Annual Report 2015
Year ended March 31, 2015

CONTENTS
Operational Results
Management Policy
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Shareholders’ Equity
Consolidated Statements of Cash Flows
Basis of Presenting Consolidated Financial Statements
Independent Auditor’s Report
Corporate information
Board of Directors and Statutory Auditors

2
7
10
12
13
14
15
16
45
46
47

Operational Results2

1. Operational Results(1) Analysis of Operational Results<Summary of Operational Results for the Consolidated Fiscal Year ended March 31, 2015>
In the Japanese economy during the current consolidated fiscal year, there weresigns of improvement in corporate earnings and the employment situation as well
as a recovery in public investments, supported by the government’s economic
measures and monetary policies. Although there was a sign of gradual recovery
in personal consumption, the future remains uncertain in some areas due tothe impact of the consumption tax hike, the weakening of the yen, and sharp
fluctuations in crude oil prices.
Under these circumstances, our Group actively implemented several measures
to expand, both domestically and overseas, sales and profits and improve ourcorporate value, the year being the second year of our mid-term management
plan “Next Step 2015” - To make the next step forward- (April 1st 2013 –Representative Director,
March 31st 2016).
President, COO
Kazuya Takahashi

As a result, in the current consolidated fiscal year, net sales increased by 8,419 million yen (9.3%) comparedwith the preceding consolidated fiscal year to 99,331 million yen due to the sales improvement at the Specialty
Truck Segment, our mainstay category. As for profit and loss status, operating income reached 9,418 million
yen, an improvement of 1,380 million yen (17.2%). Thus, the current net income reached 4,333 million yen, an
improvement of 687 million yen (18.9%), despite the record of the extraordinary loss incurred due towithdrawal from the gasifying melting business in the Environmental Equipment and Systems Segment.
We would like to present the summary of business on a consolidated basis by segment in comparison
with the preceding fiscal year.

i) Specialty Truck Segment
In Japan, the year saw a higher demand for specialty trucks same as last year. Our Group made positive efforts
to secure orders, and tried to shorten delivery time and improve sales and profit by introduction of new
equipment, etc. to improve production efficiency and rationality at each plant. Further, we actively developed
and promoted such new products as an electrically-powered refuse truck with the world’s first system which
drives refuse collection equipment powered by hybrid batteries (May 2014 on sale); and a new-type single carcarrier truck of new design with high brand awareness in Japan (November 2014 on sale).
As for our overseas business, a new company (Trex Thairung Co., Ltd., Pluakdaeng) in the Kingdom ofThailand jointly established by our Company, Nippon Trex Co., Ltd. (our consolidated subsidiary) and two
local companies, which will serve as a base for production and marketing of van bodies and dump trucks, etc.,
advanced construction of its plant (completed on May 2015). We are making preparations with a view tostarting the operation of such plant in the fiscal year ending March 2016.
As a result, net sales in the Specialty Truck Segment increased by 7,856 million yen (10.6%) to 82,231
million yen. Segment profit increased by 2,702 million yen (59.9%) to 7,217 million yen due to theimprovement of the sales and no influence of the allowance for doubtful accounts recorded in thepreceding fiscal year.

Operational Results

Electric refuse truck (Hybrid type)

Plant in Thailand

3

New-type single car carrier truck

Wing van truck (Thailand model)ii) Environmental Equipment and Systems Segment
In the field of plant construction, we reaped results from our positive marketing activities, contracting theconstruction of a recycling center in May 2014 with Shibetsu city in Hokkaido prefecture and a resource
conversion center in October 2014 with the Senboku Environmental Improvement Facility Association, a
special district authority organized by the Cities of Izumiotsu, Izumi and Takaishi in Osaka prefecture; and we
transferred four plant contracted in the past fiscal years. We made positive efforts also in the field of
maintenance and operation outsourcing.
As a result, net sales increased by 2,634 million yen (30.0%) to 11,430 million yen due to themomentary increase of the sales by the percentage of completion method. Segment profit increased by
50 million yen (3.7%) to 1,425 million yen.

Recycle center in Jonaniii) Real Estate Rental Segment
We continued to face a stiff competition in the multi-story parking equipment market. However, we engaged in
active marketing efforts in maintenance and renewal projects of such equipment. In the field of coin parking, weOperational Results

4

strove to improve the rate of operation by selecting parking lots and advance the cost reduction. In the field of
mega solar power generation, we inaugurate a power generation plant in Toyokawa City, Aichi Prefecture in
addition to two plants (in Iizuka City, Fukuoka Prefecture and in Hachinohe City, Aomori Prefecture)inaugurated in the past fiscal years.
As a result, net sales decreased by 2,055 million yen (24.3%) to 6,395 million yen due to the lack of sale of areal estate for sale in the preceding fiscal year, and segment profit decreased by 1,458 million yen (56.3%) to
1,134 million yen.

Toll parking (Coin-operated)

Multi-story parking equipment(in Indonesia)<Forecast of Operations for the Next Consolidated Fiscal Year ending March 31, 2016>
The gradual recovery of the Japanese economy is expected to continue due to such factors as the increase ofcapital investment due to improved corporate revenues and the improvement of consumption due to rise ofwage level, etc.; even though there are such alarming factors as the changes in crude oil prices and the
movement of financial conditions.
Our Group continues to make determined efforts to expand sales and profits and improve our corporate value,by steadily implementing several measures in the last year of our mid-term management plan “Next Step 2015”- To make the next step forward- to be mentioned later.
Regarding the forecast of consolidated business performance for March 2016, the Company estimates net sales
to decrease by 1,331 million yen (1.3%) compared to March 2015 to 98,000 million yen Management expects
the overall operating income to decrease by 418 million yen (4.4%) to 9,000 million yen, while net income isestimated to grow by 1,467million yen (33.9%) to 5,800 million yen.

Operational Results

5(2) Analysis on Financial Conditionsi) Situations of Assets, Liabilities and Net WorthIn the current consolidated fiscal year, total assets increased by 8,376 million yen (7.6%) from the end of thepreceding fiscal year to 119,120 million yen.
Current assets increased by 3,251 million yen (5.3%) to 64,963 million yen, due to increases in trade notes andaccounts receivable, etc.
Non-current assets (property, plant and equipment, intangible assets and investments and other assets)
increased by 5,125 million yen (10.5%) to 54,157 million yen, due to rise of market prices of investment
securities, etc.
Regarding liabilities, current liabilities increased by 4,106 million yen (11.7%) to 39,280 million yen, due toincreases in trade notes and accounts payable, etc. Non-current liabilities decreased by 1,577 million yen(12.4%) to 11,165 million yen due to decrease of long-term loans, etc.
Total net assets increased by 5,848 million yen (9.3%) to 68,675 million yen, due to posting of net profit, etc.
As a result, the capital adequacy ratio stood at 57.6% as of the end of the current fiscal year (56.7% at the end of
the preceding fiscal year).

ii) Cash Flow Situation
Consolidated cash and cash equivalents at the end of period decreased by 4,276 million yen (29.7%) comparedwith the end of the preceding fiscal year to 10,102 million yen. Cash flow by activity type is summarized asfollows:
Cash Flow from Operating Activities
Net cash provided by operating activities amounted to 1,098 million yen (a decrease of 8,289 million yen
compared with the preceding fiscal year). This was because of a posting of net profit, etc.
Cash Flow from Investing Activities
Net cash used in investing activities was 4,178 million yen (a decrease of 2,139 million yen compared with thepreceding fiscal year). This was because of purchases of non-current assets, etc.
Cash Flow from Financing Activities
Net cash used by financing activities amounted to 1,221 million yen (a decrease of 1,697 million yen comparedwith the preceding fiscal year). This was because of decrease of long-term loans.

(3) Principal policy for return of profits to shareholders and payment of dividends for the current
year and next year
The Kyokuto Kaihatsu Kogyo Group regards the return of profits to shareholders as one of the most importantmanagement’s policies. Taking the development of business in the future and business environments into
account, management has been striving to meet investors’ expectations through the improvement of businessperformance and the strengthening of its financial position.

Operational Results

6

The Meeting of Shareholders on June 25th, 2015 resolved and passed to pay a dividend of 14 yen per share at
the end of March 2015 as originally proposed by management, making its annual dividend 26 yen per shareincluding an interim dividend, increased by 5 yen compared with the preceding fiscal year, due to theimprovement of net income in the current consolidated fiscal year compared with the preceding consolidated
fiscal, despite the record of the extraordinary loss incurred due to withdrawal from the gasifying melting
business in the Environmental Equipment and Systems Segment.
For the year ending March 2016, management plans to pay an annual dividend of 26 yen per share (including
an interim dividend of 13 yen) and an anniversary dividend of 4 yen per share (including an interim anniversary
dividend of 2 yen), 30 yen per share (including an interim dividend of 15 yen) in total, increased by 4 yencompared with the preceding fiscal year..

Management Policy

7

2. Management Policy(1) Basic Management Policy of the Company
The management philosophy of the Kyokuto Kaihatsu Group is "Value technology and trust, make concerted
efforts to develop the company, and widely contribute to the society."
Our ultimate goal in the management policy is to implement corporate policy recognizing a social role andresponsibility as a public company in a strong relationship with various stakeholders such as customers,
business partners, shareholders, employees, and local societies. In addition, by providing safe, effective andhigh quality products and services through our fair and sound business activities, the Kyokuto Kaihatsu Groupseeks to bring about greater contribution to our society and maximize corporate value.
With this management policy, we devote ourselves to three major business domains including Specialty Truck,
Environmental Equipment and Systems, and Real Estate Rental.
(2) Targeted management index
The Kyokuto Kaihatsu Group has been working as one for the improvement of corporate value under the
medium-term management plan “Next Step 2015” - To make the next step forward - (3-year plan) since April 1,
2013.
In this plan, we set management targets of sales of 95,000 million yen and operating profit of 8,200 million yen
on a consolidated base for the term ending March 2016, the last fiscal year of the plan. However, while demandin our core special purpose vehicles business has trended at levels higher than we assumed, we achieved thesetargets in the second year of the plan as a result of the Group making a concerted effort to secure orders andhandle production.
We continue to implement several measures in order to achieve the above-mentioned forecast of consolidated
business performance for March 2016(3) Mid-to-Long Term Management Strategy and Major Challenges
On our group’s medium-term management plan "Next Step 2015", we are driving the key strategies forward
for our group’s progress under the basic policies as follows:
Basic policies
Kyokuto Kaihatsu Kogyo Group will celebrate its 60th anniversary in the final year of this medium-term
management planning.
Positioning this three-year range as an important term to make our structural reforms to make the next step
forward, we will try to restructure our management foundation and improve our corporate values as wellas promote the formation of attractive corporate culture as a trusted and loved group based on thefollowing basic policies.
"Step" to survive in the domestic market
For the core businesses (specialty truck, environmental equipment and systems and parking businesses),
we will construct a firm earning system to survive in the matured domestic market.
"Step" to the global development
Positioning the overseas business as a key for the future profits, we will strengthen the foundation for
global development.
We will energetically promote the early profit contribution of the overseas sites and new market
development.

Management Policy

8"Step" to the strengthening of total monozukuri (manufacturing) power
We will establish core technologies, develop human resources and ensure high quality in order tostrengthen the total monozukuri power as a company and develop our domestic/overseas business basedon the power.
"Step" to improve the brand value
We will provide high quality to various needs in the product development, production, sales and service
fields to improve customer satisfaction as well as develop effective PR strategies proactively in order toimprove our brand value in both Japan and abroad.
"Step" to get new sources of earnings
We will energetically promote business collaboration, M&A and entry in new fields in order to expand ourbushiness chances and create future core business so that we will be able to become a company that earns
100 billion yen.
Key Strategies(1) Establishing a firm earning system for the existing businesses
Specialty truck business[1] Securing orders by securely receiving domestic demands for earthquake disaster reconstruction
and recovery and land toughening.
[2] Expanding the shares of key products for sales expansion (dump trucks, refuse trucks, tailgate
lifters, trailers).
[3] Improving the production efficiency by measures such as reviewing the production process
drastically, promoting the automation and standardizing product specifications.
[4] Establishing the procurement system aiming at the best price and best quality.
[5] Establishing a firm earning foundation as a stock business by improving the after-sales service.
Environmental equipment and systems business[1] Participating in joint venture with other companies for recycle facilities and securing orders taking
advantage of competitive prices.
[2] Securing long-term stable earnings by after-sales service and accepting operation.
Parking business[1] Securing our competitiveness by promoting the product development in the fields whose markets
are expected to expand, overseas production and improving quality for mechanical multistory
parking equipment.
[2] Promoting the selection of business locations focusing on the profitability in the pay-by-the-hourparking lot.
(2) Strengthening the foundation for global development[1] Realizing the early stable operation of the plants in India and Indonesia and their contribution to
the group performance.
[2] Early establishment of the production of the plant in Thai in cooperation with NIPPON TREX
Co., Ltd.
[3] For the Kunshan plant in China, enhancing the sales in the South-East Asia and the parts supply
function to the group companies.
[4] Strengthening the business development in the specialty truck, environmental equipment andsystems and parking businesses in the China and the ASEAN region.
[5] Strengthening the development of human resources who support global development.

Management Policy

9[6] Strengthening the collaboration of domestic and overseas development sites of the group anddeveloping products that are competitive in the overseas markets.
(3) Enhancing the total power as a monozukuri company[1] Ensuring quality that is the top in the specialty truck business by measures such as promotion ofinternal manufacturing, skill tradition for monozukuri and improvement of technical skills andproduction technology.
[2] Establishing the lineup of only one and number one products that are accepted in the world andkeep leading the industry.
[3] Promoting the product development in new fields powerfully by using existing technologies.
(4) Improving the brand value[1] Improving the reliability by company-wide collaboration in the development, production, sales
and service for quality improvement.
[2] Sharing the awareness in the group that the brand is an important management resource andinputting management resources aggressively.
[3] Establishing systems for continuous brand value improvement activities and a system to evaluate
such activities.
(5) Creating future core businesses
Exploiting new needs in the existing businesses, inputting new products and creating "the fourthpillar" as a new core business in order to keep developing in the future. (E.g. entering in promisingmarkets that are not influenced by the existing businesses)(6) Company-wide activities for corporate value improvement[1] Strengthening the law observance and impropriety prevention system and social contribution by
powerful promotion of CSR activities.
[2] Strengthening the environmental management by taking measures such as energy-saving
promotion and reduction of substances of concern.
[3] Improving the satisfaction level of stockholders by implementing effective stockholder returnmeasures.

10

Consolidated Balance Sheets

CONSOLIDATED BALANCE SHEETSAt March 31, 2015 and 2014

Thousands of
U.S. dollars(Note 1)Millions of yen
ASSETS
Current assets:
Cash and deposits (Notes 8 & 9)
Short-term securities (Notes 8 & 9)
Trade notes and accounts receivable (Note 9)
Merchandise & finished goods
Work in process
Raw materials & supplies
Other current assets
Deferred tax assets (Note 15)
Allowance for doubtful accounts
Total current assets

2015¥

Property, plant and equipment (Note 10):Land (Note 5)
Buildings and structures (Note 5)
Machinery, equipment and vehicles
Construction in progress
Other
Total
Accumulated depreciation
Net property, plant and equipment

Intangible assets

Investments and other assets:
Investment securities (Notes 3 & 9)
Deferred tax assets (Note 15)
Other assets
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total
The accompanying notes are an integral part of these statements.

¥

2014

2015

6,764 ¥
3,338
40,086
371
4,771
7,063
1,041
1,570
(41)
64,963

5,643
8,736
34,654
279
3,139
6,797
1,075
1,651
(262)
61,712

20,081
31,40815,297227
4,217
71,230(34,909)
36,321

19,84330,832
13,974251
4,131
69,031(33,398)
35,633

167,133
261,405
127,315
1,888
35,101
592,842(290,548)
302,294

490

427

4,078

11,10019
4,934(3,082)
12,97149,031
110,743

128,792
418
39,969(24,807)
144,372
450,744991,429

15,47450
4,802(2,980)17,34654,157
119,120 ¥$$56,30027,779333,634
3,092
39,70458,7898,664
13,065(342)
540,685

Consolidated Balance Sheets

Thousands of
U.S. dollars(Note 1)Millions of yen
LIABILITIES AND NET ASSETS
Current liabilities:
Short-term bank loans (Notes 4, 5 & 9)
Current portion of bonds payable (Notes 4 & 9)
Current portion of long-term bank loans (Notes 4, 5 & 9)
Trade notes and accounts payable (Note 9)
Accrued expenses
Income taxes payable
Other current liabilities (Note 4)
Total current liabilities

2015¥

Non-current liabilities:
Long-term bank loans (Notes 4, 5 & 9)
Net defined benefit liabilities (Note 6)
Liabilities for directors' retirement benefits
Deferred tax liabilities (Note 15)
Other non-current liabilities (Notes 4, 5 & 9)
Total non-current liabilities
Total liabilities

Net assets:
Shareholders' equity:
Common stock (Note 12):
Authorized-170,950,672 shares
Issued-42,737,668 shares in 2015 and 2014
Capital surplus (Note 12)
Retained earnings
Treasury stock, at cost:
3,007,577 shares in 2014
3,008,559 shares in 2015
Total shareholders' equity
Accumulated other comprehensive income:Unrealized gain on available-for-sale securities
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Minority interests
Total net assets
Total
The accompanying notes are an integral part of these statements.

¥

11

2014

2015

4,140 ¥
1,688
23,739
3,792
2,084
3,837
39,280

2,720
147
2,190
20,540
3,446
3,130
3,000
35,173

$

2,363
755
190
4,191
3,666
11,16550,445

3,371
1,693
161
3,761
3,757
12,743
47,916

19,6706,280
1,580
34,88430,514
92,928419,853

11,90011,71942,064

11,90011,71938,536

99,042
97,534350,096(2,149)63,534(2,148)60,007(17,886)
528,786

5,063
(150)
171
5,084
57
68,675
119,120 ¥

2,895
(51)
(71)
2,773
47
62,827110,743

42,142(1,248)1,420
42,314476
571,576
991,429$

34,457
14,048
197,579
31,556
17,34831,937
326,925

12

Consolidated Statements of Income

CONSOLIDATED STATEMENTS OF INCOME
Years ended March 31, 2015 and 2014

Thousands of
U.S. dollars(Note 1)Millions of yen
Net sales
Cost of sales (Note 17)
Gross profit
Selling, general and administrative expenses (Note 13)
Operating income
Other income (expenses):
Interest and dividend income
Interest expense
Loss on sales or disposition of property and equipment, net
Loss on impairment of long-lived assets (Note 14)
Equity in losses of affiliates
Loss on revision of retirement benefit plans (Note 6)
Loss on liquidation of subsidiaries and affiliates
Loss on cancellation of lease assets
Foreign exchange gain
Other-net
Other expenses -net
Income before income taxes and minority interests
Income taxes (Note 15):
Current
Deferred
Total income taxes
Net income before minority interests
Minority interests in income
Net income

¥

¥

2015
99,331 ¥
78,373
20,958
11,5409,418

2014
90,91170,70420,207
12,169
8,038

$

204
(104)
(218)
(280)
(1,985)
(96)
226
(138)
(2,391)
7,027

162
(114)
(25)
(654)
(148)
(234)
204
(15)
(824)
7,214

1,695
(866)
(1,817)(2,328)(16,519)
(799)
1,878
(1,151)(19,907)58,482

3,118
(434)
2,684
4,343
10
4,333 ¥

3,543
17
3,560
3,654
8
3,646

25,949(3,615)22,334
36,14885
36,063$

U.S. dollars(Note 1)

Yen
2015
Amounts per shares:
Basic net income
Diluted net income
Cash dividends applicable to earnings of the year
The accompanying notes are an integral part of these statements.

¥

2015
826,727
652,294
174,433
96,04478,389109.06 ¥
26.00

2014
91.76
21.00

2015
$

0.91
0.22

Consolidated Statements of Comprehensive Income

13

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended March 31, 2015 and 2014

Thousands of
U.S. dollars(Note 1)Millions of yen
Net income before minority interests¥

Other comprehensive income (Note 16):
Net unrealized gains on other securities
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Share of other comprehensive income in affiliates accounted forby the equity method
Total other comprehensive income
Comprehensive income
Total comprehensive income attributable to:
Owners of the parent
Minority interests
The accompanying notes are an integral part of these statements.

¥

2015
4,343 ¥

2014
3,654

$

2015
36,148

2,168
(202)
242
73

1,189
83
36

18,043(1,676)
2,012
606

2,281

1,308

18,985

6,624 ¥

4,962

6,614
10

4,954
8

$

55,13355,04885

(2,148)

The accompanying notes are an integral part of these statements.

350,096(17,886)(11)(17,875)

528,786(7,605)(18)

36,063(11)

500,357927

499,430

24,09924,09942,142

97,534(7,605)(18)

36,063

321,656(17,875)(1,248)(1,070)

247

(425)

(425)

translation
adjustments

available-forsale securities

Balance, March 31, 2015

99,042

97,534927

320,729

Foreigncurrency

gain on

18,043$

99,042

97,534

Treasury stock

equityshareholders'

- ¥

171

242

(71)

(71)

(71)

benefit plansnts of definedRemeasureme

1,420

2,012

(592)

(592)

benefit plansnts of definedRemeasureme

Accumulated other comprehensive income

(150)

(129)

30

(51)

(51)

119

(42)

(128) ¥

adjustments

translation

Unrealized

Other net changes in the year

Cash dividends paid

Appropriation

Change in scope of equity method

Net income

Purchases of treasury stock

Restated balance, March 31, 2014

99,042

earnings

Retained

Total$

Cumulative effects of changes in accounting policies

Capital surplus

Common stock

Shareholders' equity

63,5342,895

Balance, March 31, 2014

(2,149)

(914)

(2)

4,333

(1)

60,118

5,063

11,71911,90042,064(1)(2,148)

¥

(914)

(2)

4,333

38,647

Balance, March 31, 2015

11,719111

60,007

2,168

11,900111

Other net changes in the year

Cash dividends paid

Appropriation

Change in scope of equity method

Net income

Purchases of treasury stock

Restated balance, March 31, 2014

Cumulative effects of changes in accounting policies

38,536(755)

1,706 ¥

2,895

11,719

(755)

(2)
(153)

¥

Balance, March 31, 2014

11,900

(2)
(153)

3,646

0

(2)

57,273sale securities

available-for-Foreigncurrency

gain onAccumulated other comprehensive income
Unrealized

1,189

¥

(2,146) ¥equityshareholders'

Total

Other net changes in the year

Cash dividends paid

Appropriation

Change in scope of equity method

Change in scope of consolidation

Net income
3,646

35,800 ¥0011,719 ¥Treasury stock

Disposal of treasury stock

11,900 ¥earnings(2)¥

Capital surplus

Purchases of treasury stock

Balance, March 31, 2013

Common stock

Retained

Shareholders' equity

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Years ended March 31, 2015 and 2014

42,314

18,985247

23,082

23,082

Total

5,084

2,281

30

2,773

2,773

1,237

(42)

1,578 ¥

Total

Minority

57

10

47

47

8

39

- ¥

68,675

2,291

(914)

28

4,333

(1)

62,938111

62,827

1,245

(755)

(195)

37

3,646

0

(2)

58,851

Total net assets

476

85

391

391

interests

Minority

571,576

19,070(7,605)229

36,063(11)523,830927

522,903

Total net assets

Thousands of U.S. dollars

interests

Millions of yen

Consolidated Statements of Changes 14
in Shareholders’ Equity

Consolidated Statements of Cash Flows

15

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended March 31, 2015 and 2014

Thousands of
U.S. dollars(Note 1)Millions of yen
2015
Operating activities:
Income before income taxes and minority interests
Depreciation and amortization
Loss on impairment of long-lived assets
Equity in losses of affiliates
Loss on sales or disposition of property and equipment, net
Interest and dividend income
Interest expenses
Decrease (increase) in trade notes and accounts receivable
Decrease (increase) in inventories
Increase (decrease) in trade notes and accounts payable
Increase (decrease) in net defined benefit liabilities
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in allowance for others
Increase (decrease) in consumption taxes payable
Other, net
Sub totalInterest and dividend income received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities

2015

7,027 ¥
1,793
280
216
(204)
104
(3,576)(1,972)
3,001
(282)
(314)
(60)
797
(1,748)
5,062
189
(23)
(4,130)
1,098

7,214
1,678
654
148
24
(162)
114
(2,445)
(918)
2,756
(290)
970
486
(7)
257
10,479163(66)(1,189)9,387

Investing activities:
Purchases of securities and investments
Proceeds from sales of securities and investments
Proceeds from maturity of securities and investments
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Net decrease (increase) in short-term loans
Disbursement of loans receivableCollection of loans receivable
Net cash used in investing activities(1,774)0(2,561)
51
70
(6)
42
(4,178)(1,224)615
617(2,134)
97
(12)
(9)
12
(2,038)(14,767)5(21,316)
426
583
(53)
353
(34,769)

Financing activities:
Net increase (decrease) in short-term bank loans
Proceeds from long-term bank loans
Repayment of long-term bank loans
Payment for redemption of bonds
Payment of finance lease obligations
Purchases of treasury stock
Proceeds from sales of treasury stock
Dividends paid
Net cash provided (used) in financing activities

1,420
680
(2,190)
(147)
(70)
(1)
(913)
(1,221)100
3,460(1,728)
(494)
(105)
(2)
0
(754)
477

11,8185,660(18,228)(1,223)(579)(11)(7,599)(10,162)

Foreign currency translation adjustments on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash of newly consolidated subsidiary at beginning of the year
Cash and cash equivalents at end of year (Note 8)24(4,277)
14,37910,102 ¥

58
7,884
6,466
29
14,379203(35,593)
119,672
84,079The accompanying notes are an integral part of these statements.

¥

2014

¥

$

$

58,482
14,921
2,328
1,794(1,695)866(29,766)(16,410)
24,980(2,349)(2,615)(498)
6,635(14,543)
42,1301,574(194)(34,375)
9,135

Basis of Presenting
Financial Statements

Consolidated 16

1. Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements of Kyokuto Kaihatsu Kogyo Co., Ltd.
(the “Company”) and its consolidated subsidiaries (collectively the “Group”) have been
prepared in accordance with the provisions set forth in the Japanese Financial Instruments
and Exchange Act and its related accounting regulations, and in conformity with accounting
principles generally accepted in Japan, which are different in certain respects as to theapplication and disclosure requirements of International Financial Reporting Standards.
In preparing the accompanying consolidated financial statements, certain reclassifications
have been made to the consolidated financial statements issued domestically, in order topresent them in a form which is more familiar to readers outside Japan.
In addition, the notes to consolidated financial statements include additional information
which is not required under generally accepted accounting principles and practices in Japan.
The financial statements presented herein are expressed in Japanese yen and, solely for theconvenience of the readers, have been translated into U.S. dollars at the rate of¥120.15=US$1, the approximate exchange rate on March 31, 2015. These translations
should not be construed as representations that the Japanese yen amounts actually are, havebeen or could be converted into U.S. dollar amounts.

2. Summary of Significant Accounting Policies(a) Consolidation
The consolidated financial statements include the accounts of the Company and its 9
significant subsidiaries. Investments in 4 nonconsolidated subsidiaries and 1 affiliate areaccounted for by the equity method.
Under the concept of control or significant influence, those companies in which theCompany, directly or indirectly, is able to exercise control over operations are fully
consolidated, and those companies which the Group has the ability to exercise significant
influence (affiliated companies) are accounted for by the equity method.
In March 31, 2015, 5 subsidiaries are excluded from scope of consolidation. As to these,
investments in 4 nonconsolidated subsidiaries are accounted for by the equity method, andother is not accounted for.

Basis of Presenting
Financial Statements

Consolidated 17

These companies are not material in terms of total assets, net sales, net income and retained
earnings and do not have any significant impact on the consolidated financial statements.
All significant inter-company balances and transactions have been eliminated in the
consolidated financial statements. All material unrealized gains resulting from inter-company
transactions have been eliminated.
Assets and liabilities of the consolidated subsidiaries at the time of investment are all valued
at fair value. The goodwill is being amortized on a straight-line basis over estimated useful
lives not exceeding 20 years, or 5 years in situations in which the useful lives cannot be
estimated. However, insignificant goodwill

is charged to expenses when incurred.

(b) Cash Equivalents
Cash equivalents are short-term investments that are readily convertible into cash andexposed to insignificant risk of changes in value. All of cash equivalents mature or becomedue within three months from the date of acquisition.

(c) Short-term Securities and Investment Securities
The Group classifies their securities which have readily determinable fair values as
held-to-maturity debt securities, available-for-sale securities, depending on management’s
intent.
(Held-to-maturity debt securities)
Held-to-maturity debt securities are stated at amortized cost.
(Available-for-sale securities)
Marketable available-for-sale securities are stated at fair value, with unrealized gains or losses,
net of applicable taxes, and reported in accumulated other comprehensive income. The cost ofavailable-for-sale securities sold is determined based on the moving average method.
None-marketable securities are stated at cost determined by the moving average method.
(d) Inventories
Merchandises are stated at cost determined by the specific identification method, or if lower,
the net realizable value.
Raw materials, finished goods and work in process are stated at cost determined by theperiodic average method, or if lower, the net realizable value.

Basis of Presenting
Financial Statements

Consolidated 18

Supplies are stated at cost determined by the last purchase cost method, or if lower, the net
realizable value.

(e) Depreciation
Depreciation is principally computed under the straight-line method, using rates based on
the estimated useful lives of the assets. The useful lives are principally ranging from 7 to 60
years for buildings and structures, and 4 to 17 years for machinery, equipment and vehicles.
Amortization of intangible assets is computed by the straight-line method.

(f) Retirement Benefits
Net defined benefit liabilities are recorded for employees’ pension and severance payments
based on the projected benefit obligations and the fair value of plan assets at the balance
sheet date.
In calculating the projected retirement obligations, the straight-line attribution is applied forallocation of projected benefits to the periods until the end of the current fiscal year.
Actuarial gains or losses are amortized by declining-balance method over stated years that
do not exceed the average remaining service period of the employees (10 years) beginningwith the year following the year which incurred.
(Accounting change)
From the fiscal year, the Company has adopted the “Accounting Standard for Retirement
Benefits” (Accounting Standards Board of Japan (ASBJ) Statement No.26, May 17, 2012;
hereinafter referred to as the “Retirement Benefits Accounting Standards”) and “Guidance on
Accounting Standard for Retirement Benefits” (ASBJ Guidance No.25, March 26, 2015;
hereinafter referred to as the “Guidance on Retirement Benefits”), specifically content stipulated
in paragraph 35 of the Retirement Benefits Accounting Standards and stipulated in paragraph 67of the Guidance on Retirement Benefits.
Consequently, the Company has revised its method for calculating its retirement benefit liability
and service costs, and the methodology for deciding the discount rate has also been changed, fromusing the discount rate based on the employees’ average remaining period of service to using asingle weighted average discount rate that reflects the estimated period and payment of retirement
benefits.
In accordance with transitional provisions set forth in paragraph 37 of Retirement Benefits
Accounting Standard, retained earnings are adjusted for the effect of changes in the method for
calculating retirement benefit liability and service costs at the beginning of this fiscal year.

Basis of Presenting
Financial Statements

Consolidated 19

As a result, at the beginning of the consolidated fiscal year under review, net defined benefit
liability decreased by ¥173 million ($ 1,441 thousand) and retained earnings increased by¥111 million ($ 927 thousand). The monetary effect of operating income, ordinary income
and income before income taxes were immaterial.
Net assets per share increased by ¥2.81 ($ 0.02), and the effect of net income per share was
immaterial.

(g) Allowance for Doubtful Accounts
The allowance for doubtful accounts is provided against potential losses on collections at an
amount determined using a historical bad debt loss ratio and an amount individuallyestimated on the collectability of receivables that are expected to be uncollectible due to badfinancial condition or insolvency of the debtor.

(h) Asset Retirement Obligations
Asset retirement obligations are defined as a statutory or similar obligation with regard to
the removal of tangible fixed assets and are incurred when tangible fixed assets are acquired,constructed, developed or used in an ordinary way. The asset retirement obligation isrecognized as the sum of the discounted cash flow required for the future asset retirement
and is recorded in the period in which the obligation is incurred if a reasonable estimate canbe made.

(i) Revenue from Construction Contracts
Revenues from construction contracts and the related costs are recorded under thepercentage-of-completion method, if the outcome of the construction contract can be estimatedreliably. Otherwise, the completed-contract method is applied if the outcome cannot be reliably
estimated.

(j) Allowance for Losses on Construction Contracts
Estimated losses on construction contracts are charged to income in the period in which they are
identified.

Basis of Presenting
Financial Statements

Consolidated 20(k) Leases
Finance lease transactions, except for immaterial or short-term finance leases transactions
which are accounted for as operating leases, are capitalized to recognize lease assets andlease obligations in the balance sheet. Such capitalized lease assets are depreciated by thestraight-line method over the lease terms assuming no residual value.

(l) Income Taxes
The asset and liability approach is used to recognize deferred tax assets and liabilities forthe expected future tax consequences of temporary differences between the carrying amountand tax bases of assets and liabilities, and operating loss carry-forwards.

(m) Derivatives
All derivatives, except for certain foreign exchange forward contracts and interest rate swap
contracts described below, are stated at fair value. If derivative financial instruments areused as hedges and meet certain hedging criteria, the Group defers recognition of gains orlosses resulting from a change in the market value of the derivative financial instruments
until the related gains or losses on the hedged items are recognized. Accounts payablehedged by foreign exchange contracts which meet certain hedging criteria are translated attheir contracted rates. Interest rate swaps which meet certain hedging criteria are accounted
for as if the interest rate applied to the swaps had originally applied to the underlying debt.

(n) Per Share Information
Basic net income per share is computed based on net income available to common
stockholders and the weighted average number of shares of common stock outstanding
during each period. The average numbers of shares used in the computations are 39,279 and
39,730 thousand shares for 2015 and 2014, respectively.
Diluted net income per share is not disclosed because the Company had no potentiallydilutive shares outstanding at these balance sheet dates.
Cash dividends per share shown in the statements of income are the amounts applicable to
the respective years.

Basis of Presenting
Financial Statements

Consolidated 21(o) Accounting Standards issued but not yet applied
On September 13, 2013, the ASBJ issued “Revised Accounting Standard for Business
Combinations” (ASBJ Statement No. 21), “Revised Accounting Standard for Consolidated
Financial Statements” (ASBJ Statement No. 22), “Revised Accounting Standard for Business
Divestitures” (ASBJ No. 7), “Revised Accounting Standard for Earning Per Share” (ASBJ No. 2),“Revised Guidance on Accounting Standard for Business Combinations and Accounting Standard
for Business Divestitures” (ASBJ Guidance No. 10), and “Revised Guidance on AccountingStandard for Earning Per Share” (ASBJ Guidance No.4).
(1) Summary
The accounting standard was revised that 1)the accounting treatment for changes in a parent’s
ownership interest in a subsidiary when that the parent retains control over the subsidiary on the
additional acquisition of shares in a subsidiary, 2)the accounting treatment for acquisition related
costs, 3)the amendment of the presentation method of net income and the amendment of “minority
interests” to “non-controlling interests”, 4)the accounting treatment for the transitional provisions.
(2) Scheduled date of adoption
These revised accounting standards will be adopted from the beginning of the fiscal year ending
March 31, 2016. In addition, the amendment of the accounting treatment for the transitional
provisions will be adopted from the business combinations performed on or after the beginning of
the fiscal year ending March 31, 2016.
(3) The effect of adoption of this revised accounting standard
The effect of adoption of these revised accounting standards is now under the assessment at thetime of preparation of the accompanying consolidated financial statements.

Basis of Presenting
Financial Statements

Consolidated 22

3. Securities
The following is a summary of held-to-maturity securities and available-for-sale securities
at March 31, 2015 and 2014:
Millions of yen

Held-to-maturity securities

March 31, 2015

Gross

Gross

Carrying

unrealized

unrealized

amountgains

losses¥¥¥Fair value

Debt securities,
whose fair value exceeds
carrying amount

15

1

－

¥

16

whose fair value does notexceed carrying amount
Total

－

30
¥

45

¥

1

(0)
¥

(0)

30
¥

46

Millions of yen

Held-to-maturity securities

March 31, 2014

Gross

Gross

Carrying

unrealized

unrealized

amountgains

losses¥¥¥Fair value

Debt securities,
whose fair value exceeds
carrying amount

15

0

－

¥

15

whose fair value does notexceed carrying amount
Total

－

30
¥

45

¥

0

(0)
¥

(0)

30
¥

45

Basis of Presenting
Financial Statements

Consolidated 23
Thousands of U.S. dollars

Held-to-maturity securities

March 31, 2015

Gross

Gross

Carrying

unrealized

unrealized

amountgains

lossesFair value

$

$

5

$ －

$ 130

－

(1)

249

Debt securities,
whose fair value exceeds
carrying amount125

whose fair value does notexceed carrying amount

250

Total

$

375

$

5

$

(1)

$

379

Millions of yen

Available-for-sale securities
Gross

Gross

Book Value

unrealized

unrealized(Estimated fair

gains

lossesvalue)

Cost

March 31, 2015
Market value available:
Equity securities¥

Other securities
Subtotal

5,950

¥

6,082

¥

0

132
¥

7,419

¥

7,419

(25)

¥

(2)
¥

(27)

13,344130¥

Market value not available:

13,474
1,955

Total

¥

15,429Millions of yen

Available-for-sale securities
Gross

Gross

Book Value

unrealized

unrealized(Estimated fair

gains

lossesvalue)

Cost

March 31, 2014
Market value available:
Equity securities¥

Other securities
Subtotal

5,542

¥

5,674

¥

0

132
¥

4,531

¥

4,531

(33)

¥

(9)
¥

(42)

123
¥

Market value not available:
Total

10,04010,163892¥

11,055

Basis of Presenting
Financial Statements

Consolidated 24
Thousands of U.S. dollars

Available-for-sale securities

March 31, 2015

Gross

Gross

Book Value

unrealized

unrealized(Estimated fair

gains

lossesvalue)

61,744$ (205)$ 111,065

0

(18)

1,084

61,744$ (223)$ 112,149

Cost

Market value available:
Equity securities$ 49,526

Other securities

1,102

Subtotal$ 50,628$$

Market value not available:

16,268Total$ 128,417

4. Short-term Bank Loans and Long-term Debts
The annual average interest rates applicable to short-term bank loans at March 31, 2015 and2014 were 0.47% and 0.63%, respectively.
Long-term debts at March 31, 2015 and 2014 consisted of the following:Thousands ofMillions of yen

U.S. dollars

2014

2015

2015
Bonds

-

¥ 147

4,051

5,561

33,718

144

184

1,200

Other

1,560

1,779

12,980Total¥ 5,755¥ 7,671$ 47,898

Long-term bank loans
Lease obligations

¥

$

-

Aggregate annual maturities of long-term debts subsequent to March 31, 2015 were as
follows:
Thousands ofYear ending March 31

Millions of yen

U.S. dollars

2016

¥

1,959

$ 16,310

2017

1,264

10,521

2018

1,052

8,755

2019

790

6,572

2020 and thereafter

690

5,740

5,755

$ 47,898

Total¥

Basis of Presenting
Financial Statements

Consolidated 25

To set up a commitment line by multiple finance institutions, the Company renewed anagreement with a syndicate of 7 banks for the years ended March 31, 2015 and 2014,
respectively.
The unexecuted balance of lending commitments of the Company at March 31, 2015 and2014 were as follows:
Thousands ofTotal lending commitments

Millions of yen

U.S. dollars

2015

2014

2015

¥ 3,000¥ 3,000$ 24,969

1,200

－

9,988

¥ 1,800¥ 3,000$ 14,981

Less amounts currently executed
Unexecuted balance

5. Pledged Assets
The following assets were pledged as collateral for the following borrowings at March 31,
2015 and 2014:
Thousands ofMillions of yen

U.S. dollars

2014

2015

2015
Land

¥

5,755

Buildings
Total

¥

5,755

$

47,896

3,225

3,399

26,841¥ 8,980¥ 9,154$ 74,737

Thousands ofMillions of yen

U.S. dollars

2014

2015

2015
Short-term bank loans
Current portion of
long-term bank loans
Long-term bank loans
Other non-current liabilities
Total

¥

100

¥

100

$

832

591

635

4,920

607

518

5,050

2,485

2,719

20,686¥ 3,783¥ 3,972$ 31,488

Basis of Presenting
Financial Statements

Consolidated 26

6. Retirement Benefits
The Company and a domestic subsidiary have defined benefit corporate pension plans andlump-sum retirement benefit plans. Other domestic subsidiaries join the Smaller Enterprise
Retirement Allowance Mutual Aid Scheme which is a kind of defined contribution plans.
For the year ended March 31, 2014, the Company transferred its part of defined benefit
corporate pension plan to a defined contribution pension plan. As a result of applying“Guidance on Accounting Standard for Transfers Between Retirement Benefit Plans” (ASBJ
Guidance No.1, January 31, 2002), Loss on revision of retirement benefit plans of ¥234
million was recognized.
The changes in defined benefit obligations for the year ended March 31, 2015 and 2014
were as follows:
Thousands of2015
Benefit obligations at beginning of year
Cumulative effects of changes in accounting

6,260

Millions of yen

U.S. dollars

2014

2015

¥

6,533

$

52,102(173)-(1,441)

6,087

6,533

50,661Service cost

376

385

3,132

Interest cost

84

112

701

Actuarial gains or losses

145

38

1,203

Retirement benefits paid

(521)

(424)

(4,335)

-

(384)

-

policies
Restated balance at beginning of the year

Transition to a defined contribution pension
plan
Benefit obligations at end of year

6,171

¥

6,260

$

51,362

Basis of Presenting
Financial Statements

Consolidated 27

The changes in plan assets for the year ended March 31, 2015 and 2014 were as follows:
Thousands ofPlan assets at beginning of year

Millions of yen

U.S. dollars

2015

2014

2015

¥

¥

4,567

4,135

$

38,016

Expected return on plan assets

81

71

680

Actuarial gains or losses

482

341

4,012

Contributions from employers

754

663

6,279

Retirement benefits paid

(468)

(381)

(3,905)

-

(262)

-

Transition to a defined contribution
pension plan
Plan assets at end of year

¥

5,416

¥

4,567

$

45,082

The reconciliation of the defined benefit obligations and plan assets to the net defined
benefit liabilities recognized in the consolidated balance sheet as of March 31, 2015 and2014 were as follows:

Thousands ofBenefit obligations

Millions of yen

U.S. dollars

2015

2014

2015

¥

¥

6,171

Plan assets at end of year
Net

amountofliabilities

5,416
and

assets¥recognized in consolidated balance sheet
Net defined benefit liabilities¥

Net

amountofliabilities

andassetsrecognized in consolidated balance sheet

¥

$

4,567

51,36245,082

755

¥

1,693

$

6,280

755

¥

1,693

$

6,280

－

Net defined benefit assets

6,260

755

－
¥

1,693

－
$

6,280

Basis of Presenting
Financial Statements

Consolidated 28

The retirement benefit expenses for the year ended March 31, 2015 and 2014 was asfollows:
Thousands ofMillions of yen

U.S. dollars

2015

2014

2015

¥

¥

$

Service cost

376

385

3,132

Interest cost

84

112

701

Expected return on plan assets

(81)

(71)

(680)

Recognition of actuarial gains or losses

23

108

188

Severance and pension costs

¥

402

¥

534

-

¥

234

Loss on revision of retirement benefit
plans (Other expenses)

$

3,341
-

Remeasurements of defined benefit plans recognized in other comprehensive income(amount before income tax effect) were as follows:
Thousands of2015

Millions of yen

U.S. dollars

2014

2015

Recognized actuarial gains

¥

360

-

$

2,996

Total

¥

360

-

$

2,996

Remeasurements of defined benefit plans recognized in accumulated other comprehensive
income (amount before income tax effect) were as follows:
Thousands ofMillions of yen

U.S. dollars

2015

2014

2015

Unrecognized actuarial gains or losses

¥

(250)

¥

110

$

(2,083)

Total

¥

(250)

¥

110

$

(2,083)The components of plan assets as of March 31, 2015 and 2014 were as follows:
Ratio

2015

2014

Bonds

36%

35%

Securities

41%

39%

General account asset

18%

20%

Other

5%

6%

Total

100%

100%

Basis of Presenting
Financial Statements

Consolidated 29

The major actuarial assumptions for the year ended March 31, 2015 and 2014 were as
follows:
2015

2014

Discount rate

0.9 to 1.3%

1.3%

Long-term rate of return on plan assets

1.3 to 2.0 %1.3 to 2.0 %Future salary increase

4.1 to 6.6%

4.1 to 6.4%

Long-term rate of return on plan assets was determined by considering the current andfuture portfolio of plan assets and the current and future long-term performance of various
assets comprise the plan assets.
As a result of transferring the part of defined benefit corporate pension plan to a defined
contribution pension plan on March 31, 2014, the benefit obligations decreased by ¥384
million and unrecognized actuarial gain or loss (before tax) decreased by ¥5 million for theyear ended March 31, 2014. The pension assets of ¥613 million will be transferred to thedefined contribution pension plan for 4 years. Outstanding balances for transferring of ¥343
million ($ 2,858 thousand) as of March 31, 2015, was accounted as “Other current
liabilities” and “Other non-current liabilities” on the consolidated balance sheets.
The required amount of the defined contribution pension plan were ¥87 million ($ 728
thousand) and ¥26 million for the year ended March 31, 2015 and 2014 in other domestic
subsidiaries.

7. Contingencies
At March 31, 2015 and 2014, the Group was contingently liable as follows:
Thousands of2015

Millions of yen

U.S. dollars

2014

2015

¥

$

As a guarantor of indebtedness of :Affiliated companies

¥

Other
Total

405
807

¥

1,212

3,668
172

¥

3,840

3,371
6,713

$

10,084

Basis of Presenting
Financial Statements

Consolidated 30

8. Cash and cash equivalents
Cash and cash equivalents at March 31, 2015 and 2014 were as follows:
Thousands of U.S.
Millions of yen

Cash and deposits

2015

2014

2015

¥

¥

$

Short-term securities
Cash and cash equivalents

dollars

6,764

5,643

56,300

3,338

8,736

27,779¥ 10,102¥ 14,379$ 84,079

9. Financial Instruments and Related Disclosures(1) Policy for financial instruments
The Group manages funds by utilizing short-term deposits, etc. The Group raises money
by borrowing from financial institutions and by issuing bonds. Derivatives are used, notfor speculative nor trading purpose, but to hedge the exposure to foreign exchange raterisks with the debts and credits dominated in foreign currencies and interest rate risks
associated with certain interest payments on borrowings.
(2) Types of financial instruments and related risk, and risk management for financial
instruments
Trade notes and accounts receivable are exposed to credit risk in relation to customers.
In order to monitor credit risk, the Group manages, according to the credit management
guideline of the Group, the due date and the balance of operating receivables from
customers.
Investment securities consist of mainly held-to-maturity securities and equity securities
issued by the Group’s business partners and these securities are exposed to market risk.
The Group periodically monitors the fair value of such equity securities, which isreported to the board meeting.
Trade notes and accounts payable have payment due dates mainly within one year. Tradenotes and accounts payable denominated in foreign currencies are exposed to the market
risk of fluctuation in foreign currency exchange rate. Such risk is hedged principally by
forward foreign currency contract.
Short-term bank loans are raised mainly in connection with business activities andlong-term bank loan and bonds payable, which are due mainly within five years, areraised principally for the purpose of making capital investments.

Basis of Presenting
Financial Statements

Consolidated 31

Long-term debts with variable interest rates are exposed to interest rate fluctuation risk,so the Group enters into interest rate swap transactions to manage such interest rate
exposure.
Derivatives are managed in accordance with policies and procedures for risk assessment(see Note 11 “Derivatives”) and also the Group enters into derivative transactions onlywith financially stable financial institutions to reduce institutions’ credit risk.
Based on a report from the Company and consolidated subsidiaries, the Group preparesand updates its cash flow plans on a monthly basis to manage the Group’s liquidity.
(3) Supplementary explanation of the estimated fair value of financial instruments
With regard to the below mentioned contract prices etc. of derivatives, the contract
prices themselves do not present the market risk on the derivative transactions.
Summarized in the table below are the carrying amounts and the estimated fair value offinancial instruments outstanding at March 31, 2015 and 2014. Financial instruments forwhich it is extremely difficult to determine the fair value are not included in the table below.
Millions of yen

Carrying
March 31, 2015
Cash and deposits¥

UnrecognizedamountFair value

6,764

¥

6,764

gain/loss¥─

Trade notes and accounts receivable

40,08640,086

─

Short-term securities

3,338

3,338

─

Investment securities

13,51913,5201

Trade notes and accounts payable(23,739)(23,739)

─

Short-term bank loans(4,140)(4,140)─Long-term bank loans(4,051)(4,051)0Long-term deposits(1,560)(1,678)

(118)

─

─

─

Derivatives

Basis of Presenting
Financial Statements

Consolidated 32

Millions of yen

Unrecognized

Carrying
March 31, 2014
Cash and deposits¥

amountFair value

5,643

¥

gain/loss

5,643

¥

─

Trade notes and accounts receivable

34,65434,654─

Short-term securities

8,736

8,736

─

Investment securities

10,208

10,2080Trade notes and accounts payable(20,540)(20,540)

─

Short-term bank loans(2,720)(2,720)─Long-term bank loans(5,561)(5,559)

2

(147)

(148)

(1)

(1,779)(1,908)

(129)

─

─

─

Bonds payable
Long-term deposits
Derivatives

Thousands of U.S. dollars

Carrying
account

March 31, 2015
Cash and deposits

Unrecognized$

56,300$Fair value

gain/loss

56,300$─

Trade notes and accounts receivable

333,634

333,634

─

Short-term securities

27,77927,779─Investment securities

112,524

112,5284

Trade notes and accounts payable(197,579)(197,579)―

Short-term bank loans(34,457)(34,457)─Long-term bank loans(33,718)(33,715)

3

Long-term deposits(12,980)(13,962)

(982)

─

─

─

Derivatives

Methods to determine the estimated fair value of financial instruments and other mattersrelated to securities and derivative transactions:(a) “Cash and deposits” and “Trade notes and accounts receivable”
Their carrying amounts approximate fair value because of their short maturity.
(b) “Short-term securities”
The fair values of held-to-maturity debt securities are based on quotes provided by thefinancial institutions.
The carrying amounts of the other securities than the above debt securities approximate fair value
because of their short maturity.

Basis of Presenting
Financial Statements

Consolidated 33(c) “Investment securities”
The fair values of marketable securities are based on quoted market prices. The fair valuesof debt securities are based on quotes provided by the financial institutions. For information
on securities classified by holding purpose, please refer to Note 3 “Securities”.
(d) “Trade notes and accounts payable” and “Short-term bank loans”
Their carrying amounts approximate fair value because of their short maturity.
(e) “Long-term bank loans”
The fair value of long-term bank loans is estimated based on present value of the total ofprincipal and interest discounted by an assumed current interest rate for loans with similarterms and remaining maturities.
(f) “Bonds payable”
The fair value of bonds payable is estimated based on present value of the total of principal
and interest discounted by an assumed interest rate based on debt’s maturity and credit risk.
(g) “Long-term deposit”
The fair value of long-term deposit is estimated based on present value of the total ofprincipal and interest discounted by an assumed interest rate, if possible, based on debt’s
maturity and credit risk.
(h) “Derivatives”
Please refer to Note 11 “Derivatives”.
Financial instruments for which it is extremely difficult to determine the fair value at March
31, 2015 and 2014 consist of the following:Thousands of U.S.
Millions of yen

Non-listed equity securities
Long-term deposit

2015

2014

¥

¥

1,955
1,387

dollars

2015
892

1,053

$

16,268
11,541

The annual maturities of financial assets and investment securities with contractual
maturities subsequent to March 31, 2015 and 2014 were as follows:Basis of Presenting
Financial Statements

Consolidated 34

Millions of yen
Due after one

Due after five

year throughyears throughfive years

ten years

Due in one year
or less

March 31, 2015
Cash and deposits¥

Trade notes and accounts receivable

6,764

─

¥

─

40,085

1

─

─

45

─

Investment securities
Total

¥

¥ 46,849

¥

46

¥

─

Millions of yen
Due after one

Due after five

year throughyears throughfive years

ten years

Due in one year
or less

March 31, 2014
Cash and deposits¥

Trade notes and accounts receivable

5,643

─

¥

─

34,654

─

─

─

45

─

Investment securities
Total

¥

¥ 40,297

¥

45

¥

─

Thousands of U.S. dollars

Due in one year
or less

March 31, 2015
Cash and cash equivalents
Trade notes and accounts receivable
Investment securities
Total

$

56,300Due after one

Due after five

year throughyears throughfive years

ten years

$

―

$

―

333,629

5

─

─

375

─

$ 389,929

$

380

$

―

10. Investment Property
The company and certain subsidiaries hold some rental properties including land in Tokyoand other areas (“investment properties”). The amounts of net income related to investment
properties (rental income is recognized in operating revenue and rental expense isprincipally charged to operating expenses) were ¥ 545 million ($ 4,533 thousand) and ¥ 724
million for the year ended March 31, 2015 and 2014, respectively. There was no loss on
impairment of investment properties for the year ended March 31, 2015 and 2014.

Basis of Presenting
Financial Statements

Consolidated 35

The carrying amount, changes in such balances and market prices of investment properties
were as follows:
Millions of yen

Carrying amount

Fair value

Increase/
April 1, 2014
¥ 8,364(decrease)¥ (353)

March 31, 2015

March 31, 2015

¥ 8,011¥ 10,519

Millions of yen

Carrying amount

Fair value

Increase/
April 1, 2013
¥ 9,301(decrease)¥ (937)

March 31, 2014

March 31, 2014

¥ 8,364¥ 10,707

Thousands of U.S. dollars

Carrying amount

Fair value

Increase/
April 1, 2014
$ 69,616(decrease)$ (2,937)

March 31, 2014

March 31, 2015

$ 66,679$ 87,550(1) Carrying amount is net of accumulated depreciation and accumulated impairment
losses, if any.
(2) Decrease during the year ended March 31, 2015 was mainly due to depreciation in an
amount of ¥ 202 million ($ 1,678 thousand) and the disposition by demolition ofHaneda office in an amount of ¥ 165 million ($ 1,370 thousand).
Decrease during the year ended March 31, 2014 was mainly due to depreciation in an
amount of ¥ 212 million and the change in category of Hachinohe Plant due to startingup the electric power selling in an amount of ¥ 717 million.
(3) Fair value at March 31, 2015 and 2014 were principally measured based on the real estateappraisal assessed by the external real estate appraiser.

Basis of Presenting
Financial Statements

Consolidated 36

11. Derivatives
Derivative financial instruments are utilized by the Company principally to reduce interest
rate risk and foreign exchange rate risk. The Company has established a control
environment which includes policies and procedures for risk assessment and for theapproval, reporting and monitoring of transactions involving derivative financial
instruments. The Company does not hold or issue derivative financial instruments for
trading purposes.
The notional amounts and the estimated fair value of derivative financial instruments, forwhich deferred hedge accounting has been applied were as follows:
Millions of yen

March 31, 2015

Hedged item

Contract

Contract amountamountdue after one year

Fair value

Interest rate swap:(Fixed rate payment/floating

Long-term

rate receipt)bank loans

¥

275

¥

-

Note

Millions of yen

March 31, 2014

Hedged item

Contract

Contract amountamountdue after one year¥¥

Fair value

Interest rate swap:(Fixed rate payment/floating

Long-term

rate receipt)bank loans

793

275

Note

Thousands of U.S. dollars

March 31, 2015

Hedged item

Contract

Contract amountamountdue after one year

Fair value

Interest rate swap:(Fixed rate payment/floating

Long-term

rate receipt)bank loans

$

2,289

$

-

Note

Fair value of swap contracts assigned for Long-term bank loans is included in the fair valueof Long-term bank loans disclosed at Note 9 “Financial Instruments and Related
Disclosures”.

Basis of Presenting
Financial Statements

Consolidated 37

12. Shareholders’ Equity
Changes in common stock and additional paid-in capital have resulted from the following:
Millions of yen

Balance at March 31, 2013
Retirement of stock during 2014
Balance at March 31, 2014
Retirement of stock during 2015
Balance at March 31, 2015

Numbe r o f

CommonCapita l

SharesStock

Surplu s

42,737,668

11,90011,719－－042,737,668

11,90011,719－－－42,737,668

11,90011,719Thousands of U.S. dollars

Balance at March 31, 2014
Retirement of stock during 2015
Balance at March 31, 2015

CommonCapita l

Stocksurp lus

99,042

97,534－－

99,042

97,534The Company adopted 100 shares of common stock as “unit amount of shares”. A holder ofshares representing less than one unit cannot exercise any voting rights with respect to suchshares. However, the holder is entitled to receive dividends and other distributions. A holder
of a fraction of a unit may at any time request the Company to purchase such shares at theprevailing market price.

13. Research and Development
Research and development expenditure which is included in “Selling, general andadministrative expenses” were ¥ 1,485 million ($ 12,363 thousand) and ¥ 1,347 million forthe years ended March 31, 2015 and 2014, respectively.

14. Loss on impairment of long-lived assets
With regard to the property, plant and equipment of the Group, business assets were classified into
groups based on the management accounting categories. For rental properties, idle properties andproperties for sale, each property is considered to constitute a group. Headquarters and welfare
facilities were classified as corporate assets.

Basis of Presenting
Financial Statements

Consolidated 38

In the fiscal year ending March 31, 2015, there were no losses on impairment of long-lived assets.
In the fiscal year ending March 31, 2014, the Group recognized loss on impairment of long-lived
assets as follows:
Use

Type of assets

Business property

Buildings, structures, machineryand equipment, vehicles, tools,

Location

China, Kunshan

furniture and fixtures
Property for sale

Land

Sapporo-shi, Hokkaido

Since return of investments in certain business properties was judged to be difficult due todecrease of expected future cash flow from them, the book values of such assets were written
down to the expected future cash flow, and the property for sale was written down to net sales
values, and the resulting decrease was recognized as loss on impairment of long-lived assets of¥654 million, comprising ¥389 million for buildings, ¥163 million for machinery and equipment,¥57 million for structures, ¥8 million for land and ¥37 million for other assets.

15. Income Taxes
The Company and its domestic subsidiaries are subject to several taxes based on income,which in the aggregate resulted in a statutory tax rate of approximately 35.59% and 37.96%
for the years ended March 31, 2015 and 2014, respectively. Foreign subsidiaries are subject
to income taxes of the countries in which they operate.
Following the publication on March 31, 2015 of the “Act on Partial Revision of the Income Tax
Act, etc.” and the “Act on Partial Revision of the Local Tax Act, etc.”, the effective tax rate used
for the calculation of deferred tax assets and liabilities was changed from 35.59% to 33.02% for
the temporary differences expected to be realized or settled in the year beginning on April 1, 2015
and to 31.52% for the temporary differences expected to be realized or settled from April 1, 2016.
Due to this change in tax rate, net of deferred tax liabilities (after deduction of deferred tax assets)
as of the end of the fiscal year decreased by ¥420 million ($ 3,499 thousand), and income
taxes-deferred for the fiscal year decreased ¥111 million ($ 924 thousand), unrealized gain on
available-for-sale securities and remeasurements of defined benefit plans as of the end of the fiscal
year increased by ¥ 301 million ($ 2,506 thousand) and ¥ 8 million ($ 69 thousand), respectively.
The tax effects of significant temporary differences which resulted in deferred tax assets andliabilities at March 31, 2015 and 2014 were as follows:Basis of Presenting
Financial Statements

Consolidated 39

Millions of yen

Thousands of U.S. dollars

2014

2015

660

$ 5,2812015
Deferred tax assets - current:
Accrued Bonuses

¥

635

¥

Provision for product warranties

242

242

2,011

Allowance for repairs

127

188

1,058

Allowance for doubtful accounts

408

93

3,398

Accrued corporation enterprise tax

171

244

1,425

Loss on valuation of inventories

104

85

865

Forecast of construction cost

164

55

1,365

Other

176

135

1,463

Sub-total

2,027

1,702

16,866

Less valuation allowance

(457)

(51)

(3,801)

Total deferred tax assets - current

1,570

1,651

13,065

240

597

1,998

256

272

2,135

110

125

915

Allowance for doubtful accounts

1,003

1,144

8,350

Loss on impairment of long-lived assets

440

544

3,665

215

-

1,786

423

393

3,516

Sub-total

2,687

3,075

22,365Less valuation allowance(1,682)(2,068)(13,996)

Total deferred tax assets - non-current

1,005

1,007

8,369

Unrealized gain on investment securities(2,332)(1,598)(19,412)Reduction reserve for fixed assets(1,510)(1,723)(12,570)

(143)

(145)

(1,191)(1,161)(1,283)(9,662)(5,146)(4,749)(42,835)¥ (4,141)¥ (3,742)$ (34,466)

Deferred tax assets – non-current:
Net defined benefit liabilities
Fixed assets – elimination ofintercompany profits
Accrued payable for transfer to the defined
contribution pension plan

Loss on valuation of investment for
subsidiaries and affiliates
Other

Deferred tax liabilities:

Special depreciation reserve
Unrealized gain on subsidiaries’
fixed assets by revaluation at the
beginning of consolidation
Total deferred tax liabilities - non-current

Net deferred tax assets(liabilities) – non-current

Basis of Presenting
Financial Statements

Consolidated 40

The reconciliation between the statutory tax rate and the effective income tax rate for theyear ended March 31, 2015 and 2014 were as follows:
2015
Statutory tax rate

2014

35.59%

37.96%

Non-deductible expenses for income tax purpose

1.17

0.76

Non-taxable dividend income(0.47)(0.38)

Inhabitant per capita tax

1.18

1.13

Effect of tax rate change(1.70)

1.52

Change in valuation allowance

5.81

9.96

Equity in earnings of affiliated companies

1.37

0.78

Other

(4.76)(2.38)

38.19%

49.35%

Effective tax rate

16. Comprehensive Income
The components of other comprehensive income for the year ended March 31, 2015 and 2014
were as follows:
Thousands ofMillions of yen

U.S. dollars

2015

2014

2015

¥ 2,899¥ 1,875$ 24,125

-

(11)

-

Amount before income tax effect

2,899

1,864

24,125

Income tax effect

(731)

(675)

(6,082)¥ 2,168¥ 1,189$ 18,043

Adjustments arising during the year

¥ (202)¥ 83$ (1,676)

Total¥ (202)¥ 83$ (1,676)

¥

337

¥ －

$

Reclassification adjustments for gain

23

－

188

Amount before income tax effect

360

－

2,996

Income tax effect

(118)

－

(984)

242

¥ －

Gains arising during the year

¥ 73

¥ 36

$ 606

Total

¥ 73

¥ 36

$ 606

¥ 2,281¥ 1,308$ 18,985

Unrealized gain on available-for-sale securities:
Gains arising during the year
Reclassification adjustments for loss

Total
Foreign currency translation adjustments:

Remeasurements of defined benefit plans:
Gains arising during the year

Total

¥

2,808

$

2,012

Share of other comprehensive income in affiliate:

Total other comprehensive income

Basis of Presenting
Financial Statements

Consolidated 41

17. Provision of reserve for Losses on Construction Contracts
Provision of reserve for losses on construction contracts included in Cost of Sales were ¥ 47
million ($ 394 thousand) and ¥ 71 million for the years ended March 31, 2015 and 2014,
respectively.

18. Segment Information
a. Description of reportable segments
The Group’s reportable segments are those for which separately financial information isavailable and regular evaluation by the Board of Directors is being performed in order todecide how resources are allocated among the Group. The Group conducts several types ofbusinesses including specialty truck business, environmental equipment and systems andreal estate rental business. The Company and its consolidated subsidiaries are engaged ineach business as an independent management unit. The Group consists of three reportablesegments, which are “Specialty truck business” (Industry A), “Environmental equipment
and systems business” (Industry B) and “Real estate rental business” (Industry C). Industry
A manufactures and distributes specialty trucks such as dump trucks, tailgate lifters, tanktrucks, refuse trucks, trailers, etc. Industry B manufactures and distributes recycle facilities,
including maintenance and consignment business. Industry C manufactures multistory
parking equipment and offers operating services for toll parking and real estate rental
services.
b. Methods of measurement for the amounts of sales, profit, assets, liabilities and otheritems for each reportable segment
The accounting policies of each reportable segment are consistent to those disclosed in Note
2, “Summary of Significant Accounting Policies”. Intersegment sales or transfers are basedon the market prices.
c.

Information about sales, profit, assets and other items for the years ended March 31,
2015 and 2014 are as follows:Basis of Presenting
Financial Statements

Consolidated 42
Millions of yen

Reportable segments
Industry

Industry

Industry

Reconciliations

Consolidated(Note 1)

(Note 2)

Total
A

B

C

¥ 82,212¥ 11,428¥ 5,691¥ 99,331

－

19

2

704

725

(725)

－

82,231

11,430

6,395

100,056(725)

99,331

Segment profit

7,217

1,425

1,134

9,776

(358)

9,418

Segment assets

74,351

8,697

12,20595,25323,867

119,120

1,293

42

404

1,739

1

1,740

2,316

129

234

2,679

－

2,679

2015
Net sales:
External customers¥

Intersegment sales

99,331or transfers
Total

Other items:
Depreciation
Increase in tangible andintangible fixed assets

Millions of yen
Reportable segments
Industry

Industry

Industry

Reconciliations

Consolidated(Note 1)

(Note 2)

Total
A

B

C

¥ 74,358¥ 8,793¥ 7,760¥ 90,911

－

16

2

690

708

(708)

－

74,374

8,795

8,450

91,619(708)

90,911

Segment profit

4,515

1,374

2,592

8,481

(443)

8,038

Segment assets

67,8795,459

12,777

86,115

24,628110,743

1,191

67

379

1,637

1

1,638

1,510

33

705

2,248

－

2,248

2014
Net sales:
External customers
Intersegment sales¥

90,911or transfers
Total

Other items:
Depreciation
Increase in tangible andintangible fixed assets

Basis of Presenting
Financial Statements

Consolidated 43
Thousands of U.S. dollars

Reportable segments
Industry

Industry

Industry

Reconciliations

Consolidated(Note 1)

(Note 2)

Total
A

B

C

$ 684,246$ 95,114$ 47,367$ 826,727－$ 826,727

153

15

5,862

6,030

(6,030)－684,399

95,12953,229832,757(6,030)826,727

Segment profit

60,066

11,862

9,437

81,365(2,976)78,389Segment assets

618,820

72,386

101,580

792,786

198,643

991,429

10,765348

3,362

14,475

6

14,481

19,277

1,069

1,949

22,295－22,2952015
Net sales:
External customers
Intersegment sales
or transfers
Total

Other items:
Depreciation
Increase in tangible andintangible fixed assets

1.

Reconciliations of segment profit in an amount of ¥ (358) million ($ (2,976) thousand)which consists of elimination of intersegment transactions in an amount of ¥7 million($55 thousand) and corporate expenses which are not allocated to each reportablesegment in an amount of ¥ (364) million ($ (3,031) thousand). Corporate expenses aremainly general administrative expenses not attributable to any other reportablesegments.
Reconciliations of segment assets are surplus fund (cash and deposits and securities)
and long-term investment fund (investment securities) of the Company.

2.

Segment profit is reconciled with operating income in the consolidated statements ofincome.

Information about impairment loss on fixed assets by reportable segment
There was no impairment loss on fixed assets by reportable segment for the years ended
March 31, 2015.
Millions of yen
Reportable segments
Industry

Industry

Industry

A

B

C

Total
2014
Loss on impairment¥of long-lived assets

654

¥

－

¥

－

¥

654

Reconciliations¥－

Consolidated¥

654

Basis of Presenting
Financial Statements

Consolidated 44

19. Subsequent Event
The following appropriations of the Company’s retained earnings in respect of the year
ended March 31, 2015 were as proposed by the Board of Directors and approved by theshareholders at the annual general meeting held on June 25, 2015.
Thousands ofAppropriations
Cash dividends of ¥ 14 ($ 0.12) per share

Millions of yen¥

556

U.S. dollars

$

4,629

Independent Auditor’s Report45

Board of Directors and Statutory Auditors

CORPORATE INFORMATION
Kyokuto Kaihatsu Kogyo Co., Ltd.
Established: June 1, 1955
Paid-in Capital: 11,899,867,400 yen (March 31, 2015)
Number of Shares Issued: 42,737,668 shares (March 31, 2015)
Number of Employees: consolidated 2,424; non-consolidated 950 (March 31, 2015)
Headquarters:
6-1-45, Koshienguchi, Nishinomiya-shi, Hyogo, 663-8545 Japan
Tel.+81-798-66-1000, Fax.+81-798-66-8146
Tokyo Office (Overseas Business Department):
3-15-10, Higashi-shinagawa, Shinagawa-ku, Tokyo, 140-0002, Japan
Tel.+81-3-5781-9828, Fax+81-3-5781-3431
Plants:Yokohama Plant
Occupies 102,357 ㎡
Located in Yamato, Kanagawa (Japan)
Nagoya Plant
Occupies 109,611 ㎡
Located in Komaki, Aichi (Japan)
Miki Plant
Occupies 98,274 ㎡
Located in Miki, Hyogo (Japan)
Fukuoka Plant
Occupies 43,503 ㎡
Located in Iizuka, Fukuoka (Japan)
Head Plant of NIPPON TREX Co., Ltd.
Occupies 125,285 ㎡
Located in Toyokawa, Aichi (Japan)
Otowa Plant of NIPPON TREX Co., Ltd.
Occupies 20,889 ㎡
Located in Toyokawa, Aichi (Japan)
Plant of KYOKUTO KAIHATSU (KUNSHAN) MACHINERY CO., LTD.
Occupies 83,140 ㎡
Located in Kunshan, Jiangsu (China)
Plant of MITHRA KYOKUTO SPECIAL PURPOSE VEHICLE CO., PVT. LTD.
Occupies 60,405 ㎡
Located in Veerapanenigudem, Andhra Pradesh (India)
Plant of PT KYOKUTO INDOMOBIL MANUFACTURING INDONESIA
Occupies 20,028 ㎡
Located in Purwakarta, Jawa Barat (Indonesia)
Plant of TREX THAIRUNG CO., LTD.
Occupies 85,158 ㎡
Located in Pluakdang, Rayong (Thailand)46

Board of Directors and Statutory Auditors

BOARD OF DIRECTORS AND STATUTORY AUDITORS
Takaaki Fudetani,

Representative Director, Chairman, CEO

Kazuya Takahashi,

Representative Director, President, COO

Harumi Sugimoto,Director, Associate Senior Executive Officer

Takashi Yoneda,

Director, Associate Senior Executive Officer

Haruhiro Kondo,

Director, Associate Senior Executive Officer

Ikuya Sakai,

Director, Associate Senior Executive Officer

Ryuichiro Nishikawa,Director, Associate Senior Executive Officer

Yoji Kido,

Outside Director

Akira Michigami,

Outside Director

Yoshinori Takashima,

Standing Auditor

Tomoki Ueyama,

AuditorMorio Kusunoki,

Outside Corporate Auditor

Yoshihiko Norikura,

Outside Corporate Auditor

Takeo Norimitsu,

Executive Officer

Noboru Horimoto,Executive Officer

Sadanobu Kato,

Executive Officer

Akira Sakurai,

Executive Officer

Souichiro Ochi,

Executive Officer

Tatsuya Nunohara,

Executive Officer

Hiroaki Kuriyama,

Executive Officer

Yukihiro Hosozawa,

Executive Officer

47