AKEBONO REPORT 2014

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Basic Policy for Distribution of Earnings and Dividendsfor Fiscal 2013 and 2014Akebono positions the return of profit to its shareholders as an importantmanagement issue. Accordingly, the Company adheres to a basicpolicy of ensuring long-term sustainable returns to shareholders whilegiving comprehensive consideration to its business performance anddividend payout ratio as well as to maintaining retained earnings at thelevel necessary to make investments for securing sustainable growth. Inline with this policy, the Company paid a fiscal 2013 full-year dividendof ?10 per share, which comprises an interim dividend of ?5 per shareand a year-end dividend of ?5 per share. For fiscal 2014, the Companyplans to pay a full-year dividend of ?10 per share consisting of interimand full-year dividends each amounting to ?5 per share.Basis of Presenting Consolidated Financial StatementsThe accompanying consolidated financial statements have been preparedin accordance with the provisions set forth in the JapaneseFinancial Instruments and Exchange Law and its related accounting regulations,and in conformity with accounting principles generally acceptedin Japan, which are different in certain respects as to application anddisclosure requirements of International Financial Reporting Standards.The consolidated financial statements are stated in Japanese yen,the currency of the country in which Akebono Brake Industry Co., Ltd.(the “Company”) is incorporated and operates. The translations ofJapanese yen amounts into U.S. dollars are included solely for the convenienceof readers outside Japan and have been made at the rate of?103 to $1 (rounded down to the nearest $1,000; or rounded down tothe nearest cent per share), the approximate rate of exchange at March31, 2014. Such translations should not be construed as representationsthat the Japanese yen amounts could be converted into U.S. dollars atthat or any other rate.Summary of Significant Accounting PoliciesThe Scope of ConsolidationThe consolidated financial statements as of March 31, 2014 include theaccounts of the Company and its 24 significant (23 in the fiscal yearended March 31, 2013) subsidiaries (together, the “Group”). Under thecontrolling company accounting method, companies in which theCompany, directly or indirectly, is able to exercise control over operationsare fully consolidated, and those companies over which the Group hasthe ability to exercise significant influence are accounted for by the equitymethod. During fiscal 2013, Akebono Engineering Center, EuropeS.A.S. was newly established and included in the scope of consolidation.An investment in one associated company (one in the fiscal yearended March 31, 2013) is accounted for by the equity method.Investments in the remaining two associated companies (two in the fiscalyear ended March 31, 2013) are stated at cost, and their impact onthe consolidated financial statements is insignificant. The differencesbetween the cost and the underlying net equity (at fair value) of investmentsin consolidated subsidiaries and associated companies accountedfor by the equity method have been amortized over a period of fiveyears. All significant intercompany balances and transactions have beeneliminated in consolidation. All material unrealized profit included inassets resulting from transactions within the Group is eliminated.Note: Please refer to page 61 for Changes in Accounting Policies and AccountingEstimates.Consolidated Assets, Liabilities, and Net AssetsAssetsAt the end of fiscal 2013, total consolidated assets rose ?12.6 billionfrom the end of fiscal 2012 to ?199.2 billion. Over the same period,current assets declined ?3.3 billion to ?73.1 billion. This was mainlyattributable to a ?7.1 billion decrease in cash and deposits, which outweigheda ?1.1 billion increase in notes and accounts receivable?trade and ?2.5 billion rise in inventories that contributed to theincrease of current assets. Noncurrent assets grew ?16.0 billion fromthe end of fiscal 2012 to ?126.1 billion at the end of fiscal 2013 duemainly to a ?17.3 billion increase in property, plant and equipmentarising from capital investments focusing on the United States.LiabilitiesTotal consolidated liabilities increased ?6.0 billion from the end offiscal 2012 to ?138.8 billion at the end of fiscal 2013. Over the sameperiod, current liabilities increased ?7.1 billion to ?69.2 billion dueprimarily to increases of ?4.5 billion and ?7.9 billion in notes andaccounts payable?trade and short-term loans payable, respectively,despite a ?5.2 billion decrease in current portion of long-term loanspayable. Consolidated noncurrent liabilities decreased ?1.2 billion fromthe end of fiscal 2012 to ?69.6 billion at the end of fiscal 2013 duemainly to a ?5.1 billion decline in long-term loans payable which outpaceda ?3.2 billion increase in lease obligations. Net interest-bearingdebt amounted to ?76.2 billion, following the exclusion of cash andequivalents from total interest-bearing debt of ?90.2 billion.Net AssetsAt the end of fiscal 2013, consolidated net assets rose ?6.6 billion fromthe end of fiscal 2012 to ?60.4 billion. This was mainly attributable toa ?1.1 billion increase in retained earnings and a ?5.0 billion improvementin foreign currency translation adjustment due to the depreciationof the yen.Consolidated Cash FlowsConsolidated cash and cash equivalents decreased ?7.2 billion from theend of fiscal 2012 to ?13.5 billion at the end of fiscal 2013.Cash Flow from Operating ActivitiesA net inflow of ?18.9 billion was seen in cash flow from operatingactivities (an increase of ?11.3 billion from the inflow recorded in fiscal2012). The main factors influencing this net inflow were income beforeincome taxes and minority interests of ?7.4 billion and depreciationand amortization totaling ?8.9 billion.Cash Flow from Investing ActivitiesA net outflow of ?20.3 billion was recorded in cash flow from investingactivities (an increase of ?16.3 billion from the net outflow recorded infiscal 2012). The main factors influencing this outflow were ?21.7 billionused for purchases of property, plant and equipment in the courseof facility investment focusing on North America.Cash Flow from Financing ActivitiesA net outflow of ?6.2 billion was recorded in cash flow from financingactivities (an increase of ?4.2 billion from the net outflow recorded infiscal 2012). The main factors affecting this outflow included repaymentsof long term loans payable of ?15.0 billion, which offset a netincrease in short-term loans payable of ?5.4 billion.

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