental and social topics, including, as a minimum, changes in membership and organizational practice. a. Report the highest governance body’s role in the identification and management of economic, environmental and social 79 impacts, risks, and opportunities. Include the highest governance body’s role in the implementation of due diligence G4-45 processes. ● b. Report whether stakeholder consultation is used to support the highest governance body’s identification and management of economic, environmental and social impacts, risks, and opportunities. Report the highest governance body’s role in reviewing the effectiveness of the organization’s risk G4-46 29 ● management processes for economic, environmental and social topics. GRI G4 Index

Report the frequency of the highest governance body’s review of economic, environmental and social G4-47 N/A ● impacts, risks, and opportunities. Report the highest committee or position that formally reviews and approves the organization’s G4-48 29 ● sustainability report and ensures that all material Aspects are covered. G4-49 Report the process for communicating critical concerns to the highest governance body. 28 ● Report the nature and total number of critical concerns that were communicated to the highest G4-50 29 ● governance body and the mechanism(s) used to address and resolve them. a. Report the remuneration policies for the highest governance body and senior executives for the below types of remuneration: * Fixed pay and variable pay: Performance-based pay - Equity-based pay - Bonuses - Deferred or vested shares G4-51 29 ● 80 * Sign-on bonuses or recruitment incentive payments * Termination payments Governance * Clawbacks * Retirement benefits, including the difference between benefit schemes and contribution rates for the highest governance body, senior executives, and all other employees b. Report how performance criteria in the remuneration policy relate to the highest governance body’s and senior executives’ economic, environmental and social objectives. Report the process for determining remuneration. Report whether remuneration consultants are G4-52 involved in determining remuneration and whether they are independent of management. Report any 29 ● other relationships which the remuneration consultants have with the organization. Report how stakeholders’ views are sought and taken into account regarding remuneration, including G4-53 29 ● the results of votes on remuneration policies and proposals, if applicable. Report the ratio of the annual total compensation for the organization’s highest-paid individual in each G4-54 country of significant operations to the median annual total compensation for all employees (excluding 29 ● the highest-paid individual) in the same country. Report the ratio of percentage increase in annual total compensation for the organization’s highest-paid G4-55 individual in each country of significant operations to the median percentage increase in annual total 29 ● compensation for all employees (excluding the highest-paid individual) in the same country. Ethics and Integrity Describe the organization’s values, principles, standards and norms of behavior such as codes of G4-56 58 ● conduct and codes of ethics. Report the internal and external mechanisms for seeking advice on ethical and lawful behavior, and G4-57 59 ● Ethics and Integrity matters related to organizational integrity, such as helplines or advice lines. Report the internal and external mechanisms for reporting concerns about unethical or unlawful G4-58 behavior, and matters related to organizational integrity, such as escalation through line management, 59 ● whistleblowing mechanisms or hotlines.

SPECIFIC STANDARD DISCLOSURES Material External DMA and Indicators Page omissions Aspect Assuarance Category: Economic G4-EC1 Direct economic value generated and distributed 27 ● Financial implications and other risks and opportunities for the organization’s activities due to climate G4-EC2 48 ● Economic change G4-EC3 Coverage of the organization’s defined benefit plan obligations 27 ● G4-EC4 Financial assistance received from government 27 ●

Category: Environmental G4-EN1 Materials used by weight or volume 43 ● Materials G4-EN2 Percentage of materials used that are recycled input materials 51 ● G4-EN3 Energy consumption within the organization 47 ● G4-EN4 Energy consumption outside of the organization N/A Not Managed ● Energy G4-EN5 Energy intensity 47 ● G4-EN6 Reduction of energy consumption 47 ● G4-EN7 Reductions in energy requirements of products and services 69 ● G4-EN15 Direct greenhouse gas (ghg) emissions (scope 1) 49 ● G4-EN16 Energy indirect greenhouse gas (ghg) emissions (scope 2) 49 ● G4-EN17 Other indirect greenhouse gas (ghg) emissions (scope 3) N/A Not Managed ● Emissions G4-EN18 Greenhouse gas (ghg) emissions intensity 49 ● G4-EN19 Reduction of greenhouse gas (ghg) emissions 49 ● G4-EN20 Emissions of ozone-depleting substances (ods) 44 ● G4-EN21 Nox, sox, and other significant air emissions 44 ● G4-EN22 Total water discharge by quality and destination 41 ● G4-EN23 Total weight of waste by type and disposal method 44 ● G4-EN24 Total number and volume of significant spills 44 ● Effuents and Waste Weight of transported, imported, exported, or treated waste deemed hazardous under the terms of the G4-EN25 44 ● basel convention2 annex i, ii, iii, and viii, and percentage of transported waste shipped internationally Identity, size, protected status, and biodiversity value of water bodies and related habitats significantly G4-EN26 45 ● affected by the organization’s discharges of water and runoff Products and G4-EN27 Extent of impact mitigation of environmental impacts of products and services 50~53 ● services G4-EN28 Percentage of products sold and their packaging materials that are reclaimed by category 52 ● Overall G4-EN31 Total environmental protection expenditures and investments by type 43 ● APPENDIX

Category: Social

Sub-Category: Labor Practice and Decent Work G4-LA1 Total number and rates of new employee hires and employee turnover by age group, gender and region 33 ● Benefits provided to full-time employees that are not provided to temporary or part-time employees, Employment G4-LA2 38,39 ● by significant locations of operation G4-LA3 Return to work and retention rates after parental leave, by gender 39 ● Labor/Management Minimum notice periods regarding operational changes, including whether these are specified in G4-LA4 37 ● Relations collective agreements Percentage of total workforce represented in formal joint management–worker health and safety G4-LA5 54 ● committees that help monitor and advise on occupational health and safety programs Occupational Type of injury and rates of injury, occupational diseases, lost days, and absenteeism, and total number G4-LA6 54 ● Health and Safety of work-related fatalities, by region and by gender G4-LA7 Workers with high incidence or high risk of diseases related to their occupation 55 ● G4-LA8 Health and safety topics covered in formal agreements with trade unions 54 ● G4-LA9 Average hours of training per year per employee by gender, and by employee category 35 ● Programs for skills management and lifelong learning that support the continued employability of Training and G4-LA10 35 ● employees and assist them in managing career endings Education Percentage of employees receiving regular performance and career development reviews, by gender G4-LA11 34 ● and by employee category Diversity and Composition of governance bodies and breakdown of employees per employee category according to G4-LA12 32 ● Equal Opportunity gender, age group, minority group membership, and other indicators of diversity

Sub-Category: Society Percentage of operations with implemented local community engagement, impact assessments, and Local G4-SO1 45,62,63 ● development programs Comminities G4-SO2 Operations with significant actual and potential negative impacts on local communities 45 ● Total number and percentage of operations assessed for risks related to corruption and the significant G4-SO3 N/A None ● risks identified Anti-corruption G4-SO4 Communication and training on anti-corruption policies and procedures 59 ● G4-SO5 Confirmed incidents of corruption and actions taken 59 ● Monetary value of significant fines and total number of non-monetary sanctions for non-compliance Compliance G4-SO8 59 ● with laws and regulations

Sub-Category: Product Responsibility Percentage of significant product and service categories for which health and safety impacts are G4-PR1 72 ● Customer Health assessed for improvement and Safety Total number of incidents of non-compliance with regulations and voluntary codes concerning the G4-PR2 72 ● health and safety impacts of products and services during their life cycle, by type of outcomes Type of product and service information required by the organization’s procedures for product and G4-PR3 service information and labeling, and percentage of significant 69 ● Product and Product and service categories subject to such information requirements service Labeling Total number of incidents of non-compliance with regulations and voluntary codes concerning product G4-PR4 69 ● and service information and labeling, by type of outcomes G4-PR5 Results of surveys measuring customer satisfaction 72 ● G4-PR6 Sale of banned or disputed products 74 ● Marketing Total number of incidents of non-compliance with regulations and voluntary codes concerning Communication G4-PR7 74 ● marketing communications, including advertising, promotion, and sponsorship, by type of outcomes

81 Third Party’s Assurance Statement

To the Readers of Kumho Tire Sustainability Report 2013/2014:

Foreword Korea Management Association Registration and Assessments (KMAR) has been requested by Kumho Tire to verify the 82 contents of its Sustainability Report 2013/2014 (the Report). Kumho Tire is responsible for the collection and presentation of information included in the Report. Our responsibility is to carry out assurance engagement on specific data and information in the assurance scope stipulated below.

Scope and standard Kumho Tire describes its efforts and achievements of the sustainability activities in the Report. KMAR performed a Type 2, moder- ate level of assurance using AA1000AS (2008) as an assurance standard. We evaluated the adherence to AA1000APS Principles of Inclusivity, Materiality and Responsiveness, and the reliability of the selected GRI G4 indices as below, where professional judge- ment of the practitioner of KMAR’s assurance team was exercised as materiality criteria.

The team checked whether the Report has been prepared in accordance with the ‘Comprehensive Option’ of GRI G4 which covers the followings. ■ Reporting Principles ■ General Standard Disclosures ■ Specific Standard Disclosures - Generic DMA of each of following material aspects - Economic Performance: EC1, EC2, EC3, EC4 - Materials: EN1, EN2 - Energy: EN3, EN4, EN5, EN6, EN7 - Emissions: EN15, EN16, EN17, EN18, EN19, EN20, EN21 - Effluents and Waste: EN22, EN23, EN24, EN25, EN26 - Products and Services: EN27, EN28 - Overall: EN31 - Employment: LA1, LA2, LA3 - Labor/Management Relations: LA4 - Occupational Health and Safety: LA5, LA6, LA7, LA8 - Training and Education: LA9, LA10, LA11 - Diversity and Equal Opportunity: LA12 - Local Communities: SO1, SO2 - Anti-corruption: SO3, SO4, SO5 - Compliance: SO8 - Customer Health and Safety: PR1, PR2 - Product and Service Labeling: PR3, PR4, PR5 - Marketing Communications: PR6, PR7

The data and information related to the boundary outside of Kumho Tire such as suppliers, contractors, etc. are not covered by our assurance engagement. APPENDIX

Our approach In order to verify the contents of the Report within an agreed scope of assurance in accordance with the assurance standard, KMAR’s assurance team has carried out an assurance engagement as follows:

■ Reviewed sustainability related data and reporting process ■ Reviewed Internal materials ■ Interviewed people in charge of preparing the Report

Our conclusion Based on the results we have obtained from material reviews and interviews, we had several discussions with Kumho Tire on the revision of the Report. We reviewed the Report’s final version in order to confirm that our recommendations for improvement and our revisions have been reflected. When reviewing the results of the assurance, the assurance team could not find any inappropriate contents in the Report to the compliance with the principles stipulated below. Nothing has come to our attention that causes us to believe that the data and information included in the verification scope are not presented appropriately.

■ Inclusivity Inclusivity is the participation of stakeholders in developing and achieving an accountable and strategic response to sustainability. - Kumho Tire is developing and maintaining stakeholder communication channels in various forms and levels in order to make a commitment to be responsible for the stakeholders. The assurance team could not find any critical stakeholder group left out during this procedure.

■ Materiality Materiality is determining the relevance and significance of an issue to an organization and its stakeholders. A material issue is an issue that will influence the decisions, actions, and performance of an organization or its stakeholders. - Kumho Tire is determining the materiality of issues found out through stakeholder communication channels through its own materiality evaluation process, and the assurance team could not find any critical issues left out in this process.

■ Responsiveness Responsiveness is an organization’s response to stakeholder issues that affect its sustainability performance and is realized through decisions, actions, and performance, as well as communication with stakeholders. - The assurance team could not find any evidence that Kumho Tire’s counter measures to critical stakeholder issues were inappropriately recorded in the Report.

We could not find any evidence the Report was not prepared in accordance with the ‘Comprehensive Option’ of GRI G4.

Our independence With the exception of providing third party assurance services, KMAR is not involved in any other Kumho Tire business 83 operations that are aimed at making profit in order to avoid any conflicts of interest and to maintain independence.

17. Nov. 2014

000-129 CEO Ki Ho Park Major Awards and Memberships in Association

Awards in 2013

Organizer Name of Award/Rating/Certification Details

Brand Stock Brand Star No. 1 in the tire segment

Brand International Global Competitiveness No. 1 in the brand, industrial brand, Research Institute National Brand Awards and tire segments 84 (Korea JoonAng Daily Economist)

Secretariat of the Consumers’ Choice Awards Customers’ Choice Awards Chosen in the durable goods, for Best Brand (Forbes Korea) for Best Brand tire segment

Chosun Biz Korea’s Most Admired Brand in 2013 No. 1 in the tire segment

No 1. in the Customer Impression Korea Brand Management Association No. 1 in the tire segment Brand Index

The Korea Economic Daily Best Customer Trust Brand Awards No. 1 in the tire segment

No. 1 in the passenger car tire segment, Korea Management Association Korea Consumer Satisfaction Index durable goods manufacturing

No. 1 in the passenger car tire segment, Korea Management Association Korea Net Promoter Score durable goods manufacturing

Design Zentrum Nordheim Westfalen, Product Design Category RED DOT DESIGN AWARD Germany – ecowing ES01/KH27

Korea Technology Innovation Channel A/Donga Daily Korea Management Awards Management Awards – ECSTA PS91

Eco-friendly, high-efficiency Consumer Korea Energy Winner Awards transportation segment – ecowing S

Future Creation Management The Korea Economic Daily New technology sector – ECSTA PS91 Awards of Korea

Association and Organization Membership

Korea Tire Manufacturers’ Association Korea Employers’ Federation Korea Advertisers’ Association

Polymer Society of Korea Korea Exchange Defense Security Council in Seoul

Korea Industrial Technology Association Korea Invention Promotion Association Korea Management Association

Korea-Japan Economic Association Seoul Chamber of Commerce and Industry Korea Listed Companies’ Association

Korea IR Service Rubber Society of Korea Korea-US Economic Council

Korea Defense Industry Association Fair Competition Federation Korea International Trade Association

※ Kumho Tire and 11 other global tire manufacturers have joined forces to form WBCSD-TIPG (World Business Council for Sustainable Development-Tire Industry Project Group) and invest more than US$10 million in various joint research projects. For details, refer to p.37 of Kumho Tire’s Sustainability Report 2012. Stakeholder Survey

We at Kumho Tire welcome your candid feedback on our 2013/2014 Sustainability Report. Your valuable opinions and suggestions will be carefully reviewed and fully reflected on our upcoming reports.

Yo u may let us know your opinions on this sustainability report through our corporate phone or fax: Recipient | Tel. +82-62-940-2207 | Fax. +82-62-950-4779 G. Production Planning Team, Kumho Tire Sender | Name ______Gender ______Job ______

1. To which of the following groups do you belong? □Customers □Investors/ Shareholders □Suppliers □Local communities □Civic organizations □Employees of tire companies □Research institutes □Governmen □Media □Employees of Kumho Tire □Others ( )

2. How did you come across our sustainability report? The line along which to cut off □Kumho Tire’s website □Seminars/Lectures/Exhibitions □Newspapers/Magazines □Other websites □Employees of Kumho Tire □Others ( )

3. Check all the sections that you find interesting or less than satisfactory. Sections you find Sections you find less than interesting satisfactory

Sustainability Overview Take Action for Value / Sustainable Competitive Advantage Take Action for People / Harmonious Personnel Management Take Action for Green & Safety / Management that Values Humans and Nature Take Action for Sharing / Operations Fulfilling Responsibilities Take Action for Customer / Quality for Customer Value Enhancement

4. Please evaluate this report in the following three aspects:

Very satisfactory Satisfactory Average Unsatisfactory Very unsatisfactory

Clarity of information □ □ □ □ □

Quantity of information □ □ □ □ □

Overall appraisal □ □ □ □ □

5. Please feel free to give any further opinion you may have regarding this sustainability report.

658 Eodeung-daero, Gwangsan-gu, Gwangju, Korea T +82 - 62 - 940 - 2207 / F +82 - 62 - 950 - 4779

www.kumhotire.co.kr

This report was printed with soybean oil ink on paper certified by the international environmental NGO, FSC, using elemental chorine free bleaching pulp.