KYB Corporation

Annual Review 2011
Year Ended March 31, 2011

Consolidated Five-Year Summary
KYB Corporation and its Consolidated Subsidiaries
Years ended March 31

Thousands of
U.S. dollars

Millions of yen
2011

2010

2009

2008

2007

2011

For the year:
Net sales
Costs and expenses
Net income (loss)
Capital expenditures¥320,082
295,931
17,014
8,915¥252,020
248,124661
10,081¥329,262
329,212(5,229)24,968¥387,080
368,809
8,397
23,564¥356,083
341,510
6,959
19,735$3,856,410
3,565,434
204,988
107,410

At year-end:
Working capital
Total net assets
Total assets¥ 46,024
89,964285,134¥ 48,700
78,489269,361¥ 43,512
76,450269,655¥ 29,120
91,738289,738¥ 23,758
87,816285,146$  554,506
1,083,904
3,435,349

Yen

Per share:
Net income (loss)
Cash dividends applicable to the year
Net assets
Number of employees¥ 77.548.00
395.18
11,440

¥

3.03
2.50
336.55
10,977¥ (23.62)
3.50
327.97
11,370U.S. dollars¥ 37.72
7.00
387.45
11,546¥ 31.33
7.00
372.6010,596

$0.93
0.10
4.76

Notes: 1. U.S. dollar amounts were translated from Japanese yen, for convenience only, at ¥83=U.S.$1, the approximate exchange rate prevailing on March 31, 2011.
2. This document has been translated from the original Japanese, the Annual Securities Report.

Financial Review
Summary
In the automotive components segment, sales increased
10.9% to ¥186,795 million (US$2,250,542 thousand). Sales ofshock absorbers for automobiles were higher as automobile
sales increased in Japan and other countries due in part togovernment programs to stimulate demand. Sales of shock
absorbers for motorcycles also increased. Motorcycle manufacturers in Japan and overseas completed inventory reductions and increased output. Sales of hydraulic equipment for
automobiles, chiefly for power steering, were higher. The
main reason was strong growth in sales of vane pumps forcontinuously variable transmissions.
In the hydraulic components segment, sales increased
68.8% to ¥121,221 million (US$1,460,494 thousand). There
was a large increase in sales of hydraulic equipment for industrial-use, due to an expansion in demand in China and otheremerging countries. However, sales of hydraulic equipment
for aircraft decreased partly because Japan held down its
defense budget.
In the others segment, which consists of special-purpose
vehicle and other products, sales increased slightly to ¥12,066
million (US$145,373 thousand). Sales of special-purpose vehicles, primarily concrete mixer trucks, declined along with cutsin Japan’s public-sector construction projects. However, there
was an increase in sales of other products, mainly seismic
isolation systems.
Consolidated net sales increased 27.0% to ¥320,082 million(US$3,856,410 thousand).

Operating income increased to an all-time high of ¥24,151
million (US$290,976 thousand). Growth in earnings was attributable to much higher earnings in the automotive and hydraulic components segments resulting from structural businessreform efforts as the Companywide Cost Reduction Activity.
Earnings increased in the others segment as well.
Non-operating income and expenses, net decreased¥1,813 million to a net expense. Interest expenses decreased¥382 million, but foreign exchange losses were ¥1,596 million below the previous fiscal year’s gains and there was adecrease of ¥864 million in government subsidies for employment adjustment at KYB and other group companies in Japan.
Ordinary income increased by ¥18,442 million to ¥23,972
million (US$288,819 thousand).
There was net extraordinary income of ¥466 million(US$5,614 thousand), an improvement of ¥4,326 million overthe previous fiscal year’s net extraordinary losses. One reason
was declines in extraordinary losses such as the impairment
loss, special retirement expenses at a European subsidiaryand business structure improvement expenses for reorganizing subsidiaries in Japan. In addition, there were gains fromnegative goodwill, sales of subsidiaries and affiliates’ stock,and other items.
After adding the net extraordinary income of ¥466 million
to the ordinary income of ¥23,972 million (US$288,819 thousand), income before income taxes and minority interests
totaled ¥24,439 million (US$294,446 thousand). Deductions
were ¥6,854 million for income taxes and ¥570 million forminority interests resulted in net income of ¥17,014 million(US$204,988 thousand).

Segment Information
Year ended March 31, 2011

Millions of yen
Reportable segments

Net sales:
Outside customers
Intersegment   Total sales
Segment profits

Elimination ofinter-segment
transactions

Automotive
components

Hydrauliccomponents

Total

Other

Total

¥186,795
167
186,962
10,181¥121,221
1,588
122,809
13,941¥308,016
1,756
309,772
24,123¥12,066
1,745
13,811
76¥320,082
3,501
323,583
24,200¥Consolidated
statements—(3,501)(3,501)(48)¥320,082—
320,082
24,151

Consolidated
statements$3,856,410—
3,856,410
290,976

Thousands of U.S. dollars
Reportable segments

Net sales:
Outside customers
Intersegment   Total sales
Segment profits

Automotive
components

Hydrauliccomponents

Total

Other

Total

Elimination ofinter-segment
transactions$2,250,542
2,012
2,252,554
122,663$1,460,494
19,133
1,479,627
167,964$3,711,036
21,157
3,732,193
290,639$145,373
21,024
166,398916$3,856,410
42,181
3,898,590
291,566$—(42,181)(42,181)(578)

Notes: U.S. dollar amounts were translated from Japanese yen, for convenience only, at ¥83=US$1, the approximate exchange rate prevailing on March 31, 2011.

Financial Condition
Current assets increased mainly because of an increase innotes and accounts receivable–trade that accompanied thegrowth in net sales. Non-current assets decreased becausea large reduction in new capital expenditures caused total
property, plant and equipment to decline. The result was a¥15,773 million increase in total assets from one year earlier
to ¥285,134 million (US$3,435,349 thousand).
Total liabilities increased ¥4,298 million to ¥195,169 million(US$2,351,434 thousand). Reduced capital expenditures and arecovery in earnings yielded consistent cash flows that wereused to repay debt. However, there was an increase in notes
and accounts payable–trade because the growth in goods procured for manufacturing activities.
Total net assets increased ¥11,475 million to ¥89,964 million (US$1,083,904 thousand) mainly because of the increase
in retained earnings.
The increase in net assets raised the equity ratio by 3.3 percentage points from one year earlier to 30.6%.

increases of ¥13,347 million in notes and accounts receivable–
trade and ¥4,847 million in inventories. Major sources of cash
were income before income taxes and minority interests of¥24,439 million, depreciation and amortization of ¥13,426 million and an increase of ¥15,839 million in notes and accounts
payable–trade.
Net cash used in investing activities decreased 43.6% to¥7,233 million (US$87,145 thousand). The purchase of property, plant and equipment of ¥7,665 million was the primary
use of cash.
Net cash used in financing activities increased 155.3% to¥16,967 million (US$204,422 thousand). The primary uses ofcash were ¥7,756 million for the net decrease in short-termloans payable and ¥8,986 million for the repayment of longterm loans payable.
Free cash flows (sum of operating and investing cash flows)
were a positive ¥28,200 million (US$339,759 thousand) mainly
because of the improvement of ¥22,769 million in income
before income taxes and minority interests to ¥24,439 million.
Even after the use of cash for the repayment of interest-bearing debt, there was a ¥10,459 million increase in cash andcash equivalents, which totaled ¥48,122 million (US$579,783
thousand) at the end of the period.

Cash FlowsNet cash provided by operating activities increased 56.4% to¥35,433 million (US$426,904 thousand). Cash was used by

Net Sales

Net Income (Loss)

Return on Equity (ROE)*(Billions of yen)

17.0

(%)

21.1

8.7

9.9

0.6

8.3

6.9

320.0

252.0

329.2

387.0

356.0

(Billions of yen)

-5.2

0.9

07

08

09

10

11

07

08

09

–6.6

10

11

07

08

09

10

11

* ROE = Net income/(Net assets – Minority interests
in consolidated subsidiaries)

1

KYB Corporation Annual Review 2011

Consolidated Balance Sheets (Unaudited)
KYB Corporation and its Consolidated Subsidiaries
As of March 31, 2011 and 2010

Millions of yen

ASSETS
Current assets:
Cash and deposits
Notes and accounts receivable—trade
Short-term investment securities
Finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Short-term loans receivable
Other
Allowance for doubtful accounts    Total current assets

Thousands of
U.S. dollars

2011

2010

2011

¥ 46,208
80,184—
16,534
12,879
8,098
4,107
5,051
5,058
(469)
177,654¥ 34,571
69,3035,000
15,141
13,024
8,373
3,553
140
5,279
(523)
153,864$  556,723
966,072—
199,205
155,169
97,56649,48260,85560,940(5,651)2,140,410

Non-current assets:
Property, plant and equipment:   Buildings and structures, net   Machinery, equipment and vehicles, net   Land   Lease assets, net
Construction in progress   Other, net    Total property, plant and equipment

24,14435,91022,324
1,725
4,318
2,397
90,821

25,38342,83522,601
1,889
1,427
2,863
97,000290,892
432,651
268,964
20,78352,02428,8801,094,229

Intangible assets:   Goodwill   Software   Other    Total intangible assets

16
67
1,107
1,191

50
106
874
1,031

193
807
13,337
14,34910,258
3,418
1,828
(38)
15,467
107,479¥285,134

11,101
4,585
2,487
(710)
17,464
115,496¥269,361

123,590
41,181
22,024(458)
186,349
1,294,928$3,435,349

Investments and other assets:   Investment securities   Deferred tax assets   Other   Allowance for doubtful accounts    Total investments and other assets    Total non-current assets    Total assets

Notes: 1. U.S. dollar amounts were translated from Japanese yen, for convenience only, at ¥83=US$1, the approximate exchange rate prevailing on March 31, 2011.
2. This document has been translated from the original Japanese, the Annual Securities Report.

2Millions of yen

Thousands of
U.S. dollars

LIABILITIES AND NET ASSETS
Current liabilities:
Notes and accounts payable—trade
Short-term loans payable
Lease obligations
Accounts payable—other
Income taxes payable
Notes payable—facilities
Provision for product warranties
Provision for directors’ bonuses
Provision for business structure improvement
Other    Total current liabilities

2011

2010

2011

¥ 68,340
34,802
293
7,083
4,959
756
2,949
311
—
12,134
131,630¥ 54,963
29,072
266
5,091
888
594
3,974
52
119
10,138105,163$  823,373
419,301
3,530
85,33759,7479,108
35,5303,747—
146,193
1,585,904

Non-current liabilities:
Long-term loans payable
Lease obligations
Deferred tax liabilities for land revaluation
Provision for retirement benefits
Provision for directors’ retirement benefits
Provision for environmental measures
Asset retirement obligations
Other    Total non-current liabilities    Total liabilities

44,774
1,455
4,513
10,767
666
222
209
930
63,539195,169

66,821
1,644
4,512
11,033
684
207
—
803
85,708
190,871

539,446
17,53054,373
129,723
8,024
2,675
2,518
11,205765,530
2,351,434

19,11321,00849,293(531)
88,883

19,113
20,256
33,620(990)
71,999230,277
253,108
593,892(6,398)1,070,880

1,365
—
4,768
(7,652)(1,518)2,599
89,964¥285,134

1,490
45
4,760
(4,724)
1,572
4,917
78,489¥269,361

16,446—57,446(92,193)(18,289)
31,313
1,083,904$3,435,349

Net assets:
Shareholders’ equity:   Capital stock   Capital surplus   Retained earnings   Treasury stock    Total shareholders’ equity
Accumulated other comprehensive income:   Valuation difference on available-for-sale securities   Deferred gains or losses on hedges   Revaluation reserve for land   Foreign currency translation adjustment    Total accumulated other comprehensive income
Minority interests    Total net assets    Total liabilities and net assets

3

KYB Corporation Annual Review 2011

Consolidated Statements of Income (Unaudited)
KYB Corporation and its Consolidated Subsidiaries
Years ended March 31, 2011 and 2010

Net sales
Cost of sales    Gross profit
Selling, general and administrative expenses    Operating income
Non-operating income:Interest income
Dividends income
Foreign exchange gains
Technical support fee
Equity in earnings of affiliates
Government subsidies for employment adjustment
Subsidies income
Other
Total non-operating income
Non-operating expenses:
Interest expenses
Foreign exchange losses
Other
Total non-operating expenses   Ordinary income
Extraordinary income:Gain on sales of non-current assets
Gain on sales of subsidiaries and affiliates’ stock
Gain on negative goodwill
Reversal of allowance for doubtful accounts
Surrender value of insurance
Gain on change in equity
Refund of prior periods taxes and dues
Other
Total extraordinary income
Extraordinary losses:
Loss on prior periods adjustment
Loss on disposal of non-current assets
Impairment loss
Loss on valuation of investment securities
Special retirement expenses
Retirement benefit expenses
Business structure improvement expenses
Loss on adjustment for changes of accounting standard for asset retirement obligations
Other
Total extraordinary losses   Income before income taxes and minority interests
Income taxes—current
Refund of income taxes
Income taxes—deferred
Total income taxes
Income before minority interests
Minority interests in income (loss)   Net income

Amounts per share of common stock:
Net income
Cash dividends applicable to the year

Millions of yen
2011
2010

Thousands of
U.S. dollars
2011¥320,082
257,006
63,07538,92424,151¥252,020
213,592
38,42734,531
3,896

197
239
—
762
1,192
25
156
758
3,332

172
178
104
517
977
889
565
734
4,138

2,373
2,880
—
9,181
14,361
301
1,880
9,133
40,145

1,675
1,492
343
3,511
23,972

2,058
—
445
2,503
5,530

20,181
17,976
4,133
42,301
288,819

55
410
718
50
—
—
—
236
1,470

95
—
—
23
173
164
166
—
624

663
4,940
8,651
602
—
—
—
2,843
17,711

—
351
260
0
213
—
2
165
10
1,003
24,439
5,975
(109)
987
6,854
17,584570¥ 17,014

366
519
1,232
288
1,045
293
567
—
170
4,484
1,670
1,043
(120)
348
1,271
—
(261)
¥    661

—
4,229
3,133
0
2,566
—
24
1,988
120
12,084294,446
71,988(1,313)
11,892
82,578211,855
6,867$204,988

Yen¥77.548.00$3,856,410
3,096,458
759,940
468,964
290,976

U.S. dollars

¥3.03
2.50

$0.93
0.10

Notes: 1. U.S. dollar amounts were translated from Japanese yen, for convenience only, at ¥83=US$1, the approximate exchange rate prevailing on March 31, 2011.
2. This document has been translated from the original Japanese, the Annual Securities Report.

Consolidated Statements of Comprehensive Income (Unaudited)
KYB Corporation and its Consolidated Subsidiaries
Years ended March 31, 2011 and 2010

Income before minority interests
Other comprehensive income:
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Share of other comprehensive income of associates accounted for using equity method   Total other comprehensive loss
Comprehensive income(Breakdown)Comprehensive income attributable to owners of the parent
Comprehensive income attributable to minority interests

Millions of yen
2011
2010

Thousands of
U.S. dollars
2011¥17,584¥—$211,855(128)(2,843)(206)(3,179)14,405—————(1,542)(34,253)(2,482)(38,301)
173,554

13,915489——

167,651
5,892

Notes: 1. U.S. dollar amounts were translated from Japanese yen, for convenience only, at ¥83=US$1, the approximate exchange rate prevailing on March 31, 2011.
2. This document has been translated from the original Japanese, the Annual Securities Report.

4

Consolidated Statements of Cash Flows (Unaudited)
KYB Corporation and its Consolidated Subsidiaries
Years ended March 31, 2011 and 2010

Millions of yen
2011
2010

Cash flows from operating activities:
Income before income taxes and minority interests
Depreciation and amortization
Gain on sales of non-current assets
Loss on disposal of non-current assets
Loss on valuation of investment securities
Gain on sales of stocks of subsidiaries and affiliates
Impairment loss
Amortization of goodwill
Amortization of negative goodwill
Gain on negative goodwill(Decrease) increase in allowance for doubtful accounts
Decrease in provision for retirement benefits
Decrease in provision for product warranties
Increase (decrease) in provision for directors’ bonuses
Increase in provision for environmental measures(Decrease) increase in provision for business structure improvement
Loss on adjustment for changes of accounting standard for asset retirement obligations
Interest and dividends income
Gain on cancellation of insurance contract
Interest expenses
Equity in earnings of affiliates
Increase in notes and accounts receivable—trade(Increase) decrease in inventories
Increase in notes and accounts payable—trade
Increase in accounts payable—otherSubsidy income
Other, net   Subtotal
Interest and dividends income received
Interest expenses paid
Income taxes paid
Income taxes refund
Proceeds from insurance income
Proceeds from subsidy    Net cash provided by operating activities

Thousands of
U.S. dollars
2011¥ 24,439
13,426
(55)
351
0
(410)
260
33
(37)
(718)
(26)
(234)
(956)
258
15
(119)
165
(437)
—
1,675
(1,192)(13,347)(4,847)
15,839
1,464
(156)
2,274
37,666847(1,717)(1,916)23141
279
35,433¥  1,670
15,318
(95)
519
288
—
1,232
39
(37)
—
230
(108)
(511)
(6)
—
119
—
(350)
(173)
2,058
(977)
(9,904)
2,831
7,712
581
(565)
1,063
20,938740(2,118)
(473)
2,978
175
412
22,654$ 294,446
161,759
(663)
4,229
0
(4,940)
3,133
398
(446)
(8,651)(313)(2,819)(11,518)
3,108
181(1,434)
1,988(5,265)—20,181(14,361)(160,807)(58,398)
190,831
17,639(1,880)27,398453,807
10,205(20,687)(23,084)
2,783
494
3,361
426,904

Cash flows from investing activities:
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of investment securities
Purchase of stocks of subsidiaries and affiliates
Proceeds from sales of stocks of subsidiaries and affiliates
Payments of loans receivableCollection of loans receivable
Other, net    Net cash used in investing activities(6,920)5,644(7,665)
566
(47)
(225)
1,349
(285)
692
(342)
(7,233)(1,946)
1,273(12,458)
473
(8)
—
—
(329)
299
(131)
(12,828)(83,373)
68,000(92,349)
6,819
(566)
(2,711)
16,253(3,434)
8,337(4,120)(87,145)

Cash flows from financing activities:
Net decrease in short-term loans payable
Repayments of lease obligations
Proceeds from long-term loans payable
Repayment of long-term loans payable
Redemption of bonds
Purchase of treasury stock
Proceeds from sales of treasury stock
Cash dividends paid
Proceeds from stock issuance to minority shareholders
Cash dividends paid to minority shareholders    Net cash used in financing activities(7,756)(285)
2,106(8,986)
(10)
(477)
0
(1,416)—(141)(16,967)(7,096)(227)
4,354(4,184)
(30)
(3)
0
—
664
(123)
(6,646)(93,446)(3,434)25,373(108,265)(120)(5,747)0(17,060)—(1,699)(204,422)(753)
10,47837,663—160
3,340
34,27250(9,072)
126,241
453,771—(19)¥ 48,122—¥ 37,663(229)$ 579,783

Effect of exchange rate change on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Increase in cash and cash equivalents resulting from change of scope of consolidation
Decrease in cash and cash equivalents resulting from exclusion of subsidiaries
from consolidation
Cash and cash equivalents at end of period

Notes: 1. U.S. dollar amounts were translated from Japanese yen, for convenience only, at ¥83=US$1, the approximate exchange rate prevailing on March 31, 2011.
2. This document has been translated from the original Japanese, the Annual Securities Report.

5

KYB Corporation Annual Review 2011

Corporate Information(As of March 31, 2011)

Head Office:World Trade Center Bldg., 4-1, Hamamatsu-cho 2-chome,
Minato-ku, Tokyo 105-6111, Japan
Tel: 81-3-3435-3511 Fax: 81-3-3436-6759
URL: http://www.kyb.co.jp

Date of Establishment:

November 25, 1948

Fiscal Year:

April 1 to March 31

Paid-in Capital:¥19,113 million

Number of Employees:

11,440 (Consolidated basis)

Securities Traded:

Tokyo Stock Exchange (First Section)

Plants:Sagami, Kumagaya, Gifu North, Gifu South, Gifu East

R&D Centers:

Basic Technology R&D Center, Production Technology R&D Center

Sales Branches:

Nagoya, Osaka, Fukuoka, Hamamatsu, Hiroshima

Overseas Offices:

California Representative Office5790 Katella Ave., Cypress, CA 90630, U.S.A.
Tel: 1-562-799-3862 Fax: 1-562-799-3863

Shareholder Information(As of March 31, 2011)

Common Stock Issued:

222,984,315 shares

Number of Shareholders:

10,835

Transfer Agent and Registrar:

Mizuho Trust & Banking Co., Ltd.

		

2-1, Yaesu 1-chome, Chuo-ku, Tokyo 103-8670, Japan

Major Shareholders:		
Name
Shareholdings(Thousands)

Japan Trustee Services Bank, Ltd. (Trust Account)

22,29510.00

Toyota Motor Corporation

19,654

8.81

The Master Trust Bank of Japan, Ltd.

18,006

8.08

Meiji Yasuda Life Insurance Company

10,046

4.51

Trust & Custody Services Bank, Ltd.

9,868

4.43

Hitachi Construction Machinery Co., Ltd.

8,920

4.00

Bridgestone Corporation

7,952

3.57

Mizuho Corporate Bank, Ltd.

7,163

3.21

Sompo Japan Insurance Inc.

6,744

3.02

The Ogaki Kyoritsu Bank, Ltd.

5,914

2.65

116,563

52.27

Total

Composition of Shareholders: 1,907 (0.86%)(Thousands)

30,023(13.46%)92,496(41.48%)� Financial institutions
� Other domestic companies
� Individuals and others
� Foreign companies� Treasury stock

43,048(19.31%)Printed in Japan

Percent of
Total Shares
Issued55,510(24.89%)