Corporate Philosophy A Commitment to Creating New Value through Innovation in Advanced Proprietary Technologies

The main business of the Toyo Tires Group is the manufacture and sale of automotive tires, industrial rubber, polyurethane products, and automotive anti-vibration rubber products. Since our founding in 1945, we have continued to create original markets in technologies and products. Currently, we offer goods and services that accurately meet the diversifying needs of markets in more than 100 countries worldwide. We will continue to be a good corporate citizen, maximizing each employ- ee’s efforts to improve our technical, product quality, and sales capabilities. driven to perform

Contents

02 At a Glance Please refer to our corporate website and Corporate Profile Message from the President 04 for more details about our business. 06 Special Feature: 2014 Medium-Term Business Plan Corporate Website Corporate Profile GO BEYOND 12 Review of Operations 13 Tire Business 16 DiverTech Business 18 ESG Information 18 Corporate Governance 20 Environmental and Social Contribution 22 Financial Section 22 Management’s Discussion and Analysis 26 Consolidated Financial Statements and Notes Forward-looking statements The statements contained in this report concerning the performance forecasts, plans, 51 Independent Auditor’s Report strategies, and similar topics that are not historical facts are forward-looking state- ments. These statements are management’s judgments based on information available 52 Domestic Facilities / Consolidated Subsidiaries as of March 28, 2014, and contain inherent risks and uncertainties. Consequently, readers are cautioned against making any management decision solely on the basis 53 Corporate Data / Investor Information of these performance forecasts.

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 in Production Nano Balance Technology materials design platform technology Nano Balance Technology is Toyo Tires’ advanced proprietary materials design foundation technology, which manages the development of the tire’s rubber materials at the molecular (nano) level. NANOENERGY ZERO, Toyo Tires’ new fuel-efficient tire brand, was developed using this technology, achieving the top ranking within Japan’s tire labeling system* for both rolling resistance and wet-grip performance. We are striving to continue evolving the highly eco-friendly NANOENERGY tire lineup and the Nano Balance Technology materials design platform technology that supports it as we proceed with the innovations in tire technology demanded by the next generation.

* This labeling system was established by the Japan Automobile Tyre Manufacturers Association (JATMA) as the industry’s voluntary standards for labeling to provide proper information to consumers as well as to define “fuel-efficient tires” as those that meet certain levels of both rolling resistance and wet-grip performance. in Operations ATOM production system The Advanced Tire Operation Module, or ATOM, is Toyo Tires’ proprietary, highly automated, next-generation system designed for the multiple-item, small-lot manufacture of quality products with reduced space needs. This new system has changed the stereotype of the tire factory as being heavy industry. The implementation of the ATOM system enables flexible response to changes in production plans. Currently, we are engaged in installing this system at four factories, in Japan, the United driven to perform States, China, and Malaysia, and have adopted a policy of always transferring ATOM component technology to new factories we build ourselves. This approach enables us to offer the world a stable supply of high-performance, high-quality tires. in Global Markets Toyo Tires becomes premium sponsor of AC Milan In 2014, we became a premium sponsor of renowned association football club AC Milan, seeking to grow our global branding content through participation in a sport with overwhelming international popularity. We will continue to boost the prestige of the TOYO TIRES brand in ways that are consistent with our “driven to perform” brand statement.

NITTO brand tires NITTO brand tires, characterized by their unique tread pattern, boast an enthusiastic following that has given the brand a distinctive, prominent presence in the luxury sports and SUV large-diameter tire market. The NITTO Tire Facebook page has generated more than eight million “Likes”*, and we plan to continue using digital media effectively to raise the profile of this unique, customer-supported brand.

* According to Toyo Tire data as of July 14, 2014; the most “Likes” of any tire brand and eighth in the auto industry overall.

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 01 At a Glance

Sales by Business Segment Sales by Geographic Segment

DiverTech Business Other Areas Japan 21.7% 17.6% 44.8%

Year ended Year ended December 31, December 31, 2013 2013

Tire Business North America 78.2% 37.6%

Global Production System: Production Capacity (New Rubber Consumption)

Other Asia Japan 14.0% 65.0%

North America Japan Year ended Other December 31, Asia 45,000 2013 tons 214,000 tons 29,000 tons 140,000 tons North America 21.0%

Market Data

Dubai Oil and Domestic Naphtha Prices Natural Rubber TSR 20 Price (SICOM) US$ / bbl Thousands of yen / kl US¢ / kg

160 120 600

120 90 450

80 60 300

40 30 150

0 ’09/4 ’10/3 ’11/3 ’12/3 ’12/12 ’13/12 0 0 ’09/4 ’10/3 ’11/3 ’12/3 ’12/12 ’13/12

Dubai Crude Oil Price Domestic Naphtha Price (right) Source: Singapore Commodity Exchange Limited (SICOM) Sources: Dubai crude oil Tokyo, Spot Price, FOB Domestically produced naphtha Custom Clearance Statistics, Ministry of Finance

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 02 Net Sales / Overseas Sales Ratio Operating Income / Net Income / Net Income Margin Operating Margin Billions of yen / % Billions of yen / % Billions of yen / %

400 370.2 80 40 37.2 12 16 8 10.1 61.7 11.5 300 60 30 9 12 6

200 40 20 6 8 4 3.1

100 20 10 3 4 2

0 ’10/3 ’11/3 ’12/3 ’12/12 ’13/12 0 0 ’10/3 ’11/3 ’12/3 ’12/12 ’13/12 0 0 ’10/3 ’11/3 ’12/3 ’12/12 ’13/12 0

Net Sales Operating Income Net Income Overseas Sales Ratio (right) Operating Margin (right) Net Income Margin (right)

Total Assets Net Assets / Capital Ratio Return on Assets (ROA) / Return on Equity (ROE) Billions of yen Billions of yen / % %

480 160 40 16 433.3 141.5 31.8 360 120 30 12 9.6 9.5

240 80 20 8

120 40 10 4

0 ’10/3 ’11/3 ’12/3 ’12/12 ’13/12 0 ’10/3 ’11/3 ’12/3 ’12/12 ’13/12 0 0 ’10/3 ’11/3 ’12/3 ’12/12 ’13/12

Net Assets ROA Capital Ratio (right) ROE

Net Income per Share Cash Dividends per Share Please refer to the Company’s Yen Yen Financial Fact Book for more 12 financial data. 60 12

45.7 45 9 Financial Fact Book

30 6

15 3

0 ’10/3 ’11/3 ’12/3 ’12/12 ’13/12 0 ’10/3 ’11/3 ’12/3 ’12/12 ’13/12

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 03 Message from the President

Not Resting in Place, We “GO BEYOND”

Early Achievement of 2011 Medium-Term Business Plan Performance Targets In June 2014, we announced our 2014 Medium-Term Business Plan, under the slogan “GO BEYOND.” Vision 2020, our long-term management vision for the Company in 2020, and the 2011 Medium-Term Business Plan targeting the five-year period through 2015 were announced just three years ago, but rather than wait until the end of the period of our 2011 Medium-Term Business Plan we are launching a new plan now. We have chosen to do so because we hit several of our 2011 Medium-Term Business Plan performance targets in the fiscal year ended December 31, 2013. Net sales and operating income reached record highs of ¥370.2 billion and ¥37.2 billion, respectively, meeting the plan’s operating income and operating margin targets two years ahead of schedule. Net sales are forecast to be on target in the term ending December 31, 2014, as well. Although emerging economies’ high rates of growth have begun to level off, the North American economy has rebounded strongly, helping to turn the tide of the global economy. Against this backdrop, we have been making steady progress with the implementation of measures based on the 2011 Medium-Term Business Plan, including strengthening our tire supply capacity, and we succeeded in greatly improving our results thanks to the good fit of our product portfolio, which is unique in its large-diameter tires, with the North American market. The correction to the high yen and stabilizing oil prices were part of an improved external environment that helped us move forward, but I believe that

2014 2015 2016 2017

2014 Medium-Term Business Plan (Fiscal Years Ending December 31, 2014 to 2016) Business Policy through 2018 Slogan GO BEYOND

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 04 Not Resting in Place, We “GO BEYOND”

our early achievement of the 2011 Medium-Term Business Plan performance targets was also due to successful efforts at leveraging specific portfolio strengths by improving our product and market mix and strategically deploying our resources. Not content with the present or Drawing Up a Medium-Term Growth Scenario and Rising to the Next Stage resting in place, The income level we recently succeeded in reaching is well above the previous we are striving to year’s level. We recognize that as a company we have reached a new stage. Based on this achievement, we realized we needed to draw up a new medium- rise to the next stage. term growth scenario based on foreseeable trends in the global economy. This understanding led to our formulation of the 2014 Medium-Term Business Plan, which embodies our intention to move up to the next stage rather than simply be content with the way things are. The realization of the growth scenario that we have envisioned will require employees to work as one under the slogan “GO BEYOND,” with the aim of becoming a unique company with a robust global presence. We thank all of our stakeholders, including our shareholders and other investors, for their understanding and support of our business.

August 2014

Akira Nobuki, President

2018 2019 2020 2021 2022 2023 2024

Vision 2020 Our Long-Term Vision for the Company in 2020 A company that has a strong presence, with distinctive technologies and marketing strategies, and sees things from the customer’s perspective A company that is trusted by society, with each employee keen to fulfill CSR A company that overflows with energy and vitality, rich with imaginative freedom and the spirit to take on challenges

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 05 Special Feature: 2014 Medium-Term Business Plan GO BEYOND

The present is built upon the accumulated results of past achievements. The Company has always taken a medium-term perspective in executing diverse strategies and investment while striving for growth. We will continue to hit our new targets.

Business and capital alliance with Bridgestone Corporation Iberia representative office opened in Spain Establishment of Toyo Tire North America OE Sales LLC for auto tire sales in the United States Establishment of auto tire manufacturing Subsidiary acquisition of Italian sales subsidiary Toyo Tire (Zhangjiagang) Co., Establishment of TOYO TIRE RUS LLC for company (currently Toyo Tire Italia S.p.A.) Ltd., in China auto tire sales in Russia (Moscow) Subsidiary acquisition of Silverstone Berhad, a Malaysian auto tire manufacturer 600.0 and seller, through share purchase 11.1 More Establishment of Toyo Tyre (UK) Ltd. for Establishment of Toyo Tire Japan Co., Ltd., through than auto tire sales in the United Kingdom the integration of 10 sales companies in Japan 10.1 10.0 Establishment of Toyo Tire Benelux B.V. Establishment of Toyo Chemical Industrial Products Revision of the 2008 for auto tire sales in the Netherlands Sales Co., Ltd., through the integration of two Medium-Term Business chemical products sales companies Plan due to rapid 470.0 Establishment of Nitto Tire Canada Inc. for auto tire changes in the manage- sales in Canada ment environment

370.2 357.2 328.4 320.4 320.6 300.2 287.7 294.1 291.1 4.4 5.4 4.1 4.0 228.6 3.7 189.4 2.9 177.9 3.0 181.6 180.7 158.9 151.7 151.2 131.7

Net Sales (Billions of yen) Overseas Sales (Billions of yen) Operating Margin (%) –0.9

’06/3 ’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’12/12 ’13/12 ’14/12 ’15/12 ’16/12 ’20/12

2005 Medium-Term Business Plan 2008 Medium-Term Business Plan 2011 Medium-Term Business Plan GLOBAL CHALLENGE Global Growth Charge our Dreams

Basic strategies Basic strategies Basic strategies Increase corporate value through Enhance corporate value by accelerating Focus management resources on growing global growth global growth strategies markets and strategic businesses Concentrate management resources Concentrate management resources Establish business model for on core activities with growth and on core businesses increasing profitability income potential Change business models to promote Create new demand with unique technology Implement structural reform of structural reform Continue to implement corporate business operations Target and promote proprietary restructuring Develop basic and differentiated differentiated technologies technologies with the potential to generate business and income.

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 06 Establishment of Toyo Tyre Manufacturing (Malaysia) Sdn Bhd (currently Toyo Tyre Malaysia Sdn Bhd), a Malaysian auto tire manufacturer and seller Acquisition of equity interest (subsidiary acquisition) in auto tire manufacturer and seller Shandong Silverstone Luhe Rubber & Tyre Co., Ltd., in China Establishment of joint venture with Wuxi Meifeng Rubber Products Manufacturing Co., Ltd., of China, to manufac- ture and sell parts for railway cars Integration of the chemical products segment Establishment of Toyo Rubber Chemical Products of the DiverTech Business to establish Toyo (Thailand) Limited to manufacture and sell cleaning Chemical Industrial Products Co., Ltd. blades used in OA equipment Establishment of Toyo Tires (Thailand) Co., 600.0 LTD., for auto tire sales in Thailand 11.1 More than 10.1 10.0

470.0

370.2 357.2 328.4 320.4 320.6 300.2 287.7 294.1 291.1 4.4 5.4 4.1 4.0 228.6 3.7 189.4 2.9 177.9 3.0 181.6 180.7 Transfer of headquarters 158.9 151.7 151.2 on the occasion of 131.7 our 70th anniversary

–0.9

’06/3 ’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’12/12 ’13/12 ’14/12 ’15/12 ’16/12 ’20/12

2014 Medium-Term Business Plan GO BEYOND

Business Policies Business Targets Tire Business Secure an operating margin of more than 10% and target further ■ Establish firm brand position in SUV/CUV market, where Toyo Tires has business expansion strong presence ■ Realize differentiated technologies to achieve top-class product Net Sales ¥ billion competitiveness 470.0 ■ Strengthen product development capabilities for truck and bus tires Operating Income ¥ 52.0 billion DiverTech Business Operating Margin 11.1% ■ Build profit structures to promote business management based on business units ROA more than 10.0% ■ Fortify businesses with key strengths and build solid foundation in Japan ■ Strategically develop overseas markets to improve cost-competitiveness Capital Investment ¥ 130.0 billion and expand growth foundation (Three years)

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 07 Special Feature: 2014 Medium-Term Business Plan—GO BEYOND

In this section, the Company’s President, Akira Nobuki, explains the 2014 Medium-Term Business Plan, announced in June 2014.

A New Growth Stage

As we expect to meet all management targets of the 2011 Medium-Term Business Plan, we give high marks to the plan’s overall effectiveness.

The 2011 Medium-Term Business Plan set targets for net sales of described below. Having begun to reap the benefits of resolute deter- ¥400 billion and operating income of ¥30 billion. We set these targets mination in developing new business and increasing on-site capabili- when our highest figures so far had been net sales of ¥357.2 billion, ties, we give high overall marks to the effectiveness of the strategies in the fiscal year ended March 31, 2008, and operating income of set out in the 2011 Medium-Term Business Plan. ¥15.4 billion, in the fiscal year ended March 31, 2002. Therefore, in no sense did our targets seem easily achievable. Nevertheless, we hit our target for operating income two years early, while the operating margin exceeded the 10% set in Vision 2020. We predict that net sales will reach ¥400 billion in the fiscal year ending December 31, 2014. Up to this point, the Company’s rate of supply chain expansion had not kept up with the growing pace of demand, and progress on business selection and concentra- tion had not enabled us to break out of the ¥300 billion range over the long term. It appears that finally we will be able to step up to a new growth stage. We have steadily executed each measure in the 2011 Medium- Term Business Plan, such as expanding the tire supply base and investing in strong product lines, based on the business strategies

Review of 2011 Medium-Term Business Plan

Tire Business DiverTech Business Business Strategies Business Strategies ■ Establish optimal supply system ■ Expand automotive parts business ■ Establish proprietary brand strategy ■ Gr ow urethane business in Asia ■ Innovate marketing and brand strategies ■ Expand overseas railway car parts business ■ Develop embodiment of world’s premier eco-friendly technology ■ Develop embodiment of world’s premier eco-friendly technology

Primary Initiatives Primary Initiatives ■ Opened new plants in China and Malaysia, equipped with ■ Developed overseas business platform; established manufactur- ATOM production system ing and sales bases in China, Thailand, and Mexico ■ Completed third expansion of North American plant; started ■ Began manufacture of OA devices and components in Thailand fourth expansion ■ Established Chinese joint venture for railway car parts ■  Further expanded Group’s two top brands: TOYO TIRES and NITTO ■ Launched to market “Aitas” line of heat-insulating rigid ■ Developed new business in markets in ASEAN, Russia, and polyurethane foam for buildings Eastern Europe; established sales subsidiaries and other bases ■ Launched to market low-GWP spray rigid urethane ■ Focused on expanding tire sales in North America for SUVs, CUVs, foaming agent and pickup trucks ■ Established Nano Balance Technology as new design platform technology ■ Launched flagship fuel-efficient NANOENERGY series in Japan and Europe

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 08 Aiming Higher

As a result of taking a good look at and verifying our current position, we decided to establish a new three-year medium-term business plan that challenges us to hit higher targets.

Our Corporate Mission, Corporate Philosophy, and Brand Statement The goals for the year ending December 31, 2016, the final year form the core of our corporate existence. At the same time, the in the plan, are net sales of ¥470.0 billion, operating income of medium-term business plan and long-term management vision set ¥52.0 billion, and an operating margin of 11.1%. We aim to expand the course for corporate growth and, therefore, must change with our business while maintaining return on assets (ROA) of 10.0% or each new stage. To not change course when we reach a different more and an operating margin higher than 10.0%. Moreover, we are stage would not be acceptable to our stakeholders, including our planning capital investment totaling ¥130.0 billion over the course shareholders and other investors. of the 2014 Medium-Term Business Plan against the backdrop of Although we are still looking back on and examining the 2011 increasing income levels. This investment level over a three-year Medium-Term Business Plan, based on our expectations that we will period is the highest in the Company’s history. We are poised to enter reach its management targets and broadly increase profit levels, we a growth stage, and we will continue to invest as necessary to now consider it necessary to closely reexamine our current position expand our operations. and draw up a new growth scenario. Our repeated verification of the aforementioned achievements led to the decision to formulate a new three-year medium-term business plan that challenges us to hit higher targets. Taking 2014 as a starting point, the new 2014 Medium-Term Business Plan sets out firm objec- tives to be reached over the three years through 2016, placing us in the condition we view as necessary by 2018.

Positioning of New Medium-Term Business Plan

Long-Term Management Vision Vision 2020 Course for Corporate Growth Medium-Term Business Plan 2014 Medium-Term Business Plan

driven to perform Brand Statement Pursuit of top performance

A Commitment to Creating New Value through Foundation for Corporate Philosophy Innovation in Advanced Proprietary Technologies Company’s Continuance

For each of us to give our best where we work, Corporate Mission so that our customers will always have a better product Statement at a better price, more today than yesterday.

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 09 Special Feature: 2014 Medium-Term Business Plan—GO BEYOND

Clarifying Our Course of Action

Our 2014 Medium-Term Business Plan is aimed at clarifying our course of action. Our growth scenario consists of making further progress in developing our unique portfolio.

In the 2014 Medium-Term Business Plan, I have sought to clarify our We have also embarked on policies in the DiverTech Business future course of action. Basically, I want to show the direction in that call for us to build profit structures to promote management and which we are heading. Once that has been determined, the target growth based on business units; strengthen businesses where we figures and the issues we need to grapple with become visible in enjoy a unique advantage and build a solid domestic platform; and drawing up the growth scenario. strategically develop overseas markets in the aim of improving cost- In the Tire Business, the plan spells out business policies to be competitiveness and expanding our growth platform. focused on through 2018 of establishing a firm brand position in the The product lines developed through the DiverTech Business are SUV/CUV market, where we are already strong; gaining top-class easily affected by changes in the market environment and economic product competitiveness through differentiated technologies; and trends, so we must proceed through a twin approach of “improving increasing our truck and bus tire development capabilities. cost-competitiveness” and “promoting the development of areas in The impetus for the great strides we made under the 2011 which we enjoy a unique advantage.” We are actively dealing with the Medium-Term Business Plan has been provided by our large- switch by automakers to modular production and globalization, and diameter tires, including those for SUV/CUVs, particularly in the North we will optimize our current resources to build solid profit structures. American market. While economic improvement in North America We aim to generate new business, centered on our fundamental helped us move forward, a major factor behind our rapid growth was technologies involving rubber and urethane materials.

getting the right fit for the product and market mix we have steadily For more information on the Tire Business and the DiverTech P14,16 built up to now. Business strategies, please see pages 14 and 16. Our strength lies in this kind of revenue structure, and the Tire Business growth scenario calls for further development of this mix based on the business policies outlined here. The five strategy pillars are our product, market, brand, supply, and technological strategies, and by improving on our inherent strengths we can firm up our own market presence, which is characterized by our originality, amid global competition that grows ever more stringent.

Tire Business Supply Strategy GO BEYOND Supply Capacity Production Capacity Going Beyond Our Current Global Supply Capacity (New Rubber Consumption) Tons Our 2011 Medium-Term Business Plan aimed to Under the 2014 Medium-Term Business 270,000 create an optimal global supply chain focused on Plan, we intend to expand tire production on a 280,000 three areas—North America, Japan, and other new rubber volume basis by around 25%, to 20% 214,000 parts of Asia. New plants in China and Malaysia 270,000 tons, from the 2013 figure of 214,000 19% 210,000 14% went on line, and we completed the third expan- tons. We are expanding supply capacity in 30% 21% sion phase at our U.S. tire plant, strengthening North America in particular and will bring the 21% production capacity. We also began a fourth overseas production rate to about 50% by the 140,000 expansion phase at the plant in response to end of 2016. Also, we will clarify the role of each increased demand stemming from improvement factory in conjunction with product demand in 65% 60% 50% 70,000 in the North American economy and the premier each market it supplies. This approach should market position of our products. As a result, make operations more effective and efficient. while 10% of our production was overseas in In addition, we will consider to establish new 0 ’13/12 ’14/12 ’15/12 ’16/12

2010, in 2013 we conducted 35% of our total production bases. Japan North America production outside Japan. Other Asia

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 10 Transforming Our Consciousness

Our business management is shifting from an emphasis on reactive measures that ensure survival to one focused on proactive ways to make our growth sustainable. We aim to reach the next stage by transforming the consciousness of our employees.

The 2014 Medium-Term Business Plan expresses our intention to step Toyo Tires is engaged in changing from a consciousness of sur- up to the next stage and serves as a message to our employees. vival to one of sustainable growth and achieving its management The 2011 Medium-Term Business Plan substantially altered our goals based on the 2014 Medium-Term Business Plan, aiming to base of operations, boosting operating income from ¥10 billion to the reach the next stage both in spirit and in reality. We will transcend our ¥30 billion level. The 2014 Medium-Term Business Plan aims to take present circumstances and go even further beyond, always striving to us higher, to operating income of about ¥50 billion. take the Company to the next stage. We are drawing on these stronger financial fundamentals to shift our management from the reactive, in other words ensuring survival, to the proactive, in other words making our growth sustainable. Despite strong demand for our products, our need to concentrate on survival has resulted in a number of missed opportunities. To seize on such opportunities in the future, the Company must make up-front investments for growth. We also must change our employees’ con- sciousness from a survival mode to a focus on sustaining our growth. By that, I mean employees having the ability to see the future and take on new opportunities rather than just surmounting current challenges. We have reached our current level suddenly, with our figures advancing more quickly than the thinking of our employees. I intend to change employee consciousness by demonstrating the Company’s strong will “not to be content with the current situation, but to sharpen our corporate power to reach a higher level,” demonstrating earnest- ness both within and outside the Company. To that end, we formulated a new business plan during the course of the 2011 Medium-Term Business Plan and selected “GO BEYOND” as its slogan. Also, a greater sensitivity to risk is required. We always have to be cautious about getting into situations where a single risk could result in a major loss of what we have achieved so far. Sustainable growth, on the other hand, requires each employee to be aware of safety and compliance. This is a prerequisite to competition, which we reempha- size in our basic policy on corporate functions in the 2014 Medium- Term Business Plan. This policy calls for a stronger emphasis on For more information on the 2014 Medium-Term Business Plan, environmental, social, and governance efforts to support sustainable please refer to the Investor Relations growth and development. section of our corporate website.

Corporate website, Investor Relations section

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 11 Review of Operations

Sales by Business Segment Sales by Business Segment 21.7% 78.2%

Net Sales

Operating Income by ¥ 370.2 billion Operating Income by Business Segment Business Segment 90.7% Operating Income 9.3% ¥ 37.2 billion

Tire Business DiverTech Business

Main Products Main Products ■ Tires for passenger cars ■ Seismic isolation rubber ■ Air springs ■ Tires for trucks and buses ■ Seismic isolation rubber for buildings ■ Road materials ■ Tires for construction vehicles ■ Heat insulation materials ■ OA equipment parts

Business Overview Business Overview We are developing the Tire Business by exploiting the special Through the DiverTech Business, we supply a variety of indus- characteristics of our two core brands, TOYO TIRES and trial sectors with a wide range of products that leverage the NITTO. Under the technologically trusted TOYO TIRES brand, advanced rubber and materials composition technologies and we market the OPEN COUNTRY SUV tire, the TRANPATH the vibration control technologies we have developed as a tire minivan tire, and the NANOENERGY fuel-efficient tire. manufacturer. In particular, we have a proven track record in Meanwhile, our NITTO brand is mainly focused on large- supplying automotive anti-vibration rubber and railway car air diameter tires, such as the GRAPPLER series for pickups, springs to automakers and railway equipment manufacturers luxury sports cars, and SUVs, with sales centering on North around the world, and we have gained a high degree of trust America, where the brand is known for combining sophisticated for the safety and comfort of our products. design with innovation.

Coupling

Seismic isolation rubber

Hydraulic engine Polishing pads for semiconductor mount manufacturing

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 12 Tire Business

Fiscal 2013 summary*

Net sales ¥ 289.7 billion Up 15.2% Operating income ¥ 33.8 billion Up 152.1% * Calculations are based on the same period during the previous term.

New Car Tires Japanese auto production fell below that of the previous fiscal year due to the ending of eco-car subsidies and other factors. Consequently, sales volumes for new car tires continued on a downward trend, but net sales were favorable due to such factors as expanded sales of value-added products.

Replacement Tires in Japan Net Sales In addition to efforts to promote higher sales of passenger car tires by expanding the size Billions of yen lineup of NANOENERGY 3 fuel-efficient tires, an improving Japanese economy underpinned 300 sales of truck and bus tires, leading to a favorable sales volume. Nonetheless, net sales were in line with the previous term, due to the impact of a worsening product mix and other factors. 200

Replacement Tires Overseas 100 Overall, overseas markets trended favorably in terms of volume and net sales. Market trends were as follows in the fiscal year ended December 2013. 0 ’10/3 ’11/3 ’12/3 ’12/12* ’13/12

North American market In conjunction with economic improvement in North America, sales of high-value-added Operating Income / Operating Margin products, such as OPEN COUNTRY A/T II SUV tires and NITTO brand GRAPPLER series Billions of yen / % pickup truck tires, were strong. In addition, sales volumes and net sales trended favorably 36 12 due to the launch of the NT421Q crossover utility vehicle (CUV) tire and other factors. 24 8 European market Although the sluggish European economy had an adverse effect, volumes and net sales were 12 4 firm thanks to efforts to attract new customers. Sales increased for our new PROXES CF2, which complies with the EU grading system, NANOENERGY 3, and the OBSERVE G3-ICE 0 ’10/3 ’11/3 ’12/3 ’12/12* ’13/12 0 studless snow tire, which features enhanced performance on snowy and icy roads. Operating Income Operating Margin (right)

Southeast Asian market * Fiscal year ended December 2012 was a nine-month Due to strong sales in Malaysia, where we maintain a production base, and other factors, period due to a change in the Company’s fiscal year-end. Note: Above figures include intersegment sales overall sales volumes and net sales in the Southeast Asian market were favorable. and transfers.

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 13 Review of Operations Tire Business

Business Strategies of Business Policies Targets for Fiscal 2016 2014 Medium-Term Business Plan

■ Establish firm brand position in SUV/CUV market, where Toyo Tires Net Sales ¥ 380.0 billion has strong presence Takuji Yamamoto ■ Realize differentiated technologies Representative Director, to achieve top-class product Operating Income ¥ 46.0 billion Executive Corporate Officer, competitiveness Group Executive Officer, Tire Business ■ Strengthen product development Operating Margin 12.1% capabilities for truck and bus tires

SUV/CUV/Pickup Truck Tires Product Strategy as a Percentage of Global Unit Sales In passenger car tires, we are aiming at aggressive sales growth in the SUV/CUV/pickup truck category, which is expected to constitute 40% of our global unit sales by the fiscal year ending December 2016, compared with 32% in the year ended December 2013. Products in ’16/12 Target this category, which are focused on the North American market, are earning high marks for ’13/12 32% 40% their originality in terms of function, quality, and design. Through bold and aggressive efforts to increase sales of this very competitive product line, we can establish a solid presence in the Other global market, optimize our product mix, and make our revenue platform even stronger. Unit sales: Up 45% We are also taking our truck and bus tire development efforts to the next level. Trucks and buses are mainly used for industrial purposes, so there is demand for high performance in terms of fuel efficiency and lifespan. While we have already been engaging in the development Tire Sales by Market of products that satisfy such requirements, issues concerning product development speed remain. The 2014 Medium-Term Business Plan calls for using Nano Balance Technology, our original materials design foundation technology, and other technologies to strengthen our ability 50% to develop the high levels of performance and quality that enable us to get high-value-added 45% 46% products to market promptly.

39% 35% 39% Market Strategy 15% 16% 15% ’13/12 ’14/12 ’15/12 ’16/12 Under the 2014 Medium-Term Business Plan, our markets are categorized into three (target) (target) groupings: North America; Japan, Europe, and the Middle East; and China, Southeast Asia, North America Japan / Europe / Middle East and Central and South America. We execute market strategies corresponding to each area. China / Southeast Asia / Central and South America North America The North American market is important to us as a revenue source, and by focusing on The Group’s Share of the North American increasing sales and supply capacity for the SUV/CUV/pickup truck product category, which Market for SUV/CUV/Pickup Truck Tires is our strong point, we plan to increase that market’s relative importance to us. North America is currently experiencing an economic upturn, and sales of new cars are 6.0% also up markedly. Automakers are introducing new models, and about 40% are in the SUV/ 4.5% 4.6% CUV/pickup truck category, making it a major category. We are already engaged in strengthen- ing all functions within this category, such as our supply and sales capabilities, to earn even greater support from customers. In this way, we are building an even firmer revenue platform to bring our market share for this category to 6% in the fiscal year ending December 2016. ’13/12 ’14/12 ’15/12 ’16/12 (target) (target)

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 14 Japan, Europe, and the Middle East

We are working in the medium term to strengthen our business platform in Japan, Europe, and Demand Market Strategies Forecast the Middle East, taking into consideration the characteristics of each market. Japan Trend toward Launch new TRANPATH We are bringing new, specialized products to market in Japan, such as minivan tires, increase in products; Expand demand for NANOENERGY sales premier light vehicle tires, fuel-efficient tires, and studless tires, and strengthening our high-value- product lineup. added products Europe Moderate Respond to environ- In Europe, where automobile environmental regulations are particularly strict, our energy- recovery, trend mental regulations toward increase through NANOENERGY efficient tires are highly rated, and we are working to expand their sales. In addition, given the in tire demand sales expansion; use of winter tires in Europe, we are planning aggressive efforts to open up markets for those Aggressively develop markets in Northern and tires as well. We are seeking to strengthen sales of SUV/CUV products in Russia, in particular. Eastern Europe, where winter tires are used; Demand for large vehicles is now stable in the Middle East, so we believe there is strong Increase sales of SUV/ CUV and winter tires in potential demand for our tires. We intend to enhance ties with local representatives, in parallel Russia with strengthening our supply capacity, to aggressively bring our SUV/CUV products to market Middle Steady demand Increase sales of East for large-size SUV/CUV tires and cultivate a stable growth market that can contribute to revenue. vehicles

China, Southeast Asia, and Central and South America

China, Southeast Asia, and Central and South America are markets with great potential for Demand Market Strategies Forecast growth, but causes of instability, such as intrinsic social and political conditions, as well as the China Trend toward Improve product mix; degree of market maturity, make it necessary to keep a close eye on trends and conditions in increase in Expand sales ratio of demand SUV and high-end the operating environment. focused on products SUV/CUV and Vehicle demand in China has been rising thanks to economic development, especially for other high-end large, expensive vehicles like SUV/CUVs. In response to such market changes, we have been vehicles South- Potential growth Boost stratification of expanding the sales ratio of higher-priced goods, such as SUV tires, with the goal of improving east markets, where target products based Asia currently low- on market needs; our product mix. priced products Launch NANOENERGY We are proceeding with the stabilization and expansion of supply volumes in Southeast are mainstay products manufactured at Malaysian plant Asia, and we are working to expand sales channels and bring to market such high-value- Central Trend toward Increase sales of UHP added products as fuel-efficient and large-diameter tires. and increase in tire and SUV tires South demand We are also seeking to strengthen sales of ultra-high performance (UHP) tires and SUV America tires in Central and South America.

Expanding Lines of Eco-Friendly Products Sales of NANOENERGY 3 in Malaysia

In May 2014, Toyo Tires launched NANOENERGY into consideration in our decision to launch our 3 in Malaysia. Automobile use in Malaysia—unlike flagship fuel-efficient NANOENERGY series in that neighboring countries in Southeast Asia—is char- market. The NANOENERGY 3 was developed acterized by an overwhelming number of sedans using Nano Balance Technology, our original and compact passenger cars. In addition, the materials design foundation technology. By Malaysian government has given preferential tax switching to a newly developed tread compound treatment to the manufacture and importation of and a wider tread, we have been able to combine hybrids and electric cars, and as a result demand fuel efficiency and anti-wear performance in a for fuel-efficient tires for installation on such cars standard passenger car tire. Production at our factory in Malaysia, is expected to grow. We took this background which came on line in May 2013

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 15 Review of Operations

DiverTech Business

Fiscal 2013 summary*

Net sales ¥ 80.5 billion Up 0.2% Operating income ¥ 2.6 billion Down 5.0% * Calculations are based on the same period during the previous term.

Net Sales Transportation Equipment Billions of yen In automotive anti-vibration rubber products and automobile seat cushions, demand in Japan 90 declined as a result of the end of eco-car subsidies, but overall transportation equipment net sales were even with the previous year due to strong auto production overseas, especially in 60 North America. Net sales of anti-vibration rubber and air springs for railway cars were also favorable, due 30 to sales for new rolling stock in Japan and to the overseas replacement parts market.

0 ’10/3 ’11/3 ’12/3 ’12/12* ’13/12 Thermal Insulation and Waterproofing Materials Sales of rigid urethane undiluted solution to housing materials manufacturers were strong; Operating Income / Operating Margin however, sales of materials for livestock buildings were lower. As a result, net sales were on a Billions of yen / % par with the previous year. 4.5 6 Waterproofing materials shipments increased, with sales trending favorably.

3.0 4 Industrial and Construction Materials Orders for architectural base isolation rubber and construction-use hoses were strong, and 1.5 2 sales were firm.

0 ’10/3 ’11/3 ’12/3 ’12/12* ’13/12 0

Operating Income Operating Margin

* Fiscal year ended December 2012 was a nine-month period due to a change in the Company’s fiscal year-end. Note: Above figures include intersegment sales and transfers.

Business Strategies of Business Policies Targets for Fiscal 2016 2014 Medium-Term Business Plan

■ Build profit structures to promote business management based on Net Sales ¥ 90.0 billion business units ■ Fortify businesses with key strengths Haruhiro Shinsho and build solid foundation in Japan Operating Income ¥ 6.0 billion Director, Corporate Officer, ■ Group Executive Officer, Strategically develop overseas mar- DiverTech Business kets to improve cost-competitive- Operating Margin 6.7 % ness and expand growth foundation

Sales by Business Unit Business Unit Policy Billions of yen In 2014, we divided the DiverTech Business into three units: automotive rubber products, 2014 Medium-Term Business Plan automotive urethane products, and chemical & industrial products. We have adopted clear 90.0 policies for each business unit and implemented strategies to achieve numerical targets. 80.5 82.5 50% In addition, we are developing new growth areas, such as environment and energy, life innovation, 57% 54% traffic and mobility, and horticulture/agriculture, in our core rubber and urethane products, 7% 10% 8% which should lead to new business. 35% 39% 40%

’13/12 ’14/12 ’15/12 ’16/12 ’18/12 (target) (target) New Business Auto Rubber Products Auto Urethane Chemical & Industrial Products Products

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 16 Automotive rubber products business unit

We are strengthening our overseas business platform, focusing on such important issues as Auto Rubber Products Business securing our position as a global supplier and shoring up our global supply chain. We plan Unit Strategies to raise auto parts as a percentage of overseas sales to 45% by the fiscal year ending Business development strategy: Bolster business in Mexico and ASEAN December 2016. countries The automakers with which we trade are shifting to globalized, modular production. We are Technology strategy: reinforcing our overseas business platform to deal with this trend as we step up efforts based Localize development Sales strategy: on such themes as dramatic cost reduction. Further, we are centering efforts on Mexico and Boost market share, particularly in Japan the ASEAN countries to localize technical development and enhance cost-competitiveness. Manufacturing strategy: Improve cost-competitiveness Automotive urethane products business unit In this unit, we are mainly focusing on our sales strategy, with technical ability at the core, and Auto Urethane Products Business the rebuilding of our domestic supply chain. By strengthening our sales of high-performance Unit Strategies products and increasing the unit’s sales ratio to 10% by the fiscal year ending December 2016, Expand sales of highly functional products we will increase the business value of this unit. Secure optimal supply locations in Japan Although the scale of the business is currently small, the sophistication of the unit’s high- performance products is well regarded. This competitive capability will spark product growth for the expansion of the business platform. Furthermore, we will continue to improve the domestic supply chain through our efforts to optimize our domestic business bases.

Chemical & industrial products business unit This unit is grappling with the issues of expanding and further cultivating priority businesses Chemical & Industrial Products and opening up markets in emerging economies. The business unit covers a broad field, from Business Unit Strategies transportation equipment through thermal insulation, waterproofing materials, and industrial Develop global railway car parts business and construction materials, with our original rubber and urethane materials compounding and Gain dominant share in heat-resistant urethane products and expand overseas processing technologies at its core. Among industrial products, the focus is on growth in the railway car parts business. With the start-up of our factory in China, we plan to raise the over- seas production ratio of railway car parts to 35% by the fiscal year ending December 2016. In our urethane business, thermal insulating urethane has the top share domestically, and we are strengthening sales of that product. We plan to grow our insulating urethane product sales by 20% during the course of the 2014 Medium-Term Business Plan by developing overseas markets, focusing on emerging economies.

Expanding Lines of Eco-Friendly Products “Aitas” Rigid Polyurethane Foam Insulation for Houses for Better Energy Conservation

The demand for housing insulation materials is high-performance insulating properties equal to increasing as the focus on highly energy-efficient those of fiber insulation. Aitas is self-supporting housing grows stronger. While generally used in expanded foam that maintains insulation perfor- detached houses in the past, fiber-type insulation mance over many years without falling over time. tends to fall apart over time due to pressure and Through the development of insulating materials, humidity. In July 2013, Soflan Wiz Co., Ltd.*, our chemical & industrial products business unit launched its “Aitas” line of non-fluorocarbon will continue to contribute to creating energy- polyurethane foam insulation. Soflan Wiz marked efficient housing.

the first successful development of low-density * A subsidiary within the chemical & industrial products business unit insulation product technology in Japan, offering handling the rigid polyurethane business.

Soflan Aitas installation

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 17 ESG Information

Establishment of CSR Policy In May 2014, the Toyo Tires Group established a new CSR policy, importance (materiality) to the Group and its stakeholders, summarize comprising a basic policy and priority themes. The basic policy the issues that take priority in our CSR initiatives. Under this new redefines the philosophy and values that have guided us up to now, policy, we aim to strengthen our ESG efforts. while the priority themes, which have been determined based on

CSR Policy Basic Policy The Toyo Tires Group seeks to remain a company admired by individuals and society, each member keenly aware of their “connection” with society.

Priority Themes

Seven Priority Themes Ideal status in 2020 1. Product and service reliability and innovation...... Providing eco-friendly products and services founded on high quality and safety 2. Contribution to the global environment ...... Promoting environmental management on a Group-wide basis 3. Respect for human rights and diversity...... Diverse employees actively working in an environment with a global sense of human rights 4. Collaboration with business partners ...... Entire supply chain engaging in CSR activities 5. Harmony with local communities...... Contributing to local community development while responding to stakeholders’ voices 6. Creation of safe and healthy workplaces...... With priority given to safety, promoting the creation of workplaces that ensure well-being and security 7. Reinforcement of corporate governance and compliance..... Engaging in business activities with integrity while constantly improving management transparency

Corporate Governance Corporate Governance System and is charged with deliberating and making decisions concerning The Toyo Tires Group has established a corporate governance business execution matters, such as medium-to-long-term strategy, structure that enables each body within the structure to perform its investment, and other important items. The Board of Corporate Officers assigned function. This structure comprises the Board of Directors, is composed of 18 members, including five corporate officers concur- responsible for managerial decision making and supervision; the rently serving as directors*. It is responsible for reporting on the status Management Strategy Council, charged with determining the course of business execution and on the decisions made by the Board of of business execution; the Special Committees, deliberative and Directors. The committee also offers opinions to the Board of Directors. consultative bodies for their respective areas; the Board of Corporate The Company has adopted a system of audit & supervisory Officers, responsible for business execution; and the Audit & board members. The Audit & Supervisory Board has four members*, Supervisory Board, which audits the performance of the Board three of whom are outside audit & supervisory board members of Directors and overall business execution. appointed to strengthen management auditing functions. The Board of Directors, which has been reduced to eight mem- Outside directors and outside audit & supervisory board bers, three of whom are outside directors, including one woman, members offer proposals based on their respective knowledge from makes decisions on important matters, such as management policies, an objective position, thereby fulfilling their supervisory and oversight goals, and strategies, and supervises business operations. functions from an external standpoint. As stipulated in the rules of the We have also inaugurated the Directors’ Roundtable for deeper Tokyo Stock Exchange, the outside directors and outside audit & exchanges of opinion and decision-making discussions with outside supervisory board members have been registered with the stock directors, who have either expertise or extensive experience gained exchange as independent executives posing no possible conflict of during their careers at other companies, with the aim of improving the interest with general shareholders.

quality of the Board of Directors’ meetings and enhancing corporate * As of March 28, 2014 value. The Management Strategy Council was created in April 2014

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 18 Corporate Governance Structure (As of April 1, 2014)

General Meeting of Shareholders

Report Appoint / Dismiss Report Appoint / Dismiss Appoint / Dismiss

Report Board of Directors

Report Independent Auditor Directors Cooperate 8 Directors (including 3 outside directors) Audit & Supervisory Board Report Audit & supervisory board members Select Auditing Auditing President Report Cooperate Execution of business operations Delegate authority of Corporate Behavior

Toyo Tires Group Charter Report / O er opinion ff Management Strategy Council Compliance Unification Submit proposals Toyo Tires Group Code of Conduct Submit proposals Delegate authority Section Cooperate Make decisions / Supervise Special Committees Operation Auditing Group

Risk Management Committee Hotline Consultation Desk Board of Cooperate Human Resources Committee Corporate Officers Advise R&D Committee

Corporate officers Quality Assurance Committee Report / Consulting Lawyers Safety & Environment Committee Cooperate Auditing

Cooperate Instruct Compliance Committee

Investigate Compliance Training Divisions responsible for the execution of business operations

Directors, Audit & Supervisory Board Members, and Corporate Officers(As of July 16, 2014) Directors Representative Directors A Akira Nobuki B Takuji Yamamoto

Directors C Tetsuya Kuze D Kazuyuki Ito E Haruhiro Shinsho F Toshihiro Kanai*1 G Yuzo Kawamori*1 H Hiroko Namura*1 E D B C A H F G

Audit & Supervisory Corporate Officers Executive Emeritus Board Members President Corporate Officers Toshiaki Okazaki Kenji Nakakura Audit & Supervisory Board Akira Nobuki*3 Haruhiro Shinsho*3 Shinji Tanabe Members (standing) Koichi Ono Yoshikazu Nishiwaki Executive Corporate Hiroyasu Uejima Sadao Ichihara Masaji Ishino Officer Toshiro Fujita*2 Michihiro Kawada Takashi Shimizu Takuji Yamamoto*3 Hiroshige Nose*2 Tomoshige Mizutani Senior Corporate Officers Tetsuo Tatara Audit & Supervisory Board Tetsuya Kuze*3 Tamotsu Sakuramoto Member Kazuyuki Ito*3 Gentaro Aoki *1: Outside director Kazumasa Kawaki*2 *2: Outside audit & supervisory board member James L. Hawk *3: Concurrent with directorial position

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 19 ESG Information

Compliance Promotion System as the Group-Wide Risk Management Secretariat in assisting the The Toyo Tires Group Charter of Corporate Behavior and the Toyo head of the Risk Management Committee in the execution of duties. Tires Group Code of Conduct have been established as principles of Further, special committees are organized to discuss and action to ensure that all directors, officers, and employees of Group respond to specific risk management needs. companies act in accordance with all applicable laws and regulations, articles of incorporation, and ethical standards. Emergency Response System (for Group-wide emergency situations) Our Compliance Promotion System has been constructed upon these principles, with the Compliance Committee established to President discuss and determine compliance-related policies and measures for Chief Risk Management Officer the entire Group. The implementation and promotion of these policies and measures are undertaken by the Group-Wide Compliance Head of Risk Management Committee Promotion Subcommittee and the CSR Center. Moreover, compliance ■ Gather information from across the Group promotion leaders are in place at each department and operation ■ Hold emergency response meetings base in Japan and overseas, creating a system for promoting educa- ■ Lead the emergency response operations until the emergency response organization is activated tion and awareness-raising efforts. In addition, regional meetings are held outside Japan with the goal of sharing compliance-related Group-Wide Risk Management Secretariat information among operation bases. ■ Assist the Head of the Risk Management Committee We also operate an internal reporting system aimed at proactive prevention and early detection of compliance violations. Reporting Emergency Response Meeting Hot Lines have been established both inside and outside the ■ Determine how to respond to the emergency ■ Company to enable reporting by our business partners as well as Establish teams to respond to the emergency ■ Communicate decisions and give instructions on response operations our employees. to the entire Group

Compliance Promotion System

President Compliance Committee Environmental and Social Contribution Environmental Management Group-Wide Compliance Promotion Subcommittee The Toyo Tires Group established the Corporate Environment

Compliance Promotion Leader Improvement Committee, currently the Safety & Environment Com- (each department / site) mittee, in 1972, and since the Group has sought to lead the industry

CSR Center CSR Promotion Dept. in efforts to resolve environmental issues. In 1992, we established the Toyo Global Environmental Charter, which clarified this stance. Legal Dept. This charter forms the basis of the Toyo Global Environmental Action Plan, which in turn guides our active environmental efforts from Antitrust Law Hot Line a medium-to-long-term management perspective. The Environmental

Internal Audit Dept. Subcommittee of the Safety & Environment Committee formulates the plan for Group environmental efforts each fiscal year, with efforts in Reporting Hot Lines fiscal 2013 focusing on the themes of “improving environmental compliance,” “promoting reduction of environmental impact,” and “promoting biodiversity.” Risk Management System The Toyo Tires Group has established the Toyo Risk Avoidance Main Environmental Management System

Standard (TRAMS) as its risk management guidelines, upon which President the risk management system is based. The Group’s risk management system gives priority to business continuity plans (BCPs) and has Safety & Environment Committee been shored up by the placement of a chief risk management officer, charged with overseeing risk management of the entire Group, and Safety, Health and Disaster Environmental Prevention Subcommittee Subcommittee the establishment of the Risk Management Committee. In addition, in the case of Group-wide emergency situations, the Crisis Manage- ment Subcommittee of the Risk Management Committee functions Tire Working Group DiverTech Working Group

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 20 Results of Efforts to Reduce CO2 Emissions Toyo Tires Group Environmental Protection Fund Financial Assistance (cumulative) 15.6% reduction compared with fiscal 1990 level Cumulative number of organizations to receive grants: 718 6.5% reduction compared with fiscal 2005 level Cumulative amount of grants: ¥ 410million ■ We have begun a new campaign to reduce CO2 emissions in light of our success in achieving the previous target of “reducing CO2 emissions per unit of production by 15% compared with the fiscal 1990 level by the end Areas of activities of the organizations to which funds will be provided of fiscal 2015,” setting a new target of “reducing CO2 emissions per unit Local environmental maintenance Others of production by 15% compared with the fiscal 2005 level by the end of 5% 2% fiscal 2020.” Recycling Environmental education 7% ■ We are seeking reductions across the value chain by adopting the and hands-on learning 24% “Scope 3” accounting and reporting standard. Water and river environmental protection FY2014 42 organizations t-CO2/t 12%

120 Awareness-raising Ecosystem protection 111.7 activities/events 21% 108.0 105.3 106.5 90 100.0 97.7 12% 85.0 Satoyama woodland/forest (Target) management and tree-planting 60 17%

30 Activities

0 2005 2009 2010 2011 2012 2013 2014 2020

Notes:

CO2 emissions volume is calculated according to the thermal power basic unit method pro- vided in the “Ministry of the Environment and Ministry of Economy, Trade and Industry ‘Manual for Calculating and Reporting Greenhouse Gas Emissions’ (Ver. 3.4) for Business Operators in the Rubber Industry,” issued by the Japan Rubber Manufacturers Association in June 2012.

The actual receiving-end emission factor was used as the CO2 emission factor for electricity. Its denominator is the combined value for “new rubber consumption” and “amount of materi- als converted to new-rubber amount.” Tree-planting program of NPO Niranjana Forest clearing using a wood chipper Sewa Sanga in Bihar State, India conducted by NPO Chikurinkyuentai, (funded 2011–2014) Gifu Prefecture, Japan Efforts as a Good Corporate Citizen (funded 2009–2014) As a good corporate citizen, the Toyo Tires Group is committed to contributing to the development of local communities. To this end, we strive to resolve social issues in collaboration with governmental Further, the Toyo Tires Group conducts the Tire Safety Awareness agencies as well as with various stakeholders. Program to increase understanding of the importance of tire safety As part of this effort, the Toyo Tires Group Environmental Protec- inspections. In fiscal 2013, program’s activities included distributing tion Fund was established to provide financial assistance to nonprofit safety pamphlets and offering free tire organizations (NPOs) involved in environmental protection activities. inspections at shopping malls near our This fund employs a system by which we support the good intentions worksites. We will continue to conduct of our employees by matching their donations. In fiscal 2014, a total our Tire Safety Awareness Program of ¥17.74 million will be donated to 42 organizations, for a total of with the aim of encouraging even more

¥410 million in financial assistance to 718 organizations since the people to start checking their tires daily. Demonstration of checking tire fund’s establishment in 1992. Some of our other initiatives include the tread depth using a depth gauge as part of our Tire Safety participation of personnel in forest restoration activities near our work- Awareness Program sites. The Millennium Hope Hills Project is undertaken by the city of Iwanuma, Miyagi Prefecture, as part of efforts to recover from the Please refer to Toyo Tires Group CSR CSR report Great East Japan Earthquake, and we have supported this project Report for more details about our through both funding and the voluntary efforts of employees at our ESG activities. Sendai Factory, who participate in the project’s tree-planting festival.

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 21 Management’s Discussion and Analysis Due to a change in the Company’s fiscal year-end, the previous fiscal year ended December 2012, serves as a transitional consolidated fiscal period covering nine months of results (from April 1, 2012 to December 31, 2012) for the parent company and its domestic consolidated subsidiaries and the normal 12 months of results (from January 1, 2012 to December 31, 2012) for overseas consolidated subsidiaries. Consequently, year-on-year comparisons of sales and profit growth have been omitted.

Net Sales Business Environment Billions of yen During the fiscal year ended December 31, 2013, the outlook for the global economy remained 400 uncertain. The U.S. economy was characterized by firm personal consumption and capital

300 investment, but in Europe recovery was weak, partly owing to austerity policies stemming from the region’s debt crisis, and although the Chinese economy continued to grow, the pace of 200 growth remained slow. The Japanese economy experienced a gradual recovery, as economic

100 measures and financial policies prompted yen depreciation and higher share prices, and con- sumer sentiment improved. 0 ’10/3 ’11/3 ’12/3 ’12/12 ’13/12 Against this backdrop, the Toyo Tires Group implemented a range of initiatives to meet the targets in its five-year 2011 Medium-Term Business Plan. These initiatives were aimed at expanding the Group’s business into growth and profitable markets, building an optimal supply chain, increasing sales of high-value-added products, commercializing products that utilize environmental technologies, and pushing ahead with further reductions to manufacturing costs.

Gross Profit and Gross Profit Margin As a result, the Group reported for the fiscal year ended December 2013 net sales of Billions of yen / % ¥370,218 million and gross profit of ¥115,810 million. Selling, general and administrative (SG&A)

120 40 expenses totaled ¥78,569 million, amounting to 21.2% of net sales. Operating income came to ¥37,241 million, resulting in an operating margin of 10.1%. Due to the recording of a loss on 90 30 alleged U.S. anti-trust law violation, the Group posted additional other expenses of more than

60 20 ¥12,050 million, leading to income before income taxes and minority interests of ¥25,191 million. Net income was ¥11,597 million, resulting in a net income margin of 3.1%. Net sales hit a 30 10 historic high for the first time since the fiscal year ended March 31, 2008, and operating income set a new record for the second consecutive fiscal year. Adjusting figures for the fiscal year 0 ’10/3 ’11/3 ’12/3 ’12/12 ’13/12 0 ended December 2012 to allow comparison with the fiscal year ended December 2013, net Gross Profit Gross Profit Margin (right) sales increased ¥38,518 million and operating income rose ¥20,641 million year on year.

Millions of yen Compared with SG&A Expenses and SG&A Margin the same period Billions of yen / % 2013/12 2012/12 Change 2012/12* Change 80 40 Net sales ¥370,218 ¥291,110 ¥79,108 ¥331,700 ¥38,518

60 30 Operating income 37,241 15,651 21,590 16,600 20,641 Net income 11,597 13,218 (1,621) —— 40 20 * Based on 12 months of results for the parent company and domestic consolidated subsidiaries (January – December 2012) and 20 10 12 months of results for overseas consolidated subsidiaries (January – December 2012), provided for reference purposes only.

0 ’10/3 ’11/3 ’12/3 ’12/12 ’13/12 0 SG&A Expenses SG&A Margin (right) Segment Information by Business (Net sales include intersegment sales and transfers.)

Tire Business The Tire Business reported net sales of ¥289,715 million, equivalent to 78.2% of total net sales. Operating Income Operating income was ¥33,785 million. Adjusting figures for the fiscal year ended December Billions of yen 2012 to enable comparison with the fiscal year ended December 2013, net sales increased 40 ¥38,315 million and operating income rose ¥20,385 million year on year. 30 In original equipment (O.E.) tires for Japan, a decrease in domestic auto production caused unit sales to fall. However, sales moved up steadily on a value basis, as sales of high-value- 20 added products expanded.

10

0 ’10/3 ’11/3 ’12/3 ’12/12 ’13/12

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 22 In replacement tires for Japan, the Group enhanced its size lineup of NANOENERGY 3 Net Income fuel-efficient tires, prompting an increase in sales of tires for passenger cars. The economic Billions of yen 16 recovery also led to favorable sales of truck and bus tires. Despite robust sales in this category on a unit basis, on a value basis sales remained essentially flat due to such factors as a wors- 12 ening product mix. 8 In replacement tires for overseas markets, sales volume and value were both firm in the

North American market, as the economic rebound encouraged sales of our high-value-added 4 SUV tire, the OPEN COUNTRY A/T II; the GRAPPLER series of NITTO-brand pickup truck tires; and NT421Q tires for crossover utility vehicles (CUVs). 0 ’10/3 ’11/3 ’12/3 ’12/12 ’13/12 In Europe, we strove to cultivate new customers and introduced new products compliant with the European grading system—the PROXES CF2 and the NANOENERGY 3. Sales also expanded for the OBSERVE G3-ICE, a studded tire that delivers enhanced performance on snowy and icy roads. Consequently, sales were solid on both a unit and value basis.

In the Southeast Asian market, sales volume and value increased steadily year on year, Sales by Business Segment buoyed by sales in the Malaysian market, which is home to a new Group production base. As a result, total overseas sales volume and net sales were both steady compared with the previous fiscal year. DiverTech Business 21.7% Tire DiverTech Business Business 78.2% The DiverTech Business reported net sales of ¥80,456 million, equivalent to 21.7% of total net sales. Operating income was ¥2,583 million. Adjusting figures for the fiscal year ended Decem- ber 2012 to enable comparison with the fiscal year ended December 2013, net sales increased ¥156 million and operating income decreased ¥117 million year on year. In transportation equipment, unit sales of automotive anti-vibration rubber products and automobile seat cushions were down in Japan in line with the decline in domestic auto produc- tion, but overseas sales were robust, particularly in North America, keeping overall sales steady year on year. In railway car air springs and anti-vibration rubber, sales of new parts in Japan Sales by Geographic Segment and replacement parts overseas expanded, leading to firm sales on a value basis. In thermal insulation materials, sales of rigid urethane undiluted solution to housing materials manufacturers were favorable, but sales of materials for agricultural storehouses and Other Areas 17.6% livestock buildings were lackluster, causing overall sales to remain unchanged from the previous fiscal year. In waterproofing materials, sales volume increased and net sales were firm. Japan In industrial and construction materials, sales were steady thanks to favorable orders of 44.8% seismic isolation rubber and hoses used in the construction industry. North America Millions of yen 37.6% Compared with the same period 2013/12 2012/12 Change 2012/12* Change Tire Business Net sales ¥289,715 ¥228,745 ¥60,970 ¥251,400 ¥38,315 Operating income 33,785 13,015 20,770 13,400 20,385 DiverTech Business Net sales ¥ 80,456 ¥ 62,343 ¥18,113 ¥ 80,300 ¥ 156 Operating income 2,583 2,228 355 2,700 (117)

* Based on 12 months of results for the parent company and domestic consolidated subsidiaries (January – December 2012) and 12 months of results for overseas consolidated subsidiaries (January – December 2012), provided for reference purposes only.

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 23 MD&A

Total Assets Segment Information by Region Billions of yen Net sales and operating income by region are outlined below. 480 In Japan, net sales totaled ¥165,878 million and operating income was ¥27,176 million.

360 In North America, net sales totaled ¥139,223 million and operating income was ¥7,904 million. 240 In other regions, net sales totaled ¥65,116 million and operating income was ¥3,300 million.

120 Adjusting figures for the fiscal year ended December 2012 to enable comparison with the fiscal year ended December 2013, net sales in Japan decreased ¥4,610 million and operating 0 ’10/3 ’11/3 ’12/3 ’12/12 ’13/12 income rose ¥14,429 million year on year. In North America, net sales increased ¥33,740 million and operating income rose ¥3,831 million. In other regions, net sales increased ¥9,398 million and operating income rose ¥2,749 million.

Millions of yen Compared with Net Assets the same period Billions of yen 2013/12 2012/12 Change 2012/12* Change 160 Japan

120 Net sales ¥165,878 ¥129,909 ¥35,969 ¥170,488 ¥ (4,610) Operating income 27,176 11,830 15,346 12,747 14,429 80 North America Net sales ¥139,223 ¥105,482 ¥33,741 ¥105,483 ¥33,740 40 Operating income 7,904 4,073 3,831 4,073 3,831 Other regions 0 ’10/3 ’11/3 ’12/3 ’12/12 ’13/12 Net sales ¥ 65,116 ¥ 55,717 ¥ 9,399 ¥ 55,718 ¥ 9,398 Operating income 3,300 550 2,750 551 2,749

* Based on 12 months of results for the parent company and domestic consolidated subsidiaries (January – December 2012) and 12 months of results for overseas consolidated subsidiaries (January – December 2012), provided for reference purposes only.

Capital Ratio % Financial Position 40 Total assets at the end of the fiscal year stood at ¥433,327 million, up ¥79,041 million from the end of the previous fiscal year. This rise was mainly attributable to an increase in investments in 30 securities as share prices rallied, to our augmentation of property, plant and equipment as an 20 investment in growth markets, and to higher cash and time deposits. Total liabilities at the end of the fiscal year amounted to ¥291,817 million, an increase of 10 ¥44,165 million. This chiefly reflected a provision for alleged U.S. anti-trust law violation and

0 ’10/3 ’11/3 ’12/3 ’12/12 ’13/12 higher income and enterprise taxes payable, while the balance of short-term bank loans declined. Net assets at the end of the fiscal year were ¥141,510 million, up ¥34,876 million from a year earlier. This rise was primarily due to increases in retained earnings, the valuation differ- ence on available-for-sale securities, and foreign currency translation adjustments. As a result, the capital ratio rose 2.5 percentage points from the end of the previous fiscal year, to 31.8%. Capital Expenditures Billions of yen Capital Expenditures 40 Capital expenditures for the fiscal year under review totaled ¥29,000 million, an increase of 30 ¥6,042 million year on year. Of this amount, the Tire Business accounted for ¥23,813 million, which mainly went toward business rationalization, improvements to product quality, the 20 expansion of production facilities at Toyo Tire (Zhangjiagang) Co., Ltd., and the establishment

10 of Toyo Tyre Malaysia Sdn Bhd. The DiverTech Business accounted for ¥2,832 million, which was spent mainly on business rationalization and improvements to product quality. The remain- 0 ’10/3 ’11/3 ’12/3 ’12/12 ’13/12 ing ¥2,355 million principally went toward reinforcing basic research technologies.

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 24 Interest-Bearing Debt Interest-Bearing Debt Interest-bearing debt at the end of the fiscal year totaled ¥129,849 million, a decrease of ¥3,005 Billions of yen 160 million from the end of the previous fiscal year, mainly reflecting lower short-term bank loans.

120 Cash Flows 80 Net cash provided by operating activities was ¥41,558 million. Primary sources of cash were income before income taxes and minority interests, depreciation and amortization, and an 40 increase in notes and accounts payable–trade, while major uses of cash were foreign exchange gains and an increase in notes and accounts receivable–trade. 0 ’10/3 ’11/3 ’12/3 ’12/12 ’13/12 Net cash used in investing activities came to ¥22,504 million, mainly because of the pur- chase of property, plant and equipment in line with capital expenditures. Free cash flow accordingly amounted to a positive ¥19,054 million. Net cash used in financing activities was ¥5,095 million, as uses of cash, such as epay-r ment of long-term debt and a net decrease in short-term bank loans, exceeded major sources of cash, such as proceeds from long-term debt. After combining the increases and decreases in cash flows described above with a rise in the foreign exchange translation difference, cash and cash equivalents at the end of the year totaled ¥36,352 million, up ¥16,778 million from a year earlier.

Dividends The Company’s basic policy on the distribution of profits is to pay an appropriate dividend sup- ported by a stable earnings structure over the long term, while taking into account a sufficient level of internal reserves to strengthen the operating base and fund future business develop- ment. In accordance with its basic policy and in light of results for the full year, the Company paid a dividend of ¥12.0 per share for the fiscal year under review.

Outlook for the Fiscal Year Ending December 2014 (Announced February 14, 2014) During the upcoming fiscal year, the Company expects the environment to remain uncertain. Although we anticipate economic recovery in the United States and Japan, we remain con- cerned about potential downward impacts from the European debt crisis and slowing eco- nomic growth in emerging markets. In this operating environment, the Company will continue to pursue the long-term strategies of the five-year “2011 Medium-Term Business Plan,” launched in the fiscal year ended March 31, 2012. In the Tire Business, the Company will con- tinue to expand capacity at Toyo Tire North America Manufacturing Inc., its U.S. tire production subsidiary, in response to robust tire demand in the North American market. Our establishment of a tire production base in Malaysia will boost our supply capabilities, enabling us to take advantage of free trade agreements to boost exports to other countries in the rapidly growing Southeast Asian market as well as to expand sales in such key markets as North America, Europe, and Russia. In the DiverTech Business, the Company will continue channeling man- agement resources into three areas—automobile parts, urethane, and railway car parts—while establishing a global supply chain and harnessing the Group’s proprietary technologies to develop and expand sales of high-value-added products.

The consolidated performance outlook for the fiscal year ending December 2014 is as follows: Net sales ¥400 billion Operating income ¥40 billion Net income ¥25 billion The above forecasts are based on assumed exchange rates of US$1 = ¥100 and €1 = ¥135.

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 25 Consolidated Balance Sheets Toyo Tire & Rubber Co., Ltd. and Consolidated Subsidiaries December 31, 2013 and 2012

Thousands of Millions of yen U.S. dollars (Note 1) 2013 2012 2013 ASSETS Current assets: Cash and time deposits (Note 7) ¥ 36,356 ¥ 19,577 $ 344,966 Notes and accounts receivable: Trade (Notes 5 and 7) 81,446 73,461 772,806 Other 5,065 3,800 48,060 Inventories (Note 6) 57,554 51,603 546,105 Deferred tax assets (Note 13) 7,016 4,305 66,572 Other current assets 4,606 3,670 43,704 Allowance for doubtful receivables (196) (93) (1,860) Total current assets 191,847 156,323 1,820,353

Property, plant and equipment (Note 11): Land 21,399 21,073 203,046 Buildings and structures 99,032 84,379 939,671 Machinery and equipment 320,120 296,157 3,037,480 Construction in progress 10,901 9,766 103,435 Lease assets 2,073 2,212 19,670 453,525 413,587 4,303,302 Accumulated depreciation (284,928) (267,392) (2,703,558) Total property, plant and equipment 168,597 146,195 1,599,744

Intangible assets Goodwill 3,011 2,665 28,570 Other assets 5,710 5,249 54,180 Total intangible assets 8,721 7,914 82,750

Investments and other assets: Investment in securities (Notes 7, 8 and 10) 52,577 35,196 498,880 Investments in unconsolidated subsidiaries and affiliates 1,982 1,615 18,806 Long-term loans receivable 459 535 4,355 Deferred tax assets (Note 13) 3,162 2,998 30,003 Other assets 6,202 3,783 58,848 Allowance for doubtful receivables (220) (273) (2,087) Total investments and other assets 64,162 43,854 608,805 Total assets ¥ 433,327 ¥ 354,286 $ 4,111,652

See the accompanying notes to the consolidated financial statements.

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 26 Thousands of Millions of yen U.S. dollars (Note 1) 2013 2012 2013 LIABILITIES AND NET ASSETS Current liabilities: Short-term bank loans (Notes 7 and 11) ¥ 14,024 ¥ 19,919 $ 133,068 Current portion of long-term debt (Notes 7, 10 and 11) 20,393 18,042 193,500 Notes and accounts payable: Trade (Notes 5 and 7) 66,215 58,593 628,285 Other 18,139 12,833 172,114 84,354 71,426 800,399 Accrued expenses 11,178 9,722 106,063 Income and enterprise taxes payable 10,196 3,017 96,745 Customers’ deposits 3,948 3,808 37,461 Provision for directors’ bonuses 59 26 560 Provision for sales returns 271 343 2,571 Provision for alleged U.S. anti-trust law violation 13,206 — 125,306 Other current liabilities 3,831 3,360 36,351 Total current liabilities 161,460 129,663 1,532,024

Long-term liabilities: Long-term debt due after one year (Notes 7, 10 and 11) 94,804 94,113 899,554 Severance and retirement benefits (Note 12) 13,239 13,218 125,619 Provision for environmental remediation 83 135 788 Deferred tax liabilities (Note 13) 20,782 9,053 197,191 Other long-term liabilities 1,449 1,470 13,749 Total long-term liabilities 130,357 117,989 1,236,901

Contingent liabilities (Note 15)

Net assets (Note 16):

Shareholders’ equity Common stock Authorized - 400,000,000 shares Issued - 254,358,146 shares 30,485 30,485 289,259 Capital surplus 28,507 28,507 270,491 Retained earnings 48,211 38,389 457,453 Treasury stock, at cost 2012 - 319,515 shares 2013 - 338,903 shares (117) (108) (1,110) 107,086 97,273 1,016,093 Accumulated other comprehensive income Valuation difference on available-for-sale securities 22,231 11,020 210,940 Deferred gains and losses on hedges (107) (240) (1,015) Foreign currency translation adjustments 8,507 (4,208) 80,719 30,631 6,572 290,644 Minority interests 3,793 2,789 35,990 Total net assets 141,510 106,634 1,342,727 Total liabilities and net assets ¥ 433,327 ¥ 354,286 $ 4,111,652

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 27 Consolidated Statements of Income Toyo Tire & Rubber Co., Ltd. and Consolidated Subsidiaries For the year ended December 31, 2013 and nine months ended December 31, 2012 Thousands of Millions of yen U.S. dollars (Note 1) 2013 2012 2013 (nine months) Net sales ¥ 370,218 ¥ 291,110 $ 3,512,838 Cost of sales (Note 6) 254,408 217,079 2,413,967 Gross profit 115,810 74,031 1,098,871 Selling, general and administrative expenses 78,569 58,380 745,507 Operating income 37,241 15,651 353,364

Other income (expenses): Interest income 255 150 2,420 Dividends income 902 575 8,559 Equity in earnings of affiliates 277 217 2,628 Rent income 226 168 2,144 Foreign exchange gains 2,851 1,216 27,052 Interest expense (2,626) (2,402) (24,917) Loss from liquidation of receivables (124) (75) (1,177) Gain on sales of noncurrent assets 931 — 8,834 Gain on sales of subsidiaries and affiliates’ stocks — 309 — Gain on sales of investment securities — 178 — Loss on retirement of noncurrent assets (712) (330) (6,756) Loss on litigation — (325) — Loss on alleged U.S. anti-trust law violation (13,321) — (126,397) Other net (709) (1,855) (6,728) Income before income taxes and minority interests 25,191 13,477 239,026

Income taxes (Note 13): Current 11,648 3,561 110,523 Deferred 1,414 (2,988) 13,417 13,062 573 123,940 Income before minority interests 12,129 12,904 115,086 Minority interests in net loss (income) of consolidated subsidiaries (532) 314 (5,047) Net income ¥ 11,597 ¥ 13,218 $ 110,039

Yen U.S. dollars (Note 1) 2013 2012 2013 (nine months) Net income per share ¥45.65 ¥52.03 $0.43 Diluted net income per share — — — Dividends per share 12.00 7.00 0.11

See the accompanying notes to the consolidated financial statements.

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 28 Consolidated Statements of Comprehensive Income Toyo Tire & Rubber Co., Ltd. and Consolidated Subsidiaries For the year ended December 31, 2013 and nine months ended December 31, 2012 Thousands of Millions of yen U.S. dollars (Note 1) 2013 2012 2013 (nine months) Income before minority interests ¥ 12,129 ¥ 12,904 $ 115,087 Other comprehensive income Valuation difference on available-for-sale securities 11,211 1,040 106,376 Deferred gains and losses on hedges 142 (118) 1,348 Foreign currency translation adjustments 12,850 7,360 121,928 Share of other comprehensive income of associates accounted for using equity method 317 158 3,008 Total other comprehensive income (Note 3) 24,520 8,440 232,660 Comprehensive income ¥ 36,649 ¥ 21,344 $ 347,746 Comprehensive income attributable to Owners of the parent ¥ 35,665 ¥ 21,278 $ 338,410 Minority interests 984 66 9,336

See the accompanying notes to the consolidated financial statements.

Consolidated Statements of Changes in Net Assets Toyo Tire & Rubber Co., Ltd. and Consolidated Subsidiaries For the year ended December 31, 2013 and nine months ended December 31, 2012

Millions of yen Number of Valuation Deferred Foreign shares of difference on gains and currency common stock Common Capital Retained Treasury available-for- losses on translation Minority Total (thousands) stock surplus earnings stock sale securities hedges adjustments interests net assets Balance at March 31, 2012 254,358 ¥30,485 ¥28,507 ¥26,441 ¥(106) ¥9,980 ¥(122) ¥(11,346) ¥2,714 ¥86,553 Cash dividends — — — (1,270) — — — — — (1,270) Net income — — — 13,218 — — — — — 13,218 Purchases of treasury stock — — — — (2) — — — — (2) Net changes in items other than shareholders’ equity — — — — — 1,040 (118) 7,138 75 8,135 Balance at beginning of year 254,358 30,485 28,507 38,389 (108) 11,020 (240) (4,208) 2,789 106,634 Cash dividends — — — (1,779) — — — — — (1,779) Net income — — — 11,597 — — — — — 11,597 Purchases of treasury stock — — — — (9) — — — — (9) Change in scope of consolidation — — — 4 — — — — — 4 Net changes in items other than shareholders’ equity — — — — — 11,211 133 12,715 1,004 25,063 Balance at December 31, 2013 254,358 ¥30,485 ¥28,507 ¥48,211 ¥(117) ¥22,231 ¥(107) ¥8,507 ¥3,793 ¥141,510

Thousands of U.S. dollars (Note 1) Valuation Deferred Foreign difference on gains and currency Common Capital Retained Treasury available-for- losses on translation Minority Total stock surplus earnings stock sale securities hedges adjustments interests net assets Balance at beginning of year $289,259 $270,491 $364,256 $(1,025) $104,564 $(2,277) $(39,928) $26,464 $1,011,804 Cash dividends — — (16,880) — — — — — (16,880) Net income — — 110,039 — — — — — 110,039 Purchases of treasury stock — — — (85) — — — — (85) Change in scope of consolidation — — 38 — — — — — 38 Net changes in items other than shareholders’ equity — — — — 106,376 1,262 120,647 9,526 237,811 Balance at December 31, 2013 $289,259 $270,491 $457,453 $(1,110) $210,940 $(1,015) $80,719 $35,990 $1,342,727

See the accompanying notes to the consolidated financial statements.

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 29 Consolidated Statements of Cash Flows Toyo Tire & Rubber Co., Ltd. and Consolidated Subsidiaries For the year ended December 31, 2013 and nine months ended December 31, 2012 Thousands of Millions of yen U.S. dollars (Note 1) 2013 2012 2013 (nine months) Cash flows from operating activities: Income before income taxes and minority interests ¥ 25,191 ¥ 13,477 $ 239,026 Adjustments to reconcile income before income taxes to net cash provided by operating activities: Depreciation and amortization 19,512 15,126 185,141 Equity in earnings of affiliates (277) (217) (2,628) Foreign exchange losses (gains) (1,075) 61 (10,200) Increase (decrease) in provision for retirement benefits for employees 16 333 152 Interest and dividends income (1,157) (725) (10,978) Interest expense 2,626 2,402 24,917 Loss on retirement of noncurrent assets 713 318 6,765 Loss (gain) on sales of noncurrent assets (931) — (8,834) Loss (gain) on sales of investment securities — (178) — Loss (gain) on sales of stocks of subsidiaries and affiliates — (309) — Decrease (increase) in notes and accounts receivable-trade (1,570) (9,435) (14,897) Decrease (increase) in inventories (200) 7,478 (1,898) Increase (decrease) in notes and accounts payable-trade 2,724 (9,485) 25,847 Other, net 1,626 216 15,428 Subtotal 47,198 19,062 447,841 Interest and dividends income received 1,300 712 12,335 Interest expense paid (2,682) (2,337) (25,448) Income taxes paid (4,258) (1,562) (40,402) Net cash provided by operating activities 41,558 15,875 394,326 Cash flows from investing activities: Purchase of property, plant and equipment (23,220) (22,736) (220,325) Purchase of intangible assets (537) (576) (5,095) Proceeds from sales of property, plant and equipment 1,746 501 16,567 Proceeds from sales and redemption of investment securities 51 550 484 Purchase of investments securities (16) (12) (152) Purchase of investments in capital of subsidiaries (607) — (5,760) Proceeds from sales of stocks of subsidiaries and affiliates — 1,186 — Other, net 79 22 750 Net cash used in investing activities (22,504) (21,065) (213,531) Cash flows from financial activities: Proceeds from long-term debt 16,952 32,135 160,850 Repayment of long-term debt (11,784) (24,410) (111,813) Redemption of bonds — (5,000) — Net increase (decrease) in short-term bank loans (8,511) (7,339) (80,757) Proceeds from issuance of bonds — 4,973 — Cash dividends paid (1,775) (1,268) (16,842) Cash dividends paid to minority shareholders (23) (31) (218) Proceeds from stock issuance to minority shareholders 395 39 3,748 Other, net (349) (273) (3,312) Net cash provided by (used in) financing activities (5,095) (1,174) (48,344) Effect of exchange rate on cash and cash equivalents 2,669 1,286 25,325 Net increase (decrease) in cash and cash equivalents 16,628 (5,078) 157,776 Cash and cash equivalents at beginning of period 19,574 24,652 185,729 Cash and cash equivalents of newly consolidated subsidiaries 150 — 1,423 Cash and cash equivalents at end of period (Note 4) ¥ 36,352 ¥ 19,574 $ 344,928

See the accompanying notes to the consolidated financial statements.

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 30 Notes to Consolidated Financial Statements Toyo Tire & Rubber Co., Ltd. and Consolidated Subsidiaries

1. Basis of Presenting Consolidated Financial Statements

The accompanying consolidated financial statements of Toyo translated into English with some expanded descriptions from Tire & Rubber Co., Ltd. (the “Company”) and its consolidated the consolidated financial statements of the Company prepared subsidiaries have been prepared in accordance with the provi- in accordance with Japanese GAAP and filed with the appro- sions set forth in the Japanese Financial Instruments and priate Local Finance Bureau of the Ministry of Finance as Exchange Law and its related accounting regulations and in required by the Financial Instruments and Exchange Law. conformity with accounting principles generally accepted in Certain supplementary information included in the statutory Japan (Japanese GAAP), which are different in certain respects Japanese language consolidated financial statements, but not as to application and disclosure requirements from International required for fair presentation, is not presented in the accompa- Financial Reporting Standards (“IFRS”). nying consolidated financial statements. The financial statements of the Company’s consolidated The translations of the Japanese yen amounts into U.S. dollar overseas subsidiaries for consolidation purposes have been amounts are included solely for the convenience of readers prepared in conformity with IFRS or generally accepted outside Japan, using the prevailing exchange rate at December accounting principles in the United States of America (“US 31, 2013, which was ¥105.39 to U.S. $1.00. The translations GAAP”), and partially reflect the adjustments which are neces- should not be construed as representations that the Japanese yen sary to conform with Japanese GAAP. The accompanying amounts have been, could have been or could in the future be consolidated financial statements have been reformatted and converted into U.S. dollars at this or any other rate of exchange.

2. Summary of Significant Accounting Policies

Consolidation and investments in affiliates Provision for sales returns The accompanying consolidated financial statements include the A provision for sales returns is calculated for losses incurred on accounts of Toyo Tire & Rubber Co., Ltd. (the “Company”) and the return of snow tires sold during the fiscal year but returned significant subsidiaries (together, the “Companies”) over which after the balance sheet date. The provision is based on an the Company has power of control through majority voting rights estimate using the historical rate of such returns in prior years. or the existence of certain other conditions evidencing control. Investments in affiliates over which the Company has the ability Provision for alleged U.S. anti-trust law violation to exercise significant influence over operating and financial poli- The Company has been under investigation by the United States cies are accounted for by the equity method. Department of Justice (the “DOJ”) for alleged violations of the The consolidated financial statements include the accounts U.S. anti-trust laws in connection with the sale of automotive of the Company and its 46 significant majority owned subsid- parts. On November 26, 2013 (U.S. time), the Company entered iaries (43 in 2012). The increase in the number of consolidated into a plea agreement with the DOJ, agreeing to pay a fine of subsidiaries was due to the establishment of new companies. US$120 million based on charges that it violated U.S. anti-trust All significant intercompany transactions and accounts have laws in connection with the sale of automotive anti-vibration been eliminated in consolidation. Investments in 3 affiliates (3 in rubber products and constant-velocity-joint boot products. With 2012) are accounted for by the equity method. this investigation, a provision for the alleged U.S. anti-trust law In the elimination of investments in subsidiaries, the assets violation has been recorded to provide for potential future losses and liabilities of the subsidiaries, including the portion attributable reasonably estimated at the fiscal year-end. These losses, to minority shareholders, are evaluated using the fair value at the together with the related costs of attorneys’ fees and other, are time the Company acquired control of the respective subsidiary. charged to the income statement as ’Loss on alleged U.S. anti-trust law violation’. Cash and cash equivalents The Company paid this penalty in response to the judgment In preparing the consolidated statements of cash flows, cash on form the court on February 6, 2014 (U.S. time). In connection hand, readily available deposits and short-term highly liquid with this matter, in Canada, a class action lawsuit has been filed investments with maturities not exceeding three months at the against the Company and certain subsidiaries, and the outcome time of purchase are considered to be cash and cash may impact on the operating results, but it is difficult to equivalents. reasonably estimate the impact at the present stage.

Allowance for doubtful receivables Inventories Allowance for doubtful receivables is provided to cover possible Inventories of the Company and its consolidated domestic losses on collection. With respect to normal trade accounts subsidiaries (the “Domestic Companies”) are stated principally receivable, it is stated at an amount based upon the actual rate at the lower of weighted average cost or net realizable value. of historical bad debts. For certain doubtful receivables, the Inventories of consolidated overseas subsidiaries are stated uncollectable amount has been individually estimated. principally at the lower of weighted average cost or market value.

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 31 Notes to Consolidated Financial Statements

Property, plant and equipment (except lease assets) Derivatives and hedge accounting Property, plant and equipment are stated at cost. Depreciation of The Companies state derivative financial instruments at fair value buildings and certain tools and equipment of the Domestic and recognize changes in the fair value as gain or loss unless the Companies are computed by the straight-line method over the derivative financial instruments are used for hedging purposes. If estimated useful life of the asset. The declining balance method derivative financial instruments are used as hedges and meet is applied to the remaining assets. Consolidated overseas certain hedging criteria, the Companies defer recognition of gain subsidiaries compute deprecation principally by the straight-line or loss resulting from changes in the fair value of the derivative method over the estimated useful life of the asset. financial instrument until the related loss or gain on the hedged Expenditures for maintenance and repairs, including minor item is recognized. However, when forward foreign exchange replacements and betterments, are charged to income contracts are used as hedges and meet certain hedging criteria, as incurred. the foreign currency receivables or payables are translated at the contracted rate. Also, if interest rate swap contracts are used as The estimated useful lives of assets range as follows: hedges and meet certain hedging criteria, the net amount to be Buildings and structures 3 – 50 years paid or received under the interest rate swap contract is added Machinery and equipment 2 – 17 years to or deducted from the interest on the asset or liability for which the swap contract was executed. Software costs (except lease assets) Software costs are included in intangible assets and depreciated Provision for environmental remediation by the straight-line method over the estimated useful life of 5 years. The provision for environmental remediation is estimated and recorded to provide for potential future costs such as costs Lease assets related to the removal and disposal of PCB waste. Property, plant and equipment capitalized under finance lease arrangements are depreciated over the lease term. Provision for directors’ bonuses The Domestic Companies account for finance leases that The provision for directors’ bonuses is estimated and recorded commenced prior to April 1, 2008 and that do not transfer the to provide for directors’ bonuses based on the estimated ownership of the leased property to the lessee as operating amount of payment. leases, with disclosures of certain “as if capitalized” information. The Domestic Companies have adopted a new accounting stan- Severance and retirement benefits dard for finance leases which commence after March 31, 2008 1) Employees and are capitalized, except for certain immaterial or short-term The Companies provide two types of post-employment benefit finance leases accounted for as operating leases. plans, unfunded lump-sum payment plans and funded noncon- tributory pension plans, under which all eligible employees are Goodwill entitled to benefits based on the level of wages and salaries at Goodwill is amortized by the straight-line method over the period the time of retirement or termination, length of service and it is expected to have an effect, except minor goodwill which is certain other factors. The Companies provide for employees’ expensed as incurred for the consolidated domestic subsidiaries. severance and retirement benefits based on the estimated amounts of projected benefit obligation and the fair value of plan Securities assets at the end of the year. Actuarial gains and losses are The Company classifies securities as (a) debt securities intended recognized in income and expenses using the straight-line to be held to maturity (hereafter, “held-to-maturity debt securi- method over a period that is within the average of the estimated ties”), (b) equity securities issued by subsidiaries and affiliated remaining service years of employees (mainly 15 years) companies, and (c) all other securities that are not classified in any commencing with the following period. Past service liabilities are of the above categories (hereafter, “available-for-sale securities”). amortized in expenses using the straight-line method over a The Companies have no securities held for trading purposes. period that is within the average of the estimated remaining Held-to-maturity debt securities are stated at amortized cost. service years of employees (15 years). Equity securities issued by subsidiaries and affiliated companies 2) Directors and statutory auditors which are not consolidated or accounted for using the equity In accordance with their internal rules, certain consolidated method are stated at moving average cost. Available-for-sale subsidiaries have included at their fiscal year-end amounts that securities with available fair market values are stated at fair will be necessary for the payment of retirement benefits to direc- market value. Securities with no available fair market value are tors and statutory auditors. The amounts included in the liability stated at moving average cost. Unrealized gains and unrealized for severance and retirement benefits at December 31, 2013 and losses on these securities are reported, net of applicable income 2012 were ¥9 million ($85 thousand) and ¥17 million, respectively. taxes, as a separate component of net assets. Realized gains and losses on the sale of such securities are computed using Research and development expenses moving average cost. Research and development expenses are charged to income as If the fair market value of these securities declines signifi- incurred. Such expenses for the year ended December 31, 2013 cantly, the securities are stated at fair market value and the and nine months ended December 31, 2012 were ¥8,489 million difference between the fair market value and the carrying ($80,548 thousand) and ¥6,211 million, respectively. amount is recognized as loss in the period of the decline. In this event, the fair market value will be the carrying amount of the securities at the beginning of the next year.

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 32 Income taxes overseas subsidiaries and affiliates are translated at average The asset-liability approach is used to recognize deferred tax exchange rates for the year, except for transactions with the assets and liabilities for the expected future tax consequences of Company which are translated at the rates used by the Company. temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts (Unadopted Standard and Guidance) used for income tax purposes. -Accounting Standard for Retirement Benefits (ASBJ Statement No. 26, May 17, 2012) Net income per share -Guidance on Accounting Standard for Retirement Benefits Computations of basic net income per share of common stock (ASBJ Guidance No. 25, May 17, 2012) are based on the weighted average number of shares 1) Summary outstanding during each financial period. Under the amended rule, actuarial gains and losses and past Diluted net income per share was not disclosed because service costs that are yet to be recognized in profit or loss would there were no dilutive common stock equivalents. be recognized within the net asset section, after adjusting for tax effects, and the deficit or surplus would be recognized as a Dividends per share liability or asset without any adjustments. For determining the Declarations of dividends and appropriations of unappropriated method of attributing expected benefits to periods, the standard retained earnings are approved at the annual shareholders’ now allows a choice of a benefit formula basis as well as meeting held after the end of the fiscal year. Therefore, cash divi- straight-line basis. The method for determining the discount rate dends per share shown in the consolidated statements of has also been amended. income reflect the final dividends approved after the end of the 2) Effective dates relevant fiscal year. Effective for the end of annual periods ending on or after December 31, 2014. Amendments relating to the determination Translation of foreign currencies of retirement benefit obligations and current service costs are Receivables and payables denominated in foreign currencies are effective from the beginning of annual periods ending on or after translated into Japanese yen at year-end rates. December 31, 2015. Balance sheet accounts of consolidated overseas subsid- 3) Effect of application of the standard iaries and affiliates are translated into Japanese yen at year-end The Company and its consolidated domestic subsidiaries are rates, except for net assets accounts, which are translated at currently in the process of determining the effects of these new historical rates. Revenue and expense accounts of consolidated standards on the consolidated financial statements.

3. Comprehensive Income

For the year ended December 31, 2013 and nine months ended December 31, 2012 Amounts reclassified to net income (loss) in the current period that were recognized in other comprehensive income in the current or previous periods and the tax effects for each component of other comprehensive income are as follows: Thousands of Millions of yen U.S. dollars 2013 2012 2013 (nine months) Valuation difference on available-for-sale securities Increase during the year ¥ 17,419 ¥ 1,722 $ 165,281 Reclassification adjustments (11) (107) (104) Subtotal, before tax 17,408 1,615 165,177 Tax (expense) or benefit (6,198) (575) (58,810) Subtotal, net of tax 11,210 1,040 106,367 Deferred gains and losses on hedges Increase (decrease) during the year 207 (265) 1,964 Subtotal, before tax 207 (265) 1,964 Tax (expense) or benefit (65) 147 (617) Subtotal, net of tax 142 (118) 1,347 Foreign currency translation adjustments Increase (decrease) during the year 12,850 7,360 121,929 Subtotal 12,850 7,360 121,929 Share of other comprehensive income of affiliates accounted for using equity method Increase (decrease) during the year 318 158 3,017 Subtotal 318 158 3,017 Total other comprehensive income ¥ 24,520 ¥ 8,440 $ 232,660

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 33 Notes to Consolidated Financial Statements

4. Statements of Cash Flows

Cash and cash equivalents in the consolidated statements of cash flows and cash and time deposits in the consolidated balance sheets at December 31, 2013 and 2012 were reconciled as follows:

Thousands of Millions of yen U.S. dollars 2013 2012 2013 Cash and time deposits ¥ 36,356 ¥ 19,577 $ 344,966 Less time deposits with maturities exceeding three months (4) (3) (38) Cash and cash equivalents ¥ 36,352 ¥ 19,574 $ 344,928

5. Effect of Year-end Date on Financial Statements

If the year-end date is a bank holiday, the Companies account for notes receivables and payables maturing on this date in their financial statements as if they had been settled on the year-end date. The notes outstanding at December 31, 2013 and 2012 were as follows: Thousands of Millions of yen U.S. dollars 2013 2012 2013 Notes receivable ¥ 1,071 ¥ 1,024 $ 10,162 Notes payable 395 355 3,748

6. Inventories

(1) Inventories at December 31, 2013 and 2012 consisted of the following: Thousands of Millions of yen U.S. dollars 2013 2012 2013 Finished goods ¥ 42,441 ¥ 38,413 $ 402,704 Work-in-process 3,125 2,693 29,652 Raw materials and supplies 11,988 10,497 113,749 ¥ 57,554 ¥ 51,603 $ 546,105

(2) The write-down of book values for inventories held for sale in the ordinary course of business due to decreased profitability for the years ended December 31, 2013 and 2012 was as follows: Thousands of Millions of yen U.S. dollars 2013 2012 2013 Cost of sales ¥ 900 ¥ (172) $ 8,540 ¥ 900 ¥ (172) $ 8,540

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 34 7. Financial Instruments

A. Status of financial instruments (3) Policies and processes for managing risk (1) Policies for using financial instruments a) Credit risk management (counterparty risk) The Toyo Group engages primarily in the manufacture and sale The Company monitors the financial status of counterparties and of automotive tires, industrial and construction materials, manages amounts and settlement dates under internal procedures transportation equipment and others and procures the capital for receivables. The Company works to quickly identify and mitigate required under plans of investment in plant and equipment payment risk that may result from situations such as the deterio- primarily from bank loans and bond issues. The Toyo Group ration of the financial condition of a counterparty. Consolidated manages surplus capital using financial instruments that carry subsidiaries are subject to the same risk management rules. little or no risk and procures short-term working capital from In using derivatives transactions, the Company mitigates bank loans. The Toyo Group uses derivatives to mitigate the counterparty risk by conducting transactions with highly credit- risks that are described below and, as a matter of policy, does worthy financial institutions. The maximum credit risk as of not use derivatives for speculative transactions. December 31, 2013 is presented on the balance sheet as the carrying value of financial assets exposed to credit risk. (2) Financial instruments and exposures to risk Notes and accounts receivable expose the Toyo Group to b) Managing market risk (risk of exchange rate and interest rate customer credit risk. In addition, receivables denominated in fluctuations) foreign currencies, which arise as the result of doing business For receivables denominated in foreign currencies, the Company globally, expose the Toyo Group to the risk of exchange rate uses principally forward foreign exchange contracts to hedge the fluctuations. In principle, the Toyo Group hedges the risks with risk of exchange rate fluctuations on a currency-by-currency forward foreign exchange contracts to the net position of basis evaluated monthly. In addition, the Company uses interest deducted notes and accounts payable denominated in foreign rate swaps to mitigate the risk of interest rate fluctuations asso- currencies. Investments in securities consist primarily of invest- ciated with loans. ments in companies with whom the Toyo Group does business For investment in securities, the Toyo Group periodically or has capital alliances and expose the Toyo Group to the risk examines the fair value of the securities and the financial condition of changes in market prices. of the issuing entity. Almost all notes and accounts payable are due within one For derivatives transactions, the Financial Department year. The Toyo Group procures the capital required for its invest- handles the transactions, books them and makes reconciliations ment in plant and equipment generally through bank loans and in accordance with the basic policy approved by the Board of bond issues with maturities not exceeding 8 years and incurs Directors, on the basis of established internal control procedures lease liabilities for lease transactions. Although exposure to the for financial risk. In addition, the Financial Department reports the risk of interest rate fluctuations may arise, the Toyo Group monthly amounts to finance officers and the Board of Directors. hedges the risk with derivatives transactions (interest rate swaps). The Toyo Group uses derivatives transactions, including c) Management of liquidity risk associated with capital forward foreign exchange contracts, to hedge the risk of procurement (payment default risk) exchange rate fluctuations associated with receivables denomi- The Company manages liquidity risk by creating and updating nated in foreign currencies and interest rate swaps to hedge the a capital deployment plan based on reports from each division. risk of interest rate fluctuations associated with loans. “Deriva- tives and hedge accounting” in Note 2, “Summary of Significant (4) Supplemental information on fair values Accounting Policies” explains hedge accounting issues, including The contractual amounts of the derivatives transactions methods, hedging policies, hedged items and recognition of gain discussed in Note 9, “Derivative Financial Instruments and or loss on hedged positions. Hedging Transactions” do not reflect the market risk associated with the derivatives transactions themselves.

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 35 Notes to Consolidated Financial Statements

B. Fair values of financial instruments The amounts for financial instruments presented in the consolidated balance sheets, their fair values and any differences as of December 31, 2013 and 2012 are in the tables below. Items whose fair market value was considered to be very difficult to assess are not presented in the tables below.

(1) Marketable securities, derivatives transactions and methods for estimating the fair value of financial instruments

Assets Cash and time deposits Because cash and time deposits are highly liquid, their fair value is similar to their book value. Consequently, the fair value of cash and time deposits is based on book value. Thousands of Millions of yen U.S. dollars 2013 2012 2013 Amounts presented in the consolidated balance sheets ¥ 36,356 ¥ 19,577 $ 344,966 Fair value 36,356 19,577 344,966 Difference — — —

Notes and accounts receivable—trade Because notes and accounts receivable—trade are highly liquid, their fair value is similar to their book value. Consequently, the fair value of notes and accounts receivable—trade is based on book value. Thousands of Millions of yen U.S. dollars 2013 2012 2013 Amounts presented in the consolidated balance sheets ¥ 81,446 ¥ 73,461 $ 772,806 Fair value 81,446 73,461 772,806 Difference — — —

Investment securities The fair value of shares, etc., is based on prices established on exchanges. In addition, Note 9, “Securities,” provides information on marketable securities by the intent for which they are held. Thousands of Millions of yen U.S. dollars 2013 2012 2013 Amounts presented in the consolidated balance sheets ¥ 51,913 ¥ 34,523 $ 492,580 Fair value 51,913 34,523 492,580 Difference — — —

Liabilities Notes and accounts payable—trade Because notes and accounts payable—trade are highly liquid, their fair value is similar to their book value. Consequently, the fair value of notes and accounts payable—trade is based on book value. Thousands of Millions of yen U.S. dollars 2013 2012 2013 Amounts presented in the consolidated balance sheets ¥ 66,215 ¥ 58,593 $ 628,285 Fair value 66,215 58,593 628,285 Difference — — —

Short-term bank loans Because short-term bank loans are highly liquid, their fair value is similar to their book value. Consequently, the fair value of short-term bank loans is based on book value. Thousands of Millions of yen U.S. dollars 2013 2012 2013 Amounts presented in the consolidated balance sheets ¥ 14,024 ¥ 19,919 $ 133,068 Fair value 14,024 19,919 133,068 Difference — — —

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 36 Bonds payable (including the current portion of bonds) The fair value of bonds payable is based on the price provided by counterparty financial institutions. Thousands of Millions of yen U.S. dollars 2013 2012 2013 Amounts presented in the consolidated balance sheets ¥ 28,000 ¥ 28,000 $ 265,680 Fair value 28,327 28,283 268,783 Difference 327 283 3,103

Long-term bank loans (including the current portion of long-term bank loans) The fair value of these long-term bank loans is estimated as the discounted present value of the total principal and interest using the assumed interest rates for equivalent new loans. Interest rate swaps subject to special treatment are used for long-term, floating-rate loans. Principal and interest of the loans in which these interest rate swaps are embedded are discounted using an estimate of the interest rate on the loan at the time of issue. Thousands of Millions of yen U.S. dollars 2013 2012 2013 Amounts presented in the consolidated balance sheets ¥ 87,197 ¥ 84,155 $ 827,375 Fair value 87,464 84,929 829,908 Difference 267 774 2,533

Derivatives transactions The fair value of these derivatives transactions is stated at the price presented by the counterparty financial institutions. Derivatives transactions using interest rate swap contracts that meet specified conditions and receivables denominated in foreign currencies that meet specified conditions are treated with hedge items. The fair value of these derivatives transactions is included in the applicable accounts payable items and stated accordingly. Net asset or liability which results from derivatives transactions except for these show the net amount. As a result, if this account balance is a debt, it is indicated by parenthesis ( ). Thousands of Millions of yen U.S. dollars 2013 2012 2013 Amounts presented in the consolidated balance sheets ¥ 342 ¥ (480) $ 3,245 Fair value 342 (480) 3,245 Difference — — —

(2) Financial instruments for which determining fair value is difficult Financial instruments for which fair value is considered to be very difficult to determine are shown below. These financial instruments do not have a fair market value, and it was considered very difficult to determine because their future cash flows could not be estimated. For these reasons, these financial instruments are not included among investment securities above. Thousands of Millions of yen U.S. dollars 2013 2012 2013 Non-listed equity securities ¥ 1,452 ¥ 1,371 $ 13,777

(3) The redemption schedule for receivables after the close of the fiscal year Thousands of Millions of yen U.S. dollars (Notes and accounts receivable—trade) 2013 2012 2013 Within 1 year ¥ 81,446 ¥ 73,461 $ 772,806 From 1 year to 5 years — — — From 5 years to 10 years — — — Over 10 years — — —

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 37 Notes to Consolidated Financial Statements

(4) The redemption schedule for bonds payable, long-term bank loans and lease obligations after the close of the fiscal year Thousands of Millions of yen U.S. dollars 2013 2012 2013 Within 1 year Bonds payable ¥ 8,000 ¥ — $ 75,908 Long-term bank loans 12,393 18,042 117,592 Lease obligations 342 359 3,245 ¥ 20,735 ¥ 18,401 $ 196,745

From 1 year to 2 years Bonds payable ¥ — ¥ 8,000 $ — Long-term bank loans 26,586 12,867 252,263 Lease obligations 140 280 1,328 ¥ 26,726 ¥ 21,147 $ 253,591

From 2 years to 3 years Bonds payable ¥ 10,000 ¥ — $ 94,886 Long-term bank loans 16,566 24,249 157,187 Lease obligations 66 87 626 ¥ 26,632 ¥ 24,336 $ 252,699

From 3 years to 4 years Bonds payable ¥ 5,000 ¥ 10,000 $ 47,443 Long-term bank loans 20,394 10,562 193,510 Lease obligations 45 38 427 ¥ 25,439 ¥ 20,600 $ 241,380

From 4 years to 5 years Bonds payable ¥ 5,000 ¥ 5,000 $ 47,443 Long-term bank loans 3,997 14,378 37,926 Lease obligations 19 13 180 ¥ 9,016 ¥ 19,391 $ 85,549

Over 5 years Bonds payable ¥ — ¥ 5,000 $ — Long-term bank loans 7,261 4,043 68,897 Lease obligations 17 3 161 ¥ 7,278 ¥ 9,046 $ 69,058

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 38 8. Securities

A. The following tables summarize acquisition costs and book values (fair values) of securities with available fair values as of December 31, 2013 and 2012:

Available-for-sale securities with available fair values exceeding acquisition costs Thousands of Millions of yen U.S. dollars 2013 2012 2013 Acquisition cost: Equity securities ¥ 17,050 ¥ 16,109 $ 161,780 Bonds — — — Other — — — ¥ 17,050 ¥ 16,109 $ 161,780 Book value: Equity securities ¥ 51,621 ¥ 33,405 $ 489,809 Bonds — — — Other — — — ¥ 51,621 ¥ 33,405 $ 489,809 Difference: Equity securities ¥ 34,571 ¥ 17,297 $ 328,029 Bonds — — — Other — — — ¥ 34,571 ¥ 17,297 $ 328,029

Available-for-sale securities with available fair values not exceeding acquisition costs Thousands of Millions of yen U.S. dollars 2013 2012 2013 Acquisition cost: Equity securities ¥ 346 ¥ 1,300 $ 3,283 Bonds — — — Other — — — ¥ 346 ¥ 1,300 $ 3,283 Book value: Equity securities ¥ 292 ¥ 1,118 $ 2,771 Bonds — — — Other — — — ¥ 292 ¥ 1,118 $ 2,771 Difference: Equity securities ¥ (54) ¥ (182) $ (512) Bonds — — — Other — — — ¥ (54) ¥ (182) $ (512)

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 39 Notes to Consolidated Financial Statements

B. Total sales of available-for-sale securities for the year ended December 31, 2013 and nine months ended December 31, 2012 were as follows: Thousands of Millions of yen U.S. dollars 2013 2012 2013 (nine months) Amount of sales Equity securities ¥ 41 ¥ 458 $ 389 Bonds — — — Other — — — ¥ 41 ¥ 458 $ 389 Total gain on sales Equity securities ¥ 11 ¥ 177 $ 104 Bonds — — — Other — — — ¥ 11 ¥ 177 $ 104 Total loss on sales Equity securities ¥ — ¥ 70 $ — Bonds — — — Other — — — ¥ — ¥ 70 $ —

9. Derivative Financial Instruments and Hedging Transactions

Nine months ended December 31, 2012

A. Derivatives transactions for which hedge accounting does not apply (1) Currency related

Millions of yen Portion over Recognized gain Classification Type Contact amount Fair value 1 year (loss)

Receivable floating interest rate Non-market transaction 3,247 — (93) (93) Payable fixed rate swaps

Note: Fair values were based on prices provided by relevant financial institutions.

(2) Interest rate related None

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 40 B. Derivatives transactions for which hedge accounting applies (1) Currency related

Millions of yen Portion over Hedge accounting method Type of transaction Hedge item Contract amount Fair value 1 year Forward foreign exchange contracts Selling: USD 3,638 — (168) Accounts Deferred hedges Selling: EUR receivable—trade 2,019 — (187) Selling: CAD 455 — (23) Selling: AUD 233 — (9) Forward foreign exchange contracts

Designation method Selling: USD 645 — (Note 2) Accounts for forward foreign Selling: EUR receivable—trade 484 — (Note 2) exchange contracts, etc. Selling: CAD 322 — (Note 2) Selling: AUD 150 — (Note 2)

Note: 1. Fair values were based on prices provided by relevant financial institutions. 2. The fair value of gain or loss resulting from foreign exchange contracts embedded in receivables subject to hedging is included in the fair value of corresponding receivable.

(2) Interest rate related

Millions of yen Portion over Hedge accounting method Type of transaction Hedge item Contract amount Fair value 1 year

Special treatment of interest Receivable floating interest rate Long-term loans 32,530 31,870 (Note) rate swaps Payable fixed rate swaps payable

Note: The fair value of interest rate swaps subject to special treatment embedded in long-term loans subject to hedging is included in the fair value of the corresponding long-term loans.

Year ended December 31, 2013

A. Derivatives transactions for which hedge accounting does not apply (1) Currency related

Millions of yen Portion over Recognized gain Classification Type Contact amount Fair value 1 year (loss)

Receivable floating interest rate Non-market transaction 14,228 — 514 625 Payable fixed rate swaps

Thousands of U.S. dollars Portion over Recognized gain Classification Type Contact amount Fair value 1 year (loss)

Receivable floating interest rate Non-market transaction 135,003 — 4,877 5,930 Payable fixed rate swaps

Note: Fair values were based on prices provided by relevant financial institutions.

(2) Interest rate related None

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 41 Notes to Consolidated Financial Statements

B. Derivatives transactions for which hedge accounting applies (1) Currency related

Millions of yen Portion over Hedge accounting method Type of transaction Hedge item Contract amount Fair value 1 year Forward foreign exchange contracts Selling: USD 3,224 — (147) Accounts Deferred hedges Selling: EUR receivable—trade 339 — (23) Selling: CAD 97 — (2) Selling: AUD 46 — (0) Forward foreign exchange contracts

Designation method Selling: USD 351 — (Note 2) Accounts for forward foreign Selling: EUR receivable—trade 538 — (Note 2) exchange contracts, etc. Selling: CAD 94 — (Note 2) Selling: AUD 46 — (Note 2)

Thousands of U.S. dollars Portion over Hedge accounting method Type of transaction Hedge item Contract amount Fair value 1 year Forward foreign exchange contracts Selling: USD 30,591 — (1,395) Accounts Deferred hedges Selling: EUR receivable—trade 3,217 — (218) Selling: CAD 920 — (19) Selling: AUD 436 — 0 Forward foreign exchange contracts

Designation method Selling: USD 3,330 — (Note 2) Accounts for forward foreign Selling: EUR receivable—trade 5,105 — (Note 2) exchange contracts, etc. Selling: CAD 892 — (Note 2) Selling: AUD 436 — (Note 2)

Note: 1. Fair values were based on prices provided by relevant financial institutions. 2. The fair value of gain or loss resulting from foreign exchange contracts embedded in receivables subject to hedging is included in the fair value of corresponding receivable.

(2) Interest rate related

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 42 Millions of yen Portion over 1 Hedge accounting method Type of transaction Hedge item Contract amount Fair value year

Special treatment of interest Receivable floating interest rate Long-term 29,330 27,930 (Note) rate swaps Payable fixed rate swaps loans payable

Thousands of U.S. dollars Portion over 1 Hedge accounting method Type of transaction Hedge item Contract amount Fair value year

Special treatment of interest Receivable floating interest rate Long-term 278,300 265,016 (Note) rate swaps Payable fixed rate swaps loans payable

Note: The fair value of interest rate swaps subject to special treatment embedded in long-term loans subject to hedging is included in the fair value of the corresponding long-term loans.

10. Pledged Assets

The following assets were pledged as collateral for long-term debt of ¥2,900 million ($27,517 thousand) and ¥3,300 million at December 31, 2013 and 2012. Thousands of Millions of yen U.S. dollars 2013 2012 2013 Investment in securities ¥ 9,037 ¥ 5,711 $ 85,748 Property, plant and equipment - net of accumulated depreciation 18,696 21,133 177,398 ¥ 27,733 ¥ 26,844 $ 263,146

11. Short-term Bank Loans and Long-term Debt

Short-term bank loans at December 31, 2013 and 2012 consisted of short-term notes bearing interest at the average rate of 2.2%. In the past, these loans have been renewed as required. Long-term debt at December 31, 2013 and 2012 consisted of the following: Thousands of Millions of yen U.S. dollars 2013 2012 2013 Loans principally from banks and insurance companies at the weighted average interest rate of 2.5 % at December 31, 2013 and 2.3% at 2012 were as follows: Secured ¥ 2,900 ¥ 3,300 $ 27,517

Unsecured 84,297 80,855 799,857

0.98% bonds, due in 2014 8,000 8,000 75,908 1.36% bonds, due in 2016 5,000 5,000 47,443 0.77% bonds, due in 2016 5,000 5,000 47,443 1.18% bonds, due in 2018 5,000 5,000 47,443 0.73% bonds, due in 2017 5,000 5,000 47,443 115,197 112,155 1,093,054 Less amounts due within one year (20,393) (18,042) (193,500) ¥ 94,804 ¥ 94,113 $ 899,554

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 43 Notes to Consolidated Financial Statements

Annual maturities of long-term debt at December 31, 2013 were as follows: Thousands of Years ended December 31, Millions of yen U.S. dollars 2014 ¥ 20,393 $ 193,500 2015 26,586 252,263 2016 26,566 252,073 2017 25,394 240,953 2018 and thereafter 16,258 154,265 ¥ 115,197 $ 1,093,054

Long-term loans include syndicated loan agreements with financial covenants. The covenants consist of the following:

1) On December 31 and June 30 of each year, the amount of total shareholders’ equity in the consolidated and nonconsolidated balance sheets should be more than 75% of the amount from the previous periods, ¥540 million (US$5,124 thousand) on the consolidated basis and ¥475 million (US$4,507 thousand) on the nonconsolidated basis. 2) Ordinary income recorded in the consolidated statement of income should not be negative for two consecutive fiscal years.

12. Severance and Retirement Benefits

The liability for severance and retirement benefits included in the consolidated balance sheets as of December 31, 2013 and 2012 consisted of the following: Thousands of Millions of yen U.S. dollars 2013 2012 2013 Employees’ retirement benefits Projected benefit obligation ¥ 31,616 ¥ 32,441 $ 299,990 Unrecognized actuarial differences 2,691 (4,812) 25,534 Less fair value of pension assets (21,429) (14,933) (203,330) Less unrecognized past service liabilities 11 13 104 Prepaid pension cost 341 493 3,236 Directors’ and statutory auditors’ retirement benefits 9 16 85 Liability for severance and retirement benefits ¥ 13,239 ¥ 13,218 $ 125,619

Severance and retirement benefits, except for directors’ and statutory auditors’ benefits, for the year ended December 31, 2013 and nine months ended December 31, 2012 consisted of the following: Thousands of Millions of yen U.S. dollars 2012 2013 2013 (nine months) Service costs - benefits earned during the year ¥ 1,626 ¥ 1,218 $ 15,428 Interest cost on projected benefit obligation 491 452 4,659 Expected return on plan assets (67) (51) (636) Amortization of actuarial differences 603 403 5,722 Amortization of past service liabilities (1) (1) (9) Contribution paid to the defined contribution plan 221 162 2,097 Severance and retirement benefit expenses ¥ 2,873 ¥ 2,183 $ 27,261

The discount rate and the rate of expected return on plan assets used by the Company for the year ended December 31, 2013 were mainly 1.5% and 1.0%, respectively (mainly 1.5% and 1.0% for nine months ended December 31, 2012). The estimated amount of all retirement benefits to be paid at future retirement dates is allocated equally to each service year using the estimated total number of service years. Actuarial differences are recognized in the income statement using the straight-line method mainly over fifteen years. Past service liabilities are recognized in the income statement using the straight-line method over fifteen years.

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 44 13. Income Taxes

The Company and its domestic subsidiaries are subject to corporate, inhabitants and enterprise taxes, which, in the aggregate, resulted in a statutory tax rate of approximately 38.0% for the year ended December 31, 2013 and 38.0% for nine months ended December 31, 2012.

Significant components of deferred tax assets and liabilities as of December 31, 2013 and 2012 were as follows: Thousands of Millions of yen U.S. dollars 2013 2012 2013 Current deferred tax assets Unrealized profits ¥ 1,682 ¥ 1,456 $ 15,960 Accrued bonuses 888 820 8,426 Accrued expenses 1,278 637 12,126 Loss carryforwards 1,494 — 14,176 Other 2,138 1,487 20,287 Valuation allowance (393) (70) (3,730) Total current deferred tax assets 7,087 4,330 67,245 Offset of deferred tax liabilities (71) (25) (673) Net current deferred tax assets ¥ 7,016 ¥ 4,305 $ 66,572

Current deferred tax liabilities Unrealized losses ¥ (99) ¥ (60) $ (939) Other (1) (81) (10) Total current deferred tax liabilities (100) (141) (949) Offset of deferred tax assets 72 25 683 Net current deferred tax liabilities ¥ (28) ¥ (116) $ (266)

Thousands of Millions of yen U.S. dollars 2013 2012 2013 Noncurrent deferred tax assets Excess severance and retirement benefits ¥ 4,615 ¥ 4,606 $ 43,790 Unrealized profits 1,165 1,076 11,054 Loss on write-down of investment securities 249 248 2,363 Loss on set up of employee retirement benefit trust 1,156 1,074 10,969 Loss carryforwards 8,937 5,880 84,799 Loss on write-down of golf club memberships 42 102 399 Loss on impairment of fixed assets 271 364 2,571 Other 2,148 2,086 20,381 Valuation allowance (9,884) (3,592) (93,785) Total noncurrent deferred tax assets 8,699 11,844 82,541 Offset of deferred tax liabilities (5,537) (8,846) (52,538) Net noncurrent deferred tax assets ¥ 3,162 ¥ 2,998 $ 30,003

Noncurrent deferred tax liabilities Accelerated depreciation of foreign consolidated subsidiaries ¥ (10,874) ¥ (9,064) $ (103,179) Net unrealized gains on securities (12,291) (6,091) (116,624) Undistributed profit of subsidiaries (1,087) (902) (10,314) Other (2,067) (1,842) (19,612) Total noncurrent deferred tax liabilities (26,319) (17,899) (249,729) Offset of deferred tax assets 5,537 8,846 52,538 Net noncurrent deferred tax liabilities ¥ (20,782) ¥ (9,053) $ (197,191)

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 45 Notes to Consolidated Financial Statements

Significant items in the reconciliation of the statutory tax rate and the effective rate were as follows: 2013 2012 (nine months) Statutory tax rate 38.0 % 38.0 %

Amortization of goodwill 0.4 % 0.6 % Provision for alleged U.S. anti-trust law violation 19.1 % —% Difference in statutory tax rates of subsidiaries (2.0)% (0.5)% Equity in net income of unconsolidated subsidiaries and affiliates (0.4)% (0.6)% Undistributed profit of subsidiaries 0.7 % (0.7)% Valuation allowance 26.3 % (44.6)% Adjustment of deferred tax assets for enacted changes in tax laws and rates — % —% Other (30.2)% 12.1 %

Effective tax rate 51.9 % 4.3 %

14. Leases

(1) Finance leases, as lessee Information at December 31, 2013 and 2012 for finance leases which do not transfer ownership of the leased property to the lessee and which were commenced prior to April 1, 2008 was as follows: Thousands of Millions of yen U.S. dollars 2013 2012 2013 Original lease obligations, including finance charges, for machinery, equipment and other ¥ 631 ¥ 726 $ 5,987 Payments made 266 323 2,524 Balance remaining ¥ 365 ¥ 403 $ 3,463

Thousands of Millions of yen U.S. dollars 2013 2012 2013 Future minimum payments Payments due within one year ¥ 33 ¥ 38 $ 313 Payments due after one year 332 365 3,150 ¥ 365 ¥ 403 $ 3,463

Rental expenses under non-capitalized finance leases for the year ended December 31, 2013 and nine months ended December 31, 2012 were ¥38 million ($361 thousand) and ¥48 million, respectively.

(2) Operating leases, as lessee Lease obligations under operating leases at December 31, 2013 and 2012 were as follows: Thousands of Millions of yen U.S. dollars 2013 2012 2013 Future minimum payments Payments due within one year ¥ 2,219 ¥ 1,377 $ 21,055 Payments due after one year 5,141 4,371 48,781 ¥ 7,360 ¥ 5,748 $ 69,836

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 46 15. Contingent Liabilities

Contingent liabilities at December 31, 2013 and 2012 were as follows: Thousands of Millions of yen U.S. dollars 2013 2012 2013 Loan guarantees: TOYO RETREAD CO., LTD., an equity method affiliate ¥ 98 ¥ 128 $ 930

16. Net Assets

Under the Japanese Corporate Law and regulations (“the Law”), Additional paid-in capital and legal earnings reserve may not the entire amount paid for new shares is required to be desig- be distributed as dividends. Under the Law, however, on condition nated as common stock. However, a company may, by a resolu- that the total amount of legal earnings reserve and additional tion of the Board of Directors, designate an amount not paid-in capital remained equal to or greater than 25% of exceeding one half of the price of the new shares as additional common stock, they were available for distribution by resolution paid-in capital, which is included in capital surplus. of the shareholders’ meeting. Under the Law, all additional Under the Law, in cases in which a dividend distribution of paid-in capital and all legal earnings reserve may be transferred surplus is made, the smaller of an amount equal to 10% of the to other capital surplus and retained earnings, which are poten- dividend or the excess, if any, of 25% of common stock over the tially available for dividends. total of additional paid-in capital and legal earnings reserve must The maximum amount that the Company can distribute as be set aside as additional paid-in capital or legal earnings dividends is calculated based on the nonconsolidated financial reserve. Legal earnings reserve is included in retained earnings statements of the Company in accordance with the Law. in the accompanying consolidated balance sheets. At the annual shareholders’ meeting held on March 28, 2014, Under the Law, legal earnings reserve and additional paid-in the shareholders approved cash dividends amounting to ¥3,048 capital could be used to eliminate or reduce a deficit by a million ($28,921 thousand). These appropriations have not been resolution of the shareholders’ meeting or could be capitalized accrued in the Consolidated Financial Statements as of by a resolution of the Board of Directors. Under the Law, both of December 31, 2013. Such appropriations are recognized in the these appropriations generally require a resolution of the share- period in which they are approved by the shareholders. holders’ meeting.

17. Related Party Transactions

A description is omitted because there were no material related party transactions to disclose.

18. Segment Information

(1) General information about reportable segments (2) Measuring reportable segment income or loss, segment The Company’s reportable segments are the units for which assets and other material items separate financial information is available and which are The accounting policies for reportable business segments are periodically reviewed by the Board of Directors for the purpose generally the same as those described in “Significant Accounting of deciding the allocation of management resources and evalu- Policies in the Preparation of Consolidated Financial State- ating business performance. ments.” Internal sales and transfers between segments are The Company has two divisions corresponding to the based mainly on prices for third-party transactions. operational headquarters of the Tires business and the Divertech Figures for reportable segment income are based on business. Each division formulates comprehensive strategies operating income. for both domestic and overseas markets and develops business activities. Therefore, the Company identifies “Tires” and “Divertech” as reportable segments. The Tires segment includes the manufacture and sale of tires for a range of autos, buses and other vehicles and equipments. The Divertech segment includes the manufacture and sale of rubber vibration isolators, waterproof sheets, automotive cushion seats and other products.

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 47 Notes to Consolidated Financial Statements

(3) Reportable segment income or loss, segment assets and other material items

For nine months ended December 31, 2012

Millions of yen Reportable Segments Amount reported on Adjustments consolidated Other (Note 2) financial Tires Divertech Subtotal (Note 1) Total (Note 3) statements Net sales Sales to outside customers 228,730 62,321 291,051 59 291,110 — 291,110 Intersegment sales and transfers 15 22 37 148 185 (185) — Total 228,745 62,343 291,088 207 291,295 (185) 291,110 Segment income (Operating income) 13,015 2,228 15,243 83 15,326 325 15,651 Segment assets 257,189 47,727 304,916 20,164 325,080 29,206 354,286 Other items Depreciation and amortization 12,519 2,097 14,616 510 15,126 (0) 15,126 Increase in property, plant and equipment and intangible assets 18,553 2,502 21,055 1,903 22,958 — 22,958

For the year ended December 31, 2013

Millions of yen Reportable Segments Amount reported on Adjustments consolidated Other (Note 2) financial Tires Divertech Subtotal (Note 1) Total (Note 3) statements Net sales Sales to outside customers 289,698 80,450 370,148 70 370,218 — 370,218 Intersegment sales and transfers 17 6 23 218 241 (241) — Total 289,715 80,456 370,171 288 370,459 (241) 370,218 Segment income (Operating income) 33,785 2,583 36,368 118 36,486 755 37,241 Segment assets 304,100 51,769 355,869 24,053 379,922 53,405 433,327 Other items Depreciation and amortization 16,154 2,682 18,836 676 19,512 (0) 19,512 Increase in property, plant and equipment and intangible assets 23,813 2,832 26,645 2,355 29,000 — 29,000

For the year ended December 31, 2013

Thousands of U.S. dollars Reportable Segments Amount reported on Adjustments consolidated Other (Note 2) financial Tires Divertech Subtotal (Note 1) Total (Note 3) statements Net sales Sales to outside customers 2,748,819 763,355 3,512,174 664 3,512,838 — 3,512,838 Intersegment sales and transfers 161 57 218 2,069 2,287 (2,287) — Total 2,748,980 763,412 3,512,392 2,733 3,515,125 (2,287) 3,512,838 Segment income (Operating income) 320,571 24,509 345,080 1,120 346,200 7,164 353,364 Segment assets 2,885,473 491,214 3,376,687 228,228 3,604,915 506,737 4,111,652 Other items Depreciation and amortization 153,278 25,449 178,727 6,414 185,141 (0) 185,141 Increase in property, plant and equipment and intangible assets 225,951 26,872 252,823 22,345 275,168 — 275,168

(Note1) “Other” is not included in reportable segments. It includes finance loans and purchasing credits to domestic affiliates and real-estate businesses and other. (Note2) “Adjustments” in segment income of ¥755 million and ¥325 million at December 31, 2013 and 2012, respectively, comprised the elimination of intersegment transactions. (Note3) “Adjustments” in segment assets of ¥64,098 million and ¥40,289 million at December 31, 2013 and 2012, respectively, comprised mainly cash and cash equivalents and investment securities of the Company.

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 48 Relative information For nine months ended December 31, 2012 Information about products and services This was omitted because the same information was disclosed in Segment Information.

Information about geographic areas Net sales Millions of yen Japan North America Other Total 110,389 105,494 75,227 291,110

(Note) Net sales are classified into countries and regions based on customer location.

Property, plant and equipment Millions of yen Japan North America Other Total 73,409 40,777 32,009 146,195

Information about major customers This was omitted because there were no outside customers the sales to which comprised over 10% of net sales.

For the year ended December 31, 2013 Information about products and services This was omitted because the same information was disclosed in the Segment Information.

Information about geographic areas Net sales Millions of yen Japan North America Other Total 141,654 139,126 89,438 370,218

(Note) Net sales are classified into countries and regions based on customer location.

Thousands of U.S. dollars Japan North America Other Total 1,344,093 1,320,106 848,639 3,512,838

Property, plant and equipment Millions of yen Japan North America Other Total 73,083 47,204 48,310 168,597

Thousands of U.S. dollars Japan North America Other Total 693,453 447,898 458,393 1,599,744

Information about major customers This was omitted because there were no outside customers the sales to which comprised over 10% of net sales.

Information on impairment loss in noncurrent assets by reportable segment Nothing to be noted.

Information on amortization of goodwill and unamortized balance by reportable segment For nine months ended December 31, 2012

Millions of yen Reportable Segments Eliminations and corporate Tires Divertech Subtotal Other assets Total Amortization of goodwill 196 — 196 — — 196 Balance at end of period 2,665 — 2,665 — — 2,665

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 49 Notes to Consolidated Financial Statements

For the year ended December 31, 2013

Millions of yen Reportable Segments Eliminations and corporate Tires Divertech Subtotal Other assets Total Amortization of goodwill 264 — 264 — — 264 Balance at end of period 3,011 — 3,011 — — 3,011

Thousands of U.S. dollars Reportable Segments Eliminations and corporate Tires Divertech Subtotal Other assets Total Amortization of goodwill 2,505 — 2,505 — — 2,505 Balance at end of period 28,570 — 28,570 — — 28,570

Information on negative goodwill by reportable segment Nothing to be noted.

19. Subsequent Events

Share Consolidation At its 98th shareholders’ meeting held on March 28, 2014, the (2) Overview of share consolidation Company passed a resolution for the consolidation of shares. 1 Type of shares: Common shares 2 Consolidation ratio 2 shares to 1 share (1) Purpose of share consolidation 3 Decrease in number of shares The Japanese Stock Exchanges have announced the “Action Number of outstanding shares before consolidation Plan for Consolidating Trading Units,” which aims to eventually (as of December 31, 2013) 254,358,146 unify the minimum trading units of shares of all listed domestic Decrease in number of shares due to consolidation corporations to 100 shares. 127,179,073 In accordance with this policy, the Company, as a listed Number of outstanding shares after consolidation corporation, decided to change its share trading unit from 1,000 127,179,073 shares to 100 shares. 4 Treatment of fractional lots of less than 1 share, if any In addition, along with the change in the share trading unit, If, as a result of the consolidation of shares, fractional lots of in order to improve the number of outstanding shares, the less than 1 share occur, such fractional lots shall be disposed Company consolidates shares to keep the share price within a in their entirety and the proceeds of the disposal shall be certain level set forth by the Tokyo Stock Exchange (50,000 yen distributed to the shareholders with the fractional lots on a or more and less than 500,000 yen) as a desirable level for an pro rata basis in accordance with Companies Act. investment unit.

(3) Agenda of share consolidation February 17, 2014 resolution date at Board of Directors’ meeting

March 28, 2014 resolution date at shareholders’ meeting

July 1, 2014 (tentative) effective date of share consolidation

(4) Impact on per unit information Assuming that the share consolidation took place at the beginning of the previous fiscal year, the impact on net assets per share, net income per share and diluted net income per share would be as follows: Thousands of Millions of yen U.S. dollars 2013 2012 2013 Net assets per share ¥1,084.30 ¥817.55 $10.29 Net income per share 91.30 104.06 0.87 Diluted net income per share — — —

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 50

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 51 Domestic Facilities

As of January 1, 2014

Headquarters (Osaka) Hyogo Manufacturing Complex, Akashi Plant (Hyogo) Headquarters Dojima Office (Osaka) Hyogo Manufacturing Complex, Hyogo Plant (Hyogo) Tokyo Branch Office (Tokyo) Corporate Technology Center (Hyogo) Nagoya Office (Aichi) Tire Technical Center (Hyogo) Hiroshima Office (Hiroshima) Automotive Parts Technical Center (Aichi) Sendai Plant (Miyagi) Miyazaki Tire Test Course (Miyazaki) Kuwana Plant (Mie) Saroma Tire Test Course (Hokkaido)

Consolidated Subsidiaries

As of January 1, 2014

Tire Business DiverTech and Other Businesses

Japan North America Oceania Fukushima Rubber Co., Ltd. Toyo Tire Holdings of Americas Inc. (U.S.A.) Toyo Tyre & Rubber Australia Ltd. (Australia) Toyo Soflan Co., Ltd. Toyo Tire U.S.A. Corp. (U.S.A.) Ayabe Toyo Rubber Co., Ltd. Nitto Tire U.S.A. Inc. (U.S.A.) Asia Toyo Tires Logistics Co., Ltd. Toyo Tire North America OE Sales LLC (U.S.A.) Silverstone Berhad (Malaysia) Soflan Wiz Co., Ltd. Toyo Tire North America Manufacturing Inc. Silverstone Marketing Sdn Berhad (Malaysia) (U.S.A.) Toyo Advanced Technology Incorporated Silverstone Polymer Industries Sdn Berhad Toyo Tire Mexico LLC (U.S.A.) (Malaysia) Toyo Tire Japan Co., Ltd. Toyo Automotive Parts (USA), Inc. (U.S.A.) Toyo Tyre Malaysia Sdn Bhd (Malaysia) Nitto Japan Co., Ltd. Toyo Tire Canada Inc. (Canada) TOYO RUBBER CHEMICAL PRODUCTS Toyo Chemical Industrial Products Co., Ltd. (THAILAND) LIMITED (Thailand) Nitto Tire Canada Inc. (Canada) Toyo Seiki Co., Ltd. Toyo Tire (Thailand) Co., LTD. (Thailand) NT Mexico S. de R.L. de C.V. (Mexico) Showa Estate Co., Ltd. Toyo Tire (Shanghai) Co., Ltd. (China) TOYO AUTOMOTIVE PARTS DE MEXICO, S.A. Orient Koki Co., Ltd. DE C.V. (Mexico) Toyo Tire (Zhangjiagang) Co., Ltd. (China) F.T.G Co., Ltd. Toyo Tire (Zhucheng) Co., Ltd. (China) Sendai Service Co., Ltd. Europe Toyo Automotive Parts (Guangzhou) Co., Ltd. Kuwana Service Co., Ltd. (China) Toyo Tire Europe GmbH (Germany) F.C.C. Co., Ltd. Toyo Rubber Chemical & Industrial Products Toyo Tyre (UK) Ltd. (U.K.) (HK) Ltd. (China) Toyo Tire Benelux B.V. (Netherlands) Wuxi Toyo-Meifeng Rubber Products Co., Ltd. Toyo Tire Italia S.p.A. (Italy) (China) TOYO TIRE RUS LLC (Russia) TOYO TGPM AUTOMOTIVE PARTS FOSHAN Co., LTD. (China)

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 52 Corporate Data

As of December 31, 2013

Company Name Toyo Tire & Rubber Co., Ltd. Paid-in Capital ¥30,484 million

Website http://www.toyo-rubber.co.jp/english/ Consolidated Subsidiaries 46 (Japan: 16 Overseas: 30)

Establishment August 1, 1945 Number of Employees Consolidated: 10,292 Non-consolidated: 2,913

Investor Information

Stock Information As of December 31, 2013 Common Stock Issued: 254,358,146 shares Breakdown by Shareholder Type Note: The Company conducted a 1-for-2 reverse Thousand shares share split on common stock with an effective Japanese financial date of July 1, 2014. As a result, the number instruments firms Japanese financial of shares outstanding came to 127,179,073. 3,988 institutions 1.57% 76,439 Number of Shareholders 10,892 30.05% Foreign investors Average Number of Shares Held per Shareholder 23,352 71,034 27.93% Stock Listing Tokyo

Japanese Shareholder Register Administrator and Transfer Mitsubishi UFJ Trust and individuals and Account Management Institution for Special Accounts Banking Corporation other investors Other Japanese 33,252 corporations 13.07% 69,643 Independent Auditors KPMG AZSA LLC 27.38%

Fiscal year January 1 – December 31 Breakdown by the Number Annual General Meeting of Shareholders March of Shares Held Thousand shares Major Shareholders 5,000 to Number of Percentage of 9,999 shares Name of shareholders shares held share ownership* 4,741 1.86% Less than (Thousand) (%) 5,000 shares 10,000 to 11,021 Japan Trustee Services Bank, Ltd. (Trust account) 23,644 9.30 49,999 shares 4.33% 9,969 Bridgestone Corporation 20,000 7.87 3.92% Mitsubishi Corporation 12,870 5.06 Toyota Motor Corporation 9,549 3.75 SSBT OD05 OMNIBUS ACCOUNT - TREATY CLIENTS 8,967 3.53 The Master Trust Bank of Japan, Ltd. (Trust account) 6,679 2.62 More than The Bank of Tokyo-Mitsubishi UFJ, Ltd. 5,646 2.22 50,000 shares 228,627 Nippon Life Insurance Company 4,881 1.92 89.89% Japan Trustee Services Bank, Ltd. (Trust account 9) 4,306 1.69 EVERGREEN 4,053 1.59

Note: Percentage of share ownership is calculated excluding treasury stock (338,903 shares).

Rating Information As of the date of this report’s publication

Rating institution Rating assigned Rating Announced Japan Credit Rating Long-term issuer rating A– July 16, 2014 Agency, Ltd. (JCR)

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 53 Corporate Planning Division, Corporate Communications Planning Dept.

1-17-18, Edobori, Nishi-ku, Osaka 550-8661, Japan Tel: +81-6-6441-8803 Fax: +81-6-6446-1925 http://www.toyo-rubber.co.jp/english/ The names of products, services, and other items in this brochure are the trademarks October 2014 or Japanese registered trademarks of Toyo Tire & Rubber Co., Ltd. Printed in Japan