Financial Overview

(in million JPY)

	FY ended Dec. 31, 2013	FY ended Dec. 31, 2012	Rate of change (%)	Factor
Overall
Sales	601,629	559,700	7.5	-
Operating income	56,647	49,696	14.0	-
Ordinary income	59,503	52,365	13.6	-
Net income	35,007	32,611	7.3	-
Tire Operations
Sales	479,522	444,592	7.9	Sales increased due to the following factors: -Strong sales of tires for luxury vehicles and environmentally friendly vehicles -Increased sales of aftermarket tires both in Japan and overseas
Operating income	46,021	43,369	6.1	-

Business Partnership

Partnership with Kumho Tire
-In November 2013, the Company and Kumho Tire of Korea signed a Memorandum of Understanding to share technology and enter into a capital alliance. The two companies hope to become more competitive in the global tire market through the new collaboration. The plan includes joint research on environmentally friendly tire technologies. The companies will also proceed with discussions on capital alliance based on cross-shareholding. 

Recent Development Outside Japan

<Mexico>
-The Company announced that it will start to produce automotive air conditioning hoses in Mexico. The Company consign assembly to a local manufacturer. This will be the Company's third production base in North America. The plant will be located in the suburbs of Aguascalientes, where a number of automakers have assembly plants. The Company plans to begin delivery of the hoses to Japanese and U.S. automakers in Mexico in summer 2014.

Contracts

-Major contracts in 2013:

Products	Model	Tire size
Fuel efficient tire "BluEarth A34"	Daihatsu "TanTo"	155/65R14 75S
Flagship tire "ADVAN Sport V105 MO"	Mercedes-Benz "S-Class"	245/50R18 100W
	Mercedes-Benz "A-Class", "B-Class"	225/45R17 91W
Fuel efficient tire "BluEarth E70"	Subaru "XV Hybrid"	225/55R17 97V
Fuel efficient tire "BluEarth E51"	Toyota "Lexus IS"	225/45R17 91W
Fuel efficient tire "BluEarth A34"	Subaru "Pleo Plus"	155/65R14 75S

Outlook for FY ending Dec. 31, 2014

(in billion of JPY)

	FY ending Dec. 31, 2014 (Forecast)	FY ended Dec. 31, 2013 (Actual Results)	Rate of change (%)
Sales	647.0	601.6	7.5
Operating profit	63.0	56.6	11.3
Ordinary income	57.5	59.5	(3.4)
Net income	37.5	35.0	7.1

*Exchange rates: JPY 95 to the USD, JPY 130 to the EUR
Price of natural rubber: JPY 250/1 kg

>>>Financial Forecast for the Next Fiscal Year (Sales, Operating Income etc.)

Mid-term Management Plan

Grand Design 100 (GD100) Mid-term Management Plan (year ending March 2006 through year ending December 2017)
-In the medium term business plan, the Company is aiming to achieve JPY 1 trillion in sales, JPY 100 billion in operating profit, and 10 percent in operating margin ratio. In the Phase lll of the plan, which started in December 2012, the Company is on target for achieving the following goals in three years. 

• Sales: JPY 1,800 billion
• Operating income: JPY 150 billion
• Operating margin: 8.3%

Growth strategy of tire business
1) Boosting supply capacity: the Company aims to increase its tire production capacity to 66.74 million units by FY2014.

-Major plans for FY2014

• To complete the first phase of the expansion project in the Philippines: the plant's annual capacity is expected to reach 10 million tires
• To start producing passenger car tires at Suzhou plant in China: the plant's annual capacity is expected to reach 6 million tires by 2017
• To expand passenger car tire plant in Russia: the plant's annual capacity is expected to increase to 1.6 million tires by the second half of 2014
• To begin operations at a new passenger car tire plant in India: the plant's annual capacity is expected to reach 400,000 tires by 2014

-Major plans for FY2015-

• To complete the second phase of the expansion project in the Philippines: the plant's annual capacity is expected to increase to 12.5 million tires by 2015 and to 17 million tires by 2017
• To begin operations at new truck and bus tire plant in Mississippi, U.S.A. by 2015: the plant's annual capacity is expected to reach 1 million tires by 2018

<Tire Production Capacity (Number of tires)>

(unit: ten thousand tires)

	FY2014	FY2013	FY2012
Japan
Mie (Truck & Bus, Light Truck)	590	590	590
Mishima (Passenger)	1,390	1,390	1,390
Shinshiro (Passenger)	1,410	1,410	1,410
Shinshiro Minami (Passenger)	280	280	280
Japan Total	3,670	3,670	3,670
Overseas
U.S.A (Passenger)	620	620	620
U.S.A (Truck & Bus)	60	60	58
Philippines (Passenger)	1,000	800	700
China (Passenger)	740	510	510
China (Truck & Bus)	34	34	34
Thailand (Passenger, Light Truck)	400	400	400
Thailand (Truck & Bus)	40	35	35
Russia (Passenger)	160	140	70
India (Passenger)	40	-	-
Overseas Total	3,094	2,599	2,427
Total	6,764	6,269	6,097

2) Global sales strategy for high value-added products
-The Company will step up sales of its global brands such as ADVAN, BluEarth, iceGUARD, and GEOLANDAR series tires
-Installation on premium vehicles is expected to grow in 2014. The company's tires will be fitted on the Porsche Panamera and other luxury vehicles.
-The Company established a sales subsidiary in Mexico, Yokohama Tire Mexico S. de R.L. de C.V., in April 2013.

Growth strategy of Multiple Business
-In 2013, the Company has enjoyed strong sales of hoses, especially in the U.S. where it took the largest share of the power steering hose market. From 2014 onwards, the Company will further strengthen its overseas operations by producing hydraulic high-pressure hoses in China and manufacturing air conditioner hoses in Mexico. 

R&D Expenditure

(in million of JPY)

	FY ended Dec. 31, 2013	FY ended Dec. 31, 2012	FY ended Dec. 31, 2011
Overall	12,632	12,824	9,307
-Tire Operations	8,007	7,792	5,909
-Research Headquarters	1,471	1,610	948

R&D Structure

-Research and development of basic technology will be conducted by the Research Division, while that of new products will be carried out at the Tire Division, the Industrial Products Division and the Technical Division.

<Tire Operations>

facility	Location
RADIC (Research & Development Integrated Center)	Kanagawa, Japan
D-PARC (Daigo Proving-Ground and Research Center)	Ibaraki, Japan
T*MARY (Takasu Motoring and Researching Yard)	Hokkaido, Japan
Tire Test Center of Asia	Rayong, Thailand

-In 2013, the Company has expanded the Tire Test Center of Asia, the Company's proving ground in Thailand's Rayong Province. This expansion enables Yokohama Rubber to conduct complete tests of handling and vibration performance.

• 2.5-kilometer handling-test-course for testing overall tire performance and compatibility with specific vehicles on dry roads
• 1.5-kilometer handling-test-course for testing overall tire performance and compatibility with specific vehicles on wet roads
• Skid pad for testing tire grip performance on wet roads
• Corner hydroplaning test-road for testing the overall water drainage performance of the tire and its tread pattern

Product Development

Inner Liner Technology
-The Company has developed new inner liner technology that substantially improves the ability to maintain air pressure in commercial vehicle tires for trucks and buses. New inner liner uses "flat talc" - particulate talc in planar shapes, a key characteristic of the mineral talc - embedded in the rubber in multiple layers. The flat talc blocks the permeation of air through the rubber, substantially reducing natural air leakage by about 30% compared with conventional liners. That helps maintain tire pressure and allowing the design and manufacturing of lighter tires. The new inner liner technology is being applied to tires manufactured at plants in Japan from April 2013, and will gradually be introduced at plants outside Japan.

Capital Investment

(in million of JPY)

	FY ended Dec. 31, 2013	FY ended Dec. 31, 2012	FY ended Dec. 31, 2011
Overall	33,500	28,100	22,400
-Tire Operations	29,300	25,000	19,500

<Tire Operations>
-The Company invested JPY 11,200 million in upgrading its domestic production facilities, improving productivity, and raise its quality levels, as it releases new products, including large and high-performance tires.

<Foreign subsidiaries>
-The Company invested JPY 8,100 million in constructing new plants and installing new equipment at its passenger vehicle tire plants overseas. Major investment projects included expansion of the Yokohama Tire Philippines, Inc.

Investments Outside Japan

<USA>
-In 2013, the Company held a groundbreaking ceremony for its truck and bus tire manufacturing plant at West Point, Mississippi, United States. The new plant is slated to begin operations in October 2015. The plant site is over 2 million square meters and will include production, warehousing and office facilities. The plant will produce more than one million tires annually. Yokohama plans to make an initial USD 300 million (JPY 30 billion) investment in the facility and employ approximately 500 people in the first phase. The investment and employment may each be expanded to 4 times the initial value in the future.

<Thailand>
-In 2013, the Company announced that it will double TB (truck/bus) tire production capacity in Thailand from 350,000 to 700,000 tires a year by 2015. The Company will start constructing a second plant at Yokohama Tire Manufacturing (Thailand) Co., Ltd. in July 2013, planning its operation launch in April 2015. The expansion is based on Yokohama Rubber's strategy to step up its global production and sales of TB tires.

<Russia>
-In 2013, the Company announced that it would increase its passenger tires production capacities at its manufacturing facilities in Russia. The Russian plant started a full-scale operation in May 2012 and is already expected to be fully operational this summer. Therefore, the Company will boost the plant's production capacity from the current 1.4 million units to 1.6 million units a year by the fall of 2014.

<Philippines>
-In 2013, the Company announced its plans to start the Phase II expansion project for its facility in the Philippines in May 2013. This will increase the plant's annual production capacity to 12.5 million tires. The new production line is expected to become operational in the fall of 2014 and start a full-fledged production by 2015.

Planned Capital Investments (Tire business)

(As of Dec. 31, 2013)

Facility (Location)	Business	Expected Investment (in million JPY)	Start	Planned completion	Increased capacity after completion
Hiratsuka Plant (Kanagawa Pref., Japan)	Manufacturing	4,563	Jan. 2013	Dec. 2014	-
Mie Plant (Mie Pref., Japan)	Manufacturing	6,555	Jan. 2013	Dec. 2014	-
Mishima Plant (Shizuoka Pref., Japan)	Manufacturing	3,936	Jan. 2013	Dec. 2014	-
Shinshiro Plant (Aichi Pref., Japan)	Manufacturing	8,647	Jan. 2013	Dec. 2014	-
Onomichi Plant (Hiroshima Pref., Japan)	Manufacturing	2,118	Jan. 2013	Dec. 2014	-
Suzhou Yokohama Tire Co., Ltd. (Jiangsu, China)	Manufacturing and other business	26,500	Jul. 2013	Dec. 2017	6.0 million passenger car tires
Yokohama Tire Philippines, Inc. (Clark Special Economic Zone, Philippines)	Manufacturing and other business	19,700	Feb. 2011	Jul. 2014	3.0 million passenger car tires
		11,000	May 2013	Jun. 2015	2.5 million passenger car tires