Expansion of China’s bearing manufacturing, R&D and sales platform

「In August of this year, the company established the R&D Center China within its sales subsidiary, 艾克欧東晟商貿（上海）有限公司, to further strengthen technology development in the Chinese market and its ability to respond quickly to customers.」

「For certain operating assets, as future cash flows fell below their carrying amounts due to deteriorating profitability, the carrying amounts were reduced to recoverable amounts, and the reduction was recognized as an impairment loss and recorded as an extraordinary loss.」

「In China, although shipments were temporarily affected in part by the lockdown in the first quarter, firm demand continued and sales increased.」

「In addition, because the profitability anticipated at the time of the acquisitions of 優必勝（上海）精密軸承製造有限公司 and 優必勝（蘇州）軸承有限公司 was no longer expected to be achieved for goodwill and customer-related assets, their carrying amounts were reduced to recoverable amounts and impairment losses were recognized.」

「In China, demand for capital investment remained strong, and sales increased significantly.」

「The company sought to establish an efficient global production system, including by advancing production of IKO-brand products at its production subsidiary, 優必勝（蘇州）軸承有限公司.」

「In production, we promoted the establishment of a more effective production structure by advancing a stable supply structure for IKO-brand products at our production subsidiary 優必勝（蘇州）軸承有限公司 and continuously carrying out shop-floor improvement activities to enhance price competitiveness across the entire supply chain.」

「The company sought to expand production capacity, including by commencing production of IKO-brand products at its production subsidiary, 優必勝（蘇州）軸承有限公司.」

「In production, the company sought to expand production capacity for medium- to long-term demand growth, including by producing IKO-brand products at its production subsidiary, 優必勝（蘇州）軸承有限公司.」

「In production, the company expanded its production capacity by adding equipment in preparation for medium- to long-term demand growth and by commencing production of IKO-brand products at its production subsidiary, 優必勝（蘇州）軸承有限公司.」

「The additional equity interest acquired represented 25% of the voting rights, and through this transaction 優必勝（上海）精密軸承製造有限公司 and 優必勝（蘇州）軸承有限公司 became wholly owned subsidiaries of the company.」

「In China, net sales increased as the company pursued active sales activities through its sales subsidiaries and local distributors.」

「The additional equity interest acquired represented 25% of the voting rights, and through this transaction 優必勝（上海）精密軸承製造有限公司 and 優必勝（蘇州）軸承有限公司 became wholly owned subsidiaries of the company. The additional acquisition was undertaken to enhance corporate value by further strengthening collaboration within the group and speeding up decision-making.」

「優必勝（上海）精密軸承製造有限公司 and 優必勝（蘇州）軸承有限公司 in China, which became subsidiaries in January of the previous year, have been included in the consolidated results from the first quarter.」

「The provisional accounting treatment for the business combination with 優必勝（上海）精密軸承製造有限公司 and 優必勝（蘇州）軸承有限公司 conducted on 13 January 2017, which had been applied in the previous consolidated fiscal year, was finalized during the second quarter of the current consolidated accounting period. There was no adjustment to the amount of goodwill. (1) Amount of goodwill recognized: ¥384 million (3) Amortization method and period: straight-line amortization over 10 years」

「The results of 優必勝（上海）精密軸承製造有限公司 and 優必勝（蘇州）軸承有限公司, which became subsidiaries in January of this year, have been included in the consolidated results from the current first quarter cumulative period.」

「Business combination date: 13 January 2017 (date of equity interest acquisition); voting interest acquired: 75%」

「At a meeting of the Board of Directors held on 17 October 2016, the company resolved to acquire an equity interest in 優必勝（上海）精密軸承製造有限公司 (the “Acquisition”) and make it a subsidiary, and acquired the equity interest on 13 January 2017. (6) Voting rights acquired 75%」