November 9, 2018
KYB Corporation
Stock Code: 7242; First Section of Tokyo Stock Exchange

Meeting Material 1H of FY2018 Briefing—Question and Answer Session

Date:Friday, November 9, 2018
KYB panel: Yasusuke Nakajima, Representative Director, Chairman and President Executive
Officer
Takaaki Kato, Representative Director, Chief Financial Officer[Questions about seismic isolation/mitigation oil dampers]
1. Capacity increase
Q. Please tell us the exact timing of the production capacity increase at Mie Plant from 100 unitsa month to 500 a month. Also, we’d like to know the schedule for replacement work.
A. In January 2019, we will enhance coating and processing lines to manufacture replacement
components, and starting in April 2019 we will have two shifts working on assembly. At thesame time we will ensure procurement of components, and put into place a system theproduces 500 units per month.
The actual replacement work will not depend on KYB alone. We will have to makeadjustments for the schedules of construction companies and owners. For the time being, weare giving priority to buildings and structures for which construction has not been completed.
2. Breakdown of the provision for product warranties
Q. We’d like to see the itemization of the ¥14.4 billion provision for product warranties related toseismic isolation/mitigation oil dampers.
A. Seismic isolation oil dampers: Replacement component manufacturing costs are ¥6.5 billion,
and replacement work related costs are ¥6.3 billion.
Seismic mitigation oil dampers: Replacement component manufacturing costs are ¥1.7 billion.
3. Replacement work related costs for seismic mitigation oil dampers
Q. We’d like an explanation about replacement work related costs for seismic mitigation oildampers, including past examples for reference.
A. There are differing structures and conditions among existing buildings in which seismicmitigation oil dampers are installed. Also, we have never undertaken such replacements
before. Therefore, it is currently not possible to calculate a reliable forecast of the replacement
work related costs.
4. Future appropriations of provisions for product warranties
Q. We’d like to know if there will be additional provisions for the second half or thereafter relatedto seismic isolation/mitigation oil dampers.
A. We forecast that additional costs will occur, caused by construction cost calculations,insurance premiums necessary for replacement work and costs to cover compensation.

5. Non-conforming seismic isolation/mitigation oil dampers
Q. We’d like to check if the number of non-conforming dampers has been confirmed, andwhether or not the number will increase.
A. While we are still conducting our investigations into some unclear matters, we believe that thetotal number has largely been ascertained.
6. Replacement scheduleQ. We understand that the Company will focus on manufacturing replacement components forthe next two years, but we’d like to know more about the replacement schedule.
A. Our plan is to increase production capacity to 500 units per month and work on replacement
manufacturing until September 2020. However, there is a labor shortage in the constructionindustry. We hope to make progress with replacement work upon making the necessary
adjustments with construction companies and owners. Regarding the results of structure
calculations, rather than simply release the calculation values, we hope to have information
sessions in which we will explain what kind of effect will be had on the building.
7. Estimated time of completion of replacement work
Q. You plan to have replacement work finished in September 2020. Is there a possibility that you
will not be able to meet that deadline?
A. We believe that putting the production system in place will allow us to deal with manufacturing
the replacement components. However, with the labor shortage in the construction industry, it
is possible that replacement work may fall behind schedule.
8. Future estimate of provisions for product warranties
Q. When will it be possible to calculate an estimate of the costs related seismic
isolation/mitigation oil dampers?
A. In the current term, there are some things for which we can calculate an estimate, and somefor which we cannot.
Regarding replacement costs for seismic mitigation oil dampers, we’ll be able to give anestimate that is accurate, to a degree, once we get some replacements finished and use themas examples for our calculations. We are currently making progress on construction costcalculations, so we will be able to release an estimate of those costs comparatively soon. Forcosts related to compensation, we are unable to make any calculations at the present time.
9. Investments for production increase
Q. What is the scope of investments necessary for the production increase?
A. We anticipate investments of approximately ¥300 million to increase production on coatingand processing lines.

10. Fund procurement
Q. We assume that the amount of funds used for the provision for product warranties is going toimpact the Company’s capital. Do you plan to cover the replacement expenses with theCompany’s own funds, or to borrow funds for that purpose?
A. Expenditures for manufacturing replacement components and for replacement work are
expected to occur over time. Currently, we have a target for funding in this fiscal year. In thefuture, we will consider the situation in light of our funding plan.
[Questions about business divisions]
11. AC Operations and HC Operations in the next term and onward
Q. Please tell us about the direction you will take in AC and HC Operations in the next term andthe future.
A. We foresee no major changes from this fiscal year in external environment factors, such as
trends in demand. In HC Operations, it does appear that the operating ratio of construction
machinery itself is declining, but the amount of inquiries we are receiving is not changing.
However, based on the current severe state of affairs, we believe we will need to compress
our total assets and review unprofitable businesses both domestically and overseas.
12. Impact on AC Operations
Q. How have automobile manufacturers reacted to the issue of non-conforming acts involving
seismic isolation/mitigation oil dampers for buildings? Has there been any progress on talks
regarding global specification integration?
A. Automobile manufacturers and construction machinery manufacturers both have checks forthe quality of our products, and we have explained our processing methods. They understandthat this issue does not affect them. We also had some manufacturers visit a plant to check
our manufacturing procedures for themselves.
As for global specification integration, we plan to explain to our customers that it will not
only benefit KYB, but more importantly will provide benefits for their companies.
[Questions about dividends]
13. Resumption of dividends
Q. When do you plan to resume dividends?
A. We are continuing with our previously stated dividend policy: aiming for a consolidated
dividend payout ratio of 30% and at least 2% (annual rate) of shareholders’ equity on aconsolidated basis. At the present stage, we have yet to determine an exact timeframe for theresumption of dividend provision, but we will do so while taking into account future losses andtotal net assets.