The share exchange described in this press release involves securities of a foreign company. The share exchange
is subject to disclosure requirements of a foreign country that are different from those of the United States.
Financial information included in this document, if any, was excerpted from financial statements prepared inaccordance with foreign accounting standards that may not be comparable to the financial statements of UnitedStates companies.
It may be difficult for you to enforce your rights and any claim you may have arising under the U.S. federal
securities laws, since the issuer is located in a foreign country and some or all of its officers and directors may beresidents of a foreign country. You may not be able to sue a foreign company or its officers or directors in aforeign court for violations of the U.S. securities laws. It may be difficult to compel a foreign company and its
affiliates to subject themselves to a U.S. court’s judgment.
You should be aware that the issuer may purchase securities otherwise than under the share exchange, such as inopen market or privately negotiated purchases.
This document has been translated from the Japanese-language original for reference purposes only. While thisEnglish translation is believed to be generally accurate, it is subject to, and qualified by, in its entirety, theJapanese-language original. Such Japanese-language original shall be the controlling document for all purposes.

[APPENDIX]
Business Report(April 1, 2020 to March 31, 2021)
1.

Matters Concerning the Present State of the Company(1) Progress and results of business
During the period under review, the Japanese economy experienced an unprecedented
situation due to the spread of the Novel Coronavirus (COVID-19) infection. While theend of the pandemic was still not in sight, production, imports, and exports picked up
toward the end of the period.
Looking at the global economy, there are still no signs of COVID-19 abating, and trade
friction between the U.S. and China is intensifying, making the outlook uncertain.
In the semiconductor industry, there was strong demand related to remote working andgaming, and companies continued to invest in advanced technology associated with EUV
lithography.
Under these circumstances, our core products such as the photomask CD-SEM “Z
Series” and the photomask DR-SEM (observation and analysis) “LEXa Series” sold well,leading to net sales exceeding our initial forecast, generally as announced in the “NoticeRegarding Revision to Earnings Forecast” on November 6, 2020. However, because weinvested significant resources in the research and development of next-generation models,income was lower than estimated in the revised forecast. To meet our customers’ needs
for investment in advanced technology over the long term, we have positioned the releaseof next-generation models as a top priority and are working together as a company.
As a result of the above, net sales for the period under review amounted to JPY
3,105,000,000 (down 27.2% year-on-year). As for profits and losses, the Company
posted an operating income of JPY 611,000,000 (down 57.6% year-on-year), an ordinary
income of JPY 587,000,000 (down 58.9% year-on-year), and a net income of JPY
431,000,000 (down 55.4% year-on-year).
Breakdown of net sales
Name of Segment

Net Sales(JPY thousand)Year-on-year(%)

Electron beam related
Total

3,105,928
3,105,928

72.8
72.8

(2) Capital expenditures
During the Business Year, we effected capital expenditures of JPY 1,193,000,000 for
the acquisition of land and construction of a new headquarters plant, among others, whichwere mainly financed by capital increase.
(3) Financing activities
To finance the capital expenditures, we raised JPY 2,143,000,000 in total through theissuance of new shares by a public offering and third-party allotment with a payment dateof September 8, 2020, and by an issuance of new shares by third-party allotment with apayment date of September 25, 2020.
(4) Current issues facing the company(I) Strengthening overseas customer services
Our overseas business development and product support services are outsourced
to local companies, except for those handled by the Korea Branch. Some of these
local companies have supported us as partners for more than 20 years, while others
have only been under contract for a few years. The photomask CD-SEM, one of
our core products, has high accuracy and performance but requires extremelycomplex and precise adjustments. Therefore, local service engineers must be
trained and well-experienced. We have been dispatching our company engineersfrom Japan to support those operations that cannot be handled locally. However,as a measure to prevent the spread of COVID-19, many countries currently restrict
the entry of foreign nationals.
Fortunately, no major confusion or inconvenience has been caused to ourcustomers due to the inability to dispatch engineers overseas. However, we intend
to establish a stronger service system in cooperation with our overseas partnercompanies so that we can continue to provide a high level of service to ourcustomers even if similar unforeseen circumstances arise again in the future.
In addition, given the increasing number of shipped equipment, we will work onequipment production with a view to reducing the burden of maintenance in orderto prevent delays in the provision of local maintenance services for such equipment.
(II) Responding to market expansion
With the introduction of multi-electron beam lithography systems at state-of-theart photomask manufacturing plants, the production volume of photomasks has
increased significantly in recent years. This has led to a greater demand formeasuring instruments (CD-SEM). In the past three years, we have been able tomanufacture equipment as scheduled and to make deliveries to customers without
delay. However, the inability to fix definitive shipping dates for equipment, and ashortage of equipment manufacturing space to respond to urgent orders, has createdbottlenecks. In addition, we are under increasing pressure to secure amanufacturing environment for the development of next-generation equipment andnew equipment.
Under these circumstances, we are planning to relocate to a new plant
headquarters in July 2021 and to secure a wider manufacturing space as well as amanufacturing environment suitable for new products in terms of vibration andexternal magnetic field disturbances, thereby focusing on further market expansion
in the future.
-2-

(III) Securing human resources
Human resources are of the utmost importance for the development of theCompany. As a company that develops, manufactures, sells, and provides various
services relating to photomask CD-SEMs, we need personnel with a wide range ofskills and are recruiting new graduates as well as mid-career workers.
In securing human resources that can better contribute to the development of theCompany, we believe that the proposed relocation of our plant headquarters willlead to improved access for commuters and will also have a positive effect on ourjob offers. We will continue to improve employment conditions and the working
environment and strive to develop excellent engineers.
At the same time, to reach new customers globally, we are considering recruiting
personnel who are familiar with local conditions.
We would appreciate the continued support of our shareholders.
(5) Changes in financial assets and profit/loss condition
Category
33rd business34th businessyear ended
year ended
March 2018
March 201935th businessyear ended
March 2020

Net sales (JPY thousand)

1,315,752

2,958,735

4,267,523

36th (current)
business year
ended March
2021
3,105,928

Ordinary income (JPY
thousand)
Net income (JPY thousand)

115,435

811,217

1,428,881

587,022

125,894

564,466

968,363431,961

Net income per share (JPY)

37.69

168.99289.92119. 65

Total assets (JPY thousand)

2,138,281

3,375,522

4,269,020

6,320,166

Net assets (JPY thousand)

1, 192,948

1,740,307

2,624,953

5,128,276(6) Status of parent company and significant subsidiaries(I) Status of parent company(i) Relationship with parent company
Our parent company is A&D Company, Limited, which owns 1,950,100 shares(51.0% of the voting rights) in our Company.
Two employees are dispatched from said company to our Company as Directors.
(ii) Matters concerning transactions with parent company
We determine the terms and conditions of transactions with the parent company
and others by considering factors such as prevailing market prices and market
interest rates, and therefore believe that such terms and conditions are appropriate.
In addition, we conduct our own decision-making led by our Board of Directors andtherefore believe that the legitimacy of our decision-making process is unassailable.
(II) Status of subsidiaries
Not applicable.
(7) Main business
Development, manufacture, and sale of equipment for high-precision measurement
and inspection of fine patterns on masks using electron beams.
-3-(8) Major business offices
Headquarters in Tokorozawa-shi, Saitama
Korea Branch in Bundang-gu, Seongnam-si, Gyeonggi-do(9) Status of employees
Number of Employees Change in Number Since
the Previous BusinessYear End46-

Average Age

Average Years ofService

42.4

9.6(Note) The above number of employees does not include three Directors who concurrently
serve as employees.
(10) Major Lenders
LenderOutstanding Borrowings

Sumitomo Mitsui Banking Corporation

JPY 175,000,000

Japan Finance Corporation

JPY 23,000,000

The Shoko Chukin Bank, Ltd.

JPY 11,150,000

Mizuho Bank, Ltd.

JPY 6,684,000(11) Other Significant Matters Concerning the Present State of the Company
Not applicable.
2. Matters Concerning Shares of the Company(1) Total number of authorized shares: 10,200,000 shares(2) Total number of issued shares:
3,823,900 shares (including 440 treasury shares)(Note) The total number of issued shares increased by 483,400 shares due to the issuanceof new shares through public offering and third-party allotment.
(3)

Number of shareholders

2,743 shareholders(4) Major shareholders
Number of shares held

Shareholding ratio(shares)(%)

A&D Company, Limited

1,950,100

51.00

Custody Bank of Japan, Ltd. (trust account)

238,000

6.22

183,100

4.79

179,100

4.68

Name of Shareholder

NOMURA PB NOMINEES LIMITEDOMNIBUS-MARGIN (CASHPB)STATE STREET BANK AND TRUSTCOMPANY FOR STATE STREET BANKINTERNATIONAL GMBH, LUXEMBOURG
BRANCH ON BEHALF OF ITS CLIENTS:
CLIENT OMNI OM25
-4-

BNP-PARIBAS SECURITIES SERVICESFRANKFURT BRANCH/ JASDEC/ GERMANRESIDENTS-AIFM

71,1001.86

Tasuku Higashi

40,0001.05

Custody Bank of Japan, Ltd. (securities
investment trust account)

31,4000.82

Credit Suisse Securities (Japan) Limited

26,2080.69

au Kabucom Securities Co., Ltd.

26,0000.68

Hiroshi Inoue

25,5000.67(Note) The shareholding ratio is calculated after deducting treasury shares (440 shares).
(5) Other Significant Matters Concerning Shares
Not applicable.
3. Matters Concerning Stock Acquisition Rights, etc. of the Company
Not applicable.
4. Matters Concerning Corporate Officers(1) Names, etc. of directors and corporate auditors
Position

Name

Responsibilities and Significant Concurrent Positions

Representative
Director and President

Hao Zhang

Director

Michio Oshima

General Manager

Director

Akio Sugano

Director, General Affairs Department

Director

Park Seoljong

Director, Sales Department

Director

Hiroshi Sawaragi

Director

Hitoshi Ikehata

Director

Shuji Inoue

Full-time Corporate
AuditorKaori Yanagihara

Corporate Auditor

Hidekazu Saito

Manager of 2nd Design Development Department, 14th
Section of A&D Company, Limited
Manager of 2nd Design Development Department, 13th
Section of A&D Company, Limited
Director of Vivitec Co., Ltd.

Representative Director of Advanced Systems, Co.,
Ltd.
(Notes) 1. Director Mr. Shuji Inoue is an Outside Director.
2. Director Mr. Shuji Inoue is an independent officer as stipulated by the Tokyo
Stock Exchange.
3. Corporate Auditors Mr. Hidekazu Saito and Mr. Masasuke Saito are Outside
Corporate Auditors.
4. Corporate Auditor Mr. Hidekazu Saito is an independent officer as stipulatedby the Tokyo Stock Exchange.
Corporate Auditor

Masasuke Saito-5-(2) Outline of contract for limitation of liability
We have entered into a contract with each of the Directors and Corporate Auditors
who are not executive directors, etc. to limit their liability for damages under Article 423,
Paragraph 1 of the Companies Act, and the maximum amount of liability for damages
under such contracts is the amount stipulated by laws and regulations.
(3) Amount of remuneration, etc. for Directors and Corporate Auditors
The amount of remuneration paid to our Directors is determined based on the position,
responsibility, and experience of the Directors as well as market level and balance with
employee salaries.
At the 17th General Shareholders Meeting held on June 28, 2002, it was resolved thatthe maximum amount of remuneration for Directors shall be JPY 90,000,000 per year
(excluding employee salaries received by Directors who concurrently serve as
employees) and that the maximum amount of remuneration for Corporate Auditors shallbe JPY 20,000,000 per year. At the conclusion of the said General Shareholders Meeting,the number of Directors was seven and the number of Corporate Auditors was one.
With regard to the remuneration for officers, the maximum amount is determined
separately for the Directors and the Corporate Auditors by the resolution of the General
Shareholders Meeting. The amount of remuneration for Directors is determined by the
Representative Director and President under the authority delegated from the Board of
Directors within the amount resolved at the General Shareholders Meeting. In theBusiness Year, the delegation of authority to the Representative Director and President
was resolved at the meeting of the Board of Directors held on June 24, 2020.
In our Company, the Representative Director and President, Mr. Hao Zhang,determines the specific remuneration amount for each Director based on a resolution thatdelegates authority from the Board of Directors. He is granted the authority to conduct
evaluation and allocation based on the amount of basic remuneration for each Director
and the performance of the business that he/she is responsible for. The reason for thedelegation of such authority is that the Representative Director is the most qualified toevaluate the businesses that the Directors are responsible for by giving comprehensive
consideration to the performance of the Company as a whole.
The Board of Directors has determined the amount of remuneration for each Director
while fully respecting the opinions of the Outside Officers regarding the proposed
remuneration and has therefore determined that such remuneration is in line with ourpolicy for determining remuneration.
The remuneration for the Corporate Auditors is determined through discussion among
the Corporate Auditors.
Category

Number of Persons

Amount of Remuneration, etc.

Directors(Outside Directors)

7(1)

JPY 72,300,000(JPY 3,600,000)

3(2)

JPY 10,800,000(JPY 4,800,000)

10

JPY 83,100,000

Corporate Auditors(Outside Corporate Auditors)
Total(4) Matters concerning Outside Officers-6-(I) Relationship between the Company and companies at which significant concurrent
positions are held
Director Mr. Shuji Inoue is a director of Vivitec Co., Ltd., but there is no special
relationship between our Company and the said company.
Corporate Auditor Mr. Masasuke Saito is the Representative Director ofAdvanced Systems, Co., Ltd., and there are systems development transactions
between our Company and the said company.
(II) Principal activities of Outside Officers
Category5.

Name

Director

Shuji Inoue

Corporate
Auditor

Hidekazu Saito

Corporate
AuditorMasasuke Saito

Principal activities
Shuji Inoue attended eleven (11) meetings out of sixteen (16)meetings of the Board of Directors that were held during theBusiness Year, where he provided appropriate and a wide varietyof advice and suggestions on the board’s decision-making, taking
advantage of his considerable experience and expertise in theindustry.
Hidekazu Saito attended all sixteen (16) meetings of the Board of
Directors that were held during the Business Year, and took partin the discussions. He also attended all twelve (12) meetings of
the Audit & Supervisory Board that were held during theBusiness Year, where he exchanged opinions on the audit results
and discussed important audit-related matters with othermembers.
Masanori Saito attended all sixteen (16) meetings of the Board of
Directors that were held during the Business Year, where he took
part in the discussions. He also attended all twelve (12) meetingsof the Audit & Supervisory Board that were held during theBusiness Year, where he exchanged opinions on the audit results
and discussed important audit-related matters with othermembers.

Status of Independent Auditor(1) Name
ARK LLC(2) Amount of fees payable to the Independent Auditor for the Business Year(I) Amount of fees payable to the Independent Auditor for the Business Year:
JPY 12,000,000(II) Aggregate amount of fees and other financial profits payable by the Company:
JPY 13,000,000(Note) 1. Based on the “Practical Guidelines for Cooperation with Independent Auditors”
released by the Japan Corporate Auditors Association, and in consideration of
the audit time by audit item, changes in audit fees as well as audit plans andperformances for the previous business years, the Audit & Supervisory Boardof the Company reviewed the validity of the audit time and audit fees for theBusiness Year, and expressed its consent in respect of audit fees for the
Independent Auditor pursuant to Article 399, Paragraph 1 of the Companies
Act.
2. The audit agreement by and between the Company and the Independent
Auditor does not distinguish the audit fees for the audits under the Companies-7-

Act and the audit fees for the audits under the Financial Instruments andExchange Act, and it is practically impossible to distinguish between them.
Therefore, the aggregate amount of both fees is stated above.
(3) Non-audit services
The Company pays fees to the Independent Auditor for the preparation of letters fromauditors to underwriting firms which does not fall under the services set forth in
Article 2, Paragraph 1 of the Certified Public Accountants Act.
(4) Outline of limited liability agreement
Pursuant to the provisions of Article 427, Paragraph 1 of the Companies Act, theCompany has entered into a limited liability agreement with ARK LLC, which issummarized as follows:
The maximum amount of liabilities for damages payable to the Company by ARK
LLC in respect of any damage suffered by the Company in relation to ARK LLC’s
performance of the agreement shall not exceed the highest of the annual aggregate
financial profits that were received from or are payable by the Company as fees for orconsideration of its services for the business years for which it provided audit services
as the Independent Auditor, multiplied by two (2), unless there is malicious intent or
gross negligence on the part of ARK LLC.
(5) Policy on the decision of removal or non-reappointment of Independent Auditor
The Audit & Supervisory Board may resolve on a proposal for removal or nonreappointment of the Independent Auditor if it determines that the Independent
Auditor needs to be removed because, among other reasons, the Independent Auditor
is unable to perform its services in an appropriate manner. The Board of Directors willsubmit the proposal to the General Shareholders Meeting following such resolution.
Additionally, if the Audit & Supervisory Board determines that the Independent
Auditor falls under any of the Items of Article 340, Paragraph 1 of the Companies Act,
the Audit & Supervisory Board will remove the Independent Auditor subject to theunanimous consent of the members of the Audit & Supervisory Board. In such case,
the Corporate Auditor appointed by the Audit & Supervisory Board will report theremoval of the Independent Auditor and the reason therefor at the first General
Shareholders Meeting that is convened after the removal.
6.

Systems and Policies of the Company(1) Systems necessary to ensure that the execution of duties by Directors complies withlaws and regulations and the articles of incorporation of the Company(I) Each of the Directors assumes obligations to comply with laws and regulations,articles of incorporation of the Company and the resolutions of the General
Shareholders Meeting, to pay due attention as a prudent manager in the capacityof a Director, and to faithfully perform his / her duties. The Board of Directors
assumes obligations to oversee whether the Directors have established and areoperating internal control systems in an appropriate manner pursuant to the basic
policies on internal control systems adopted by the Board of Directors.
(II) In respect of any matters pointed out in an audit by the Corporate Auditors, theIndependent Auditor and our internal control department, the Directors willcause relevant department that is subject to such audit to take necessary remedial
measures within a certain period of time.
(III) Directors have established systems necessary to disclose financial and any other-8-

corporate information of the Company in an appropriate and timely manner.
(2) Other systems necessary to ensure the appropriateness of the businesses of a stockcompany(I) Systems with respect to the maintenance and management of information in
respect of the performance of duties by Directors
The Company maintains and manages information contained in any documents(including those recorded by electromagnetic means) in an appropriate mannerfor such period and by such means as provided for in its document management
rules.
(II) Rules and other systems related to the management of risk of loss
1) In the course of its risk management, the Company identifies operationalrisks, and assesses the impact on its business operations, significance of, andpreventive measures for such risks.
2) The Company establishes and implements its risk management policies andrisk management rules to provide for assessment of, and preventive measuresfor operational risks, identification of emergencies, and minimization of theirimpact on the Company’s business operations.
(III) Systems to ensure the effectiveness of performance of duties by Directors
The Board of Directors fully acknowledges the division of duties of each
Director, and performs its duties pursuant to the rules on the division of duties,
and instructions and orders in an effective manner (including digitalization), andobtains management information in a prompt and appropriate manner.
(IV) Systems to ensure that the performance of duties by employees complies withlaws and regulations and the articles of incorporation of the Company
The Company establishes and implements its compliance rules not only for ourinternal control department’s assessment of the appropriateness andeffectiveness of performance of duties by our employees, but also for preventionof violations of laws and regulations, and actions and corrective measures to betaken when the Company becomes aware of such violations.
(3) Systems to ensure the effectiveness of the audit by Corporate Auditors(I) If Corporate Auditors request the appointment of any employees to assist with
their duties (assistant employees), the matters concerning such employees andtheir independence from Directors
1) If Corporate Auditors request a system necessary to ensure sufficient audit,
Directors will establish such system.
2) Assistant employees will not be bound by Director’s instructions and orders,
but comply with instructions of Corporate Auditors.
(II) Systems regarding reporting from Directors and employees to Corporate
Auditors and any other systems for reporting to Corporate Auditors
1) Directors report to Corporate Auditors any matters required to be reported
under laws and regulations and any other matters requested by Corporate
Auditors from time to time.
2) Directors report to Corporate Auditors the plans for, and progress and resultsof internal audits by the internal control department.
3) No person who has reported to Corporate Auditors will be treated unfairly
because of his/her reporting.
(III) Matters related to the policies on reimbursement of the costs incurred ordischarge of obligations in relation to the performance of duties by Corporate-9-Auditors
If Corporate Auditors request advance payment or reimbursement of the costs
incurred in relation to the performance of their duties, the Company promptly
reimburses such costs or discharges such obligations unless it is deemed
unnecessary for the performance of their duties.
(IV) Other systems to ensure the effectiveness of the audit by Corporate Auditors
The Representative Director regularly meets with Corporate Auditors to
exchange opinions on the challenges that the Company is facing, risks to which
the Company is exposed and the developments of audit environment for
Corporate Auditors, thereby enhancing mutual understanding.
(4) Basic policies on the elimination of anti-social forces and development thereof(I) The Company will continue to break off any relationship with anti-social forces
or organizations that threaten social order and safety, and take a resolute stanceagainst and never give in any unreasonable and illegal demands.
(II) Based on its compliance rules, the Company, at the initiative of the President,
has established an internal system under which it resists unreasonable and illegal
demands from anti-social forces and organizations. Furthermore, if theCompany receives any unreasonable and illegal demand from an anti-socialorganization or individual, we will promptly cooperate with externalorganizations such as the police, and relevant departments of the Company will
liaise and cooperate with each other to respond to it in an organized manner.
(5) Systems to ensure the reliability of financial reporting(I) The Company complies with accounting standards and other laws andregulations, and conducts proper accounting by establishing accounting andother related regulations.
(II) In order to effectively leverage management resources (people, materials,
money and information), the Company has established a system to promptly andappropriately communicate internal and external information.
(III) Along with the thorough risk management in the course of business operations,the Company has established efficient and transparent internal control systems.
(IV) Pursuant to the standards that are generally accepted as fair and appropriate, theCompany periodically evaluates the status of the development and operation of
its internal control systems and continuously improves the business operation.
(V) The Company promotes the development and operation of internal controls overfinancial reporting, prepares an effective and appropriate internal control reports,and submits them to the related parties.
The above are subject to “effectiveness and efficiency of business operations,”“reliability of financial reporting,” “compliance with laws and regulations
related to business activities,” and “preservation of assets.”(6) Status of operation of systems to ensure the appropriateness of business operations
Based on the “Basic Policies on the Establishment of Internal Control Systems,” theCompany has clarified the division of duties and established a system under which thedepartments monitor each other internally. In addition, as a means of control, theCompany has established internal regulations, etc. to ensure appropriate operation andmanagement, and our Corporate Planning Office, in cooperation with the Independent
Auditor and Corporate Auditors, conducts audits from time to time.
- 10 -

(7) Basic policies on control of a stock company
The Company has not established any specific basic policy regarding a person who
controls decision-making on the Company’s financial and business policies.
(Note) In this Business Report, any fractional amounts less than a specified unit are
rounded off to the nearest unit in the case of net income for the year, and any otherfractional amounts are rounded down.

- 11 -

Balance Sheet(As of March 31, 2021)
Item(Assets)
Current assets
Cash and deposits

Amount
4,722,179
2,485,871

Accounts receivable

1,209,867

Work in progress

668,889

Raw materials

199,990

Prepaid expense
Accruedconsumption taxes
Other
Fixed assets
Tangible fixed
assetsBuildings
Structures

3,521
151,560
2,479
1,597,987
1,305,05200Machinery anddevices
Vehicles andtransportationequipment
Tools, instruments
and equipment
Land626,031

Leased assets

12,196

Construction inprogress
Intangible fixed
assetsSoftware
Software in
progress
Investments andother assets
Investment
securities
Deferred tax assets
Lease and guarantee
deposits

Item(Liabilities)
Current liabilities
Bills payable
Electronicallyrecordedobligations
Accounts payable
Current portion of
long-term
borrowings
Lease obligations

6,997

143,058
358,859
140,834
3,799
78,180Accrued expenses
Income taxes
payable49,996

Deposits

8,221

Reserve for bonuses
Reserve for productwarranties

96,384

Other

7,164

Long-term
borrowings
Lease obligations
Allowance forretirement benefits

613,935 Total liabilities
84,205974,997
13,928

Arrears

0 Fixed liabilities
45,891(Unit: JPY thousand)Amount15,18659,383

216,891
75,0009,934
131,957
1,191,889(Net Assets)

75,377

Shareholders’equity5,128,276

8,827

Amount of capital

1,764,024

208,729

Capital surplus

1,235,416

1,276

Capital reserve

1,235,416

113,740

Capital surplus
Legal retained
earnings

2,129,834
9,336

88,203- 12 -

Other5,510

Other retained
earnings
Retainedearnings brought
forwardTreasury shares
Total net assets
Total assets
6,320,166 Total liabilities andnet assets(Note) Amounts less than JPY 1,000 are rounded down.

- 13 -

2,120,498
2,120,498(998)
5,128,276
6,320,166

Income Statement(From April 1, 2020 to March 31, 2021)
Item

AmountNet sales
Cost of sales

3,105,928
1,467,818

Gross profit
Selling, general and administrative expenses

1,638,110
1,026,419

Operating income
Non-operating income
Interest income
Foreign exchange gains
Other
Non-operating expenses

611,690
1,731
56
1,557
117
26,399Interest expense
Stock issuance expenses

1,767
24,490

Other

141

Ordinary income
Extraordinary loss
Loss on disposition of fixed assets

587,022
25,9780

Impairment loss

25,978Net income before income taxes
Corporate, inhabitant and enterprise taxes

561,044
199,768

Deferred tax expenses(70,684)

Net income for the year

431,961(Unit: JPY thousand)(Note) Amounts less than JPY 1,000 are rounded down.

- 14 -

Statement of Changes in Equity(From April 1, 2020 to March 31, 2021)(Unit: JPY thousand)Amount of capital
Balance as of April 1, 2020

692,361

Shareholders’ equity
Capital surplus
Capital reserve
Total capital surplus
163,754
163,754

Movement during the Business Year
Issuance of new shares
Dividends of surplus
Net income for the year

1,071,662

1,071,662

1,071,662

Total movement during the BusinessYear

1,071,662

1,071,662

1,071,662

Balance as of March 31, 2021

1,764,024

1,235,416

1,235,416

Acquisition of treasury shares(Unit: JPY thousand)Shareholders’ equity
Retained earnings
Other retainedLegalearnings
Total retained
retainedearnings
Retainedearnings
earnings
brought forward
Balance as of April 1,
2020

9,336

Movement during theBusiness Year
Issuance of newsharesDividends ofsurplus
Net income for theyear

1,760,172

1,769,509

TreasurysharesTotalshareholders’equityTotal net
assets(671)

2,624,953

2,624,953

2,143,324

2,143,324(71,636)(71,636)(71,636)(71,636)431,961

431,961

431,961

431,961

(326)

(326)

(326)

Acquisition ofTreasury shares
Total movement
during the BusinessYear-360,325

360,325(326)

2,503,323

2,503,323

Balance as of March
31, 2021

9,336

2,120,498

2,129,834(998)

5,128,276

5,128,276(Note) Amounts less than JPY 1,000 are rounded down.

- 15 -

Notes to Non-consolidated Financial Statements
1. Notes on the Going Concern Assumption
Not applicable
2. Notes Concerning Matters pertaining to Significant Accounting Policies(1) Valuation basis and valuation method for securities
Other securities
Securities without market value
The moving average cost method isadopted.
(2) Valuation basis and valuation method for inventories
Products in progress and raw materials
The cost method based on specificidentification method (method of writedown of book value due to decline inprofitability) is adopted.
(3) Derivatives
The market value method is adopted.
(4) Depreciation method for fixed assets
Tangible fixed assets
The straight-line method is adopted.
(excluding leased assets)
Major useful life are as follows.
Buildings
14 years
Tools, instruments and equipment
2–8
years
Intangible fixed assets
The straight-line method is adopted. With respect(excluding leased assets)
to software for internal use, the estimated usefullife is based on the internal available period (5years), and with respect to embedded software, theestimated useful life is based on the effective
period (within 3 years).
Leased assets
With respect to leased assets pertaining to financelease under which ownership is not transferred, thestraight-line method is adopted where the lease
period shall be the useful life and the residual value
is zero.
(5)Standards for recognition of allowances
Allowance for doubtful accounts In order to prepare for losses due to bad debts,
the Company records the estimated amount of
bad debts based on the historical bad debt ratio
for general claims, and for specified claims
such as claims with a possibility of default,
after considering the collectability of suchclaims on an individual basis.
Reserve for bonuses
In order to prepare for the payment of
employee bonuses, the Company records theestimated amount of bonus payments to be
paid during the Business Year.
- 16 -

Allowance for retirement benefits In order to prepare for the payment of
retirement benefits to employees, theCompany has applied the simplified method
to the calculation of the allowance forretirement benefits and retirement benefit
expenses, using the method in which theamount required to be paid for voluntaryreasons at the end of the term for retirement
benefits shall be the retirement benefit
obligation.
Reserve for product warranties
In order to prepare for the expenditure of free
repair costs of products, the Company records
the estimated amount of free repair costs
within the warranty period.
(6) Method of hedge accounting(I) Method of hedge accounting
In principle, deferred hedge accounting is applied. The Company has adopted theallocation method for forward exchange contracts that meet the requirement for the
allocation method.
(II) Hedging instruments and hedged items
Hedging instruments: Forward exchange contracts
Hedged items: Exchange rate fluctuation risk relating to operating receivables
denominated in foreign currency and forecasted transactions denominated in foreign
currency(III) Hedging policy
The Company enters into forward exchange contracts to avoid future exchange rate
fluctuation risk and stabilize costs.
The Company does not intend to enter into derivative transactions for
speculative purposes.
(IV) Method of evaluating hedge effectivenessThe effectiveness of hedging is assessed, in principle, by comparing the cumulativechanges in the market price or cash flow of the hedged items with the cumulativechanges in the market price or cash flow of the hedging instruments for the period fromthe commencement of the hedge to the point of assessment of effectiveness, based on
the amount of changes in both.
However, the Company does not assess the effectiveness of forward exchange
contracts using the allocation method.
(7)

Disposition method of deferred assets
Stock issuance expenses
The entire amount is reported as an expenseat the time of expenditure.

(8)

Accounting for consumption taxes
The tax-excluded method is used. However, non-deductible consumption taxes
related to assets are treated as periodic expenses in the business year in which theyarise.

3. Notes on Changes in the Method of Presentation(Application of “Accounting Standards for Disclosure of Accounting Estimates”)- 17 -

The Company has adopted the “Accounting Standards for Disclosure of Accounting
Estimates” (Corporate Accounting Standards No. 31 of March 31, 2020) from theBusiness Year, and has included the “Notes on Accounting Estimates” in the notes tonon-consolidated financial statements.

4. Notes on Accounting Estimates
The following item is recorded in the financial statements for the Business Year basedon accounting estimates and that may have a significant impact on the financial
statements for the following business year.
Deferred tax assets JPY 113,740,000
Deferred tax assets are recognized based on estimates of the timing and amount of
taxable income arising from future business plans. Such estimates may be affected bychanges in uncertain economic conditions in the future, and if the timing and amountof taxable income actually accrued differ from the estimates, the amount of deferred tax
assets may be materially affected in the financial statements for the following businessyear.
5. Notes on Balance Sheet(1) Accumulated depreciation deducted from assets
Tangible fixed assets
Buildings
Structures
Machinery and devices
Vehicles and transportation equipment
Tools, instruments and equipment
Leased assets

JPY 405,184,000
JPY 131,110,000
JPY 590,000
JPY 17,110,000
JPY 313,000
JPY 227,020,000
JPY 29,039,000(2) Monetary liabilities to affiliates are as follows.
Short-term monetary liabilities

JPY 99,547,000

6. Notes on Profit and Loss Statements(1) Total amount of research and development expenses
Research and development expenses included in general and administrative
expenses
JPY 354,252,000(2) Transaction volume with affiliates
Research and development expenses

JPY 90,497,000(3) Impairment loss
The Company has recorded impairment loss on the following asset.
Location
Use
Type

Impairment loss

Tokorozawa-shi,
Headquarters plant
Building and structure
JPY 25,978,000
Saitama
The Company groups its assets by the smallest unit that generates an independent cash
flow based on categories for management accounting purposes. Idle assets and assets tobe disposed of are grouped individually.
In the Business Year, the Company has determined to relocate its headquarters, andas the buildings of the headquarters are no longer expected to be used in the future, theCompany reduced the book value to the recoverable value and recorded such reduced- 18 -

amount as an impairment loss under extraordinary losses. The breakdown is as follows:buildings: JPY 25,849,000; structures: JPY 129,000. The recoverable value of theheadquarters plant is assessed by net sales value and is evaluated as zero.
7. Notes on Statements of Changes in Net Assets(1) Matters concerning issued shares
Type of shares
Beginning of the
Increase
Decrease
End of the BusinessBusiness Year
Year
Common shares
3,340,500
483,400
3,823,900(shares)(Note) The increase of 483,400 shares in the number of outstanding common shares is dueto the issuance of new shares through a public offering and third-party allotment.
(2) Matters concerning treasury shares

Type of shares
Common shares(shares)(Note)

Beginning of theBusiness Year
380

Increase
60

Decrease-

End of theBusiness Year440

The increase of 60 shares in the number of treasury shares of common shares is due to thepurchase of shares of less than one share unit.

(3) Matters concerning stock acquisition rights, etc.
Not applicable(4) Matters concerning dividends(I) Dividends paid
Total amount Dividend per
Resolution
Type ofof dividend
share (JPY)
Record dateshares (JPY thousand)Annual shareholders
meeting on June 24, Common
33,401
10
March 31, 2020
2020
sharesBoard of directors
meeting on
Common38,23410
September 30,
November 6, 2020
shares2020

Effective dateJune 25, 2020

December 8,2020(II) Dividends the record date of which falls in the Business Year and the effective dateof which falls in the following business year
The following matters concerning dividends of common shares have been proposedat the annual shareholders meeting held on June 23, 2021.
Total
Dividend per
Resolution
Type of amount of share (JPY) Record date Effective
Dividend
sharesdividenddateresource(JPY
thousand)Annual shareholders
meeting on June 23, Common 38,234
10March 31,
June 24,
Retained
2021
shares2021
2021
earnings
8. Notes on Tax Effect Accounting- 19 -

Breakdown of major causes for the occurrence of deferred tax assets and deferred tax
liabilities(Deferred tax assets)
Reserve for bonuses(JPY thousand)
29,358Reserve for product warranties

18,087

Raw materials write-down

3,728

Depreciation in excess

11,825

Allowance for retirement benefits

40,193

Impairment loss

34,612Others23,262

Subtotal of deferred tax assets

161,065

Valuation reserve
Total of deferred tax asset

47,324
113,740

Deferred tax assets are included in the following item of balance sheet.
Investments and other assets deferred tax assets
JPY 113,740,000
9. Notes on Financial Instruments(1) Matters concerning the status of financial instruments(I) Policy on financial instruments
The Company’s policy is to limit fund management to short-term deposits, etc., andto procure funds by borrowing from banks. Derivative transactions are used to avoid
the risks described below, and the Company’s policy is not to engage in speculativetransactions.
(II) Contents of financial instruments, their risks and risk management system
Bills receivable, electronically recorded monetary claims and accounts receivable,
which are operating receivables, are exposed to credit risks of customers. With respect
to such risks, the Company manages due dates and remaining balances for eachcustomer in accordance with our credit management system. While operatingreceivables denominated in foreign currency are exposed to the risk of exchange rate
fluctuations, the Company offsets such risk with forward exchange contracts asnecessary.
Most of bills payable, electronically recorded obligations and accounts payable,
which are operating payables, and arrears are due within one year.
Of borrowings, short-term borrowings are mainly financing for business
transactions, and long-term borrowings (in principle, within five years) are mainly
financing for development investments.
While operating payables are exposed to liquidity risk and borrowings are exposed
to liquidity risk and interest-rate risk, the Company manages these risks by preparing
monthly cash management plans.
Derivative transactions are mainly forward exchange contracts for the purpose ofhedging foreign exchange fluctuation risks relating to operating receivables
denominated in foreign currency and forecasted transactions denominated in foreign
currency, and are executed by the department in charge with the approval of thedecision maker in accordance with the management rules that stipulate transaction
authority and transaction limits. The Company recognizes that there is almost no- 20 -

credit risk in derivative transactions since the counterparties to these transactions arelimited to financial institutions with a certain credit rating.
For details of hedging instruments and hedged items, hedging policy and methodof evaluating hedge effectiveness relating to hedge accounting, please refer to “(6)Method of hedge accounting” under “2. Notes Concerning Matters pertaining to
Significant Accounting Policies” described above.
(III) Supplementary explanation on matters concerning the market value of financial
instruments
The market value of financial instruments includes values based on market prices
and if no market price is available, reasonably calculated values. Since variablefactors are incorporated in the calculation of such value, such value may fluctuate
depending on the adoption of different assumptions.
(2) Matters concerning market value of financial instruments
The following table shows the amounts recorded on the balance sheet, the market value
and the difference between them as of March 31, 2021 (the current end-term settlementday). Please note that this does not include those amounts the market value of which isconsidered extremely difficult to figure out (Please see (Note 2).).
(Unit：JPY1,000）
Balance Sheet
Market value
Difference
Amount(I) Cash and deposits
2,485,871
2,485,871(II) Bills receivable

-

-

-

(III) Electronically recorded monetary claims

-

-

-

(IV) Accounts receivable

1,209,867

1,209,867-(V) Bills payable(13, 928)(13, 928)-(VI) Electronically recorded obligations(143, 058)

(143, 058)-

(VII) Accounts payable(358, 859)

(358, 859)

-

(-)

(-)

-

(IX) Arrears(78, 180)(78, 180)-(X) Long-term borrowings (*) 1(215, 834)

(215, 851)

(17)(XI) Derivative transactions (*) 3

-

-

-

(VIII） Short-term borrowings

(*)1
(*)2
(*)3

(X) Long-term borrowings include the current portion of long-term borrowings.
Items recorded as liabilities are shown in parentheses.
(XI) Amounts are presented as net claims and liabilities arising from derivativetransactions. Items that are net liabilities in total are shown in parentheses.

(Note 1) Matters concerning the calculation of the market value of financial instruments(I) Cash and deposits, (II) Bills receivable, (III) Electronically recorded monetaryclaims, (IV)Accounts receivable, (V) Bills payable, (VI) Electronically recorded
obligations, (VII) Accounts payable, (VIII) Short-term borrowings and (IX) Arrears
As these are settled in a short period of time, the market value, which is- 21 -

approximately equal to the carrying amount, is based on the book value.
(X) Long-term borrowings (including current portion of long-term borrowings)
The market value of the long-term borrowings is calculated based on the present
value of the total amount of principal and interest discounted at the interest rate thatwould be applied if similar new loans were made.
(XI) Derivative transactions
The market value is based on the prices presented by the financial institutions withwhich we do business.
(Note 2) Amounts recorded on the balance sheet of the financial instruments the market
value of which is considered extremely difficult to figure out(Unit: JPY1,000)
Classification
Balance Sheet AmountUnlisted shares

1,276

There are no market prices for these, and it is expected that excessive costs will be
required to estimate future cash flows. Therefore, they are not included in the table
above because it is considered extremely difficult to figure out their market value.
(Note 3) Scheduled repayment of long-term borrowings after the balance sheet date
(Unit：JPY1,000）
Classification Within 1 year
Long-term
borrowings

140,834

Over 1 year
Within 2years

Over 2 years
Within 3 years

75,000-Over 3 years Over 4 years
Within 4 years Within 5 years--

10. Notes on Transactions with Related PartyClass

Parentcompany

Name of Company

A&D Company,
LimitedRelationship with related party

Location

Toshima-ku,
TokyoTransaction
description

Amount ofcapital(JPY1,000)

6,388,671

Business
Description

Percentage ofownership of(owned) voting
rightsManufacture andsale of measuring
and weighing(Owned)instruments,
directly 51.0%
medical and healthcare equipment

Transaction
amount(JPY1,000)

Item

Ending balance(JPY1,000)

Joint development for new
Accounts
R&D expense
90,497
99,547business – purchase of parts
payable(Note 1) Of the above amounts, the transaction amount does not include consumption taxes,
and the ending balance includes consumption taxes.
(Note 2) Transaction conditions and policy for determining transaction conditions
The decision is made in consideration of the market price and total costs.
- 22 -

11. Notes on Information per Share(1) Net assets per share
JPY1,341.27(2) Net income per share
JPY119.65(Note) The basis for the calculation of net income per share is as follows:
Net income on income statement
JPY431, 961,000
Amount not attributable to common stock

JPY1,000

Net income attributable to common stock

JPY431, 961,000

Average number of common stock during the period

3, 610, 142 shares

12. Significant subsequent events
Not applicable.
13. Other notes
Investment profit under the equity method is not stated because there are noaffiliates.

- 23 -

Copy of Auditor’s Report

Independent Auditor’s Report
May 14, 2021

To: The Board of Directorsof Holon Co., Ltd.

ARK LLC, Tokyo Office
Tokuro Mishima (Seal), certified accountant,designated limited liability member and executive
memberHiroyuki Morioka (Seal), certified accountant,designated limited liability member and executive
memberAudit Opinion
Pursuant to the provisions of Article 436, paragraph 2, item 1 of the Companies Act, wehave audited the accounts, i.e., the balance sheet, profit and loss statement, statement ofchanges in net assets and individual explanatory notes, together with their supplementaryschedules of Holon Co., Ltd. for the 36th Business Year from April 1, 2020 to March 31,
2021 (hereinafter referred to as the “Financial Statements”).
In our opinion, the above Financial Statements present fairly, in all material respects, thestatus of property and profits and losses for the relevant period in accordance with theaccounting principles generally accepted in Japan.
Basis for Audit Opinion
We have conducted our audits in accordance with the auditing standards generally acceptedin Japan. Our responsibility under the auditing standards is set forth in the “Auditor’s
Responsibility in Auditing Financial Statements”. We are independent of the Company andfulfill our other ethical responsibilities as auditors in accordance with the provisions
concerning professional ethics in Japan. We believe that we have obtained sufficient andappropriate audit evidence to provide a basis for our opinion.
Responsibilities of Management, Corporate Auditors and Audit & Supervisory Board for
Financial Statements
The responsibility of the management is to prepare and fairly present the Financial
Statements in accordance with corporate accounting standards that are generally accepted inJapan. This includes developing and operating internal controls that the management
considers necessary to prepare and fairly present the Financial Statements free from material
misstatement, whether due to fraud or error.
In preparing the Financial Statements, the management shall evaluate whether it isappropriate to prepare the Financial Statements based on the premise of a going concern, andif it is required to disclose matters of a going concern based on the corporate accounting
standards generally accepted in Japan, the management shall be responsible to disclose suchmatters.
The responsibility of the Corporate Auditors and the Audit & Supervisory Board is tomonitor the execution of the duties of the Directors in the development and operation of thefinancial reporting process.

- 24 -

Auditor’s Responsibility in Auditing Financial Statements
The responsibility of the auditors is to express their opinions to the Financial Statementsfrom an independent standpoint in the auditor’s report, based on the audits conducted by
the auditors, with reasonable assurance as to whether the Financial Statements as a whole
are free from material misstatement, whether due to fraud or error. Misstatements can arise
by fraud or error and are individually or in aggregate considered material if they arereasonably expected to affect decision making of users of the Financial Statements.
Auditors shall, in accordance with the auditing standards generally accepted in Japan,
make professional judgments and carry out the following with professional skepticism
throughout the auditing process:• Identify and assess material misstatement risks, whether due to fraud or error. In
addition, develop and implement audit procedures in accordance with such material
misstatement risks. The selection and application of audit procedures shall be at thediscretion of the auditors. In addition, obtain sufficient and appropriate audit evidence
to provide a basis for our opinion;• The purpose of auditing the Financial Statements is not to express an opinion on theeffectiveness of internal controls, but the Auditors consider internal controls related toauditing in carrying out risk assessments in order to design audit procedures that areappropriate to the circumstances;• Evaluate the appropriateness of the accounting policy adopted by the management andits application method, as well as the reasonableness of the accounting estimates madeby the management and the adequacy of the related notes;• Conclude whether it is appropriate for the management to prepare the Financial
Statements based on the premise of a going concern, and based on the audit evidence
obtained, whether there is any material uncertainty regarding events or circumstancesthat may raise significant doubts about the premise of a going concern. It is required to
draw attention to the notes of the Financial Statements if there is any material uncertainty
regarding the premise of a going concern, and to express a qualified opinion regarding
the Financial Statements if the notes of the Financial Statements concerning significant
uncertainties are inappropriate. The auditors’ conclusions are based on the audit
evidence obtained by the date of the audit report, but future events or circumstances may
prevent an entity from continuing as a going concern; and• Evaluate whether the presentation and notes of the Financial Statements are incompliance with the corporate accounting standards generally accepted in Japan, as wellas the presentation (including the related notes), composition and contents of the
Financial Statements and whether the Financial Statements fairly presents the underlying
transactions and accounting events.
The auditors shall report to the Corporate Auditors and the Audit & Supervisory Board
the scope and timing of the planned audit, material audit findings, including significant
deficiencies in internal controls identified in the course of implementing the audit, andother matters required under the audit standards.
The auditors shall report to the Corporate Auditors and the Audit & Supervisory board
on compliance with the provisions related to professional ethics in Japan concerning
independence, matters that are reasonably likely to affect the independence of the auditors,
and the details of the safeguards to eliminate or reduce impediments, if any.
Interests
Between the Company and us or the executive members, there is no interest to be statedpursuant to the provisions of the Certified Public Accountants Act.
End
- 25 -

Copy of Audit Report of Audit & Supervisory Board

Auditor’s Report
The Audit & Supervisory Board has prepared this audit report after consultation basedon the audit report prepared by each Corporate Auditor concerning the execution of theduties of the Directors for the 36th Business Year from April 1, 2020 to March 31, 2021 asfollows.
Method and content of audits by Corporate Auditors and Audit & Supervisory Board(1) The Audit & Supervisory Board has established the audit policy, assigned the duties andthe like, received reports from each Corporate Auditor regarding the status of implementationand the results of the audits, received reports from the Directors and Independent Auditors
regarding the status of execution of their duties, and asked for explanations as needed.
(2) Each Corporate Auditor has complied with the standards for the audit by the Corporate
Auditors, the audit policy and the assignment of duties established by the Audit & Supervisory
Board, communicated with the Directors, the internal audit department and other employees,
strived to collect information and improve the environment for auditing and conducted audits
by the following methods:(I) Attended meetings of the Board of Directors and other important meetings, received
reports on the status of execution of the duties by the Directors and employees, asked for
explanations as needed, inspected important approval documents and investigated the statusof business and assets at the headquarters and offices.
(II) With respect to the resolution of the Board of Directors concerning establishment of
the system to ensure that the duties of the Directors described in the business report is
executed in accordance with laws and regulations and the articles of incorporation and othersystems provided in Article 100, Paragraphs (1) and (3) of the Regulations for Enforcementof the Companies Act as necessary to ensure proper business activities of a stock company
as well as the system established based on such resolution (internal control system), we
received regular reports from the Directors and employees concerning the status of theircomposition and operation, asked for explanations as needed and expressed our opinions.
(III) Reviewed the particulars to be given due consideration provided in Article 118, Item(v) (a) of the Regulations for Enforcement of the Companies Act and the judgment and thereason therefor provided in Item (v) (b) of the same set out in the business report, based on thestatus of deliberation at the Board of Directors and other meetings.
(IV) Monitored and verified whether or not the Independent Auditor maintained
independence and conducted fair audits as well as received reports from the Independent
Auditor concerning the status of the execution of its duties and asked for explanations asneeded. In addition, we received notification from the Independent Auditor that a “system
to ensure fair execution of duties” (as set forth in each item of Article 131 of the Regulations
on Corporate Accounting) has been developed in accordance with the “Quality Control
Standards for Audit” (Business Accounting Council, October 28, 2005) and asked for
explanations as needed.
1.

Based on the methods described above, we reviewed the business report and its
supplementary schedules, the accounts (balance sheet, profit and loss statement, statementof changes in net assets and individual explanatory notes) together with the supplementaryschedules for the relevant Business Year.

- 26 -

2. Results of the audit(1) Results of Audit of Business Reports(I) We find that the business report and its supplementary schedules are in accordance withlaws and regulations and the articles of incorporation, and present fairly the Company’s
condition.
(II) We do not find any misconduct or material fact in violation of laws and regulations or
the articles of incorporation in connection with the execution of the duties by the Directors.
(III) We find that the resolution by the Board of Directors concerning the internal control
system is appropriate. There are no matters to be pointed out with respect to the descriptionof the business report and the execution of the duties by the Directors concerning such internal
control system.
(IV)With respect to the transaction with the parent company, etc., described in the business
report, there are no matters to be pointed out with respect to the particulars to be given due
consideration so as not to harm the interests of the Company in carrying out the transaction
and the judgment of the Board of Directors related to whether or not the transaction harms
the interests of the Company, and the reasons therefor.
(2) Audit results of the Financial Statements and its supplementary schedules
We find that the audit methods and results by the Independent Auditor ARK LLC are
appropriate.
May 21, 2021
Audit & Supervisory Board of Holon Co., Ltd.
Kaori Yanagihara (Seal), Full-time Corporate
Auditor
Hidekazu Saito (Seal), Outside Corporate
AuditorMasasuke Saito (Seal), Outside Corporate
AuditorEnd