TOYO KANETSU K.K.
Annual Report 2017
For the year ended March 31, 2017

CONTENTS

To Our Shareholders

1Lines of Business2

Consolidated Financial Highlights

3

Analysis of Operating Environment and Results

4

Business Risks

5

Medium-Term Business Plan

6

Overseas Delivery Record

8

Board of Directors, Audit & Supervisory Committee Members
and Corporate Officers

10

Corporate Governance System

10

Financial Section

11

Consolidated Balance Sheet

12

Consolidated Statement of Income and Comprehensive Income

14

Consolidated Statement of Changes in Equity

15

Consolidated Statement of Cash Flows17

Notes to Consolidated Financial Statements

19

Independent Auditor’s Report

48

Corporate Data

50

Directory50

To Our Shareholders

The Toyo Kanetsu K.K. (TKK) Group was established in 1941 under the company creed: “Be creative, be good for thesociety.” Based on the technology we have built up since that time, we operate mainly in the Plant & Machinery
Business and the Material Handling Systems Business. By supplying customers in various industrial fields with
optimal products, systems, and services, we have earned their approval and trust while contributing to society andthe environment.

Beginning in 1950, the Plant & Machinery Business employed high-grade welding technology to manufacture allwelded tanks. This technology enabled us to produce structurally superior tanks more safely and economically than
before, and in larger sizes. Now the TKK Group has delivered more than 5,700 oil storage tanks and low-temperature
LNG storage tanks all over the world, where they form an integral part of the global energy infrastructure.

Since 1955, the Material Handling Systems Business has followed a “customer first” policy in delivering its specialty
sorting and picking systems and automated case storage systems to distribution centers, airports, and other facilities.
We have long been a leader in constructing systems that respond flexibly to increasingly diversified andsophisticated needs.

The year of 2016, the TKK Group celebrated 75 years since being founded. We wish to deeply thank all of our
stakeholders, for without them this would not have been possible. Enthusiastic and committed to our work, and with aspirit of “Challenge & Change,” we look forward to years of sustained development and rising corporate value as the
TKK Group advances toward its 100th anniversary.

In closing, I would like to thank you in advance for your understanding and continued support of our efforts.

June 2017

Toru Yanagawa
President
and Representative Director1Lines of BusinessToyo Kanetsu K.K. (President: Toru Yanagawa) was established as Toyo Kanetsu Kogyo K.K. in May 1941 and soon
began producing and selling industrial furnaces. Currently, the Plant & Machinery Business and Material Handling Systems
Business are the two pillars of our operations.

Plant & Machinery
Business

Material Handling
Systems Business

Other Business

Net Sales

Net Sales

Net Sales

Operating Profit¥958 million

Operating Profit

Operating Profit¥13,852 million ¥633 million¥21,711million ¥1,981 million¥6,368 million

Design, production, andinstallation of storage tanks for
LNG, LPG, crude oil, and othergases and liquids, as well as all
types of tank maintenance.

Development, design, andinstallation of distribution systems,
especially those for sorting,picking, and conveyance, as well
as all types of maintenance workon these systems.

Construction on contract of social
service facilities, rental housing,and others; manufacture and saleof industrial equipment such asbalancers and winches; and realestate rental and property
management.
*Before the elimination of inter-segment transactions.

Net Sales

Operating Profit

Cash Dividends per Share(Millions of yen)

(Millions of yen)

(Yen)

5,000

60,00050,00052,457
48,395

15

4,341

4,000

12.0

12

2.0 *

46,57245,50340,0003,588

41,932
3,000

10.0

9

3,080

3,024

30,000
2,000

2,271

6

20,000

5.0

5.0
4.0

4.0
3

1,000

10,0000

0FY2013

FY2014FY2015FY20160

FY2013

FY2017FY2014FY2015FY2016FY2017FY2013

FY2014FY2015FY2016FY2017*Commemorative dividend

Profit Attributable to Owners of Parent

Total Net Assets / Total Assets
Total Net Assets(Millions of yen)
4,000

Total Assets(Millions of yen)

70,0003,746

60,00058,078

3,000
2,879

55,92854,51550,0003,019

53,22851,36840,0002,000
1,906

30,00030,86233,78936,58034,37635,481

1,526
20,0001,000

10,0000

0FY2013

2

FY2014FY2015FY2016

Toyo Kanetsu K.K. Annual Report 2017

FY2017FY2013

FY2014FY2015FY2016FY2017

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Financial Highlights
For the years ended March 31

Millions of yen

2017

2016

2015

2014

2013

For the Years Ended March 31:¥41,932¥46,572¥52,457¥48,395¥45,504

Plant & Machinery Business

13,852

22,78829,425

26,90324,027

Material Handling Systems Business

21,711

17,206

15,68915,158

14,966

Other

6,368

6,577

7,341

6,333

6,511

Operating profit

3,080

3,024

3,588

4,341

2,272

Profit Attributable to Owners of Parent

3,746

1,906

3,019

2,879

1,527

Comprehensive Income

3,923

1,302

4,390

3,223

1,971

Cash Dividends

1,150

514

460

594

477

Current Assets¥28,479¥29,995¥33,463¥33,841¥37,149

Property, Plant and Equipment

16,084

13,661

13,577

12,912

13,655Investments and Other Assets

8,245

7,340

8,504

7,368

6,810

Net Sales

At March 31:

418

370

382

393

465

Total Assets

53,22851,36855,92854,51558,079Current Liabilities

13,104

12,866

15,57016,724

23,169Total Non-Current Liabilities

4,642

4,125

3,777

4,000

4,048

Shareholders’ Equity

33,97832,13633,525

32,10529,530

Accumulated Other Comprehensive Income

1,503

2,239

2,814

1,471

1,174

–

–

240

212

158

Total Liabilities and Net Assets

53,22851,36855,92854,51558,079Order Backlog

24,48524,12632,25649,06546,459Intangible Assets

Non-Controlling Interests

Yen

Per Share:

2017

2016

2015

2014

2013

Profit Attributable to Owners of Parent¥37.38¥17.45¥26.08¥24.18¥12.53

Cash Dividends

12.00

5.00

4.00

5.00

4.00

Shareholders’ Equity

370.20333.91315.91

282.18257.71

2017
Number of Shareholders
Number of Employees

2016

2015

2014

2013

11,36012,83915,22916,73817,277

899

884

753

742

787

Toyo Kanetsu K.K. Annual Report 20173

Analysis of Operating Environment and Results
In fiscal 2017 (ended March 31, 2017), corporate

but they did not lead to large orders in fiscal 2017. In theearnings in Japan and the employment and income

maintenance field, the business environment was toughsituations improved against a background of supportive

due to increasingly severe competition.

economic policies, which helped to sustain a gradualeconomic recovery. On the other hand, global growth

Against this background, consolidated net sales in thiseased as the economies of China and other developing

business decreased by 39.2% year on year to ¥13,852

countries slowed. Also, the outlook remains uncertain

million. Operating profit dropped by 67.0% to ¥633

due to Brexit, the Trump administration’s policy

million (before adjustment), while orders received

directions, and other factors.

declined by 34.0% to ¥8,182 million.

Our Plant & Machinery Business continued to face toughMaterial Handling Systems Business

operating conditions. OPEC coordinated production cuts
aimed at supporting oil prices, and the LNG market grew,

Amid increasing demand for material handling systems,

led by China, India, and other developing countries.

we recorded new installation sales for the online andNevertheless, these factors were not enough to stimulate

brick & mortar retail industries, as well as sales ofgrowth in oil- and gas-related capital investment, such as

facilities to co-ops. We not only recorded higher sales,

increased construction or expansion of large tanks.

but also steadily implemented important policies in our
medium-term business plan, which lowered costs andIn the Material Handling Systems Business, labor

greatly improved profitability.

shortages stemming from the falling birthrate and an
aging population in Japan are increasing the need for

As a result, consolidated net sales in this businessautomation. In particular, online shopping is likely to keepincreased by 26.2% year on year to ¥21,711 million,

growing at a high rate. Also, strong demand for aviation

while operating profit rose by 197.0% to ¥1,981 million

is continuing an increase in airport construction projects(before adjustment), and orders received grew by 45.3%

and information system upgrade projects, so demand forto ¥28,486 million.

distribution systems is trending upward.

Other Businesses
In this business environment, the Material HandlingIn businesses other than those above, we concentrated

Systems Business recorded positive sales growth, whileon improving results in a way suited to the characteristics

sales for the Plant & Machinery Business fell because of aof each business. Consolidated net sales declined bydecline in orders for new installations. As a result, the

3.2% year on year to ¥6,368 million, operating profit rose

Company’s consolidated net sales totaled ¥41,932

by 12.0% to ¥958 million (before adjustment), and orders

million (down 10.0% year on year). Operating profit rose

received decreased by 58.4% to ¥726 million.

to ¥3,080 million (up 1.9%), mainly due to firm businessconditions for the Material Handling Systems Business,and ordinary profit was ¥3,441 million (up 6.6%). Profit
attributable to owners of the parent company was ¥3,746
million (up 96.5%). This large increase was mainly due toan extraordinary profit stemming from the sale of the landand building of the Company’s former head office. Orders
received in fiscal 2017 rose by 10.8% to ¥37,395 million.

Segment results are as follows.
Plant & Machinery Business
Some capital investment plans were postponed becauseof the cloudy market outlook, which limited orders forconstruction or expansion of tanks. We stepped up
marketing efforts aimed at broadening our order domain,

4

Toyo Kanetsu K.K. Annual Report 2017

Business Risks
The following risks may affect the business results, stock

entering into forward exchange contracts or option

price and financial position of the TKK Group.

contracts, and by implementing structural solutions suchas using overseas manufacturing bases and internationallyEffect of the Global Economy and Energy Market Trends

procuring raw materials. However, an unexpected change

The Plant & Machinery Business, the TKK Group’s

in exchange rates may adversely affect the TKK Group’s

mainstay business, is subject not only to global

business results and financial position.

economic trends but also to economic and social
conditions in oil- and gas-producing and consuming

Project Execution

countries, energy and environmental policies in each

The business results of the TKK Group may be affected

country, and the prices of crude oil and LNG. Owing toby situations where, for customer reasons, projects arethese factors, some customers have halted, postponed,

suspended or postponed or the project content isor reviewed their investment plans in ways that could

otherwise altered.

adversely affect Plant & Machinery Business orders andthe TKK Group’s earnings and financial standing.

Further, as our projects take the form of inclusive
contracts, deterioration in project profitability may impact

Potential Risks Associated with Internationalon business results in the event of a sudden change inActivities and Overseas Advancethe economic situation leading to unforeseen rises in

The TKK Group conducts some operations in overseas

equipment and material prices, transportation costs,

markets, primarily those of the Plant & Machinery

construction costs or other expenses, or in the event of

Business. Further, its subsidiary manufactures tanka natural disaster, outbreak of disease, serious accident

materials in Indonesia. These overseas operations carryor other eventualities.

inherent risks as stated below, and the TKK Group’sbusiness results and financial position may be adversely

Intense Competition for Winning Orders

affected by such risks.

All of the major businesses of the TKK Group are being
operated under the make-to-order type system, and the(1) Unexpected changes in laws and regulations(2) Political and economic instability(3) Difficulties in securing human resources(4) Tax system revisions that could be unfavorable to

TKK Group is facing severe competition to win orders.

the TKK Group(5) Social confusion arising from acts of terror, war
or any other factors

Although the TKK Group strives to reduce all kinds ofDepending on the circumstances, we recognize thepossibility that a competitor may disregard profitability
and enter into price competition with the TKK Group.
costs and reinforce its price competitiveness, suchunreasonable downward pressure on the TKK Group’s
earnings may adversely affect the TKK Group’s business

Exchange Rate Fluctuations

results and financial position.

The TKK Group’s business activities include
manufacturing products, selling materials andDisasters

implementing construction operations overseas. Foreign-

The TKK Group takes necessary measures such as acurrency-denominated accounting items such as sales,

daily check, drill and establishment of a contact system

expenses and assets are translated into Japanese yen

to continue it’s business activities to prepare for fire,

for the purpose of preparing consolidated financial

earthquakes or other large-scale natural disasters. In

statements. The exchange rates used in currency

addition, major personal and property damages areconversion may affect the yen-denominated value. As

adequately covered by insurance against such disasters.

most of our payments and receipts are denominated in

However, the TKK Group’s business results and financial

U.S. dollars or euros, a stronger yen will adversely affectposition may be adversely affected if projections are

the TKK Group’s business, while a weaker yen will

exceeded by the scale of the direct or indirect materialfavorably affect the TKK Group’s business.

damage or human injury, or by the burden of restoration
costs or other expenses.

The TKK Group makes an effort to minimize the adverse
effects of such exchange rate fluctuations by flexibly

Toyo Kanetsu K.K. Annual Report 20175

Medium-Term Business Plan
The TKK Group has devised a medium-term business plan covering the fiscal years 2017–2019. Under the slogan“Challenge & Change,” the Group will not be bound by conventional business domains and processes as it embarks on
the following four management policies.

Expansion of businessdomains

Launch of new
businesses that build on
the strengths of existing
businesses

Switch to a more
profitable andcompetitive structure

Construction of acorporate governancesystem that enables
appropriate risk-taking

Business Strategy[Plant & Machinery Business][Material Handling Systems Business](1) Gaining projects in Southeast Asia and the Middle East
(2) Alliance strategy with facilities developers(3) Entry into the small tank market(1) Expansion of sales where our systems have an advantage(2) A stronger advance into the refrigeration and freezing field(3) Expansion of business domains through alliances(4) Improvement of business productivity(5) Shortening and standardization of project operations(6) Expansion of the maintenance business(4) Reinforcement of the value chain from sales through maintenance(5) Reinforcement of the maintenance business(6) Development of future strategic products[Development of New Products and Services,
Launch of New Businesses that Build on Existing Strengths]
In the Plant & Machinery Business, we are developing large liquefied hydrogen tanks to fill the needs of a lowcarbon society. Hydrogen energy emits no CO2 and is expected to play a major role in reducing mankind’s
environmental impact, and we anticipate the need for storage facilities.
In the Material Handling Systems Business, we are rising to the challenges presented by changing retail formats,progress in the Internet of Things (IoT), and the decline of Japan’s working-age population. Our response is toconstruct next-generation systems that employ the IoT and robots.
Given our affinity with the energy industry and the numerous sales channels we have built up over the years, we areconsidering entry into the electric power business.

Important Companywide Policies(1) Put governance guidelines into practice and make Board of Directors’ meetings more functional(2) Release information in a timely manner and raise TKK’s image and name recognition(3) Hold earnings explanation meetings and step up dialog with shareholders(4) Reinforce Environmental, Social, Governance (ESG) initiatives(5) Consider the Group’s optimum organization based on medium- to long-term management issues and the business environment(6) Optimize fund procurement aimed at both capital efficiency and management stability(7) Foster a corporate atmosphere of “Challenge & Change”(8) Train and strengthen the next generation of management(9) Encourage women’s activity and contributions in the workplace

Basic Plans for Capital Policy and Return to Shareholders
We see the return of profits to shareholders as one of our most important management issues. The optimal balance between financial soundness andshareholders’ return is the point we aimed for in devising our shareholders’ return policy. On November 11, 2016, we released the basic plan for our capital
policy, which comprehensively takes into consideration aggressive investment to improve corporate value, profit distribution, and capital efficiency, based on
our earnings projections and financial standing. From the viewpoint of enhancing TKK’s return to shareholders, the policy we have put in place is as follows.

1. Consolidated dividend payout ratio
Before revision: Set at 20%-30% (but with a minimum of ¥5 per share)
After revision: Set at 30% or more (but with an annual minimum of ¥10 per share)

2. Consolidated total return ratio
Before revision: Set at 50%-75%. In addition to 1, share buybacks will be carried out flexibly, when necessary.
(However, the Company may not be held to this rule when it faces demand for a large amount of funds.)
After revision: Set at 100%. In addition to 1, share buybacks will be carried out flexibly, when necessary.
(However, the Company may not be held to this rule when it faces demand for a large amount of funds.)
This shareholders’ return policy will be applied for the three years of the TKK Group’s medium-term plan (fiscal years ending March 2017 – March 2019),
and it will be reviewed when the three years are over. Based on these basic plans for capital policy and return to shareholders, we will raise capitalefficiency, aiming for an ROE of 8% or higher in fiscal 2021.

6

Toyo Kanetsu K.K. Annual Report 2017

Examples of Business Strategy Initiatives[Plant & Machinery Business]
Participation in Gastech Japan 2017
From April 4 to April 7, 2017, TKK participated in Gastech Japan 2017, the world’s largest
natural gas and LNG industry event, held at Makuhari Messe in Chiba Prefecture.
At this gathering of leading global companies from both Japan and overseas, many ofwhich are our customers, we highlighted displays showing our delivery record for LNG
tanks and our advanced construction technology. Many visitors to Gastech Japan engaged
in business talks with us and we fielded many enquiries, making the event a success.
As we approach the next recovery phase for LNG demand, we will strengthen customer
relationships while responding better to customers’ needs and expectations by, for example, shortening tank construction times so that the lead time is
reduced from the capital investment decision to beginning operations. By developing highly dependable, price-competitive products and technologies,
we will give TKK an even greater presence in the LNG market, which is forecast to expand over the long term.

[Material Handling Systems Business]
World-First Debut of Latest Airport Baggage Handling System
Based on the TKK Group’s medium-term business plan (fiscal 2016-2018), we are focusing on sales ofsuperior systems and expanding our business domains through alliances. From March 2 to 4, 2017, we andour local partner participated in CeMAT Southeast Asia, a distribution and logistics exhibition held in Indonesia.
With the goal of showing our technological prowess to Indonesian airport authorities, we introduced
TKK’s baggage handling system for airport visitors. We showed that TKK’s system can sort baggage
without harming individual pieces, and that it is equipped with a highly effective horizontal divider for use
with inline screening (an automatic bomb detection system), for which demand is high at airports around theworld. Teaming up with a partner that has an overwhelming share in baggage handling facilities at domestic airports, we are looking to expand sales inSoutheast Asia and in this way expand our business domain.

[New Business]
Development of New Products & Services, Launch of New Businesses That Build on Existing Strengths
In the Plant & Machinery Business, we set our sights on developing the market for thermal power plants fueled by liquid hydrogen. Our near-term goal is
to build a large-scale 10,000 cubic meters liquefied hydrogen tank, which will greatly exceed the capacity of the largest existing model.
In the Material Handling Systems Business, we are making adjustments to include IoT and robotics in our next-generation distribution system prior toits market entry.
In the TKK Group’s medium-term business plan, we allocated ¥4 billion to launching new businesses through M&As, investments in other companies,
and obtaining new seed-stage businesses.

Consolidated Net Sales and Operating Profit Targets by Segment
Plant & Machinery Business
60

Material Handling Systems Business

Others, net adjusted amountNet Sales(unit: billions of yen)

55.0
Net Sales

48.2

50

Net Sales
40

41.9
6.3

Operating
Profit

3.08
0.46

30

21.7
20

1.98
10

13.8
0.63
0

ROE
Dividend payout ratio
Total return ratio
Overseas sales ratio
New business sales ratio

Increased sales and profits atother subsidiary businesses

10.0

7.4
Operating
Profit20.0

Postponement of large
projects leads to a majordecline in sales and profits

1.6
20.8
1.0

3.5
0.55

22.0

3.1
0.5

Increase in projects for online
retailers, co-ops, airports;
important policies lead to a major
increase in sales and profits

Operating
ProfitNew businesses produce
increased sales and operating profit

Increase in maintenancecontracts leads to sales
and profit growth

1.8

Domestic maintenance andoverseas small tank projects
lead to sales and profit growth

23.0
1.15

FY2017FY2019 (target)

FY2021 (target)

10.7%
32.1%
108.6%
12.6%

7.2%

8.0%

30% or higher
100% or higher
15.0%

25.0%
4.7%

Toyo Kanetsu K.K. Annual Report 20177

Overseas Delivery Record
Making Things Happen Worldwide
Our Plant & Machinery Business has delivered a range of storage tanks to 40
countries around the world, including many suppliers of oil and liquefied natural gas.
We advantageously use our Indonesian production andprocessing base to maintain a strong profile
overseas, especially in Southeast Asia and the
Middle East, where we have built up an
extensive delivery record andwon favorable assessmentsin every country.
Our Material Handling

New Posi-Sorter installation
project for Seongnam Post Office(South Korea)

Netherlands

Systems Business hasdelivered airport baggage
handling systems in 17

RussiaSpain
GreeceTurkeycountries.

Turkmenistan

South Korea

Iraq
Algeria
Libya

China

KuwaitIran Pakistan
Qatar
U.A.E.

Egypt

Saudi Arabia

Hong Kong

Oman

Laos
India

Thailand

SaipanPhilippines

Yemen

Nigeria

TaiwanVietnam

Guam

Malaysia Brunei
Kenya

Sri Lanka

Indonesia

Singapore
Tanzania
AngolaAustralia
South Africa
Baggage handling system delivery
project for Malaysian international
airport (Malaysia)

TKK Group Companies
Domestic
SAPPORO

Toyo Kanetsu Solutions K.K.
Toyo Kanetsu Builtec K.K.
Toyo Service System K.K.
Toyo Koken K.K.

SENDAI

Overseas
PT Toyo Kanetsu Indonesia
Toyo Kanetsu (Malaysia) Sdn. Bhd.
Toyo Kanetsu Singapore Pte. Ltd.

YOKOHAMAOKAYAMAFUKUOKA

NAGOYAOSAKAWAKAYAMASAITAMA
TOKYO
CHIBA

Toyo Kanetsu(Malaysia) Sdn. Bhd.
Toyo Kanetsu
Singapore Pte. Ltd.
PT Toyo Kanetsu
Indonesia

8

Toyo Kanetsu K.K. Annual Report 2017

Material handling system delivery
and installation project for food
distribution center (South Korea)

AlaskaLegend for map entries
LNG tank-related
Other tank-related

BahamasDistribution system-related

Aruba

120,000㎥ PC LNG tank for
Brunei LNG project (Brunei)

Curacao

Trinidad and Tobago

170,000㎥ PC LNG tank for
Donggi-Senoro LNG project(Indonesia)

Brazil
140,000㎥ PC LNG tanks for
Queensland Curtis LNG project(Australia)

Chile

Other Business

Plant & Machinery Business

TOYO KANETSU K.K.
Toyo Kanetsu Builtec K.K.

Toyo Service System K.K.

Toyo Koken K.K.

Material Handling Systems BusinessToyo Kanetsu Solutions K.K.

PT Toyo Kanetsu Indonesia

Toyo Kanetsu (Malaysia) Sdn. Bhd.
Toyo Kanetsu
Singapore Pte. Ltd.

Domestic
Subsidiaries

Overseas
Subsidiaries

Toyo Kanetsu K.K. Annual Report 20179

Board of Directors, Audit & Supervisory Committee Members
and Corporate Officers
Directors

Corporate Officers

President and Representative Director

Toru Yanagawa

Directors and Senior Corporate Officers

Isao Shimomae
Masayuki Takeda
Keisuke Kodama

Senior Corporate Officers Tetsuya Watanabe

Shiro Ito

Directors and Audit& Supervisory Committee Members

Corporate Officers

Kazuto Abe
Toshiaki Hiwatari
Tsuneo Nagai
Shigeharu Nakamura

Hiroshi Ohgi
Hiromi Tanaka
Takeshi Yonehara
Hiroshi Kimoto
Akira Kakihara
Masahiko Mitsumoto

Corporate Governance System
At TKK’s 107th ordinary general meeting of shareholders, held on June 26, 2015, a resolution was passed making TKK a
company with an audit and supervisory committee. On the same day, TKK made the transition from a company with aboard of auditors to one with an audit and supervisory committee.
By giving voting rights in the Board of Directors to directors who are committee members (including multiple outside
directors), we aimed to strengthen the role of the Board of Directors and auditing and supervisory roles whileconstructing a more effective corporate governance system.

Corporate Governance System
General Meeting of Shareholders
Selection, dismissal

Selection, dismissal

Selection, dismissal, non-reappointment

Board of Directors
Non-committee member
directors

Committee member directors

Audit and Supervisory
Committee

LinkageAccounting
auditor

Auditing,supervision
Consultation

ReportSupervision
Nomination
and Compensation
Committee

Audit

Report Monitoring, instruction

Business Execution Division
President and CEO

Audit
Report Monitoring, instruction

Management
CouncilBusiness execution
for each Division(businesses, Group
companies, etc.)

10

Toyo Kanetsu K.K. Annual Report 2017

Linkage

Control support

Internal Control
Division

Audit and control
assessment

Internal Audit
Division

Financial Section
For the years ended March 31, 2016 and 2017

The following “Consolidated financial statements, etc.” is an English translation of theconsolidated financial statements, etc. of Toyo Kanetsu Kabushiki Kaisha (“the Company”).
The Company provides this translation for reference and convenience only and without any
warranty as to its accuracy or otherwise.

Toyo Kanetsu K.K. Annual Report 201711

Consolidated financial statements, etc.
(1) Consolidated financial statements(i) Consolidated balance sheet(Millions of yen)Previous fiscal period(As of March 31, 2016)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade
Lease investment assets
Securities
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures, net
Machinery, equipment and vehicles, net
Tools, furniture and fixtures, net
LandConstruction in progress
Other, net
Total property, plant and equipment
Intangible assets
Investments and other assets
Investment securities
Deferred tax assets
Net defined benefit asset
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets

12

Toyo Kanetsu K.K. Annual Report 2017

Current fiscal period(As of March 31, 2017)*1

13,608
9,474
1,527
500
55
2,644
1,310
380
515
(22)
29,995*1

6,811
12,824
1,526
100
54
4,140
1,649
582
872
(83)
28,479

*3

2,325
1,208
202
9,427
498
0
13,661
370

*3

3,578
1,132
288
10,9651190
16,084418*3*3*3, *4

*2

6,240
41
390
923
(256)
7,340
21,37251,368*3*3*3, *4

*2

7,325
41
358
788
(267)
8,245
24,74853,228(Millions of yen)Previous fiscal period(As of March 31, 2016)
Liabilities
Current liabilities
Notes and accounts payable - trade
Short-term loans payable
Current portion of long-term loans payable
Accrued expenses
Income taxes payable
Deferred tax liabilities
Advances received
Provision for bonuses
Provision for loss on order received
Provision for warranties for completed
construction
Other
Total current liabilities
Non-current liabilities
Long-term loans payable
Deferred tax liabilities
Deferred tax liabilities for land revaluation
Net defined benefit liability
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-salesecurities
Deferred gains or losses on hedges
Revaluation reserve for land
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Total net assets
Total liabilities and net assets

*3
*3

*3

*4

*4

3,231
2,357
60
3,434
669
10
1,478
275
521

Current fiscal period(As of March 31, 2017)

*3
*3

2,347
2,397
60
4,324
647
–
1,173
258
674

181

512

646
12,866709
13,104

1,155
607
1,529
462
332
39
4,125
16,991

*3

*4

1,095
1,692
1,121
364
332
37
4,642
17,747

18,5801,273
15,170(2,887)32,136

18,5801,273
16,447(2,323)33,978

1,788

1,992

–
1,077
(639)
12
2,239
34,37651,368

*4

(14)
163
(652)
14
1,503
35,48153,228

Toyo Kanetsu K.K. Annual Report 2017

13

(ii)

Consolidated statement of income and comprehensive income(Millions of yen)Previous fiscal year
(From April 1, 2015
to March 31, 2016)

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit
Non-operating income
Interest income
Dividend income
Gain on investments in silent partnership
Miscellaneous income
Total non-operating income
Non-operating expenses
Interest expenses
Foreign exchange losses
Miscellaneous loss
Total non-operating expenses
Ordinary profit
Extraordinary income
Gain on sales of non-current assets
Insurance income
Other
Total extraordinary income
Extraordinary losses
Loss on sales of non-current assets
Loss on retirement of non-current assets
Impairment loss
Merger expenses
Head office relocation expenses
Other
Total extraordinary losses
Profit before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
ProfitProfit attributable toProfit attributable to owners of parent
Loss attributable to non-controlling interests
Other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Revaluation reserve for land
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax
Total other comprehensive income
Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to non-controllinginterests

14

Toyo Kanetsu K.K. Annual Report 2017*1

*2, *3*4*5

46,57239,361
7,211
4,186
3,024

Current fiscal year
(From April 1, 2016
to March 31, 2017)*1*2, *341,932
33,660
8,272
5,191
3,080

44
206
16
222
489

20
248
60
136
466

14
228
43
287
3,227

20
69
15
105
3,441

14
8
5
29

2,315
–
3
2,319

27
7
19
25
11
3
95
3,161
1,011
253
1,264
1,897

179
401
–
–
226
2
809
4,951
818
386
1,205
3,746

1,906
(9)

3,746
–

(246)
–
82
(109)
(321)
(594)
1,302

203
(14)
–
(13)
2
177
3,923

*5

1,331

3,923

(28)

–

(iii) Consolidated statement of changes in equity
Previous fiscal year (From April 1, 2015 to March 31, 2016)(Millions of yen)
Shareholders’ equity
Capital stock
Balance at beginning ofcurrent period
Changes of items during
periodCapital surplus

Retained earnings

1,104

18,797

18,580Treasury shares

Total shareholders’equity(4,957)33,525

Dividends of surplus

(460)

(460)

Profit attributable toowners of parent

1,906

1,906

Purchase of treasury
sharesRetirement of treasury
sharesPurchase of shares of
consolidated subsidiaries(5,074)(3,004)(3,004)

5,074

–

169

169

Net changes of items otherthan shareholders’ equity
Total changes of items during
periodBalance at end of current
period–169(3,627)2,069(1,388)18,5801,273

15,170(2,887)32,136

Accumulated other comprehensive income
Valuationdifference on
available-forsale securities
Balance at beginning ofcurrent period
Changes of items during
period2,035

Revaluation
reserve for land995

Foreigncurrencytranslation
adjustment(549)

Remeasurements ofdefined benefit
plans
334

Total
Non-controlling
Total net assets
accumulated
interests
othercomprehensive
income2,814

240

36,580

Dividends of surplus(460)

Profit attributable toowners of parent

1,906

Purchase of treasury
sharesRetirement of treasury
sharesPurchase of shares of
consolidated subsidiaries
Net changes of items otherthan shareholders’ equity
Total changes of items during
periodBalance at end of current
period(3,004)
–
169
(246)

82

(89)

(321)

(575)

(240)

(815)

(246)

82

(89)

(321)

(575)

(240)

(2,204)

1,788

1,077

(639)

12

2,239

–

34,376

Toyo Kanetsu K.K. Annual Report 201715

Current fiscal year (From April 1, 2016 to March 31, 2017)(Millions of yen)
Shareholders’ equity
Capital stock
Balance at beginning ofcurrent period
Changes of items during
periodCapital surplus

Retained earnings

1,273

15,17018,580Treasury shares

Total shareholders’equity(2,887)32,136

Dividends of surplus

(514)

(514)

Profit attributable toowners of parent

3,746

3,746

Reversal of revaluation
reserve for land

914

914

Purchase of treasury
sharesRetirement of treasury
shares(2,304)(2,304)(2,868)2,868–

Net changes of items otherthan shareholders’ equity
Total changes of items during
periodBalance at end of current
period

–

–

1,277

563

1,841

18,5801,273

16,447(2,323)33,978

Accumulated other comprehensive income
Valuationdifference on
available-forsale securities
Balance at beginning ofcurrent period
Changes of items during
period1,788

Deferred gains
or losses onhedges–RemeasureForeign currency
Revaluation
ments oftranslation
reserve for landdefined benefit
adjustment
plans
1,077

(639)

12

Total
accumulated
othercomprehensive
income2,239

34,376

Dividends of surplus(514)

Profit attributable toowners of parent

3,746

Reversal of revaluation
reserve for land

914

Purchase of treasury
sharesRetirement of treasury
sharesNet changes of items otherthan shareholders’ equity
Total changes of items during
periodBalance at end of current
period16

Total net assets

Toyo Kanetsu K.K. Annual Report 2017

(2,304)
–
203

(14)

(914)

(13)

2

(736)

(736)

203

(14)

(914)

(13)

2

(736)

1,104

1,992

(14)

163

(652)

14

1,503

35,481

(iv) Consolidated statement of cash flows(Millions of yen)Previous fiscal year
(From April 1, 2015
to March 31, 2016)
Cash flows from operating activities
Profit before income taxes
Depreciation
Amortization of long-term prepaid expenses
Impairment loss
Amortization of goodwill
Increase (decrease) in allowance for doubtful
accounts
Increase (decrease) in net defined benefit liability
Decrease (increase) in net defined benefit asset
Increase (decrease) in provision for loss on order
received
Increase (decrease) in provision for warranties forcompleted construction
Interest and dividend income
Interest expenses
Merger expenses
Head office relocation expenses
Foreign exchange losses (gains)
Loss (gain) on sales of investment securities
Loss (gain) on sales of non-current assets
Loss on retirement of non-current assets
Decrease (increase) in notes and accounts receivable- tradeDecrease (increase) in lease investment assets
Decrease (increase) in inventories
Decrease (increase) in advance payments
Decrease (increase) in accounts receivable - other
Increase (decrease) in notes and accounts payable trade
Increase (decrease) in advances received
Other, net
SubtotalInterest and dividend income received
Interest expenses paid
Payments for merger expenses
Payments for head office relocation expenses
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Proceeds from sales and redemption of securities
Purchase of non-current assets
Proceeds from sales of non-current assets
Purchase of investment securities
Proceeds from sales and redemption of investment
securities
Other, net
Net cash provided by (used in) investing activities

Current fiscal year
(From April 1, 2016
to March 31, 2017)

3,161
765
2
19
62

4,951
691
3
–
62

(121)

72

(78)
(148)

(86)

186

165

(73)

330

(250)

(269)

14
25
11
286
(5 )
12
15

20
–
226
34
(2 )
(2,136)401

758(3,380)

(93)
997
38
987

(1,833)
(286)
(123)

765

99

(2,137)

(303)

215
5,417
251
(14)
(25)
(4 )
(1,582)
4,041

2

0

0

(1,357)
272
(20)
–
(233)
(791)
(2,131)

(0 )
32
200
(1,175)
65
(102)

(202)
232
500
(5,160)
3,647
(887)

208

6

4
(766)

148
(1,714)

Toyo Kanetsu K.K. Annual Report 201717

(Millions of yen)Previous fiscal year
(From April 1, 2015
to March 31, 2016)
Cash flows from financing activities
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Purchase of treasury shares
Cash dividends paid
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

18

Toyo Kanetsu K.K. Annual Report 2017

*1

Current fiscal year
(From April 1, 2016
to March 31, 2017)

(48)
600
(728)
(3,004)(459)(3,640)56–(60)(2,304)(512)(2,820)

(399)

(130)

(765)
14,372
13,606(6,796)
13,6066,810*1

NotesBasis of presenting the consolidated financial statements
The accompanying consolidated financial statements of the Company and its domestic consolidated subsidiaries
are prepared on the basis of accounting principles generally accepted in Japan, which are different in certain
respects as to application and disclosure requirements of International Financial Reporting Standards, and arecompiled from the consolidated financial statements prepared by the Company as required by the Financial
Instruments and Exchange Act of Japan. The accounts of overseas-consolidated subsidiaries are based on theirfinancial statements prepared in conformity with generally accepted accounting principles and practices
prevailing in the respective countries in which the subsidiaries are incorporated.
Significant accounting policies for preparation of the consolidated financial statements
1. Disclosure of scope of consolidation
Number of consolidated subsidiaries: 8 companies
Names of major consolidated subsidiaries are omitted since those names are described in “TKK Group
Companies.”
2. Disclosure about application of the equity method
Not applicable
3. Disclosure about fiscal years, etc. of consolidated subsidiaries
Of the Company’s consolidated subsidiaries, PT Toyo Kanetsu Indonesia, TKK-USA, Inc., Toyo Kanetsu
Singapore Pte. Ltd and Toyo Kanetsu (Malaysia) Sdn. Bhd have a closing date of December 31. In preparation of
consolidated financial statements, their financial statements as of December 31 are used. However, for majortransactions that occurred between that date and the consolidated balance sheet date, the necessary adjustments
are made in the consolidated financial statements.
4. Disclosure of accounting policies(1) Accounting policy for measuring significant assets(i) Securitiesa) Held-to-maturity bonds: Stated at amortized cost (straight-line method)b) Available-for-sale securities
Available-for-sale securities with available fair market values are stated at fair value based on the market
price or the like on the consolidated balance sheet date (valuation differences are directly charged or
credited to net assets, and cost of securities sold is determined by the moving-average method).
Available-for-sale securities without available fair market value are valued at cost determined by themoving-average method.
(ii)

Derivatives
Derivatives are valued at fair value.

(iii) Inventoriesa) Finished goods: Primarily, at cost using the first-in first-out method(The value on the balance sheet is written down to reflect a decline in profitability.)b) Work in process: Primarily, at cost using the specific identification method(The value on the balance sheet is written down to reflect a decline in profitability.)c) Raw materials: Primarily, at cost using the weighted-average method(The value on the balance sheet is written down to reflect a decline in profitability.)

Toyo Kanetsu K.K. Annual Report 201719

(2) Accounting policy for depreciation of significant assets(i) Property, plant and equipment
The Company and its domestic consolidated subsidiaries use the declining balance method, and overseas
consolidated subsidiaries use the straight-line method in accordance with provisions of accounting standards
in their respective countries.
However, the Company and its domestic consolidated subsidiaries use the straight-line method to depreciatebuildings (excluding facilities attached to buildings) acquired on or after April 1, 1998, and facilities attached
to buildings and structures acquired on or after April 1, 2016.
The estimated useful lives of major items are as follows:
Buildings and structures
2 to 57 years
Machinery and equipment
2 to 13 years(ii) Intangible assets
Intangible assets are amortized using the straight-line method.
Software for internal use is amortized using the straight-line method over the estimated useful life as internallydetermined (5 years).
(3) Accounting policy for significant provisions(i) Allowance for doubtful accounts
To cover losses from bad debts for notes and accounts receivable - trade, loans receivable and others, anallowance for doubtful accounts is provided based on historical experience of bad debts for general
receivables. For specific receivables such as highly doubtful receivables, the collectibility is individuallyconsidered and the estimated amount of uncollectible accounts is provided as the allowance.
(ii) Provision for bonuses
To pay bonuses to employees, out of the estimated amount to be paid in the following fiscal year, an amountattributable to the current fiscal year is recorded.
(iii) Provision for loss on order received
To make provision for losses on orders received, as for existing construction, for which an amount of loss canbe reasonably estimated at the end of the current fiscal year, an expected amount of loss in future is recorded
as the provision.
(iv) Provision for warranties for completed construction
To cover costs of warranty against defects and after-sales service for completed construction, an amount isrecorded based on the historical loss rate as well as consideration of an amount for individual construction thatis expected to incur in future at the end of the current fiscal year.
(4) Method for accounting for retirement benefits(i) Method of attributing estimated retirement benefits to periods
For the purpose of attributing estimated retirement benefits over the period up to the end of the current fiscal
year in the calculation of retirement benefit obligations, the benefit formula method is applied.
(ii) Method of amortizing actuarial gain or loss and past service cost
Past service costs are recorded as an expense in the year they are incurred.
With regard to actuarial gain or loss, the amount is amortized by the straight-line method over a certain term
within the average remaining service period of the eligible employees (5 years) for each applicable fiscal year,
and expensed from the year following the year in which the gain or loss is recognized.
(5) Accounting policies for significant revenues and expenses(i) Recognition of revenues and costs of completed construction contracts
The percentage-of-completion method is applied to construction showing certainty of performance on the
progress made up until the end of the current fiscal year (the cost-to-cost method is applied to estimate theextent of progress toward completion), and the completed-contract method is applied to other construction.
(ii) Standards for recognition of revenues and expenses related to finance lease transactions
Sales and costs are recognized at the time of receiving lease payments.
(6) Accounting policy for hedging(i) Method of hedge accounting
In principle, the deferral accounting is applied. The allocation method is applied to forward foreign exchange
contracts that meet requirements thereof, and the exceptional treatment is applied to interest rate swaps thatmeet requirements thereof.

20

Toyo Kanetsu K.K. Annual Report 2017

(ii) Hedging instruments and hedged items
Hedging instrument: ........... Forward foreign exchange contracts, Interest rate swaps
Hedged item: ...................... Forecast transactions denominated in foreign currencies and borrowings(iii) Hedging policy
In accordance with the “Rules on Handling of Derivative Transactions” established by the Company, theCompany and its consolidated subsidiaries (collectively, the “Group”) do not enter into any derivativetransaction for speculative purposes but use derivative transactions only to hedge exchange rate fluctuation
risk and interest rate fluctuation risk.
(iv) Method of assessing the hedging effectiveness
The Group confirms effectiveness by comparing and examining cash flows of hedging instruments and hedged
items in advance. However, the Group omits assessment of effectiveness on interest rate swaps to which the
exceptional treatment is applied.
(7) Accounting policy for goodwill
Goodwill is amortized evenly over the period of 5 years.
(8) Scope of cash and cash equivalents in consolidated statement of cash flows
Cash and cash equivalents include cash in hand, readily available deposits and short-term investments withmaturities of three months or less from the purchase date whose value is not subject to significant fluctuation
risk.
(9) Other significant information for preparation of the consolidated financial statements
Accounting policy for consumption taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of taxes.

Notes - Changes in accounting policies
Application of Practical Solution on a Change in Depreciation Method Due to Tax Reform 2016
Following the revision to the Corporation Tax Act, the Company has applied the “Practical Solution on a Change inDepreciation Method Due to Tax Reform 2016” (ASBJ PITF No. 32, June 17, 2016) from the fiscal year ended
March 31, 2017, and changed the depreciation method for facilities attached to buildings and structures acquired on
or after April 1, 2016 from the declining-balance method to the straight-line method.
The impact from this change on operating profit, ordinary profit and profit before income taxes for the current fiscal
year is immaterial.
Notes - Additional information
Application of ASBJ Guidance on Recoverability of Deferred Tax Assets
Effective from the fiscal year ended March 31, 2017, the Company has applied the Guidance on Recoverability ofDeferred Tax Assets (ASBJ Guidance No. 26, March 28, 2016).
Notes - Changes in presentation
Consolidated balance sheet“Accounts receivable - other” under current assets, which was set down separately until the previous fiscal year, hasbeen included in “other” under current assets from the current fiscal year since significance of the amount has
decreased. In order to reflect this change in the method of presentation, the amount in the consolidated financial
statements for the previous fiscal year has been reclassified.
As a result, ¥101 million included in “accounts receivable - other” under current assets in the consolidated balance
sheet as of the end of the previous fiscal year has been reclassified to “other.”Consolidated statement of income and consolidated statement of comprehensive income“Gain on investments in silent partnership” which was included in “miscellaneous income” under non-operating
income for the previous fiscal year, has been set down separately from the current fiscal year since significance of
the amount has increased. In order to reflect this change in the method of presentation, the amount in the
consolidated financial statements for the previous fiscal year has been reclassified.
“Gain on sales of scraps” and “reversal of allowance for doubtful accounts” under non-operating income, whichwere set down separately for the previous fiscal year, have been included in “miscellaneous income” under
non-operating income from the current fiscal year since significance of the amounts has decreased. In order toToyo Kanetsu K.K. Annual Report 201721

reflect this change in the method of presentation, the amount in the consolidated financial statements for theprevious fiscal year has been reclassified.
As a result, in the consolidated statement of income and consolidated statement of comprehensive income for theprevious fiscal year, “miscellaneous income” under non-operating income, which originally was presented as ¥88
million, has been restated as ¥222 million after reclassifying “gain on investments in silent partnership” of ¥16
million, “gain on sales of scraps” of ¥59 million, and “reversal of allowance for doubtful accounts” of ¥91 million
under “miscellaneous income.”“Loss on retirement of non-current assets” included in “other” under extraordinary losses for the previous fiscal
year has been set down separately from the current fiscal year since significance of the amount has increased. Inorder to reflect this change in the method of presentation, the amount in the consolidated financial statements for theprevious fiscal year has been reclassified.
As a result, ¥11 million included in “other” under extraordinary losses in the consolidated statement of income andconsolidated statement of comprehensive income for the previous fiscal year has been reclassified to “loss onretirement of non-current assets” of ¥7 million and “other” of ¥3 million.
Notes - Consolidated balance sheet*1.

Use of a certain part of the Company’s current deposits is restricted by a bank in return for its issuing a bankguarantee, which was provided by the Company to the Ministry of Economy and Planning of the United ArabEmirates in connection with corporate registration in the country.
The restricted deposits are as follows:
Previous fiscal year
(As of March 31, 2016)
Current deposit*2.

Current fiscal year
(As of March 31, 2017)¥1 million(50,000 AED)

¥1 million(50,000 AED)

Accumulated depreciation of property, plant and equipment are as follows:
Previous fiscal year
(As of March 31, 2016)

Current fiscal year
(As of March 31, 2017)¥13,405 million*3.

¥11,203 million

Assets pledged and liabilities secured

Assets pledged and liabilities secured as collateral are as follows:
Assets pledged
Previous fiscal year
(As of March 31, 2016)
Buildings and structures
Machinery, equipment and vehicles
Tools, furniture and fixtures
Land
Total

¥464 million
0
0
5,523

[¥464 million][0][0][5,523]

5,988[5,988]Current fiscal year
(As of March 31, 2017)¥405 million
0
0
5,458
5,864

[¥405 million][0][0][5,458][5,864]

Liabilities secured
Previous fiscal year
(As of March 31, 2016)
Short-term loans payable
Long-term loans payable
Total

Current fiscal year
(As of March 31, 2017)¥427 million
980[¥427 million][980]¥426 million
980[¥426 million]
[980]

1,407

[1,407]

1,406[1,406]In the above table, figures in brackets present mortgages on factory foundation and the relevant debts. The amountsof land are after revaluation.
*4.

22

In accordance with the “Act on Revaluation of Land” (Act No. 34 promulgated on March 31, 1998), theCompany revalues its land for business use and, as for the valuation difference, records an amount equivalent
to tax relating to the valuation difference as “deferred tax liabilities for land revaluation” in the liabilities
section and an amount after deducting said amount as “revaluation reserve for land” in the net assets section.
Method of revaluation – The Company revalues the land by the calculation method where a value based on the

Toyo Kanetsu K.K. Annual Report 2017assessed value of fixed asset tax set forth in Article 2, Item 3 and road rating set forth in Article 2, Item 4 of
the “Order for Enforcement of the Act on Revaluation of Land” (Cabinet Order No. 119 promulgated on
March 31, 1998) is reasonably adjusted.
Date of revaluation – March 31, 2002
Previous fiscal year
(As of March 31, 2016)
Difference between the year-end value ofrevaluated land and the book value after therevaluation

Current fiscal year
(As of March 31, 2017)¥(3,250) million¥(3,233) million

Notes - Consolidated statement of income and consolidated statement of comprehensive income*1.

Provision for loss on order received included in cost of sales
Previous fiscal year
(From April 1, 2015
to March 31, 2016)

Current fiscal year
(From April 1, 2016
to March 31, 2017)¥158 million*2.

¥116 million

Major components of selling, general and administrative expenses
Previous fiscal year
(From April 1, 2015
to March 31, 2016)

Salaries and allowances
Bonuses
Provision for bonuses
Retirement benefit expenses
Provision of allowance for doubtful accounts*3.

Current fiscal year
(From April 1, 2016
to March 31, 2017)¥1,407 million
325
103
80
(30)

¥1,489 million
380
109
105
72

Total of research and development expenses included in general and administrative expenses andmanufacturing costs
Previous fiscal year
(From April 1, 2015
to March 31, 2016)

Current fiscal year
(From April 1, 2016
to March 31, 2017)¥352 million*4.

¥567 million

Impairment loss

Previous fiscal year (From April 1, 2015 to March 31, 2016)
The Group recorded impairment loss on the asset groups as follows:
Location

Use

Type

Minami-Alps City, Yamanashi

Idle assets

Land

In principle, the Group’s assets for business use are grouped on the basis of the business, and the Group’s idle assets
are grouped by each asset.
For the fiscal year ended March 31, 2017, an impairment loss (¥19 million) was recorded under extraordinary losses
since the Group recognized that land owned by the Group continued to be idle.
The recoverable amount of this asset group was measured based on the net realizable value.
Current fiscal year (From April 1, 2016 to March 31, 2017)
Not applicable*5. Reclassification adjustments and tax effects relating to other comprehensive income
Previous fiscal year
(From April 1, 2015
to March 31, 2016)

Current fiscal year
(From April 1, 2016
to March 31, 2017)

Toyo Kanetsu K.K. Annual Report 201723

Valuation difference on available-for-sale securities:
Amount recorded during the period
Reclassified amount¥(517) million(5)¥295 million(2)Pre-adjustment of tax effectTax effect amount

(523)
276

292
(89)

Valuation difference on available-for-salesecurities

(246)

203

Deferred gains or losses on hedges:
Amount recorded during the period
Reclassified amount

–
–

(21)
–

Pre-adjustment of tax effectTax effect amount

–
–

(21)
6

Deferred gains or losses on hedges

–

(14)

Revaluation reserve for land:
Amount recorded during the period
Reclassified amount

–
–

–
–

Pre-adjustment of tax effectTax effect amount

–
82

–
–

Revaluation reserve for land82–

Foreign currency translation adjustment:
Amount recorded during the period
Reclassified amount

(109)
–

(13)
–

Pre-adjustment of tax effectTax effect amount

(109)
–

(13)
–

Foreign currency translation adjustment

(109)

(13)

Remeasurements of defined benefit plans, net of tax:
Amount recorded during the period
Reclassified amount

(360)
(113)

35
(33)

Pre-adjustment of tax effectTax effect amount

(474)
152

1
0

Remeasurements of defined benefit plans,
net of tax

(321)

2

Total other comprehensive income

(594)

177

Notes - Consolidated statement of changes in equity
Previous fiscal year (From April 1, 2015 to March 31, 2016)
1.
Matters concerning class and total number of issued shares, and class and number of treasury shares
Number of shares at
beginning of period

Number of shares
increased in period

Number of shares
decreased in period(Thousands of shares)
Number of shares at
end of period

Issued shares
Common shares

138,730–

23,700115,030

Total

138,730–

23,700115,030

23,697

12,08423,70012,081

Treasury shares
Common shares (Note)(Notes) 1.

2.

24

Total
23,697
12,08423,70012,081
The number of common shares in treasury increased by 12,084 thousand shares due to purchase of treasury sharesbased on a resolution by the Board of Directors of 12,063 thousand shares and purchase of shares less than one
unit of 21 thousand shares.
The number of issued common shares decreased by 23,700 thousand shares and the number of common shares intreasury decreased by 23,700 thousand shares due to cancellation of treasury shares based on a resolution by the
Board of Directors.

Toyo Kanetsu K.K. Annual Report 2017

2.

Matters concerning dividends(1) Cash dividends paid
Resolution

Class of shares

Total cash
dividends

Dividends per
share

Record date

Effective dateOrdinary General Meeting of
Shareholders on June 26,
2015

Common shares¥460 million¥4

March 31, 2015

June 29, 2015

(2)

Dividends whose record dates are in the current fiscal year but whose effective dates fall in the next
fiscal year

Resolution

Class ofsharesTotal cash
dividends

Source ofdividends

Dividends per
share

Record date

Effective dateOrdinary General
Meeting of
Shareholders on June29, 2016

Commonshares¥514 million

Retainedearnings¥5

March 31, 2016

June 30, 2016

Current fiscal year (From April 1, 2016 to March 31, 2017)
1.
Matters concerning class and total number of issued shares, and class and number of treasury shares
Number of shares at
beginning of period

Number of shares
increased in period

Number of shares
decreased in period(Thousands of shares)
Number of shares at
end of period

Issued shares
Common shares (Note 1)

115,030–

12,000103,030

Total

115,030–

12,000103,030

Common shares (Notes 1 and 2)

12,081

7,106

12,0007,187

Treasury shares(Notes) 1.

2.

2.

Total
12,081
7,106
12,0007,187
The number of issued common shares decreased by 12,000 thousand shares and the number of common shares intreasury decreased by 12,000 thousand shares due to cancellation of treasury shares based on a resolution by the
Board of Directors.
The number of common shares in treasury increased by 7,106 thousand shares due to purchase of treasury sharesbased on a resolution by the Board of Directors of 7,091 thousand shares and purchase of shares less than one unitof 15 thousand shares.

Matters concerning dividends(1) Cash dividends paid
Resolution

Class of shares

Total cash
dividends

Dividends per
share

Record date

Effective dateOrdinary General Meeting of
Shareholders on June 29,
2016

Common shares¥514 million¥5

March 31, 2016

June 30, 2016

(2)

Dividends whose record dates are in the current fiscal year but whose effective dates fall in the next
fiscal year

Resolution

Class ofsharesTotal cash
dividends

Source ofdividends

Dividends per
share

Record date

Effective dateOrdinary General
Meeting of
Shareholders on June29, 2017

Commonshares¥1,150 million

Retainedearnings¥12

March 31, 2017

June 30, 2017

Toyo Kanetsu K.K. Annual Report 201725

Notes - Consolidated statement of cash flows*1.

Reconciliation of ending balance of cash and cash equivalents with account balances per balance sheet
Previous fiscal year
(From April 1, 2015
to March 31, 2016)

Current fiscal year
(From April 1, 2016
to March 31, 2017)

Cash and deposits
Restricted deposits¥13,608 million(1)¥6,811 million(1)

Cash and cash equivalents

13,606

6,810

Notes - Leases(Borrower)
Operating lease transactions
Future lease payments under non-cancelable operating leases

Due within 1 year
Due over 1 year
Total

Previous fiscal year
(As of March 31, 2016)

Current fiscal year
(As of March 31, 2017)¥7 million¥8 million

15

16

23

25

Previous fiscal year
(As of March 31, 2016)

Current fiscal year
(As of March 31, 2017)¥1,648 million¥1,596 million(Lender)
Finance lease transactions(1) The components of lease investment assets
Current assets

Lease payments receivable

76

81

Amount equivalent to interest income

(197)

(151)

Lease investment assets

1,527

1,526

Estimated residual value(2)

Amounts expected to be collected on lease payments receivable of lease investment assets after consolidatedbalance sheet dateCurrent assets(Millions of yen)Previous fiscal year (As of March 31, 2016)
Within 1 year

Over 1 year
to 2 years

Over 2 years
to 3 years

Over 3 years
to 4 years

Over 4 years
to 5 years

Over 5 years

530

515

370

215

16

–

Lease investment
assets(Millions of yen)
Current fiscal year (As of March 31, 2017)
Within 1 year
Lease investment
assets26

Toyo Kanetsu K.K. Annual Report 2017622

Over 1 year
to 2 years

Over 2 years
to 3 years

Over 3 years
to 4 years

Over 4 years
to 5 years

Over 5 years

476

321

123

52

–

Notes - Financial instruments
1.
Status of financial instruments(1) Policy on treatment of financial instruments
The Group raises funds necessary to run its business smoothly by borrowing from banks. In the case where theGroup has temporary surplus funds, it invests them only in safe financial instruments.
The Group uses derivative transactions to hedge various risks described in (2) in accordance with the “Rules on
Handling of Derivative Transactions” established by the Company and has a policy not to enter into any
speculative transaction.
(2) Content and risks of financial instruments and risk management system therefor
The Group’s notes and accounts receivable - trade are subject to credit risk of its customers, and its certain
receivables denominated in foreign currencies are subject to exchange rate fluctuation risk. The Group mitigatesthe credit risk of its customers by periodically confirming whether there is any overdue receivable using an aging
schedule and other documents and the exchange rate fluctuation risk such as by borrowing in foreign currencies
as needed.
The Company’s securities are subject to credit risk of its investees, but the Company invests surplus funds in safe
financial instruments with high ratings thorough prescribed internal procedures.
The Group’s investment securities are subject to credit risk of its investees and market price fluctuation risk.
They are equity securities of listed companies with which the Group has business relationships, most of which
are categorized as available-for-sale securities, and the Group periodically ascertains the fair value thereof.
Certain bond securities include hybrid financial instruments that were accounted for with embedded derivatives.
The Group’s notes and accounts payable - trade and accrued expenses are subject to liquidity risk, and its certain
payables denominated in foreign currencies are subject to exchange rate fluctuation risk. The Group mitigates theliquidity risk by periodically preparing a schedule of cash receipts and disbursements and other documents andthe exchange rate fluctuation risk by forward exchange contracts and other means as needed.
Of borrowings, short-term loans payable are primarily for daily business transactions, and long-term loans
payable are primarily for temporary advances on large-scale projects. Variable-rate borrowings are subject tointerest rate fluctuation risk, for most of the long-term loans payable, the Group uses interest rate swaps as
hedging instruments for respective contracts in order to hedge the fluctuation risk of the interest rates to be paid
and fix interest expenses. The Group limits interest rate swaps to those to which the exceptional treatment can beapplied and omits assessment of hedge effectiveness thereon. The Group mitigates the liquidity risk by
periodically preparing a schedule of cash receipts and disbursements and other documents.
The Group executes and manages derivative transactions in accordance with the Company’s Rules on Handlingof Derivative Transactions and, when using derivatives, enters into transactions with financial institutions withhigh ratings to mitigate credit risk. Please see “Accounting policy for hedging” of “Disclosure of accounting
policies” in “Significant accounting policies for preparation of consolidated financial statements” describedabove for the hedging instruments, hedging policy, method of assessing the hedging effectiveness and otherinformation on hedge accounting.
(3) Supplementary explanation concerning fair values of financial instruments
Fair values of financial instruments comprise values based on market prices and reasonably measured values
where market prices are unavailable. As several variable factors are incorporated in calculating the relevant fairvalue, the resulting amount may vary depending on the different preconditions employed. In addition, thecontract amounts of derivative transactions, mentioned in “Notes - Derivatives” in Notes, should not be
considered indicative of the sizes of the market risks involved in the derivative transactions.

Toyo Kanetsu K.K. Annual Report 201727

2.
Fair values of financial instruments
Carrying amounts on the consolidated balance sheet, fair values and differences therebetween of the financial
instruments as of March 31, 2016 and 2017, are as shown below. However, financial instruments whose fair values
are deemed to be extremely difficult to determine are not included therein (Note 2).
Previous fiscal year (As of March 31, 2016)(Millions of yen)
Carrying amount on
the consolidatedbalance sheet(1) Cash and deposits(2) Notes and accounts receivable - trade
Allowance for doubtful accounts (*)

Difference

13,6089,474(19)13,608

–

9,455

9,455

–

500
5,317

500
5,317

–
0

Total assets

28,88028,8800Notes and accounts payable - trade
Short-term loans payable
Accrued expenses
Long-term loans payable(including within 1 year)

3,231
2,357
3,434

3,231
2,357
3,434

–
–
–

1,215

1,229

14

Total liabilities

10,238

10,252

14

–
–

–
–

–
–

(3) Securities(4) Investment securities
(1)
(2)
(3)
(4)

Fair value

Derivatives(1)
Those not qualifying for hedge accounting(2)
Those qualifying for hedge accounting

Total derivatives–––(*) Amounts of allowance for doubtful accounts separately included in notes and accounts receivable - trade are excluded.

Current fiscal year (As of March 31, 2017)(Millions of yen)
Carrying amount on
the consolidatedbalance sheet(1) Cash and deposits(2) Notes and accounts receivable - trade
Allowance for doubtful accounts (*)

Difference

6,811
12,824
(30)

6,811

–

12,794

12,794

–

100
6,402

100
6,404

–
1

Total assets

26,108

26,1101

Notes and accounts payable - trade
Short-term loans payable
Accrued expenses
Long-term loans payable(including within 1 year)

2,347
2,397
4,324

2,347
2,397
4,324

–
–
–

1,155

1,169

14

Total liabilities

10,224

10,238

14

–
(21)

–
(21)

–
–

(3) Securities(4) Investment securities
(1)
(2)
(3)
(4)

Fair value

Derivatives(1)
Those not qualifying for hedge accounting(2)
Those qualifying for hedge accounting

Total derivatives
(21)
(21)
–
(*) Amounts of allowance for doubtful accounts separately included in notes and accounts receivable - trade are excluded.
(Notes) 1.

28

Calculation method of fair values of financial instruments and matters concerning short-term investment securities
and derivatives
Assets(1) Cash and deposits and (2) Notes and accounts receivable - trade

Toyo Kanetsu K.K. Annual Report 2017

Because these accounts are settled in a short period, their fair values approximate their book values. Therefore,
the fair values are based on the book values.
(3) Securities
Because this account has a short-term maturity, its fair value approximates its book value. Therefore, the fairvalue is based on the book value.
(4) Investment securities
Fair value of this account is based on the price on exchanges, the price provided by counterparty financial
institutions or other prices. Please refer to “Notes - Securities” for the notes.
Liabilities(1) Notes and accounts payable - trade, (2) Short-term loans payable and (3) Accrued expenses
Because these accounts are settled in a short period, their fair values approximate their book values. Therefore,
the fair values are based on the book values.
(4) Long-term loans payable (including within 1 year)
Fair value of this account is determined by discounting the total amount of principal and interest at the interest
rate available for a similar borrowing. Fair values of long-term loans payable with variable rates, to which the
exceptional treatment for the interest rate swap is applied, are determined by discounting the total amount ofprincipal and interest accounted for with the relevant interest rate swaps at the reasonably estimated interest
rates applied to similar borrowings.
Derivatives
Please refer to “Notes - Derivatives” in Notes.
2.
3.

“Assets (4) Investment securities” do not include unlisted equity securities (carrying amount on the consolidatedbalance sheet of ¥922 million) because there is no market price and their future cash flows cannot be estimated andaccordingly it is extremely difficult to ascertain their fair values.
Projected redemption amounts for monetary claims and securities with maturities after the consolidated balance
sheet datePrevious fiscal year (As of March 31, 2016)
Due within 1 year

Due after 1 year
through 5 years(Millions of yen)
Due after 5 years
Due over 10 years
through 10 years

Cash
Notes and accounts receivable - trade
Securities
Investment securities
Held-to-maturity bonds
Available-for-sale securities

13,588
9,455
500

–
–
–

–
–
–

–
–
–

–
–

600
87

–
–

–
–

Total

23,543687––

Current fiscal year (As of March 31, 2017)
Due within 1 year

Due after 1 year
through 5 years(Millions of yen)
Due after 5 years
Due over 10 years
through 10 years

Cash
Notes and accounts receivable - trade
Securities
Investment securities
Held-to-maturity bonds
Available-for-sale securities

6,796
12,794
100

–
–
–

–
–
–

–
–
–

–
–

500
96

–
–

–
–

Total

19,690596––

Toyo Kanetsu K.K. Annual Report 2017

29

4.

Scheduled repayment amounts of long-term loans payable and other interest-bearing liabilities
Previous fiscal year (As of March 31, 2016)
Over 1 year
to 2 years

Over 2 years
to 3 years

Over 3 years
to 4 years

60

15

480

Over 1 year
to 2 years

Over 2 years
to 3 years

Over 3 years
to 4 years

15

480

600

Long-term loans payable(Millions of yen)Over 4 years
to 5 years
600

Current fiscal year (As of March 31, 2017)

Long-term loans payable(Millions of yen)Over 4 years
to 5 years–

Notes - Securities
1.

Held-to-maturity bonds
Previous fiscal year (As of March 31, 2016)(Millions of yen)
Type

Securities for which the fair value
exceeds the carrying amount on the
consolidated balance sheet

Securities for which the fair value
does not exceed the carrying amounton the consolidated balance sheet

Carrying amount on
the consolidatedbalance sheet

Fair value

Difference(1) Government
bonds and municipal
bonds, etc.

––

(2) Corporate bonds

100

100

0

–

–

–

(3) Other–

Subtotal

100

100

0

(1) Government
bonds and municipal
bonds, etc.

–

–

–

(2) Corporate bonds

–

–

–

1,000

999

(0)

1,000

999

(0)

1,100

1,099

(0)

(3) Other
Subtotal

Total

Current fiscal year (As of March 31, 2017)(Millions of yen)
Type

Securities for which the fair value
exceeds the carrying amount on the
consolidated balance sheet

Securities for which the fair value
does not exceed the carrying amounton the consolidated balance sheet

30

Toyo Kanetsu K.K. Annual Report 2017

Fair value

Difference(1) Government
bonds and municipal
bonds, etc.

–

–

–

(2) Corporate bonds

100

100

0

(3) Other

500

501

1

Subtotal

600

601

1

(1) Government
bonds and municipal
bonds, etc.

–

–

–

(2) Corporate bonds

–

–

–

(3) Other

–

–

–

–

–

–

600

601

1

Subtotal
Total

Carrying amount on
the consolidatedbalance sheet

2.

Available-for-sale securities (securities classified as other securities under Japanese GAAP)
Previous fiscal year (As of March 31, 2016)(Millions of yen)Type(1) Stocks

Carrying amount on
the consolidatedbalance sheet

Acquisition cost

Difference

4,071

1,517

2,554

(i) Government
bonds andmunicipal bonds,
etc.

–

–

–

(ii) Corporate
bonds

–

–

–

(iii) Other

–

–

–

(3) Other

–

–

–

4,071

1,517

2,554

558

717

(159)

(i) Government
bonds andmunicipal bonds,
etc.

–

–

–

(ii) Corporate
bonds

–

–

–

(iii) Other

87

100

(12)

(3) Other

–

–

–

645

817

(171)

(2) Bonds

Securities for which the carrying
amount on the consolidated balance
sheet exceeds the acquisition cost

Subtotal(1) Stocks(2) Bonds

Securities for which the carrying
amount on the consolidated balance
sheet does not exceed the acquisition
cost

Subtotal(Note)

Total
4,717
2,334
2,382
“Available-for sale securities” in the above table do not include unlisted equity securities (carrying amount on the
consolidated balance sheet of ¥922 million) because there is no market value and accordingly it is extremely difficult
to ascertain their fair values.

Toyo Kanetsu K.K. Annual Report 201731

Current fiscal year (As of March 31, 2017)(Millions of yen)
Carrying amount on
the consolidatedbalance sheet

Type(1) Stocks

Acquisition cost

Difference

5,164

2,400

2,764

(i) Government
bonds andmunicipal bonds,
etc.

–

–

–

(ii) Corporate
bonds

–

–

–

(iii) Other

–

–

–

(2) Bonds

Securities for which the carrying
amount on the consolidated balance
sheet exceeds the acquisition cost(3) Other

–

–

–

5,164

2,400

2,764

640

717

(76)

(i) Government
bonds andmunicipal bonds,
etc.

–

–

–

(ii) Corporate
bonds

–

–

–

(iii) Other

96

100

(3)

Subtotal(1) Stocks(2) Bonds

Securities for which the carrying
amount on the consolidated balance
sheet does not exceed the acquisition
cost(3) Other
Subtotal(Note)

3.

–

–

–

737

817

(79)

Total
5,902
3,217
2,685
“Available-for sale securities” in the above table do not include unlisted equity securities (carrying amount on the
consolidated balance sheet of ¥922 million) because there is no market value and accordingly it is extremely difficult
to ascertain their fair values.

Available-for-sale securities that were sold
Previous fiscal year (From April 1, 2015 to March 31, 2016)
Type(1) Shares(2) Bonds(i) Government bonds and municipal bonds,
etc.
(ii) Corporate bonds(iii) Other(3) Other
Total

Sales amount8

Total gain on sales
5(Millions of yen)
Total loss on sales
–

–

–

–

–
–
–

–
–
–

–
–
–

8

5

–

Current fiscal year (From April 1, 2016 to March 31, 2017)
Type(1) Shares(2) Bonds(i) Government bonds and municipal bonds,
etc.
(ii) Corporate bonds(iii) Other(3) Other
Total

32

Toyo Kanetsu K.K. Annual Report 2017

Sales amount6

Total gain on sales
2(Millions of yen)
Total loss on sales
–

–

–

–

–
–
–

–
–
–

–
–
–

6

2

–

Notes - Derivatives
1. Derivative transactions to which hedge accounting is not applied
Not applicable
2. Derivative transactions to which hedge accounting is applied(1) Currencies
Previous fiscal year (As of March 31, 2016)
Not applicable
Current fiscal year (As of March 31, 2017)(Millions of yen)Type of derivativetransaction, etc.

Classification

Principal hedged
items

Contract
amountPortion ofcontract
amount over
1 yearFair value
calculation
methodFair value

Forward exchange
contract
Allocation method
for forward
exchange contract

Fair value iscalculated
based on theprice provided
by counterparty
financial
institutions orother prices.

Buy contract
Euro

Accounts payable- trade

Total

839

–

818

839

–

818

(2) Interest rates
Previous fiscal year (As of March 31, 2016)(Millions of yen)Classification

Type of derivativetransaction, etc.

Interest rate swap
Exceptionaltransactions
treatment of interest
Receive variable,
rate swaps
pay fixed(Note)

Principal hedged
itemsLong-term loans
payableContract
amount1,115

Portion ofcontract
amount over
1 year
1,055

Fair value
calculation
methodFair value(Note)(Note)

The fair value of interest rate swaps that are accounted for using exceptional treatment is included in that ofcorresponding long-term loans payable, as those interest rate swaps are treated as an adjustment to long-term loans
payable as hedged items.

Current fiscal year (As of March 31, 2017)(Millions of yen)Classification

Type of derivativetransaction, etc.

Interest rate swap
Exceptionaltransactions
treatment of interest
Receive variable,
rate swaps
pay fixed(Note)

Principal hedged
itemsLong-term loans
payableContract
amount1,055

Portion ofcontract
amount over
1 year
1,055

Fair value(Note)

Fair value
calculation
method(Note)

The fair value of interest rate swaps that are accounted for using exceptional treatment is included in that ofcorresponding long-term loans payable, as those interest rate swaps are treated as an adjustment to long-term loans
payable as hedged items.

Toyo Kanetsu K.K. Annual Report 201733

Notes - Retirement benefits
1. Summary of retirement benefit plans adopted
The Company and certain consolidated subsidiaries have defined benefit corporate pension plans as defined benefit
plans, and certain consolidated subsidiaries have a small and medium sized enterprise retirement allowancecooperative plan and lump-sum retirement plans.
In addition, the Company and certain consolidated subsidiaries have defined contribution corporate pension plans.
The Company and certain consolidated subsidiaries participate in Nihon Sangyo Kikai Kougyo Kouseinenkin Kikin(pension fund of Japan industrial machinery manufacturers). For this fund, since the amount of pension plan assets
corresponding to contributions by the respective companies cannot be reasonably calculated, the fund is accounted
for similar to defined contribution plans.
The Nihon Sangyo Kikai Kougyo Kouseinenkin Kikin has received permission from the Minister of Health, Labourand Welfare on May 1, 2017 for past portions of the entrusted employees’ pension portion to be returned to the state,
and it has changed its pension scheme from a employees’ pension fund plan to a corporate pension fund plan.
2. Defined benefit plans(1) Reconciliation between beginning balance and ending balance of retirement benefit obligations
Previous fiscal year
(From April 1, 2015
to March 31, 2016)
Beginning balance of retirement benefit
obligations
Service cost
Interest expenses
Unrecognized net actuarial gain or loss
Retirement benefits paid
Past service cost
Other
Ending balance of retirement benefit
obligations(2)¥3,075 million¥3,342 million

170
44
257
(229)
41
(16)

178
15
37
(136)
–
1

3,342

3,438

Reconciliation between beginning balance and ending balance of pension plan assets

Beginning balance of pension plan assets
Expected return on plan assets
Unrecognized net actuarial gain or loss
Amount of employer contribution
Retirement benefits paid
Other
Ending balance of pension plan assets

34

Current fiscal year
(From April 1, 2016
to March 31, 2017)

Toyo Kanetsu K.K. Annual Report 2017

Previous fiscal year
(From April 1, 2015
to March 31, 2016)¥3,249 million
31
(112)
326
(219)
(4)
3,271

Current fiscal year
(From April 1, 2016
to March 31, 2017)¥3,271 million
41
78
174
(134)
0
3,432

(3)

Retirement benefit obligations and pension plan assets at the end of the fiscal year and reconciliation of net
defined benefit liability and net defined benefit asset on consolidated balance sheet
Previous fiscal year
(From April 1, 2015
to March 31, 2016)Retirement benefit obligations under
funded system
Pension plan assets
Retirement benefit obligations under
unfunded system
Net amount of assets and liabilities
stated in the consolidated balance sheet
Net defined benefit liability
Net defined benefit asset
Net amount of assets and liabilities
stated in the consolidated balance sheet(4)

Current fiscal year
(From April 1, 2016
to March 31, 2017)¥3,340 million¥3,436 million(3,271)(3,432)

69

3

2

2

71

5

462
(390)

364
(358)

71

5

Retirement benefit expenses and components thereofService cost
Interest expenses
Expected return on plan assets
Amortization of net actuarial gain or
loss
Amortization of past service cost
Retirement benefit expenses pertaining
to defined benefit plans

Previous fiscal year
(From April 1, 2015
to March 31, 2016)¥170 million
44(31)

Current fiscal year
(From April 1, 2016
to March 31, 2017)¥178 million
15
(41)

(114)

(42)

41

–

111

110

(5)

Remeasurements of defined benefit plans, net of tax on consolidated statement of income and comprehensive
income
The components of remeasurements of defined benefit plans, net of tax (before tax effects deduction) are as follows:
Previous fiscal year
(From April 1, 2015
to March 31, 2016)
Past service cost
Actuarial gains and losses
Total

Current fiscal year
(From April 1, 2016
to March 31, 2017)¥– million(474)¥– million
1

(474)

1

(6) Remeasurements of defined benefit plans on consolidated balance sheet
The components of remeasurements of defined benefit plans (before tax effects deduction) are as follows:
Previous fiscal year
(From April 1, 2015
to March 31, 2016)
Unrecognized past service cost
Unrecognized net actuarial gain or loss
Total

Current fiscal year
(From April 1, 2016
to March 31, 2017)¥– million(21)¥– million
3

(21)

3

Toyo Kanetsu K.K. Annual Report 201735

(7) Pension plan assets(i) Major components of pension plan assets
Ratio of major components for total pension plan assets is as follows:
Previous fiscal year
(From April 1, 2015
to March 31, 2016)

Current fiscal year
(From April 1, 2016
to March 31, 2017)

29%
31
31
9

27%
33
31
9

100

100

Bonds
SharesGeneral account
Other
Total

(ii) Method of establishing expected long-term rates of return on plan assets
In order to determine the expected long-term rates of return on plan assets, the current and forecast distributionof plan assets and the current and expected long-term rates of return from the diverse assets that comprise theplan assets are taken into consideration.
(8) Matters relating to the basis for actuarial calculations
Main basis for actuarial calculations

Discount rate
Expected long-term rates of return on pension plan
assetsPrevious fiscal year
(As of March 31, 2016)

Current fiscal year
(As of March 31, 2017)

0.25%

0.25%

1.00%

1.00%

3. Defined contribution plans
The required contribution from the Company and its consolidated subsidiaries into the defined contribution pension
plans was ¥42 million in the previous fiscal year and ¥53 million in the current fiscal year.
4. Multi-employer plan
The required contribution amount to the employees’ pension fund plan under the multi-employer plan, which isaccounted for in the same manner as a defined contribution plan, was ¥80 million in the previous fiscal year and ¥98
million in the current fiscal year.
(1)

Funded status of multi-employer plan

Plan assets
Sum of actuarial obligations calculated forfinance status of pension plan and minimum
reserve
Net amountPrevious fiscal year
(As of March 31, 2015)

Current fiscal year
(As of March 31, 2016)¥83,744 million¥77,014 million¥104,880 million¥96,894 million¥(21,136) million¥(19,880) million(2) Group’s proportion of total contributions to planPrevious fiscal year 3.76%(From April 1, 2015 to March 31, 2016)
Current fiscal year 4.36%(From April 1, 2016 to March 31, 2017)(3) Supplementary explanation
Major factors for the net amount in (1) above are the balance of past service liabilities (¥22,875 million as of March
31, 2015 and ¥22,440 million as of March 31, 2016) and surplus amount (¥1,739 million as of March 31, 2015 and¥2,560 million as of March 31, 2016) for pension financing calculation.
The principal and interest of past service liabilities in this plan are amortized equally over 20 years, and the Group
recorded special contributions applied to such amortization (¥56 million for the previous fiscal year and ¥68 million
for the current fiscal year) as expenses in the consolidated financial statements.
The proportions in (2) above are not consistent with the proportions actually funded by the Group.

36

Toyo Kanetsu K.K. Annual Report 2017

Notes - Share options, etc.
Not applicable
Notes - Tax effect accounting
1. Significant components of deferred tax assets and liabilities

Deferred tax assets
Tax loss carry-forward
Accrued business tax
Net defined benefit liability
Provision for bonuses
Allowance for doubtful accounts
Provision for loss on order received
Loss on valuation of investment securities
Loss on valuation of investments in capital
Impairment loss
Depreciation
Asset retirement obligations
Other
Subtotal
Valuation reserve
Total deferred tax assets
Deferred tax liabilities
Revaluation reserve for land
Valuation difference on available-for-salesecurities
Reserve for advanced depreciation of non-current assets
Other

Previous fiscal year
(As of March 31, 2016)

Current fiscal year
(As of March 31, 2017)¥881 million
53
141
84
85
140
278
39
181
26
101
181

¥459 million
58
111
79
107
207
275
39
181
47
101
258

2,196
(1,531)

1,928(1,165)

665

762

1,529

1,121

602

692

–
259

888
251

Total deferred tax liabilities
2,390
2,952
(Note)The net deferred tax assets as of March 31, 2016 and March 31, 2017 are included in the items below of theconsolidated balance sheet.

Current assets㸫Deferred tax assets

Previous fiscal year
(As of March 31, 2016)

Current fiscal year
(As of March 31, 2017)¥380 million¥582 million

Non-current assets㸫Deferred tax assets

41

41

Current liabilities㸫Deferred tax liabilities

10–

Non-current liabilities㸫Deferred tax liabilities

607

1,692

㸫Deferred tax liabilities for land revaluation

1,529

1,121

Toyo Kanetsu K.K. Annual Report 201737

2. Main components causing significant differences between the statutory effective tax rate and the actual effective
tax rate after application of tax effect accounting
Previous fiscal year
(As of March 31, 2016)

Current fiscal year
(As of March 31, 2017)

Statutory effective tax rate
Adjustments
Increase/decrease in valuation reserve
Expenses not deductible for income tax purposes, such asentertainment expenses
Income not included for income tax purposes, such as dividends
received
Per capita levy of inhabitant taxes
Effect of differences in tax rates applicable to subsidiaries fromtax rate applicable to the Company
Adjustment of deferred tax assets at end of period resulting
from tax rate changes
Amortization of goodwill
Retained earnings of overseas subsidiaries
Tax credits
Other

33.06%

30.86%(0.41)(8.33)

1.41

0.97(0.27)(0.22)

1.27

0.79(0.21)

0.30

1.08

–

0.65
2.96
–
0.23

0.39
0.22
(0.42)(0.21)

Actual effective tax rate

39.77

24.34

Notes - Asset retirement obligations
Of asset retirement obligations, items recorded on the consolidated balance sheeta) Outline of asset retirement obligations
The asset retirement obligations of the Group are obligations in certain facilities for rent under the Ordinanceon Prevention of Asbestos Hazards.
b) Calculation method for determining asset retirement obligation amountThe amount of asset retirement obligations was calculated assuming an estimated period of use of 31 years
from acquisition, and using a discount rate from 2.2%.
c) Increase (decrease) in total asset retirement obligations
Previous fiscal year
(From April 1, 2015
to March 31, 2016)38

Current fiscal year
(From April 1, 2016
to March 31, 2017)

Beginning balance
Increase from purchase of property, plant and equipment¥224 million
107¥332 million–

Ending balance

332

332

Toyo Kanetsu K.K. Annual Report 2017

Notes - Real estate for lease, etc.
The Company and certain subsidiaries rent out a space such as in their business places as well as land mainly forrental housing and buildings in the Tokyo metropolitan area and other areas. Rental profit related to the real estate
for rent, etc. for the previous fiscal year was ¥310 million (rent income is recorded in net sales, and rent expenses
are recorded in cost of sales). Rental profit related to the real estate for rent, etc. for the current fiscal year was ¥353
million (rent income is recorded in net sales, and rent expenses are recorded in cost of sales).
Carrying amounts on the consolidated balance sheet, changes during period for the previous and current fiscal years
and fair values of the real estate for rent, etc. are as follows:(Millions of yen)
Current fiscal year
(From April 1, 2016
to March 31, 2017)

Previous fiscal year
(From April 1, 2015
to March 31, 2016)
Carrying amount on the consolidatedbalance sheet
Balance at
beginning of period

6,103

5,364

Increase (decrease)during period

(739)

(315)

Balance at end of
period

5,364

5,049

Fair value at end of period
3,684
3,398
(Notes) 1. Carrying amount on the consolidated balance sheet is calculated by subtracting accumulated depreciation andimpairment loss from acquisition cost.
2. The increase (decrease) during period for the previous fiscal year primarily consist of a decrease in rentable space(¥693 million) and decrease due to depreciation (¥45 million). The increase (decrease) during period for thecurrent fiscal year primarily consist of a decrease in rentable space (¥231 million) and decrease due to depreciation(¥83 million).
3. Fair value of property whose amount has significance at the end of the period is an amount based on a value
investigation report by an external real property appraiser, and that of other property whose amount has little
significance is an amount based on an index which is believed to reflect a market value appropriately.

Notes - Segment information, etc.
[Segment information]
1. Description of reportable segments
The reportable segments of the Company are components for which discrete financial information is available
and whose operating results are regularly reviewed by the Board of Directors of the Company to make decisions
about resource allocation and assess their performance.
The Group develops comprehensive business strategies and engages in business activities for respective products
and services of divisions by product and service in the Company and of Toyo Kanetsu Solutions K.K., asubsidiary of the Company.
Accordingly, the Company is comprised of segments by product and service, and its reportable segments consistof “Plant & Machinery Business” and “Material Handling Systems Business.”“Plant & Machinery Business” designs, builds, and executes construction works of, storage tanks for LNG, LPG,
crude oil and other gas and liquid and provides maintenance services and other operations for these tanks.
“Material Handling Systems Business” develops, designs, builds and executes construction works of, logistics
systems focusing on sorting, picking and conveying systems and provides maintenance services and otheroperations for these systems.
2. Method of measurements of sales, profit (loss), asset, liability, and other items for each reportable segment
The accounting procedures for the reporting operating segments are nearly the same as those stated in“Significant accounting policies for preparation of the consolidated financial statements.” Profits of thereportable segments are based on operating profit. Intersegment transactions are based on actual transaction
amounts.
Application of Practical Solution on a Change in Depreciation Method Due to Tax Reform 2016
As described in “Notes - Changes in accounting policies,” the Company has applied the “Practical Solution on a
Change in Depreciation Method Due to Tax Reform 2016” from the fiscal year ended March 31, 2017, andchanged the depreciation method for facilities attached to buildings and structures acquired on or after April 1,

Toyo Kanetsu K.K. Annual Report 201739

2016 from the declining-balance method to the straight-line method.
Compared to the results under the previous method, the impact from this change on segment profit for the current
fiscal year is immaterial.
3. Disclosure of sales, profit (loss), asset, liability, and other items for each reportable segment
Previous fiscal year (From April 1, 2015 to March 31, 2016)(Millions of yen)
Reportable segments
Plant &
MachineryBusiness
Sales
Sales to externalcustomers
Transactions withother segments

Material
Handling
Systems Business

Other(Note)

Total

Adjustment

Total

22,78817,20639,995

6,577–

46,572

–

–

–

592

(592)

–
46,572

Total

22,78817,20639,995

7,170

(592)

Segment profit

1,921

667

2,588

855

(419)

3,024

Segment assets

12,88814,34027,2298,173

15,96551,368

249

314

563

174

26

765

298

687

985

181

22

1,189

Other items
Depreciation
Increase in property,
plant and equipment,
and intangible assets(Note)“Other” includes the building construction business, manufacturing and sales of industrial facilities and equipment, realestate rental operations, leasing operations and other operations.

Current fiscal year (From April 1, 2016 to March 31, 2017)(Millions of yen)
Reportable segments
Plant &
MachineryBusiness
Sales
Sales to externalcustomers
Transactions withother segments

Other(Note)

Total

Adjustment

Total

13,852

21,71135,563

6,368–

41,932

–

–

–

661

(661)

–
41,932

Total

13,852

21,71135,563

7,030

(661)

Segment profit

633

1,981

2,614

958

(492)

3,080

Segment assets

12,707

21,23033,9388,106

11,18353,228

237

306

544

135

12

691

1,728

2,934

4,663

100

387

5,152

Other items
Depreciation
Increase in property,
plant and equipment,
and intangible assets(Note)

40

Material
Handling
Systems Business“Other” includes the building construction business, manufacturing and sales of industrial facilities and equipment, realestate rental operations, leasing operations and other operations.

Toyo Kanetsu K.K. Annual Report 2017

4. Differences between total amounts for reportable segments and amounts in the consolidated financial statements
and main details of these differences (matters relating to difference adjustments)
Profit(Millions of yen)
Current fiscal year

Previous fiscal year

Reportable segments total
Profit of “other”
Corporate expenses (Note)
Other adjustments

2,588
855
(432)
12

2,614
958
(495)
3

Operating profit in the consolidated
3,024
3,080
financial statements(Note) Corporate expenses mainly represent expenses related to administrative divisions such as the general affairs division,
which are not attributable to the reportable segments.
(Millions of yen)
Asset
Reportable segments total
Assets of “other”
Corporate assets (Note)
Other adjustments

Previous fiscal year

Current fiscal year
27,2298,173
16,019(53)

33,938
8,106
11,235(51)

Total assets in the consolidated financial
51,36853,228statements(Note) Corporate assets mainly represent assets related to divisions managing cash and deposits, investment securities andother assets of the Company, which are not attributable to the reportable segments.

Toyo Kanetsu K.K. Annual Report 201741

[Information associated with reportable segments]
Previous fiscal year (From April 1, 2015 to March 31, 2016)
1. Information for each product and service(Millions of yen)
Storage tank, etc.

Maintenanceservices ofstorage tanks

Logistics systemequipment, etc.

13,887

8,901

17,206

Sales to external customers

Other

Total

6,577

46,572

2. Information about geographical area
(1) Sales(Millions of yen)

(Note)Japan

Southeast Asia

Oceania

Other

Total

36,171

8,923

1,068

409

46,572

Sales are classified by country or region on the basis of construction sites.

(2) Property, plant and equipment(Millions of yen)
Japan

Southeast Asia
12,440Oceania

Total

1,171

50

13,661

3. Information for each of main customers
This information has been omitted since sales to a specific customer account for less than 10% of net sales in the
consolidated statement of income.
Current fiscal year (From April 1, 2016 to March 31, 2017)
1. Information for each product and service(Millions of yen)
Storage tank, etc.

Maintenanceservices ofstorage tanks

Logistics systemequipment, etc.

6,961

6,891

21,711

Sales to external customers

Other

Total

6,368

41,932

2. Information about geographical area
(1) Sales(Millions of yen)Japan
(Note)Southeast Asia

Total

Other

36,643
5,170
119
Sales are classified by country or region on the basis of construction sites.

41,932(2) Property, plant and equipment(Millions of yen)
Japan

Southeast Asia
15,093

943

Oceania

Total
48

16,084

3. Information for each of main customers
This information has been omitted since sales to a specific customer account for less than 10% of net sales in the
consolidated statement of income.

42

Toyo Kanetsu K.K. Annual Report 2017

[Disclosure of impairment loss on non-current assets for each reportable segment]
Previous fiscal year (From April 1, 2015 to March 31, 2016)(Millions of yen)
Reportable segments
Plant & Machinery
Business
Impairment loss
(Note)

Material Handling
Systems Business

–

–

Other
(Note)

Adjustment

19

–

Total
19

The amount of “other” is an amount related to manufacturing and sales of industrial facilities and equipment.

Current fiscal year (From April 1, 2016 to March 31, 2017)
Not applicable[Amortization and unamortized balance of goodwill for each reportable segment]
Previous fiscal year (From April 1, 2015 to March 31, 2016)(Millions of yen)
Reportable segments
Plant & Machinery
Business

Material Handling
Systems Business

Other(Note)

Adjustment

Total

Amortization in thecurrent fiscal year

–

–

62

–

62

Ending balance

–

–

62

–

62

(Note)

The amount of “other” is an amount related to manufacturing and sales of industrial facilities and equipment.

Current fiscal year (From April 1, 2016 to March 31, 2017)(Millions of yen)
Reportable segments
Plant & Machinery
Business

Material Handling
Systems Business

Other(Note)

Adjustment

Total

Amortization in thecurrent fiscal year

–

–

62

–

62

Ending balance

–

–

–

–

–

(Note)

The amount of “other” is an amount related to manufacturing and sales of industrial facilities and equipment.

[Information associated with related parties]
Subsidiaries and others
1.
Related party transactions
Not applicable2.

Notes concerning the parent company or important affiliated companies
Not applicable

Toyo Kanetsu K.K. Annual Report 201743

Notes - Per share information
Previous fiscal year
(From April 1, 2015
to March 31, 2016)

Current fiscal year
(From April 1, 2016
to March 31, 2017)

Net assets per share¥333.91¥370.20

Basic earnings per share¥17.45¥37.38(Note)(Note)

1.
2.

The amount of diluted earnings per share is not provided because there are no potential shares.
The basis for calculation for basic earnings per share is as follows:
Previous fiscal year
Current fiscal year
(From April 1, 2015
(From April 1, 2016
to March 31, 2016)
to March 31, 2017)

Profit attributable to owners of parent
Profit not relating to common shareholders

44¥1,906 million¥3,746 million––

Profit attributable to owners of parent pertaining tocommon shares

1,906

3,746

Average number of outstanding common shares

109,260
thousands shares

100,230
thousands shares

Toyo Kanetsu K.K. Annual Report 2017

Notes - Significant events after reporting period
1. Share consolidation
The Company’s Board of Directors made a resolution on May 12, 2017 for the Company to change the number ofshares constituting one unit and make partial amendments to its Articles of Incorporation, on the condition that the
proposal concerning the share consolidation be made at 109th Ordinary General Meeting of Shareholders on June29, 2017, and that the said proposal be approved at the said General Meeting of Shareholders.
The proposal concerning the share consolidation was approved at the said General Meeting of Shareholders. Detailsof the proposal are as follows.
(1) Purpose of share consolidation
Japan’s stock exchanges have announced the “Action Plan for Consolidating Trading Units,” aiming tostandardize the trading units of listed domestic corporations at 100 shares.
As a listed corporation on Tokyo Stock Exchange, the Company respects the purport of this plan and will change
its shares per trading unit from 1,000 shares to 100 shares. The Company will also consolidate ten shares into one
share in order to achieve an investment unit deemed desirable by Japan’s stock exchanges (50,000 yen or more
and less than 500,000 yen).
(2) Details of share consolidation(i) Class of share to be consolidated
Common shares(ii) Method of consolidation and consolidation ratio
The Company will conduct a 10-to-1 share consolidation on October 1, 2017, based on the number of shares
held by shareholders recorded in the final shareholder registry as of September 30, 2017.
(iii) Decrease in number of shares due to share consolidation
Total number of shares issued before share consolidation (as of March 31, 2017)

103,030,741 shares

Decrease in number of shares due to share consolidation

92,727,667 shares

Total number of shares issued after share consolidation
10,303,074 shares(Notes) 1. “Decrease in number of shares due to share consolidation” and “total number of shares issued after
share consolidation” are theoretical values calculated by multiplying the total number of shares issued
before the share consolidation by the share consolidation ratio.
2. The Company disposed of 6,000,000 shares of treasury shares on May 25, 2017. Total number ofshares issued after the share disposition will be 97,030,741 shares. By taking it into account, the total
number of shares issued after share consolidation will be 9,703,074 shares.

(iv) Handling of fractional shares less than one share
In accordance with Article 235 of the Companies Act of Japan, any fractional shares emerging as a result of
the share consolidation will be collectively sold, and proceeds of the sale will be accordingly distributed to theshareholders thereof, in proportion to their fractional holdings.
(3) Details of change in number of shares constituting one unit
In line with the effectuation of share consolidation, the number of shares constituting one unit of the Company’scommon shares will be changed from 1,000 shares to 100 shares.
(4)

Schedule for share consolidation and change in number of shares constituting one unit
Date of resolution by the Board of Directors

May 12, 2017

Date of the Ordinary General Meeting of Shareholders

June 29, 2017

Share consolidation and change in number of shares constituting one unit

October 1, 2017

Toyo Kanetsu K.K. Annual Report 201745

(5) Impact on per share information
The following shows the per share information for the previous fiscal year and current fiscal year calculated
under the assumption that the share consolidation was conducted on April 1, 2015.
Previous fiscal year
(From April 1, 2015
to March 31, 2016)
Net assets per share

Current fiscal year
(From April 1, 2016
to March 31, 2017)¥3,339.15

Basic earnings per share¥174.53(Note)
The amount of diluted earnings per share is not provided because there are no potential shares.

¥3,702.00¥374.06

2. Purchase and cancellation of treasury shares
The Company’s Board of Directors made a resolution on May 12, 2017 for the Company to acquire its own sharespursuant to the provision of Article 156 of the Companies Act, as applied by replacing the relevant terms pursuant to
the Act’s provision of Article 165, Paragraph 3, and to cancel treasury shares pursuant to the provision of Article
178 of the Companies Act, and conducted the purchase and cancellation of treasury shares according to theparticulars stated below.
(1) Reason for purchase and cancellation
To implement a flexible capital policy based on the shareholder return policy and to improve capital efficiency.
(2) Details of the matters relating to transaction(i) Type of the shares to be acquired:
Common shares(ii) Total number of shares to be repurchased: Up to 1,700 thousand shares(Ratio of the total number of shares to be repurchased to thetotal number of shares issued (excluding treasury shares):
1.8%)(iii) Total price of repurchase:
Up to ¥500 million(iv) Repurchase period:
May 18, 2017 to August 28, 2017(v) Repurchase method:
Purchase on the stock exchange via a trust bank
The purchase of treasury shares above was completed on May 25, 2017.
(i) Type of the shares acquired
Common shares(ii) Total number of shares acquired
1,597 thousand shares(iii) Total price of repurchase¥499 million(3) Details of the matters relating to cancellation(i) Type of the shares to be cancelled:
Common shares(ii) Total number of shares to be cancelled:
6,000 thousand shares(Ratio of the total number of shares to be cancelled to the total
number of shares issued (excluding treasury shares) before thecancellation: 5.8%)(iii) Date of cancellation:
May 25, 201746

Toyo Kanetsu K.K. Annual Report 2017

(v)Annexed consolidated detailed schedules

Annexed consolidated detailed schedule of corporate bonds
Not applicable
Annexed consolidated detailed schedule of borrowings
Classification

Beginning balanceEnding balance(Millions of yen)

(Millions of yen)

Short-term loans payable

Average interest
rate (%)

Repayment due¥2,357¥2,3970.88–

Current portion of long-term loans
payable

60

60

1.35

–

Long-term loans payable (excluding
current portion)

1,155

1,095

0.93

Between 2018 and 2020

Total

3,572

3,552

–

–

(Notes) 1.
2.

In calculating the average interest rate, the weighted average interest rate on the ending balance of loans payable, isshown.
Repayment of long-term loans payable (excluding the current portion) scheduled within five years after the balance
sheet date are as follows:

Long-term loans
payableDue after 1 year
through 2 years

Due after 2 years
through 3 years

Due after 3 years
through 4 years

Due after 4 years
through 5 years¥15 million¥480 million¥600 million¥– million

Annexed consolidated detailed schedule of asset retirement obligations
A schedule of asset retirement obligations has been omitted since matters to be stated in the schedule are stated as
notes prescribed in Article 15-23 of the Ordinance on Terminology, Forms, and Preparation Methods ofConsolidated Financial Statements.

(2) Other information
Quarterly information for the current fiscal year
First quarter(Cumulative)(Cumulative period)
Net sales(From April 1, 2016
to June 30, 2016)

Second quarter(Cumulative)

Third quarter(Cumulative)(From April 1, 2016
(From April 1, 2016
to September 30, 2016) to December 31, 2016)

Current fiscal year
(From April 1, 2016 to
March 31, 2017)(Millions of yen)

8,074

19,82828,84941,932

Profit before income taxes(Millions of yen)

1,132

2,037

4,141

4,951

Profit attributable to owners ofparent(Millions of yen)

748

1,522

2,985

3,746

Basic earnings per share

7.27

14.79

29.40

37.38

First quarter

Second quarter

Third quarter

Fourth quarter

7.27

7.51

14.71

7.94

(Yen)

(Accounting period)
Basic earnings per share(Yen)

Toyo Kanetsu K.K. Annual Report 201747

(TRANSLATION)
INDEPENDENT AUDITOR’S REPORT
June 29, 2017
To the Board of Directors of
Toyo Kanetsu Kabushiki Kaisha
GYOSEI & CO.
Representative Partner
Engagement Partner
Certified Public Accountant

Takayuki Nakagawa (seal)

Representative Partner
Engagement Partner
Certified Public Accountant

Tetsuo Noguchi(seal)Engagement Partner
Certified Public Accountant

Satoshi Ogawa(seal)

Audit of Financial Statements
Pursuant to the first paragraph of Article 193-2 of the Financial Instruments and Exchange Act of Japan, we haveaudited the accompanying consolidated financial statements of Toyo Kanetsu Kabushiki Kaisha (the “Company”)
and its subsidiaries, which comprise the consolidated balance sheet as of March 31, 2017, and the consolidated
statements of income and comprehensive income, the consolidated statement of changes in equity, cash flows forthe fiscal year from April 1, 2016 to March 31, 2017, and significant accounting policies for preparation of theconsolidated financial statements, other notes, and annexed consolidated detailed schedules, all expressed inJapanese yen.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements inaccordance with accounting principles generally accepted in Japan, and for designing and operating such internal
control as management determines is necessary to enable the preparation and fair presentation of the consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements
are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. The purpose of an audit of the consolidated financial statements is not to express an opinion on theeffectiveness of the entity’s internal control, but in making these risk assessments the auditor considers internal
controls relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order todesign audit procedures that are appropriate in the circumstances. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates made by management,
as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Audit Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, theconsolidated financial position of the Company and its subsidiaries as of March 31, 2017, and the consolidated48

Toyo Kanetsu K.K. Annual Report 2017

results of their operations and their cash flows for the year then ended in conformity with accounting principles
generally accepted in Japan.
Emphasis of Matter
As stated in “Notes - Significant events after reporting period,” the Company’s Board of Directors made aresolution on May 12, 2017 for the Company to acquire its own shares and to cancel treasury shares, and it acquiredand cancelled those shares on May 25, 2017.
This matter does not have any impact on our opinion.
Audit of Internal Control
Pursuant to the second paragraph of Article 193-2 of the Financial Instruments and Exchange Act of Japan, we haveaudited management’s report on internal control over financial reporting of the Company as of March 31, 2017.
Management’s Responsibility for the Report on Internal Control
Management is responsible for designing and operating effective internal control over financial reporting and for the
preparation and fair presentation of its report on internal control in accordance with assessment standards forinternal control over financial reporting generally accepted in Japan. There is a possibility that misstatements may
not be completely prevented or detected by internal control over financial reporting.
Auditor’s Responsibility
Our responsibility is to express an opinion on management’s report on internal control based on our internal control
audit. We conducted our internal control audit in accordance with auditing standards for internal control overfinancial reporting generally accepted in Japan. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether management’s report on internal control is free from material misstatement.
An internal control audit involves performing procedures to obtain audit evidence about the results of theassessment of internal control over financial reporting in management’s report on internal control. The procedures
selected depend on the auditor’s judgment, including the significance of effects on reliability of financial reporting.
An internal control audit includes examining representations on the scope, procedures and results of the assessmentof internal control over financial reporting made by management, as well as evaluating the overall presentation ofmanagement’s report on internal control.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Audit Opinion
In our opinion, the management’s report on internal control referred to above, which represents that the internal
control over financial reporting of the Company as of March 31, 2017 was effective, presents fairly, in all material
respects, the results of the assessment of internal control over financial reporting in accordance with assessment
standards for internal control over financial reporting generally accepted in Japan.
Conflicts of Interest
We have no interest in the Company which should be disclosed in compliance with the Certified Public Accountants
Act.
The above represents a translation, for convenience only, of the original report issued in the Japanese language.

Toyo Kanetsu K.K. Annual Report 201749

Corporate Data
Date of Establishment

May 16, 1941

Common Stock¥18,580 million

Authorized Shares

297,000,000

Capital Stock Issued

103,030,741

Number of Shareholders

11,360

Security Traded

Tokyo Stock Exchange, First Section

Transfer Agent and Registrar

The Mitsubishi UFJ Trust and Banking Corporation
4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8212, Japan

Annual Meeting

The annual meeting of shareholders is normally held in June in Tokyo, Japan

Directory
Head Office11-1, Minamisuna 2-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3333 Fax: +81-3-5857-1952
URL: http://www.toyokanetsu.co.jp/global/

Osaka Sales Office
1-9-2, Senrioka-Higashi, Settsu, Osaka 566-0011, Japan
Tel: +81-72-645-2520 Fax: +81-72-645-2532

Plant & Machinery Business
Tel: +81-3-5857-3109 Fax: +81-3-5857-3173

Material Handling Systems Business(Toyo Kanetsu Solutions K.K. Head Office)Tel: +81-3-5857-3126 Fax: +81-3-5857-3185

2 Tsukiji, Kisarazu, Chiba 292-0835, Japan
Tel: +81-438-36-7161 Fax: +81-438-36-8211

Domestic Subsidiaries

Overseas Subsidiaries

Toyo Kanetsu Solutions K.K.

PT Toyo Kanetsu Indonesia

11-1, Minamisuna 2-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3126 Fax: +81-3-5857-3185
URL: http://www.tksl.co.jp/en(Jakarta Head Office)Midplaza Building 1, 8th Floor, Jl. Jend. Sudirman Kav. 10-11,
Jakarta 10220, Indonesia
Tel: +62-21-570-7805 / 7739 Fax: +62-21-570-3950

Toyo Kanetsu Builtec K.K.
11-1, Minamisuna 2-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-3640-5164 Fax: +81-3-6800-3156
URL: http://www.web-tkb.com

Toyo Service System K.K.
11-1, Minamisuna 2-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3200 Fax: +81-3-5857-3171
URL: http://www.toyoservice.co.jp

Toyo Koken K.K.
11-1, Minamisuna 2-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3161 Fax: +81-3-5857-3198
URL: http://www.toyokoken.co.jp/en50

Chiba Plant

Toyo Kanetsu K.K. Annual Report 2017

Toyo Kanetsu Singapore Pte. Ltd.
16 Ayer Rajah Crescent #03-04 Tempco Technominium,
3rd Floor, 139965, Singapore
Tel: +65-6776-2393 Fax: +65-6773-1703

Toyo Kanetsu (Malaysia) Sdn. Bhd.
Sublot 51, 1st Floor, Medan Jaya Commercial Centre,
97000 Bintulu, Sarawak, Malaysia
Tel: +60-86-338122 Fax: +60-86-338123

11-1, Minamisuna 2-chome, Koto-ku,
Tokyo 136-8666, Japan
Tel: +81-3-5857-3100 Fax: +81-3-6700-1952
URL: http://www.toyokanetsu.co.jp/global/