Financial Information as of March 31, 2016

(The English translation of the“Yukashoken-Houkokusho” forthe year ended March 31, 2016)

Daito Woolen Spinning & Weaving
Company, Limited1【Cover】【Document Submitted】

Securities Report (“Yukashoken-Houkokusho”)【Article of the Applicable Law Requiring Article 24, Paragraph 1 of the Financial Instruments and Exchange Law
Submission of This Document】【Filed to】

Director of the Kanto Local Finance Bureau【Date of Filing】

June 24, 2016

【Business Year】

196th Fiscal Year (From April 1, 2015 to March 31, 2016)【Company Name】

Daito Boshoku Kabushiki Kaisha【Company Name (in English)】Daito Woolen Spinning & Weaving Company, Limited【Position and Name of Representative】

Kazuhiro Yamauchi, President and Representative Director【Location of Head Office】

6-6 Nihonbashikobuna-cho, Chuo-ku, Tokyo, Japan【Phone No.】+81-3-3665-7843【Contact for Communications】

Shogo Mieda, Director and Executive Officer,
General Manager of Business Management Headquarters【Nearest Office to Contact】

6-6 Nihonbashikobuna-cho, Chuo-ku, Tokyo, Japan【Phone No.】+81-3-3665-7843【Contact for Communications】

Shogo Mieda, Director and Executive Officer,
General Manager of Business Management Headquarters【Place Where Documents are
Available for Public Inspection】

Tokyo Stock Exchange, Inc.
(2-1 Nihombashi Kabutocho, Chuo-ku, Tokyo, Japan)
Nagoya Stock Exchange, Inc.
(8-20, Sakae 3-chome, Naka-ku, Nagoya, Japan)

2Part I Information on the Company
1. Overview of the Company
1.

Key financial data and trends(1) Consolidated financial data
Fiscal year
Year ended

Net sales
Ordinary income (loss)
Profit (loss) attributable toowners of parent
Comprehensive income
Net assets
Total assets

Thousandsof yenThousandsof yenThousandsof yenThousandsof yenThousandsof yenThousandsof yen

192nd

193rd

194th

195th

196th

March 31, 2012

March 31, 2013

March 31, 2014

March 31, 2015

March 31, 2016

8,101,237

8,179,708

7,548,836

5,937,473

5,407,011

56,54753,33377,905(519,849)

74,79731,45915,41027,966(644,117)

124,831430,315

156,060

239,767(279,051)

149,864

4,636,973

4,790,170

4,429,546

4,150,472

4,300,315

22,764,241

22,054,350

20,778,686

20,405,300

18,996,244

Net assets per share

Yen

141.08144.57147.98138.65143.66

Basic earnings (loss) per
share

Yen

1.05

0.51

0.93

(21.52)

4.17

Diluted earnings per share

Yen

―

―

―

―

―

Equity ratio

%

18.6

19.6

21.3

20.3

22.6

Rate of return on equity

%

0.8

0.4

0.6

(15.0)

3.0

Times

69.5

137.3

78.5

(3.4)

14.4

388,753

610,417308,124

92,427(229,557)(49,693)(52,597)(408,051)(127,119)

50,264(193,412)(414,053)

54,863(27,045)(52,686)

937,711

1,093,231

978,786

919,966

687,297

107
(645)

105

(564)

105
(447)

102
(70)

101
(35)

Price earnings ratio
Cash flows from operating
activities
Cash flows from investing
activities
Cash flows from financing
activities
Cash and cash equivalents at
end of the period

Thousandsof yenThousandsof yenThousandsof yenThousandsof yenEmployees(the average number of part-time
employees not included)

Persons

Notes: 1. Net sales are presented exclusive of consumption tax, etc. (meaning both national and local consumption taxes;
likewise hereafter).
2. Diluted earnings per share for the 192nd, 193rd, 194th, and 196th fiscal year are not presented because Daito
Woolen Spinning & Weaving Company, Limited (the “Company”) had no securities with dilutive effects. Diluted
earnings per share for the 195th fiscal year are equivalent to net loss per share and not presented because theCompany had no securities with dilutive effects.
3. Effective from the 196th fiscal year, the former “Profit (loss)” has been presented as “Profit (loss) attributable toowners of parent” by applying accounting standards such as “Revised Accounting Standard for Business
Combinations” (ASBJ Statement No. 21, released on September 13, 2013).

3

(2) Non-consolidated financial data
Fiscal year

192nd

193rd

194th

195th

196th

Year ended

March 31,2012

March 31, 2013

March 31, 2014

March 31, 2015

March 31, 2016

5,431,157

5,064,798

4,450,019

5,075,136

4,265,457

22,6952,396

43,520(755,331)

38,532

21,518(18,387)

13,907(769,940)

238,438

1,500,000

1,500,000

1,500,000

1,500,000

1,500,000

30,000,000

30,000,000

30,000,000

30,000,000

30,000,000

4,431,512

4,440,239

4,448,619

3,940,439

4,250,889

21,757,003

20,895,398

20,279,933

19,139,378

18,524,091

Net sales
Ordinary income (loss)
Profit (loss)
Capital stock
Number of shares issued
Net assets
Total assets

Thousandsof yenThousandsof yenThousandsof yenThousandsof yenSharesThousandsof yenThousandsof yenNet assets per share

Yen

148.03148.33148.61131.64142.01

Cash dividends per share(Interim cash dividends
included herein)

Yen

—
(—)

—
(—)

—
(—)

—
(—)

—
(—)

Basic earnings (loss) per share

Yen

0.72

(0.61)

0.46(25.72)

7.97

Diluted earnings per share

Yen

―

―

―

―

―

Equity ratio

%

20.4

21.2

21.9

20.6

22.9

Rate of return on equity

%

0.5

(0.4)

0.3

(18.4)

5.8

Price earnings ratio

Times

101.4

(114.8)

158.7

(2.8)

7.5

Dividend payout ratio

%

―

―

―

―

―

Persons

48
(15)

46
(14)

51
(11)

46
(9)

51
(5)

Employees(the average number of part-time
employees not included)

Notes: 1. Net sales are presented exclusive of consumption tax, etc.
2. Diluted earnings per share for the 192nd, 194th, and 196th fiscal year are not presented because the Company had no securities
with dilutive effects. Diluted earnings per share for the 193rd and 195th fiscal year are equivalent to net loss per share and notpresented because the Company had no securities with dilutive effects.

4

2.

History

February1896

Established Tokyo Muslin Spinning & Weaving Company, Limited

September 1911

Commenced the manufacture of wool tops

June 1921

Merged Tokyo Calico Weaving Company, Limited

February 1923

Started the operations of Nagoya Wool-weaving Factory

December 1936

Changed the company name to Daito Woolen Spinning & Weaving Company, Limited

June 1941

Merged Numazu Woolen Company, Limited

March 1944

Changed the company name to Daito Industry Company, Limited

May 1947

Changed the company name to Daito Woolen Spinning & Weaving Company, Limited

May 1949

Listed the Company’s stock on the Tokyo Stock Exchange

November 1960

Launched apparel business

October 1961

Listed the Company’s stock on the Nagoya Stock Exchange

February 1974

Established PENTA Sports Co., Ltd. (currently Rockingham PENTA Co., Ltd.) and launchedmedium-lightweight apparel business

October 1980

Commenced the manufacture of bed and bedding products

December 1981

Constructed a shopping center SUN TERRACE SUNTO (currently SUN TO MOON ANNEX) in
Mishima’s suburbs and started leasing operations

December 1990

Separated Niigata Branch Factory (woolen quilt manufacturing) and established Niigata Daitobo Co., Ltd.

March 1991

Separated Bed and Bedding Sales Division and established Daitobo Shinso Co., Ltd.

July 1996

Developed a new shrink-resistant finish material (EWOOL)

September 1996

Established Daitobo Estate Co., Ltd. as an operating and management company for shopping centers

April 1997

Constructed a shopping center SUN TO MOON Kakitagawa in Mishima’s suburbs (the 1st stage
development) and started leasing operations

August 2000

Established a clothing manufacturer NINGBO SHANSHAN DADONG GARMENTS CO., LTD.. in Ningbo,
China as a joint venture with Shanshan Group Co., Ltd. of China

November 2001

Established Shanghai Office

September 2005

Established a clothing manufacturer NINGBO SHANJING APPAREL CO. LTD. (currently an affiliatedcompany) in Ningbo, China as a joint venture with Shanshan Group Co., Ltd. of China

October 2006

Relocated the head office from Nihonbashihakozaki-cho to Nihonbashikobuna-cho

December 2007

Completed the additions and upgrades (the 2nd development) to the SUN TO MOON Kakitagawa shopping
center

September 2008

Completed the renovation (the 3rd development) of the SUN TO MOON ANNEX shopping center

October 2008

Took over part of the womenswear proposal-type OEM business of Cosmoa Co.,LTD

August 2010

Established an apparel sales company DAITOBOSHOKU (SHANGHAI) CORPORATION in Shanghai,
China

February 2011

Closed Shanghai Office

September 2011

Grand opening of an outlet mall Shanjing Outlet Plaza-Ningbo in Ningbo, China

February 2012

NINGBO SHANJING APPAREL CO. LTD. (currently an affiliated company) is surviving entity in amerger, with dissolution of NINGBO SHANSHAN DADONG GARMENTS CO., LTD..

February 2014

The Company is surviving entity in a merger, with dissolution of Daitobo Shinso Co., Ltd.

July 2015

Dissolved Rockingham PENTA Co., Ltd.

5

3.

Description of business
The Company Group (or the “Group”) consists of the Company (Daito Woolen Spinning & Weaving Company, Limited),
4 subsidiaries, and 2 affiliates. The Group is engaged in textile and apparel business of which the main business ismanufacturing and sales of apparel products (clothing and uniforms) and fiber (material), etc., the commercial property
business of which main business is operation and management of real estate rental and commercial facilities, and thehealth care business of which the main business is manufacturing and sales of beds and bedding, etc.
A resolution was passed in July 2015 for the dissolution of Rockingham PENTA Co., Ltd., and liquidation procedures areunderway.
Below is a description of the businesses in which the Group engages, and of the positioning of the Group and its
affiliated companies in relation to them. The following classification is the same as the Group’s actual segments forreporting purposes.
(1) Textile and apparel businessApparel section
The section where a part of apparel purchased by a subsidiary DAITOBOSHOKU(SHANGHAI) CORPORATION is sold through the Company. In addition, the section wheresubsidiary Rockingham PENTA Co., Ltd sells apparel and an affiliate NINGBO SHANJINGAPPAREL CO. LTD. manufactures and sells apparel.
Uniform section
The section where the Company sells uniforms.
Textile section
The section where the Company and an affiliate Takara Textile Industry Co., Ltd. sells fiber
materials, etc.
The Group also outsources processing operations relating to the abovementioned apparel, uniform and textile sections
to outside parties.
(2) Commercial property business

The business where the Company rents real estate and a subsidiary Daitobo EstateCo., Ltd. operates and manages commercial facilities.

(3) Health care business

The business where a subsidiary Niigata Daitobo Co., Ltd. manufactures products
and sells them through the Company.
The Group outsources certain processing operations.

[Organization chart] The information above is summarized in tabular form in the following organizational chart.
繊維・アパレル事業
織物製造販売会社※宝繊維工業㈱衣料品製造販売会社◎寧波杉京服飾有限公司
販売会社㈱ロッキンガムペンタ
上海大東紡織貿易有限公司

Textile and apparel businessTextile manufacturing and sales company*Takara Textile Industry Co., Ltd.
ApparelManufacturing and sales company◎NINGBO SHANJING APPAREL CO. LTD.
Sales company
Rockingham PENTA Co., Ltd.
DAITOBOSHOKU (SHANGHAI) CORPORATION

商業施設事業
商業施設の運営委託
商業施設の運営・管理
大東紡エステート㈱Commercial property business
Consignment of operations of commercial facilities
Operation and management of commercial facilities
Daitobo Estate Co., Ltd.

ヘルスケア事業
寝装品
製造販売会社
新潟大東紡㈱Health care business
Bed and bedding
Manufacturing and sales company
Niigata Daitobo Co., Ltd.

（当社）大東紡織㈱得意先(The Company) Daito Woolen Spinning & Weaving Company, Limited
Customers◎ Affiliates accounted for by the equity method, * Affiliates not accounted for by the equity method; All others without
symbols are consolidated subsidiaries.

64. Information on subsidiaries and affiliates

Name of company

Location

Principal
businesses

CapitalPercentage
of votingrights held(%)

Business relationship(Consolidated subsidiaries)
Operation of Company-owned
commercial facilities is
100 outsourced to this unit
Interlocking executives: Yes
Lease of facilities: Yes
Sells a part of apparel which
the Company sells
100Interlocking executives: Yes
Financial assistance: Yes
Manufactures bed and bedding
which the Company sells
100 Interlocking executives: Yes
Financial assistance: Yes
Lease of facilities: Yes

Daitobo Estate Co., Ltd.
(Note 2 and 3)

Shimizu-cho,Sunto-gun,Shizuoka

Thousands Commercialof JPY property
30,000 business

Rockingham PENTA Co.,
Ltd.
(Note 4)Chuo-ku, Tokyo

Thousands Textile andof JPY apparel
10,000 businessNiigata Daitobo Co., Ltd.

Tokamachi,
NiigataThousands
Health careof JPYbusiness
10,000DAITOBOSHOKU(SHANGHAI)CORPORATION

Shanghai,
People’sRepublic of
China

Thousands Textile andof USD apparel450 business

100

Sells a part of apparel which
the Company purchases
Interlocking executives: Yes

Ningbo,People’sRepublic of
China

Thousands Textile andof USD apparel
7,600 business48

Interlocking executives: Yes(Affiliates accounted for by
the equity method)
NINGBO SHANJINGAPPAREL CO. LTD.

Notes: 1. The “Principal businesses” column states the name of the segment.
2. Companies indicated are specified subsidiaries.
3. Net sales (excluding intercompany sales within the Group) of Daitobo Estate Co., Ltd. exceeded 10% of consolidated net
sales.
Principal financial data: Daitobo Estate Co., Ltd.
1) Net sales
2) Ordinary income¥ 2,029,961 thousand¥ 30,760 thousand

3) Profit
4) Net assets¥ 20,364 thousand¥ 175,227 thousand

5) Total assets¥ 2,118,100 thousand

4. A resolution was passed in July 2015 for the dissolution of Rockingham PENTA Co., Ltd., and liquidation procedures areunderway.

7

5. Employees(1) Consolidated companies(As of March 31, 2016)
Name of segment

Number of employees

Textile and apparel business

19

(29)

Commercial property business

30

(—)

Health care business

32

(4)

81

(33)

20

(2)

101

(35)

Subtotal of reportable segments
Corporate (common)
Total

Notes: 1. The number of employees presented above pertains to full-time employees. The figures in parentheses
represent the average number of part-time employees during the year ended March 31, 2016, and are notincluded in the number of full-time employees.
2. The number of employees presented as “Corporate (common)” pertains to those belonging to administrative
departments that cannot be classified under the specified segments.
3. The number of temporary employees decreased by 35 from the prior fiscal year due mainly to the dissolutionof Rockingham PENTA Co., Ltd. in the textile and apparel business.
(2) The Company
Number of employees
51

Average age(Years)(5)

Name of segment

Average years of service(Years)43.7(As of March 31, 2016)
Average annual salary(Thousands of yen)

14.4

5,212

Number of employees

Textile and apparel business

17

(2)

Commercial property business

3(—)

Health care business

11

(1)

31

(3)

20

(2)

51

(5)

Subtotal of reportable segments
Corporate (common)
Total

Notes: 1. The number of employees presented above pertains to full-time employees. The figures in parentheses
represent the average number of part-time employees during the year ended March 31, 2016, and are notincluded in the number of full-time employees.
2. The average annual salary for employees includes bonuses and overtime pay.
3. The number of employees presented as “Corporate (common)” pertains to those belonging to administrative
departments that cannot be classified under the specified segments.
(3) Trade union
Of the Company Group, the trade union of the Company is a member of the Japanese Federation of Textile, Chemical,
Food, Commercial, Service and General Workers’ Unions (UA ZENSEN).
The labor-management relations of the Company are smooth, hence there are no particular items which require
mentioning.

82. Business Overview
1.

Overview of business results(1) Operating results
During the fiscal year under review, the Japanese economy maintained moderate recovery momentum supported by
improved corporate earnings and a brighter employment and income picture as government economic measures andfinancial easing measures from the Bank of Japan took effect. However, weakness set in from the turn of the year, due toanemic consumer sentiment amid a strong yen and falling share prices. Overseas economic trends, including theEuropean sovereign debt crisis, slowdown in China and other newly emerging economies and the fall in resource prices,
also continued to raise concerns.
In the textile and apparel sector, there were signs of recovery momentum on the back of buoyant “inbound” demand(from overseas visitors to Japan) and increased sales of premium price products, combined with a rebound from theslump of the previous year when Japan’s consumption tax increase kicked in. However, there were also signs ofsluggishness in certain segments due partly to weakened consumer sentiment from the beginning of the year and theimpact of unseasonal weather.
The shopping center sector enjoyed strong sales to overseas tourists visiting Japan at home electronics and other massretail outlets, showing recovery momentum compared with the previous year when consumer sentiment was depressed by
the consumption tax increase. However, sales growth was blunted after the turn of the year as sales of winter wear were
hit by the warm winter in Japan and consumer sentiment worsened.
The health care sector was somewhat subdued. Although core demand remained firm due to the growing
health-awareness boom, the very hot summer and warm winter took a toll on bed and bedding sales.
Against this background, based on the “Beyond 120th” Mid-term Management Plan, the Group continued to step up
measures to develop growth strategies in its commercial property and health care businesses. In its textile and apparelbusiness, the Group took measures to push forward a range of structural reorganization policies, with partial revision of
the mid-term management plan.
In the textile and apparel business, the Company completed its structural reorganization including dissolution of its men’ssuits sales subsidiary and its withdrawal from the materials and design-type proposal OEM business. While significantly
cutting selling, general and administrative expenses including employee shakeouts in these businesses, the Company
worked to escape from red ink in this business segment after a better-than-expected performance by the men’s suits
business “Sayonara” (closing down) sale and other positives. However, earnings disappointed, due in part to an increaseof the allowance for doubtful accounts at the end of the period under review with regard to certain business partners.
In the commercial property business, performance was solid. We stepped up advertising and promotional activities
through television, radio and other media, and strengthened measures in the field of family-participation events mainly
targeting parents of young children in the regions. At the same time, we replaced tenants, undertook partial
refurbishments and took measures to uphold customer footfall levels. However, there was some earnings fallout from
temporary closure of a large bowling alley tenant and lower revenues during rebuilding works.
We transferred personnel to the health care business, and took measures to expand sales of proprietary products such as
the health-promoting fabric EWOOL and bio-linen. We also took measures to develop new products, including additionof antibacterial and deodorizing properties to EWOOL and miniature thermal and electric potential therapy devices.
However, the increase in expenses from redeploying personnel and persistently high raw-material costs affected earnings
negatively.
As a result, net sales of the Group for the year ended March 31, 2016 totaled ¥5,407 million (decreasing by 8.9% from theprior fiscal year). Despite increased unit revenues from the health care business and uniform section, reduced revenues
due to structural reorganization of the textile and apparel business took their toll. At the same time, operating income was¥378 million (compared with an operating loss of ¥232 million for the prior fiscal year), due partly to the effects of areduction in selling, general and administrative expenses including personnel costs. Ordinary income was ¥74 million(compared with an ordinary loss of ¥519 million for the prior fiscal year), due to recording of gain on sales of shares,
initial expenses from a syndicated loan and interest expenses for borrowings, etc. Furthermore, profit attributable toowners of parent was ¥124 million (compared with a net loss attributable to owners of parent of ¥644 million for the priorfiscal year), due partly to the recording of extraordinary income of ¥64 million on the partial transfer of the business ofthe men’s suits sales subsidiary. This brought us back into profitability on a year-on-year basis. We were also able to posta profit with a year-on-year increase in each of these four quarters from the first quarter in each profit category(cumulative basis).
The operating results by reportable segments are summarized as follows:(Textile and apparel business)
In the apparel section, sales were down significantly year-on-year due to withdrawal from the men’s suits sales businessand materials and design-type proposal OEM business. In the uniform section, sales were up year-on-year due partly tolarge orders from the private sector. Turning to earnings, although the Company is getting out of the red at the operating
line in the textile and apparel business due to a significant year-on-year decrease in selling, general and administrative
expenses from structural reorganization, provisions of the allowance for doubtful accounts and other outgoings amounted
to around ¥50 million at the end of the period.
9

As a result, net sales in the textile and apparel business for the current fiscal year totaled ¥2,237 million (decreased by
18.0% from the prior fiscal year), and operating loss amounted to ¥49 million (improved by ¥661 million from the priorfiscal year).
(Commercial property business)
In the commercial property business, sales and earnings were both down year-on-year. The operating margin improvedon the back of an overall robust performance by food and consumer electronics mass retailing at the SUN TO MOON
Kakitagawa, one of the leading commercial facilities in Shizuoka Prefecture, as a result of measures to build up customer
footfall through advertising and promotion activities and special summer and year-end events. But this was outweighedby negatives including earnings fallout from temporary closure of a bowling alley tenant and lower revenues during
rebuilding works.
As a result, net sales in the commercial property business totaled ¥2,324 million (decreased by 3.1% from the prior fiscal
year), and operating income amounted to ¥883 million (decreased by 1.0% from the prior fiscal year).
(Note) From the first quarter accounting period (consolidated basis), the name of a reportable segment “real estatebusiness” was changed to “commercial property business.” This change affects only the name, and has no
impact on segment information.
(Health care business)
Sales in the health care business section were up year-on-year. Although sales of the premium price EWOOL Camel
Series launched in the previous fiscal year were sluggish, bio-linen spring and summer bedding items and household
thermal and electric potential therapy devices saw steadily growing sales.
In the general bed and bedding section, sales rose year-on-year due to the continuing robustness of orders forcommercial-use bed and bedding. However, the operating income decreased year-on-year amid persistently high raw
material costs and expenses from an increase in personnel that could not be absorbed.
As a result, net sales in the health care business totaled ¥845 million (increased by 4.3% from the prior fiscal year), andoperating loss amounted to ¥10 million (compared with an operating income of ¥35 million for the prior fiscal year).
(Notes)(2)

1 Figures for operating income reported above as segment earnings include internal inter-segment
transactions.
2 The tax-exclusion method is applied to accounting procedures for consumption and other taxes, and so thefigure reported in “1. Overview of business results” does not include consumption taxes, etc.
3 Items relating to earnings projections, etc. are based on judgments made as of the end of the fiscal year
under review (consolidated basis). Due to possible unpredictable changes in the economic environment, theCompany cannot offer any guarantee that forecast results will be achieved.

Cash flows
Cash and cash equivalents at the end of the current fiscal year reflected ¥229 million in net cash used in operating activities(¥92 million provided in the prior fiscal year), ¥50 million in net cash provided by investing activities (¥127 million usedin the prior fiscal year), and ¥52 million in net cash used in financing activities (¥27 million used in the prior fiscal year).
As a result of these activities, cash and cash equivalents decreased by ¥232 million (25.3%) from the end of the prior fiscal
year to ¥687 million.
Cash flows and related factors for the period under review are as follows.
(Cash flows from operating activities)
Net cash used in operating activities amounted to ¥229 million (¥92 million provided in the prior fiscal year). This was
mainly attributable to a decrease of ¥361 million in provision for sales returns, a decrease of ¥522 million in notes andaccounts receivable-trade, a decrease of ¥182 million in inventories, a decrease of ¥498 million in notes and accounts
payable-trade, and a decrease of ¥293 million in guarantee deposits received.
(Cash flows from investing activities)
Net cash provided by investing activities amounted to ¥50 million (¥127 million used in the prior fiscal year). This was
mainly due to ¥94 million in purchase of property, plant and equipment and intangible assets, ¥49 million in proceedsfrom sales of investment securities, ¥64 million in proceeds from transfer of business, and ¥26 million in proceeds fromsales of investments in capital.
(Cash flows from financing activities)
Net cash used in financing activities was ¥52 million (¥27 million used in the prior fiscal year). This was mainly
attributable to ¥2,140 million in proceeds from long-term loans payable, ¥2,631 million in repayments of long-term loans
payable, ¥650 million in proceeds from issuance of bonds, ¥184 million in redemption of bonds, and ¥26 million in
repayments of lease obligations.

10

2.

Production, orders received and sales
The Group produces and markets a very wide range and variety of products. Within a particular type of product, form
and unit type may differ, and for some products, the Group does not apply the make-to-order system. As a result, we do
not provide monetary or quantity figures for production and order scale on an individual segment basis.
For this reason, status of production, orders and sales is shown in relation to segment performance in “1. Overview ofbusiness results.”

3.

Issues to be addressed(1) We expect to see ongoing moderate recovery momentum in the Japanese economy, with further improvement in theemployment and income picture. However, falling resource prices and a persistently strong yen in foreign exchange
markets will likely combine with the long time needed before we see any effects of economic and financial
policy-tuning by the government and the Bank of Japan to heighten uncertainties. In addition, trends in China andother newly emerging economies and in the Europe, as well as the prognosis for the US presidential elections, arealso matters for concern. We believe that we will continue to face an environment that needs to be watched for
economic downside risk.
In the fiscal year ended March 31, 2010, (the 190th fiscal year), the Group racked up successive operating and net
losses as a result of the severe slump in the men’s suits sales subsidiary. This, combined with the burdens of funding
for phase 2 and 3 of the redevelopment of “SUN TO MOON Kakitagawa” and dealing with the working capital
deficit in the loss-making men’s suits sales subsidiary, pushed interest-bearing debt to a high level. Although there
has been in progress in this area, the issue has not yet been fully resolved. This situation could prompt substantial
doubts as to the viability of the business as a going concern.
To address this situation, the Group took measures based on the “KAIKAKU” Mid-term Management Plan 2010 for
the 191st-193rd fiscal years (fiscal year ended March 31, 2011 to the fiscal year ended March 31, 2013). The main
goals in this plan, overhauls of our business and cost structures, have been more or less achieved as planned. The
Group has also made progress in terms of both earnings and financial position, enabling generation of profit
attributable to owners of parent for two successive fiscal years, as well as reduction of interest-bearing debt togreater than targeted levels.
The “Beyond 120th” Mid-term Management Plan was launched in the fiscal year ended March 31, 2014 (194th
fiscal year). Under it, we took measures to create a platform for long-term development of the Group, pivoted on
measures for a growth strategy.
In these circumstances, the Company has decided to implement structural reforms in the textile and apparel businessduring the current fiscal year, centered on the withdrawal from the men’s suits sales business, given the rapid
weakening of the Japanese yen and the protracted nature of the market slowdown following the consumption tax rise.
Specific measures have included strengthening operations at the SUN TO MOON Kakitagawa, one of the leading
commercial facilities in Shizuoka Prefecture, as part of a growth strategy of increasing earnings potential; and astrengthening of the health care business through measures such as expanding sales of products using
health-promoting substances based on the Company’s proprietary technology.
At the same time, in the textile and apparel business, we were able to achieve structural reorganization by pushing
through radical overhauls after partial revision of the mid-term management plan, and through completion of alltasks listed below during the current fiscal year.
1) Dissolution and extraordinary liquidation of the men’s suits sales subsidiary
2) Withdrawal from the materials and design-type proposal OEM business
3) Reduction of personnel in the textile and apparel business
4) Reduction of selling, general and administrative expenses in the textile and apparel business5) Overhaul of procurement structures in the textile and apparel business
6) Review of personnel strategy in the textile and apparel businessAs a result, we were able to post a profit in each of the four quarters of the period under review (cumulative basis)from the first quarter onward. After making upward revisions to earnings forecasts during the term, the Group also
booked year-end operating income that was ahead of the revised forecast. We booked our highest profit attributableto owners of parent in nine years. Reductions of interest-bearing debt were also ahead of targeted levels in the plan.
Looking ahead, we have launched the “Bridge to the Future” Mid-term Management Plan for the fiscal year ending
March 31, 2017 to the fiscal year ending March 31, 2018 (the 197th and 198th fiscal years).
Given the uncertain macro-economic prospects, the “Bridge to the Future” Mid-term Management Plan is a
shortened and concentrated two-year plan. Measures undertaken take due account of the need to improve the shareprice, with launch of initiatives to strengthen our financial position and a policy emphasis on establishing a robust
platform for our core businesses and ensuring higher level of earnings.
Specific measures are as follows.
Issue to be addressed (1): Maintaining a position to outperform rivals and strengthening our competitive advantage
in the commercial property business. To achieve this, the Group will enhance the attractiveness of facilities, and takemeasures to further increase their appeal to families, a strength of the Group.
Issue to be addressed (2): Promoting business cooperation including alliances with business partners in health carebusiness, with contribution to a society with long healthy lifespans. To this end, we are committed to sharing
platforms and visions with business partners, including through alliances, by measures for total health care with a11

sound night’s sleep as the keynote and by pursuit of the Japan quality utilizing Group factories in Japan.
Issue to be addressed (3): Promoting preparations to enter a growth track through reconstructing the business after
the structural reforms in the textile and apparel business. To achieve this, we plan to designate the original
woolen-related businesses (official-use uniforms and knitwear, etc.) as businesses to be preserved and strengthened,
and, with a better understanding of end-user needs, reorient operations toward creating products that will sell well.
Issue to be addressed (4): Strengthening our financial structure. To achieve this goal, we will proceed withprocurement of stable, long-term funding, and resolutely set and pursue a range of financial targets for the Company.
In addition, we will continue to work to reduce interest-bearing debt by continuously using surplus operating cash
flow.
Issue to be addressed (5): Promoting management in line with corporate governance code. To achieve this, we will
ensure swift and bold decision-making in a transparent and fair manner, taking into account the standpoint of
stakeholders such as shareholders, and take independent measures to ensure sustainable growth and mid- tolong-term improvement in corporate value.
Issue to be addressed (6): Promoting measures toward the Human Resources Mission in the personnel strategy, andfostering personnel that can contribute to the Company’s business and society. To achieve this, we will selectyounger and female personnel for certain positions, and foster management talent.
Through the above measures, the Group aims to work together to achieve the aims of the “Bridge to the Future”
Mid-term Management Plan and further improve corporate value, based on our 120-year-old management
philosophies of fostering a spirit of enterprise, and of social contribution by helping others through self-help.
(2) Basic policy on the person controlling financial and business policy decision-making
1) Summary of the basic policy
The Company is a listed company, and as such allows free trading of its shares, etc., by all its shareholders andinvestors. In the event of large-scale purchases of shares, etc. of the Company, (as defined in (3) ii. below;
hereafter the same shall apply), we believe approval or disapproval should ultimately be entrusted to the
judgment of shareholders of the Company.
However, in recent years, we have seen in capital markets in Japan signs of unilateral, forced large-scalepurchases, carried out without gaining the approval of the management of the targeted company. We believe thatsome of these large-scale purchases do not contribute to corporate value or protect the interests of the targetedcompany and the common interests of shareholders.
The Company believes that it is inappropriate for parties carrying out large-scale purchases that do not improve
corporate value or protect the interests of the Company and the common interests of shareholders to control our
financial and business policy decision-making. Should such parties emerge, we see it as necessary to take theappropriate countermeasures.
2)

Summary of special measures taken to help realize the basic policy
As the following measures are formulated with full understanding of the source of the corporate value of theCompany stated in i. below and after full discussion of the mid- to long-term improvement of corporate value
and protection of the interests of the Company and the common interests of shareholders, the Board of Directorsof the Company believes that the following measures are aligned with the above basic policy, that they do notharm the common interests of shareholders of the Company and that they are not intended to protect the current
status of the executives of the Company.
i. Regarding the source of corporate value of the Company
As the first woolen cloth company in Japan, our Company was established in February 1896 with thefinancing of the Mitsui family and other major financiers in Tokyo. From that time, it was a driver ofJapanese economic growth from the Meiji to the beginning of the Showa period, and contributed overmany years to the development of Japan’s economy and society as one of the country’s leading textile
companies. Having quickly established an integrated production process for woolen cloth, it was able tobring to bear its strengths in uniforms for both official and civilian users, and built up an impressive trackrecord including supply of uniforms for the police and fire departments and other state agencies, as well as
providing uniforms for the Tokyo Olympics. During the period from the mid-1960s to mid-1970s, theCompany greatly expanded its operations in the apparel sector, equipping its factories for mass productionof men’s suits and forming alliances with leading US brands. The Company also entered the textile sector
in China in the early 1990s, with the establishment of a men’s suit manufacturing plant in a joint venturewith leading Chinese conglomerate Shanshan Group Co., Ltd. In 2008, it took over the proposal-type OEM
business of Cosmoa Co.,LTD, a strong player in the knitwear business, and newly started the knitwear
planning business. In particular, a cluster of businesses was developed: uniform production,
production-management-type OEM operations and knitwear planning businesses, which are expected tosupport the textile and apparel business in years ahead. With the textile industry in Japan subsequently
slumping, the Company forced through needed restructuring measures, including the closure in 2002 ofwhat was once the Company’s largest spinning plant in Japan, at Suzuka.
With the slump in the textile industry in Japan proving protracted, the Company embarked on thedevelopment of the regional large-scale shopping center SUN TO MOON Kakitagawa, using the site of theCompany’s Mishima plant in Sunto-gun in Shizuoka Prefecture. The commercial property business has
become a core driver of corporate earnings.
12

Over the years, the Company also committed itself to building up an integrated production and marketingsystem, launching a bedding manufacturing business within the Suzuka plant in 1980, establishing a bed
and bedding marketing subsidiary between 1990 in 1991 and a bed and bedding manufacturing subsidiaryin Tokamachi, Niigata Prefecture, and developing other new businesses. Subsequently, in 2014, in
anticipation of a rapidly aging population, we further developed the bed and bedding business andestablished a new health care business centered on the three fields of healthy textile materials, health careand medical devices, and health-promoting foodstuffs, which we expect to generate growth in the years
ahead.
The Company’s management strategy is based on the “Bridge to the Future” Mid-term Management Plan
launched in April 2016. Based on the achievements of our history of roughly 120 years and our new
approach to the future, we believe we can achieve sustainable, stable and long-term growth.
In the new Mid-term Management Plan “Bridge to the Future,” we will embark on measures to strengthen
our financial position and gear policies to establishing a robust platform for our core businesses andensuring higher level of earnings, giving due attention to improvement of the share price as we pursue
these goals.
In the commercial property business, our basic strategy is to consolidate our long-term competitive position
to keep us ahead of our rivals. In the health care business, our basic strategy will be to develop
collaboratively, including alliances with business partners, in hopes of contributing to a healthier,longer-lived society. In the textile and apparel business, our basic strategy will be to prepare for entry intoa growth trajectory through reengineering of our businesses after structural reorganization.
The Group aims to achieve all the aims of the “Bridge to the Future” Mid-term Management Plan andfurther improve corporate value, based on the 120-year-old management philosophies handed down fromgeneration to generation, of fostering a spirit of enterprise, and of social contribution by helping others
through self-help.
Based on this history and track record, the sources of corporate value of the Company are our business
partners, with each of whom we have long-standing relations of trust, and the businesses we have built up
as a unified Group based on the rich experience and technical expertise of our personnel. By understanding
the sources of our corporate value and duly managing them, we believe we will be able to consolidate andimprove corporate earnings and further the common interests of our shareholders on a continuous,
sustainable basis.
ii.

3)

Corporate governanceFor corporate governance measures, please see “4. 6. Status of Corporate Governance, etc.”

Detailed summary of measures to prevent takeovers of financial and business policy decision-making of theCompany by inappropriate parties under the basic policy
i. Ensuring improvement in corporate value and protecting the interests of the Company and the common
interests of shareholders
In the event of actions constituting a large-scale share purchase, the Company considers it appropriate thatshareholders should jointly reach a decision as to whether such action would lead to improvement ofcorporate value of the Company or contribute to protection of the interests of the Company and thecommon interests of shareholders. To decide whether or not to respond to a proposal relating to alarge-scale purchase of the Company shares, etc., we believe the prospective buyer (as defined in ii. below;
hereafter the same shall apply.) and Board of Directors of the Company should both provide adequate andample information, and sufficient time must be allowed to ensure discussion. Likewise, in the event thatthey judge it necessary to modify or improve conditions or methods of any large-scale purchase tosafeguard or improve the corporate value of the Company and protect the interests of the Company and thecommon interests of shareholders, the Board of Directors of the Company shall discuss with the purchasing
party the conditions and methods of the large-scale purchase. Because it may be necessary to have asubstitute proposal, etc. presented to shareholders, adequate time necessary for this purpose should be duly
set aside.
Based on this approach, the Company decided at a Board of Directors’ meeting on May 19, 2015, to
introduce a takeover defense policy as a countermeasure against actions constituting large-scale purchasesof the Company shares, etc. (hereafter, the “Takeover Defense Plan”). At the 195th Annual General
Meeting of Shareholders held on June 25, 2015, a resolution for the introduction of this plan was approvedby shareholders. The Takeover Defense Plan has stipulated matters that any purchaser would be expected
to respect, and countermeasures as a response in the event of failure to comply or in the event that it isdeemed that significant harm would be done to the corporate value of the Company or the interests of theCompany and the common interests of shareholders.
ii.

Actions that would trigger the Takeover Defense Plan
Generally, actions that would trigger the Takeover Defense Plan are those that entail a purchase of at least
20% of the shares, etc. of the Company, or other actions which would likewise constitute transfer of such
quantity of shares for a consideration (hereafter “Large-Scale Purchase”). In the event of a large-scalepurchase, with regard to the party carrying out or intending to carry out such large-scale purchase13

(hereafter “Large-Scale Purchaser”), the Takeover Defense Plan would require provision of informationnecessary for prior discussion of the details of the Large-Scale Purchase by shareholders and the Board of
Directors of the Company; and ensuring of a certain period of time necessary for collection and discussionof information relating to the Large-Scale Purchase by shareholders and the Board of Directors of theCompany. Subsequently, if necessary, the Takeover Defense Plan would provide that discussions takeplace with the Large-Scale Purchaser on the conditions and methods of the Large-Scale Purchase, andprocedures would be provided for the Board of Directors of the Company to respond through measures
including presentation to shareholders of a substitute plan.

4)

iii.

Summary of countermeasures
Under the Takeover Defense Plan, certain set procedures are required to be followed in any Large-Scale
Purchase by any Large-Scale Purchaser. In the event of failure to follow such procedures – or, despite
compliance with them, it is deemed that significant harm would be done to the corporate value of theCompany or the interests of the Company and the common interests of shareholders – stock acquisitionrights shall be allocated free of charge to shareholders, in principle, as a defense measure against any such(unwelcome) Large-Scale Purchase.
It is expected that conditions would be attached for any allocation of stock acquisition rights (hereafter,“Stock Acquisition Rights”) in line with the Takeover Defense Plan, such conditions being: (1) prohibitionof exercise by the Large-Scale Purchaser or its associates, and (2) acquisition of Stock Acquisition Rights
by the Company in exchange for the Company shares from shareholders other than the Large-Scale
Purchaser and its associates.
In the event of a gratis allocation of Stock Acquisition Rights, the related conditions of exercise andacquisition terms could prompt significant dilution of the ratio of voting rights held by the Large-Scale
Purchaser and its associates.

iv.

Establishment of an independent committee
The questions of (1) whether or not the purchaser has completed the set of procedures in line with the rules
laid down in the Takeover Defense Plan, and (2), if the rules in the Takeover Defense Plan have been
complied with, whether or not to trigger certain countermeasures deemed necessary and appropriate tosafeguard corporate value and the interests of the Company and the common interests of shareholders, shallultimately be decided by the Board of Directors of the Company. To ensure the reasonableness and fairnessof such decision-making, the Company has established an independent committee separate from the Boardof Directors of the Company. The number of members of the independent committee shall be at least three
and at most five, and members shall be selected by the Board of Directors from among Outside Directors,
Outside Corporate Auditors, lawyers, tax specialists, certified public accountants, experts from academia,
experts well versed in investment banking, and external parties with experience as directors or executive
officers of other companies.

v.

Disclosure of information
The Company shall make prompt and due disclosure of information to shareholders regarding any
Large-Scale Purchase under procedures based on the Takeover Defense Plan; any provision of informationnecessary for discussion of the details of any Large-Scale Purchase by any Large-Scale Purchaser; anysummary of decision-making by the independent committee; any summary of any decision to trigger or not
trigger countermeasures; and any other matters relating to the initiation of countermeasures.

Reasonableness of the Takeover Defense Plan (reasons for the judgment that Takeover Defense Plan follows thebasic policy, that it does not harm the common interests of the shareholders of the Company and that it is notintended to protect current status of the executives of the Company)
For the following reasons, the Board of Directors of the Company believes that Takeover Defense Plan follows
the basic policy stated in 1) above, that it does not harm the common interests of shareholders of the Company
and that it is not intended to protect the current status of the executives of the Company.
i.
Requirements of guidelines for the takeover defense policy have been met in fullii.
It has been introduced with the purpose of improving corporate value, and safeguarding the interests of
the Company and the common interests of shareholders
iii.
Decisions of shareholders have been given priorityiv.
The judgments of highly independent external parties have been given priorityv.
Reasonable objective criteria have been establishedvi.
It is possible to obtain advice from independent, third-party specialists
vii.
The Takeover Defense Plan is neither a deadhand or slowhand defensive strategy
Please refer to the Company’s website for more details of the Takeover Defense Plan.
(http://www.daitobo.co.jp/; in Japanese)

144. Risks related to businessWith regard to disclosure in the Business Overview, Financial Information and other parts of this Securities Report, thesignificant items which may affect the decisions of our investors can be grouped under the following risk factors.
Any future forecasts included in the following descriptions are based on the judgment of the Group as of the end of thecurrent fiscal year.
(1) Concentration in specified area of a specified business
Commercial facilities including the shopping centers, etc. of the commercial property business, major revenue drivers
for the Group, are concentrated in Mishima District, Shimizu-cho, Sunto-gun, Shizuoka Prefecture.
In the event of an earthquake occurring, as widely predicted, in the Tokai region, there is a risk of adverse impact on theGroup’s business performance, etc.
(2) Lease contracts on non-current assets
The commercial property business, a major revenue generator for the Group, has concluded leasing agreements forcommercial facilities including shopping centers, etc. In the event of any future cancellation of these contracts, due tovarious circumstances, there is a risk of adverse impact on the Group’s business performance, etc.
(3) Interest-bearing debt
The balance of interest-bearing debt at the end of the period under review due to phase 2 and 3 developments at the SUN
TO MOON Kakitagawa commercial property and other factors was ¥9,135 million. In the event of a future increase inmarket interest rates, there is a risk of adverse impact on the Group’s business performance, etc.
(4) Major events, etc.

Year-end
Net sales
Operating income (loss)(Thousandsof yen)(Thousandsof yen)Profit (loss) attributable to (Thousandsof yen)owners of parent(Thousands
Total assetsof yen)(Thousands
Interest-bearing debt
of yen)193rd
fiscal year

194thfiscal year

195th
fiscal year

196thfiscal year

March 2013

March 2014

March 2015

March 2016

8,179,708

7,548,836

5,937,473

5,407,011

373,444377,283(232,610)

378,801

15,41027,966(644,117)

124,831

22,054,350

20,778,686

20,405,300

18,996,244

9,723,042

9,324,225

9,250,506

9,135,017

In the fiscal year ended March 31, 2010 (the 190th fiscal year), the Group’s interest-bearing debt burden had risen to ahigh level. The impact of booking consecutive operating losses and losses attributable to owners of parent due to thesevere earnings impact of the slump in the men’s suits sales subsidiary was exacerbated by the burden of development
funding for phases 2 and 3 of SUN TO MOON Kakitagawa, and a working capital deficit and other negatives in the
men’s suits sales subsidiary. Although there has been in progress in repayment, the issue has not yet been fully resolved.
This situation could prompt substantial doubts as to the viability of the business as a going concern.
However, as stated in “3. Issues to be addressed” and “7. Analysis of financial position, operating results and cash flows(5),” we do not have any significant doubts that the Company can continue as a going concern, given our
implementation of measures to turn around and progress the current situation.
5.

Important business contracts
Lease contracts on non-current assets
The Group has signed land and building leasing contracts with ENCHO Co., Ltd. regarding the SUN TO MOON
Kakitagawa shopping center in the suburb of Mishima, completed and opened in April 1997.

6.

Research and development activities
Not applicable

15

7.

Analysis of financial position, operating results and cash flows
Any future forecasts included in the following descriptions are based on the judgment of the Group as of end of thecurrent fiscal year. Due to the risk of unpredictable changes in the economic environment, the Company cannot offer any
guarantee that forecast results will be achieved.

(1) Significant accounting policies and estimates
The Group’s consolidated financial statements are prepared in accordance with accounting principles generally acceptedin Japan. The preparation of consolidated financial statements requires management to select and then apply theaccounting policies and to make accounting estimates which have the impact on financial position and business resultson the closing date.
Although the Company believes that the estimates made reasonably reflect past experience as well as present
circumstances, the actual results could differ because of the uncertainty inherent in those estimates. The significant
accounting policies applied for the preparation of the consolidated financial statements are explained in “1. Basis ofpreparation of the consolidated financial statements and the non-consolidated financial statements” in “5. Financial
Information.” However, in management’s opinion, the management team’s accounting estimates could materially affect
the Group’s financial position and business results, especially with regard to the following items:
1) Allowance for doubtful accounts
Allowance for doubtful accounts is provided to cover losses on debts based on the loan repayment default rate forgeneral receivables and a case by case consideration of potential collectability for specified debts including doubtfulreceivables. The Group may need to increase the allowance if the financial circumstances of debtors were to
deteriorate more drastically than anticipated, and if their ability to pay their debts was thus significantly impaired.
2) Impairment of investments
The Group owns shares in specified customers and financial institutions for the purpose of upholding long-term
relations, etc. Investment impairment losses are booked if it is judged that a fall in the value of investments is not
temporary. There is a risk of having to book valuation losses in the event that losses arise that are not reflected incurrent book value, or book value becomes unrecoverable, due to deterioration in market conditions or poor
performance at investment targets in years ahead.
(2) Analysis of financial position
1) Assets
The balance of total assets as of the end of the current fiscal year decreased by ¥1,409 million from the end of theprior fiscal year to ¥18,996 million (¥20,405 million for the prior fiscal year). This was mainly due to a decrease of¥232 million in cash and deposits, a decrease of ¥511 million in notes and accounts receivable-trade, a decrease of¥182 million in inventories, and a decrease of ¥323 million in property, plant and equipment.
2)

Liabilities
The balance of liabilities as of the end of the current fiscal year decreased by ¥1,558 million from the end of theprior fiscal year to ¥14,695 million (¥16,254 million as of the end of the prior fiscal year). This was mainly due to adecrease of ¥488 million in notes and accounts payable-trade, a decrease of ¥361 million in provision for sales
returns, and a decrease of ¥588 million in long-term loans payable.

3)

Net assets
The balance of net assets as of the end of the current fiscal year increased by ¥149 million from the end of the priorfiscal year to ¥4,300 million (¥4,150 million as of the end of the prior fiscal year). This was mainly due to anincrease of ¥124 million in retained earnings, a decrease of ¥64 million in valuation difference on available-for-salesecurities, an increase of ¥121 million in revaluation reserve for land, and a decrease of ¥32 million in foreign
currency translation adjustment.

(3) Analysis of operating results
1) Net sales
Net sales for the current fiscal year were ¥5,407 million, a decrease of ¥530 million (8.9% year-on-year). A major
factor was withdrawal from the men’s suits sales business and materials and design-type proposal OEM business as
part of structural reorganization of the textile and apparel business. This outweighed a sound performance by the
uniform section, which enjoyed large-scale orders for uniforms from the private sector, and the health care business,where sales of bio-linen spring and summer bedding, home-use thermal and electric potential therapy devices andcommercial-use bed and bedding were strong.
2)

Cost of sales and selling, general and administrative expenses
Cost of sales for the current fiscal year were ¥4,100 million, a decrease of ¥560 million (12.0% year-on-year), andits ratio for sales improved by 2.7 percentage points from 78.5% in the previous year to 75.8% in the term underreview. Selling, general and administrative expenses for the current fiscal year were ¥927 million, a decrease of¥581 million (38.5% year-on-year). Major factors affecting the cost of sales were the absence in the year underreview of the cumulative provision for reserves connected with the withdrawals from the men’s suits sales businessand the original design manufacture fabric business undertaken in the previous fiscal year. Major cost-increasing
factors in selling, general and administrative expenses were the structural reforms implemented in textile andapparel business.
16

3)

Operating income and expenses
Net operating income for the current fiscal year amounted to ¥378 million, an increase of ¥611 million from the priorfiscal year (net operating loss of ¥232 million). This result was mainly due to improvements in the cost of sales ratio in
the wake of structural reorganization of the textile and apparel business and a reduction in SG&A costs.

4)

Non-operating income and expenses
Non-operating income for the current fiscal year amounted to ¥84 million, an increase of ¥64 million (325.3%
year-on-year). Non-operating expenses amounted to ¥388 million, an increase of ¥81 million (26.6% year-on-year).
As a result, net non-operating loss amounted to ¥304 million, an increase of ¥16 million from the prior fiscal year.
This result was mainly due to an increase in non-operating expenses from syndicated-loan related costs, which
outweighed an increase in non-operating income from gain on sales of investment securities and gain on sales ofinvestments in capital.

5)

Profit or loss before income taxes
Profit before income taxes for the current fiscal year increased by ¥754 million from the prior fiscal year to ¥139
million (¥615 million of loss before income taxes for the prior fiscal year). This was due to a ¥611 million boost at
the operating line which outweighed a ¥16 million non-operating deterioration, a ¥64 million extraordinary income
from the partial transfer of the men’s suits sales subsidiary business, and the absence of extraordinary losses bookedin the previous fiscal year.

6)

Profit or loss attributable to owners of parent
Profit attributable to owners of parent for the current fiscal year increased by ¥768 million from the prior fiscal yearto ¥124 million (¥644 million of loss attributable to owners of parent for the prior fiscal year). This result was
mainly due to the aforementioned increase of ¥754 million in profit before income taxes.

(4) Cash flow information
Net cash used in operating activities in the current fiscal year amounted to ¥229 million (¥92 million provided in the priorfiscal year). This was mainly attributable to a decrease of ¥361 million in provision for sales returns, a decrease of ¥522
million in notes and accounts receivable-trade, a decrease of ¥182 million in inventories, a decrease of ¥498 million innotes and accounts payable-trade, and a decrease of ¥293 million in guarantee deposits received.
Net cash provided by investing activities in the current fiscal year amounted to ¥50 million (¥127 million used in the priorfiscal year). This was mainly due to ¥94 million used for purchase of property, plant and equipment and intangible assets,¥49 million in proceeds from sales of investment securities, ¥64 million in proceeds from transfer of business, and ¥26
million in proceeds from sales of investments in capital.
Net cash used in financing activities was ¥52 million in the current fiscal year (¥27 million used in the prior fiscal year). Thiswas mainly attributable to ¥2,140 million in proceeds from long-term loans payable, ¥2,631 million in repayments of long-termloans payable, ¥650 million in proceeds from issuance of bonds, ¥184 million in redemption of bonds and ¥26 million in
repayments of lease obligations.
As a result of these activities, cash and cash equivalents at the end of the current fiscal year decreased by ¥232 million(25.3%) from the end of the prior fiscal year to ¥687 million.
(5) Analysis and discussion of major events, etc. listed under risks related to business and measures for resolution andimprovement
As stated in “4. Risks related to business, (4) Major events, etc.,” the situation faced by the Group could prompt
substantial doubts as to the viability of the business as a going concern.
To deal with this situation, overhauls of the business and cost structures, pillars of the “KAIKAKU” Mid-termManagement Plan 2010 for the three years from the fiscal year ended March 31, 2011 (the 191st fiscal year) to the fiscal
year ended March 31, 2013 (the 193rd fiscal year), have been completed more or less as planned. The Group has also
made progress in terms of both earnings and financial position, enabling generation of profit attributable to owners ofparent for two successive fiscal years, as well as reduction of interest-bearing debt to greater than targeted levels.
In the fiscal year ended March 31, 2014 (the 194th fiscal year), we launched the “Beyond 120th” Mid-term Management
Plan. Under it, the Group has taken measures to create a platform for long-term development, centered on growth strategy
measures.
Under these circumstances, the Company has decided to implement structural reforms in the textile and apparel businessduring the current fiscal year, centered on the withdrawal from the men’s suits sales business, given the rapid weakeningof the Japanese yen and the protracted nature of the market slowdown following the consumption tax rise.
Specific measures have included strengthening operations at the SUN TO MOON Kakitagawa, one of the leading
commercial facilities in Shizuoka Prefecture, as part of a growth strategy of increasing earnings potential; and astrengthening of the health care business through measures such as expanding sales of products using health-promoting
substances based on the Company’s proprietary technology.
At the same time, in the textile and apparel business, we were able to achieve structural reorganization by pushing
through overhauls after partial revision of the mid-term management plan, and through completion of all tasks listed
below during the current fiscal year.
By continuing with the “Beyond 120th” Mid-term Management Plan, the Group has made progress in terms of bothearnings and financial position during the fiscal year ended March 31, 2016 (the 196th fiscal year), and secured net profit
17

on a consolidated basis in line with targets. At the same time, we continue to work to reduce interest-bearing debt bycontinuously using surplus operating cash flow. Accordingly, we do not have any significant doubts that the Company
can continue as a going concern.

183. Equipment and Facilities
1.

Overview of capital expenditures
The Group carries out capital investments for the purpose of continuously strengthening its business structure. The total
amount of capital expenditure for the current fiscal year was ¥95 million. By segment, ¥91 million went into thecommercial property business and ¥3 million into the Group as a whole.
In the commercial property business, investment was mostly made to the SUN TO MOON Kakitagawa complex.

2.

Major equipment and facilities
The Group’s major equipment and facilities are summarized as follows:

The Company(As of March 31, 2016)
Net book value

Location

Name of segment

Description

Machinery,
Buildings andequipment
structuresand vehicles

Land

Leasedassets

Other

Total

(Thousands(Thousands (Thousands (Thousandsof yen)of yen)of yen)of yen)2(m )(Thousands (Thousandsof yen)of yen)Corporate
Head office
functions andCommercial
back-officeproperty business operations

—
(—)

—

1,270

15 (2)
9,336

2,317

12,924

3 (–)

Health carebusiness
SUN TO MOON
Kakitagawa, etc.
(Shimizu-cho,Sunto-gun,Shizuoka)

Commercial
property business(Persons)

20 (2)

Textile andapparel business
Head Office(Chuo-ku, Tokyo)

Number of
employees

8 (1)Commercial
facilities, etc.
(Note 2)

8,912,070(92,551)—

6,380,290

183,661

22,831

15,498,853

27 (–)

Notes: 1. “Other” in net book value consists of tools, furniture and fixtures, and does not include construction in progress.
Amounts are presented exclusive of consumption tax, etc.
2. SUN TO MOON Kakitagawa, etc. are leased to Daitobo Estate Co., Ltd. and ENCHO Co., Ltd., etc. by theCompany.
Number of employees of SUN TO MOON Kakitagawa, etc. indicates the number of employees related to Daitobo
Estate Co., Ltd.
3. In addition to the above, other major leased assets are presented as follows:
The Company
Location

Name of segment

Description

Corporate
Head Office(Chuo-ku, Tokyo)(As of March 31, 2016)
Lease Fees
Number of
employees(Thousands(Persons)of yen/year)
20 (2)

Textile and apparelbusiness

Head office
functions andCommercial property back-office
operations (lease)business

15 (2)

Health care business

8 (1)72,3873 (–)

4. The figures in parentheses represent the number of part-time employees and are not included in the number offull-time employees.
3.

Plans for new additions or disposals of equipment and facilities
Not applicable194. Corporate Information
Information on the Company’s shares

1.

(1) Number of shares and other1)

Number of shares
Type

Number of shares authorized to beissuedCommon stock

96,000,000

Total

96,000,000

2)Number of shares issued
Number of shares issued
As of June 24, 2016Type
As of March 31, 2016
(filing date of this
Securities Report)

Stock exchanges on which
the Company is listed

Description

Common stock

30,000,000

30,000,000

First Section of the Tokyo
Stock Exchange and of the
Nagoya Stock Exchange

The number of shares
per unit is 1,000

Total

30,000,000

30,000,000——(2) Status of the stock acquisition rights
Not applicable(3) Exercise status of bonds with stock acquisition rights containing a clause for exercise price adjustment
Not applicable(4) Rights plan
Not applicable(5) Changes in the number of shares issued and the amount of common stock and other
Changes in thenumber of sharesissued(Shares)

PeriodSeptember 25, 1973—
(Note)
Note: Addition to revaluation reserve

Balance of the
Changes in
Balance of
Changes in
Balance of
number of shares
legal capital
legal capital
capital stock
capital stock
issuedsurplussurplus(Shares)(Thousands of yen) (Thousands of yen) (Thousands of yen) (Thousands of yen)―

30,000,000

1,500,000

502,765

503,270(6) Details of shareholders(As of March 31, 2016)

Classification

Number ofshareholders(Persons)
Number ofshares held
(Units)Shareholding
Ratio (%)

Status of shares (1 unit = 1,000 shares)
Foreign
Foreign
Securities
Other
shareholders
shareholders
companies
corporations(other than(individuals)
individuals)

Stocks ofless than astandard unit

National andlocal
governments

Financial
institutions

―

21

32

56

29

4

3,345

3,487

―

―

4,631

2,752

1,448

805

11

20,197

29,844

156,000

―

15.52

9.22

4.85

2.70

0.04

67.67

100

―

Individuals
and other

Total

Notes: 1. Treasury stock of 66,213 shares are included in “Individuals and other” at 66 units, and in “Stocks of less than astandard unit” at 213 shares.
2. “Other corporations” include 7 units held under the name of Japan Securities Depository Center, Incorporated.

20

(7) Principal shareholders

Name

Address(As of March 31, 2016)
Number ofshares held as a
Number ofpercentage ofshares held
total sharesissued(Thousands)(%)

Sumitomo Mitsui Trust Bank, Limited

1-4-1 Marunouchi, Chiyoda-ku, Tokyo

1,478

4.92

SBI SECURITIES Co., Ltd.

1-6-1 Roppongi, Minato-ku, Tokyo

1,125

3.75

Osamu Ikemoto

Nishi-ku, Hiroshima-shi, Hiroshima

971

3.23

Rakuten Securities, Inc.

1-14-1 Tamagawa, Setagaya-ku, Tokyo

904

3.01

610

2.03

550

1.83

Mitsui Sumitomo Insurance Company, Limited
Developer Sanshin inc.

3-9 Kanda-Surugadai, Chiyoda-ku,
Tokyo
3-11 Kanda-Nishikicho, Chiyoda-ku,
Tokyo

Yoshio Koizumi

Kawaguchi-shi, Saitama

499

1.66

Atsushi Hida

Nara-shi, Nara

422

1.40

8-11 Harumi 1-Chome, Chuo-ku, Tokyo

352

1.17

2-11-3 Hamamatsu-cho, Minato-ku,
Tokyo

348

1.16

7,259

24.19

Japan Trustee Services Bank, Ltd.
(Trust account 5)
The Master Trust Bank of Japan, Ltd.
(Trust account)

―

Total

Note: Of the above shareholdings, those held by trust banks are as follows.
The Master Trust Bank of Japan, Ltd. (Trust account)
348 thousand shares21

(8) Status of voting rights
1)

Shares issued(As of March 31, 2016)
Number of shares(Shares)Number of voting rights(Units)Description

Nonvoting shares

―

―

―

Limited voting shares (Treasury
stock, etc.)

―

―

―

―

―

―

―

―

―

Classification

Limited voting shares (Others)

Shares with full voting rights(Treasury stock, etc.)―(Treasury stock)
Common stock
66,000(Crossholding stock)
Common stock
93,000Shares with full voting rights(Others)
Stocks of less than a standard
unit

Common stock
Common stock
156,000

Total shares issued

30,000,000

Total voting rights held by all
shareholders――

29,68529,685,000

―

―

―

―
―

29,685

Note: “Shares with full voting rights (Others)” includes 7,000 shares held under the name of Japan Securities Depository
Center, Incorporated. “Number of voting rights” includes seven cases of voting rights relating to shares with fullvoting rights held in the name of Japan Securities Depository Center.
2)

Treasury stock, etc.
(As of March 31, 2016)
Shareholders

Number ofshares held
under own
name(Shares)

Addresses of shareholders

Number of
Total number Number of shares held
shares heldof shares
as a percentage ofunder theheld
total shares issued
names of others(Shares)(Shares)(%)

Treasury stock:
6-6 Nihonbashikobuna-cho, Chuo-ku,
Daito Woolen Spinning & Weaving Tokyo
Company, Limited

66,000―66,0000.22

Crossholding stock:
Takara Textile Industry Co., Ltd.

93,000―93,0000.31

159,000—

159,000

0.53

Total

1255-2 Hatsuoi-cho, Kita-ku,
Hamamatsu-shi, Shizuoka—

22

(9) Stock option plans
Based on the stipulations of Article 361 of the Companies Act, the amount of remuneration, etc. of the stock acquisitionrights in the form of stock remuneration-type stock options for Directors (excluding Directors serving as Audit andSupervisory Committee Members) of the Company was approved at the General Meeting of Shareholders held on June24, 2016.
Date for resolution
No. of individuals covered by the Plan
Type of shares to be issued upon theexercise of stock acquisition rights
Number of shares to be issued upon theexercise of stock acquisition rights
Amount to be subscribed upon the exerciseof stock acquisition rights

Exercise period of stock acquisition rights

Conditions for the exercise of stockacquisition rights
Transfer of stock acquisition rights
Matters relating to subrogation payment
Matters relating to the issuance of stockacquisition rights as a result oforganizational restructuring action

June 24, 2016
3 Directors (excluding Directors serving as Audit and Supervisory
Committee Members) of the Company (Note)
Common stock
The upper limit on stock acquisition rights to be allocated each fiscal
year to Directors (excluding Directors serving as Audit andSupervisory Committee Members) is 200,000 shares in total.
The payment per share for shares deliverable through exercise ofstock acquisition rights is 1 yen per share, and the amount to be
subscribed is this value multiplied by the total of shares under eachstock acquisition right.
To be decided at a Board of Directors’ meeting, within a range of five
years from the date in which three years have passed from the day
following the allocation of stock acquisition rights.
Recipients who have been provided stock acquisition rights shall beable to exercise such rights from the day after the loss of position as
Director of the Company. Other conditions for the exercise of stockacquisition rights are determined at a Board of Directors’ meeting.
Any and all transfers of stock acquisition rights must be approved by
the Board of Directors of the Company.
——(Note) Company’s executive officers will also be receiving stock acquisition rights of the same nature as those describedabove.

23

2.

Acquisition of treasury stock
Type of shares: Acquisition of shares of common stock under Article 155, Item 7 of the Companies Act(1) Acquisition of treasury stock based on a resolution approved at the General Meeting of the Shareholders
Not applicable(2) Acquisition of treasury stock based on a resolution approved by the Board of Directors
Not applicable(3) Acquisition of treasury stock not based on a resolution approved at the General Meeting of the Shareholders or on a
resolution approved by the Board of Directors
Number of shares(Shares)Classification

Treasury stock acquired during the current fiscal year

301

Total amount(Yen)
21,478Treasury stock acquired during the period for——
acquisition
Note: “Treasury stock acquired during the period for acquisition” does not include stocks of less than a standard unit
purchased during the period from June 1, 2016 to the filing date of this Securities Report.
(4) Current status of the disposition and holding of acquired treasury stock
Current fiscal year
Period for acquisition
Total
Total
Number of
Number ofClassification
disposition
disposition
sharessharesamountamount(Shares)(Shares)
(Yen)
(Yen)
Acquired treasury stock for which subscribers――――
were solicited――――
Acquired treasury stock that was disposed ofAcquired treasury stock for which transfer of――――shares was conducted in association withmerger/stock exchange/corporate separation
Other
―
―
―
―
(—)
66,213―
66,213―
Number of shares of treasury stock held
Note: “Number of shares of treasury stock held” does not include stocks of less than a standard unit purchased during theperiod from June 1, 2016 to the filing date of this Securities Report.

24

3.

Dividend policy
In the belief that it is one of the main priorities of management to uphold and strengthen competitiveness and ensure astable and appropriate return of profits to all shareholders through expansion of corporate value, the Group has a basic
policy of gearing decisions regarding distribution of profit to the need to improve business performance while also paying
due attention to its internal reserves.
Based on the provisions of Article 454, Paragraph 5 of the Companies Act, the Company has included in its Articles ofIncorporation a provision that “an interim dividend may be issued upon resolution by the Board of Directors, with
September 30 as the date of record.” The basic policy of the Company is that an interim and a year-end dividend are eachpaid once a year from surplus. The decision-making regarding the dividends from surplus is carried out at a General
Meeting of Shareholders for the year-end dividend, and at the Board of Directors for the interim dividend.
Given the need to increase the level of internal reserves, the Group announces with regret that no dividend will be paid
during the term under review.
Looking ahead to the coming fiscal year and beyond, the Group will make every effort to quickly re-establish a stablefinancial base and restore the dividend.

4.

Changes in the market price of the Company’s shares(1) Highest and lowest prices during the past five years
192ndfiscal year

193rd
fiscal year

194thfiscal year

195th
fiscal year

196thfiscal year

March 2012

March 2013

March 2014

March 2015

March 2016

Highest (Yen)

94

82

100

80

97

Lowest (Yen)

55

56

61

66

55

Year-end

Note: The above prices are those quoted on the First Section of the Tokyo Stock Exchange.
(2) Highest and lowest prices during the past six months
Month

October 2015

November

DecemberJanuary 2016

February

Highest (Yen)

70

76

72

66

63

61

Lowest (Yen)

64

67

61

56

55

57

Note: The above prices are those quoted on the First Section of the Tokyo Stock Exchange.

25

March

5.

Members of the Board of Directors and Statutory Auditors

8 males, 0 females (female ratio of 0.0%)
Function

Position

Name(Date of birth)

Career summary
April 1979
February 2002

President andRepresentative
Director—

Kazuhiro
Yamauchi(January 5,
1957)

January 2004
January 2007
June 2009
August 2010

June 2012

July 2013

June 2015
March 1974
April 2002
April 2004

Vice President
andRepresentative
Director—

Toshiyasu
Nomura(February 27,
1952)

May 2005
May 2007
October 2011
June 2012
June 2013
February 2014
June 2014

Director

Executive
Officer,
GeneralManager,Business
Management
Headquarters,
GeneralManager,
Corporate
Planning
Division

April 2015
April 1990
September 2010
June 2012
Shogo Mieda(February 12,
1969)

June 2015

April 1976
January 1989
Director—

Yasunobu
Sawada(January 9,
1953)

October 1997
April 2002
July 2003

Director(Audit andSupervisory
Committee
Member)—Yuji Kakuma(July 8, 1948)

June 2015
April 1967
July 2006
June 2007
June 2008
August 2010
June 2012
June 2016

Term ofofficeJoined Mitsui Trust and Banking Company, Limited(currently Sumitomo Mitsui Trust Bank, Limited)
General Manager, Personnel Planning Dept. of Chuo
Mitsui Trust and Banking Company, Limited(currently Sumitomo Mitsui Trust Bank, Limited)
General Manager, Osaka Branch Business Dept. II
General Manager, Shinjuku Nishiguchi Branch
Director and General Manager, Corporate Planning
Division of the Company
Managing Director and General Manager, Business(Note 3)
Management Headquarters, General Manager,
Corporate Planning Division
Senior Managing Director and General Manager,
Business Management Headquarters, Deputy General
Manager, Real Estate Headquarters
Director and Senior Managing Executive Officer,
General Manager, Business Management
Headquarters, General Manager, Personnel Division
President and Representative Director (current post)
Joined the Company
General Manager, Functional Textile Business Division
Deputy General Manager, Textile Business
Headquarters
President and Director of Niigata Daitobo Co., Ltd.
President and Director of Daitobo Shinso Co., Ltd.
General Manager, Functional Textile Sales Division,
Sales Headquarters(Note 3)
Director and General Manager, Functional Textile Sales
Division, Sales Headquarters
Vice President and Director
Vice President and Director
General Manager, Health Care Business Headquarters
Vice President and Representative Director
General Manager, Health Care Business Headquarters
Vice President and Representative Director (current post)
Joined the Company
Accounting Group Leader, Administration Division
General Manager, Corporate Planning Division,
Business Management Headquarters
Director and Executive Officer, General Manager,
Business Management Headquarters, General(Note 3)
Manager, Corporate Planning Division (current post)

Joined the Ministry of Labour (currently Ministry of
Health, Labour and Welfare)
Joined A.T. Kearney, Inc. (currently A.T. Kearney
K.K.), assigned to Tokyo OfficeDirector of Practice Management
Executive Director of Enterprise IG Japan K.K.
(currently Brand Union/WPP Group)
Representative Director of VieBrand Consulting Inc.
(current post)
Director of the Company (current post)
Joined the Company
General Manager, Accounting Division
Director and General Manager, Accounting Division
Director and General Manager, Administration Division
Director and General Manager, Administration Division,
Business Management Headquarters
Corporate Auditor
Director (Audit and Supervisory Committee Member)(current post)

26

Number ofshares owned(Shares)

35,00028,0004,000(Note 3)—(Note 4)67,000Function

Director(Audit andSupervisory
Committee
Member)Position—

Name(Date of birth)

Haruki Iinuma(April 19, 1948)

Career summary
April 1976
April 1978
April 2000
June 2011
June 2016
September 2001

Director(Audit andSupervisory
Committee
Member)July 2005
August 2006—

Takashi Kagami(December 19,
1976)

November 2013

June 2016
April 1977

April 2003
Director(Audit andSupervisory
Committee
Member)April 2006—

Shusaku
Okumura(June 16, 1952)

April 2008
October 2010
April 2013
March 2016
June 2016

Registered as an attorney
Established IINUMA LAW OFFICE (current position)
Registered as a licensed tax accountant
Corporate Auditor of the Company
Director (Audit and Supervisory Committee Member)(current post)
Joined Shin Nihon & Co. (currently Ernst & Young
ShinNihon LLC)
Registered as a certified public accountant
Joined Certified Public Tax Accountants’ Co. Takano
Sogo Accounting Firm and Takano Sogo Consulting
Co. (concurrent)
Registered as a licensed tax accountant
Partner of Certified Public Tax Accountants’ Co. Takano
Sogo Accounting Firm and Takano Sogo Consulting
Co. (current post)
Director (Audit and Supervisory Committee Member) of
the Company (current post)
Joined Sumitomo Marine & Fire Insurance Co., Ltd.
(currently Mitsui Sumitomo Insurance Company,
Limited)General Manager, Nursing Care & Service Office of
Mitsui Sumitomo Insurance Company, Limited
President and Representative Director of American
Appraisal Japan Co., Ltd.
General Manager, Risk Management Division of Mitsui
Sumitomo Insurance Company, Limited
General Manager, Corporate Risk Management Dept. of
MS&AD Insurance Group Holdings, Inc.
Fixed-term employee, Corporate Risk Management
Dept. of MS&AD Insurance Group Holdings, Inc.
Retired from MS&AD Insurance Group Holdings, Inc.
Director (Audit and Supervisory Committee Member) of
the Company (current post)

Total
Notes:

Term ofofficeNumber ofsharesowned(Shares)(Note 4)—(Note 4)—(Note 4)—

134,000

1. The Company has transitioned to a company with an Audit and Supervisory Committee on June 24, 2016 based on the approval of amendments
to the Articles of Incorporation in the General Meeting of Shareholders held on the same date.
2. Messrs. Yasunobu Sawada, Haruki Iinuma, and Takashi Kagami are Outside Directors.
3. One year from the conclusion of the General Meeting of Shareholders held on June 24, 2016.
4. Two years from the conclusion of the General Meeting of Shareholders held on June 24, 2016.
5. The Audit and Supervisory Committee is comprised as follows.
Chairman: Yuji Kakuma, Committee members: Haruki Iinuma, Takashi Kagami, and Shusaku Okumura

27

6.

Status of Corporate governance, etc.

(1) Status of corporate governance
Basic corporate governance policy
Taking a viewpoint that prioritizes corporate value, the Company believes that corporate governance is one of the mostimportant issues facing management. Faced with a rapidly changing economic environment, our basic belief is that it isnecessary to ensure that management is transparent, sound and compliant, to work for swift and appropriate disclosure of
information that prioritizes accountability to all stakeholders, and to streamline management, speed up decision-making andexpand management monitoring roles. Aiming to improve corporate governance, the Company works for thorough complianceand risk management, and works to ensure transparent, fair, prompt and resolute decision-making based on the perspectives ofshareholders and all other stakeholders. We are committed to taking autonomous measures to ensure sustainable growth, andlonger-term improvement in corporate value.
1) Corporate governance systemi)

Summary of the Company’s corporate governance system
The Company transitioned to a company with an Audit and Supervisory Committee in June 2016. Reasons for adopting
this framework are that by setting up an Audit and Supervisory Committee with Directors holding voting rights serving as
its members, we believe we can strengthen the auditing and supervisory roles of the Board of Directors and ensure evenmore comprehensive corporate governance, under a transparent and flexible corporate management model. We have set
up a system that aims to ensure a high level of corporate governance. In addition to the Board of Directors and Audit andSupervisory Committee, an Outside Officers’ Meeting and Advisory Committee and other entities have been created, andwe have introduced an executive officer system which strengthens the supervisory role of the Board of Directors andclarifies operational executive responsibilities, as well as ensuring smooth cooperation between the Audit andSupervisory Committee, Accounting Auditor and the Internal Audit Office.
(Board of Directors)
Designated as a body for overseeing management decision-making and performance of duties by Directors, the Board of
Directors comprises eight (8) Directors in total: four (4) Directors (excluding Directors serving as Audit and Supervisory
Committee Members) of whom one (1) member is an Independent Outside Director, and four (4) Directors serving as
Audit and Supervisory Committee Members, of whom three (3) members are Independent Outside Directors. As a rule,
the Board of Directors meets once a month, convenes extraordinary meetings of the Board of Directors when necessary
and deliberates, reports and decides on issues facing management and receives reports on status of execution of business.
In this way, a framework has been created for the appropriate supervision of Directors’ performance of duties.
(Audit and Supervisory Committee)
The Audit and Supervisory Committee is composed of four (4) Directors serving as Audit and Supervisory Committee
Members (including three (3) Independent Outside Directors). With one (1) full-time Audit and Supervisory Committee
Member, the Audit and Supervisory Committee meets once a month as a rule, audits the performance of duties byDirectors and compiles auditing reports. As a rule, Directors serving as Audit and Supervisory Committee Members siton the Board of Directors and Audit and Supervisory Committee; likewise, the Director serving as a full-time Audit andSupervisory Committee Member attends important internal meetings including the General Managers’ Meeting. In thisway, auditing is carried out through the internal control system to ensure legality and propriety of operations, and theperformance of duties by Directors is audited. Together with the Internal Audit Office, an internal audit liaison meeting is
also regularly held once a month in addition to exchanging opinions as needed. With the Accounting Auditor, it carriesout regular accounting audits, and maintains close cooperative relations by facilitating consultation and discussion
opportunities as needed regarding major accounting issues.
(Outside Officers’ Meeting and Advisory Committee)
To provide a fresh external perspective, an Outside Officers’ Meeting has been established comprising only four (4)Independent Outside Directors, one (1) of whom is the senior Independent Outside Director. The caucus is intended as aplatform for useful advice contributing to sustainable growth and improved corporate value, and lively discussion ofsuggestions relating to management supervision. Regarding important matters such as selection and compensation ofsenior management including Directors, the Independent Outside Directors form a suitable platform for advice-giving.
Under the Board of Directors, an Advisory Committee including the President and Vice President and mainly comprising
Independent Outside Directors has been set up.
(Internal Control Committee)
The Internal Control Committee meets as a rule once a month. Set up along with the Audit and Supervisory Committee inJune 2016, it has been established as an organization developed from the former Internal Management Reinforcement
Committee. The President is the committee chairman and the General Manager of Internal Audit Office runs theoperational business office. Executive officers at the grade of general manager and higher also attend, along with
Directors and the Director serving as a full-time Audit and Supervisory Committee Member. This committee consults andreports on wide-ranging risk management issues and operational status of internal controls.

28

(General Managers’ Meeting, etc.)
The General Managers’ Meeting, attended by Directors (excluding Directors serving as Audit and Supervisory
Committee Members), Executive Officers, the Director serving as a full-time Audit and Supervisory Committee Member,and executives at the grade of general manager and above, is held once a month for discussions on important mattersconcerning management policy and performance of duties. A reporting meeting is also held once a month as a rule tofollow the progress of operations at the Group companies.

29

Indicated below is a diagram of the corporate governance system of the Company.
株主総会
General Meeting of Shareholders
報告
Reporting
選任解任
Appointment and dismissal
選任解任
Appointment and dismissal
選任解任
Appointment and dismissal
社外役員会議Outside Officers’ Meeting
助言・提言
Advice and suggestion
取締役会
Board of Directors
監査等委員会
Audit and Supervisory Committee
監査等委員である取締役
Directors serving as Audit and Supervisory Committee Members
連携
Cooperation
会計監査人
Accounting Auditor
監査・監視
Auditing and monitoring
補佐
Assistance
諮問委員会
Advisory Committee
人事・報酬
Personnel affairs and compensation
助言・提言
Advice and suggestion
取締役（監査等委員である取締役を除く）
Directors (excluding Directors serving as Audit and Supervisory Committee Members)
報告
Reporting
選定・解職Selection and discharge
監視Monitoring
連携
Cooperation
監査等委員会室
Audit and Supervisory Committee Office
指示Direction
代表取締役社長
President and Representative Director
内部監査室Internal Audit Office
報告Reporting
運営
Management
部長会
General Managers’ Meeting
内部統制委員会
Internal Control Committee
助言
Advice
顧問弁護士
Legal adviser
各部署・子会社
Divisions and subsidiariesii) Other matters related to corporate governance•Status of the Company’s internal control systems
The Company has created the following frameworks: systems for ensuring that performance of duties by Directors is incompliance with laws and regulations and the Articles of Incorporation; systems provided by laws and regulations as
being necessary to otherwise ensure the propriety of operations of the Company and its subsidiaries making up the
Daito Woolen Spinning & Weaving group; and systems for combating antisocial forces and frameworks for internal
governance mechanisms relating to financial reporting. For these systems, basic policy is decided by the Board of
Directors. To ensure their appropriate operation, audits are carried out by the Audit and Supervisory Committee as well
as by the Internal Audit Office directly under the President. These measures ensure creation of a full internal control
system that sets up necessary organizations and procedures, etc.

•

Status of the Company’s risk management systems
The Company classifies and analyzes risk relating to Company operations and ensures appropriate management
structures for risk management. With regard to compliance and risk, whenever major legal issues arise, consultations
are undertaken as necessary with legal advisers and external experts to prevent actions that violate laws and regulations
and the Articles of Incorporation. In the event of discovery by Directors of other Directors’ actions that violate laws andregulations and the Articles of Incorporation, a framework is in place for immediate reporting to Directors serving as
Audit and Supervisory Committee Members and Board of Directors. Regarding management of information, a basic
information security policy and management procedure have been compiled, and are duly and effectively maintained
and managed. In the event of major earthquakes or other disasters, an organized, systematic set of measures has been
put in place based on disaster and crisis basic management procedures, to minimize the resulting impact. Measures are
additionally taken to prevent risk from arising in the first place, through establishment of rules corresponding to various
risk categories.

30iii) Systems to ensure appropriate business operations of the subsidiaries of the Company
Regarding the operational management of the Group, meetings are duly held, including the operational auditing andother meetings held once a month as a rule, as platforms for the reporting of events relating to the carrying out of
operations by subsidiaries, as a means to ensure that management follows operational procedures laid down foraffiliated companies. Furthermore, we implement internal audits of subsidiaries through the Internal Audit Office, withresults reported to directors of the subsidiaries and Directors of the Company. These form frameworks for managementof risk of loss at subsidiaries, ensuring the effective performance of duties by directors of subsidiaries, and ensuring
compliance with laws and regulations and the Articles of Incorporation in the execution of duties by directors and other
employees of subsidiaries.
iv) Outline of the limited liability agreement
Based on the stipulation in Article 427, Paragraph 1 of the Companies Act, the Company has entered into an agreementwith Directors who are not Executive Directors, etc. to limit liability of damages, as stipulated in Article 423, Paragraph 1of the Companies Act. The limit of liability under this agreement is the minimum liability amount set forth in Article 425,
Paragraph 1 of the Companies Act. These provisions are intended to ensure that Directors who are not Executive
Directors, etc. are able to fully carry out the roles expected of them.
2) Internal audits and Audit and Supervisory Committee
The Company has set up an Internal Audit Office directly under the President as the section responsible for internal controls.
It comprises four (4) members: two (2) full-time and two (2) part-time members. The Internal Audit Office carries out audits
based on internal auditing plans, and regularly reports to the President and Audit and Supervisory Committee.
The Company has an Audit and Supervisory Committee which is composed of four (4) members in all (including three (3)Independent Outside Directors): one (1) full-time Audit and Supervisory Committee Member and three (3) Audit andSupervisory Committee Members. The full-time Audit and Supervisory Committee Member has long years of experience ofaccounting matters at the Company, and of the Independent Outside Directors serving as Audit and Supervisory Committee
Members, one (1) is a partner from an accounting office qualified respectively as a certified public accountant and as a tax
specialist; both of them have a thorough understanding of finance and accounting matters.
Based on the Audit and Supervisory Committee Regulations, the Audit and Supervisory Committee holds Committee
meetings once a month as a rule. It audits the performance of duties by Directors (excluding Directors serving as Audit andSupervisory Committee Members) and compiles auditing reports. In order to assist the Audit and Supervisory Committee
Members, the Company has set up an Audit and Supervisory Committee Office, and has appointed to it one (1) full-timeoffice manager and one (1) part-time employee. In addition to the monthly Internal Control Committee, the Internal Audit
Office and Audit and Supervisory Committee arrange monthly internal audit liaison meetings and maintain close cooperative
relations by facilitating consultation and discussion meetings as needed. With the Accounting Auditor, it carries out regularaccounting audits and facilitates consultations and discussion opportunities regarding major accounting issues as needed.
3) Outside Directors
The Company has four (4) Outside Directors, and has registered all of them as independent officers. None of these four
Directors have any conflicts of interest in terms of interpersonal, capital, transaction or any other relations with the Company.
Based on their specialist knowledge, deep experience and wide understanding, the function and roles we expect of the
Independent Outside Directors is to adequately supervise management from a position of neutrality and independence fromthe Company and give various kinds of management advice, thereby improving corporate governance at the Company.
With regard to Outside Directors, the Company has a policy of appointing personnel with a strong understanding ofcorporate management, finance and accounting, practical experience in law and other operationally necessary specialist
knowledge and experience. It also has a policy of appointing Independent Outside Directors who are above suspicion of
conflict of interest with general shareholders. Currently, all four (4) Outside Directors are registered as independent
officers as they are not in breach of the criteria for independence laid down by the Company. Of the eight (8) Directors of
the Company, 50% or four (4) of them are Independent Outside Directors. Leveraging their own separate fields ofexpertise, they are expected to correspondingly raise corporate governance standards.
An overview of the main criteria for independence is laid down by the Company follows.
・The Independent Outside Directors shall not be involved in execution of the business of the Company or of subsidiariesof the Company
・Independent Outside Directors shall not be significant transaction partners of the Company or the executing officer
thereof・Independent Outside Directors shall not be consultants or other kinds of specialist who derive large sums of money orother assets from the Company
・Independent Outside Directors shall not be major shareholders of the Company.
When having multiple Independent Outside Directors, the Company appoints one of them as senior Independent Outside
Director. And as of the Annual General Meeting of Shareholders held on June 24, 2016, multiple Independent Outside
Directors were approved by resolution. For this reason, a resolution was passed on the same day at the Board of Directors’
meeting to appoint Director Yasunobu Sawada as senior Outside Director, and an Outside Officers’ Meeting comprised
only of Outside Directors was set up.
Through meetings and interviews, the Outside Directors, Internal Audit Office, Audit and Supervisory Committee andAccounting Auditor of the Company have opportunities for consultation and discussion as needed and maintain close
cooperative relations.
314) Compensation paid to Executivesi)Total amount of remuneration, remuneration by type, and number of recipients, by class of executive
Total remuneration by remuneration type
Total
(Thousands of yen)
Remuneration
Category(Thousands
Basic
Retirement
Stock Option
Bonusof yen)Remuneration
Benefits
Directors(except for Outside
36,42336,423――—
Directors)
Corporate Auditors(except for Outside
8,823
8,823
―
―
―
Corporate Auditors)
Outside Directors andOutside Corporate
9,510
9,510
―
―
―
Auditors

Number of
Executives(Persons)

7

1

3

Notes: 1. On the last day of the fiscal year under review, there were six (6) Directors and three (3) Corporate Auditors.
2. The remuneration framework for Directors (excluding Directors serving as Audit and Supervisory Committee Members)
has been resolved to be an annual amount with an upper limit of 72,000 thousand yen (of which a remuneration within arange of up to 10,000 thousand yen for Outside Directors; does not include remuneration paid as employees) at the 196th
Annual General Meeting of Shareholders held on June 24, 2016.
3. The remuneration framework for Directors serving as Audit and Supervisory Committee Members has been resolved to be
an annual amount with an upper limit of 36,000 thousand yen at the 196th Annual General Meeting of Shareholders held on
June 24, 2016.

ii) Total amount of remuneration by executive at the Company
Not applicable, as there are no employees earning ¥100 million or more in total remuneration (consolidated).
iii) Remuneration paid to employees to those who serve concurrently as executives
Total Remuneration
Number of Executives
Description(Thousands of yen)
(Persons)
Salaries for general managers of divisions or
16,354
5
headquartersiv) Details of policy and method of decision-making regarding remuneration, etc. levels for executives, and decisions on
method of calculation
The President makes decisions regarding the Directors’ compensations based on in-house regulations on executives, after
being so empowered by the Board of Directors’ meeting, provided that the total sum to be paid out does not exceed aceiling range laid down by resolution at the General Meeting of Shareholders. With regard to the decision, acomprehensive evaluation is made in consideration of an individual Director’s role, number of years of experience andtrack record, and Company expectations of his or her contribution, etc., with reference to prevailing market rates andgeneral employee remuneration and after due consideration has been given to the Advisory Committee’s opinions. For
senior management executives, draft proposals are made by the President in line with the decision-making approach for
Directors’ compensations, with due consideration given to balancing them with the Directors’ remuneration levels andbased on in-house regulations relating to executive officers, etc. The decisions are subject to the approval of each
Director.
5) Status of stocks heldi)

Number of stocks and total amounts recorded in the balance sheet of the stocks for investment held for any purposes
other than pure investment
Number of stocks: 14
Total of the amounts recorded in the balance sheet: ¥228,257 thousandii) Holding classification, stocks, number of shares held, amount recorded in the balance sheet and holding purpose of thestocks for investment held for any purposes other than pure investment

32

Prior fiscal year
Specific stocks for investment
Number of shares heldby the Company(Shares)Amount recorded in thebalance sheet(Thousands of yen)

159,133

190,959

Maintain the trade relations, etc.

6,000

2,598

Maintain the trade relations, etc.

Isetan Mitsukoshi Holdings Ltd.

357

709

Maintain the trade relations, etc.

RENOWN INCORPORATED

100

22

Maintain the trade relations, etc.

Number of shares heldby the Company(Shares)Amount recorded in thebalance sheet(Thousands of yen)

159,133

129,215

Maintain the trade relations, etc.

6,000

2,628

Maintain the trade relations, etc.

Isetan Mitsukoshi Holdings Ltd.

300

394

Maintain the trade relations, etc.

RENOWN INCORPORATED

100

11

Maintain the trade relations, etc.

StocksTHE SHIZUOKA BANK, LTD.
ENCHO Co., Ltd.

Holding Purpose

Current fiscal year
Specific stocks for investment
StocksTHE SHIZUOKA BANK, LTD.
ENCHO Co., Ltd.

Holding Purposeiii) Total amount recorded in the balance sheet for the prior and current fiscal year, total amount of dividend income, gain orloss on sale, and gain or loss on valuation for the current fiscal year of stocks for investment held for any purposes otherthan pure investment
Not applicable6) Audit of financial statements
The Company has signed an auditing contract with Deloitte Touche Tohmatsu LLC, which serves as Accounting Auditor
and carries out audits. The names of the certified public accountants who carried out auditing in the year ended March 31,
2016 are Messrs. Masato Yoshimizu and Tatsuya Nakajima. Assisting in the audit operations are ten (10) personnel
including certified public accountants. No conflict of interest in terms of interpersonal, capital or transaction relations
exist with the certified public accountant and his or her assistants who carried out audit operations.
7) Requisite number of Directors
The Company stipulates in its Articles of Incorporation that the number of Directors (excluding Directors serving as Audit
and Supervisory Committee Members) shall be not more than eleven (11) and the number of Directors serving as Audit
and Supervisory Committee Members shall be not more than four (4).
8) Requirement of a resolution for election and dismissal of Directors
The Company stipulates in its Articles of Incorporation that a resolution for the election of Directors shall be adopted
through a majority vote of shareholders in attendance who hold at least one-third (1/3) of the voting rights held byshareholders entitled to exercise their voting rights, and shall not be determined by cumulative vote.
9) Enabling agenda items before the General Meeting of Shareholders to be resolved by the Board of Directors·

Acquisition of the Company’s shares
The Company has determined in its Articles of Incorporation that the Company may acquire its own shares by aresolution of the Board of Directors as stipulated in Article 165, Paragraph 2 of the Companies Act. This is intended toenable management to act flexibly in response to changes in the business environment.

·Interim dividends
The Company has determined in its Articles of Incorporation that the Company may, upon resolution by the Board of
Directors, distribute interim dividends as stipulated in Article 454, Paragraph 5 of the Companies Act, with September
30 each year as the record date. This is intended to enable flexible distribution of profit to shareholders.

·

Exemption from liabilities of the Directors
The Company has determined in its Articles of Incorporation, as stipulated in Article 426, Paragraph 1 of the33Companies Act, that the Company may exempt Directors (including former Directors) from liability for damages due tonegligence of duties, and Corporate Auditors (including former Corporate Auditors) from liability for damages relating
to actions taken before conclusion of the 196th Annual General Meeting of Shareholders as prescribed in Article 423,
Paragraph 1 of the Companies Act, by resolution of the Board of Directors and to the extent permitted by laws andregulations. This is done so that the Directors can fully demonstrate their roles expected in executing their duties.
10) Requirements for extraordinary resolutions at the General Meeting of Shareholders
With regard to extraordinary resolutions at the General Meeting of Shareholders as provided in Article 309, Paragraph 2 of
the Companies Act, the Company lays down in the Articles of Incorporation a provision to the effect that such resolutions
may be passed by a two-thirds (2/3) majority vote of shareholders present holding not less than one-third (1/3) of theshares with voting rights held by shareholders entitled to exercise their voting rights. This relaxation of quorum rules for
special resolutions at the General Meeting of Shareholders is intended to ensure that the General Meeting of Shareholders
passes off smoothly.

34

(2) Details of audit fee, etc.
1) Details of the remuneration to the Certified Public Accountants

Category

Prior fiscal year
Remuneration to be Remuneration to be
paid for auditing
paid for non-audit
and attestation
services

The Company
Consolidated
subsidiaries
Total(Thousands of yen)
Current fiscal year
Remuneration to be Remuneration to be
paid for auditing
paid for non-audit
and attestation
services

31,500—37,250

—

—

—

—

—

31,500—37,250—2) Details of other important remuneration(Prior fiscal year)
Not applicable(Current fiscal year)
Not applicable3) Details of non-audit services provided by the Certified Public Accountants to the Company(Prior fiscal year)
Not applicable(Current fiscal year)
Not applicable4) Policy on determining the audit fee
The audit fee is determined after consideration of the number of days taken by the audit process, the scale and businesscharacteristics of the Group, and other factors.

35

5. Financial Information
1.

Basis of preparation of the consolidated financial statements and the non-consolidated financial statements(1) The consolidated financial statements of the Company are prepared in accordance with the Ministry of Finance OrdinanceNo. 28, 1976 “Regulations Concerning the Terminology, Forms and Preparation Methods of Consolidated Financial
Statements.”(2) The non-consolidated financial statements of the Company are prepared in accordance with the Ministry of FinanceOrdinance No. 59, 1963 “Regulations Concerning the Terminology, Forms and Preparation Methods of
Non-Consolidated Financial Statements.”
2.

Auditing and attestation
The consolidated and the non-consolidated financial statements for the fiscal year ended March 31, 2016 (from April 1,2015 to March 31, 2016) were audited by Deloitte Touche Tohmatsu LLC, in accordance with Article 193-2, Paragraph 1of the Financial Instruments and Exchange Law.

3.

Particular efforts to ensure appropriateness of the consolidated financial statements
In order to establish a system to ensure correct understanding of accounting standards, etc., and to correspond
appropriately to any changes in these standards, etc., the Company has obtained membership in the Financial AccountingStandards Foundation, participates in seminars organized by audit firms and other organizations, and subscribes toaccounting journals.

36

1.

Consolidated Financial Statements(1) Consolidated financial statements
1) Consolidated balance sheet(Thousands of yen)
Prior fiscal year

Current fiscal year

(As of March 31, 2015)(As of March 31, 2016)

AssetsCurrent assets
Cash and deposits*1

Notes and accounts receivable-trade

1,010,131*1

1,023,884

Inventories*2606,242

777,476
512,836*2

424,094

Other

86,808141,807

Allowance for doubtful accounts

(760)

—

2,726,307

1,856,216

Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures, net*1

Machinery, equipment and vehicles, net
Land6,792,725

*1

3,105
*1, *5

9,343,020

6,488,7440*1, *5

9,343,758

Leased assets, net

217,012

192,997

Other, net

28,37035,422

Total property, plant and equipment*3

Intangible assets

16,384,234*3

16,66916,060,922
12,995Investments and other assets
Investment securities*1, *4

366,543*1, *4

265,809

Investments in capital of subsidiaries and associates
Claims provable in bankruptcy, claims provable inrehabilitation and otherOther593,260

567,601

127,403

101,243

315,130

228,038

Allowance for doubtful accounts(124,249)(96,583)

Total investments and other assets

1,278,088

1,066,110

17,678,992

17,140,028

20,405,300

18,996,244

Total non-current assets
Total assets

37

(Thousands of yen)
Prior fiscal year

Current fiscal year

(As of March 31, 2015)(As of March 31, 2016)

Liabilities
Current liabilities
Notes and accounts payable-trade890,409401,870

Short-term loans payable*1

3,071,640*1

3,168,584

Current portion of bonds*1

100,000*1

169,000

Income taxes payable

23,499

7,002

Provision for sales returns

361,200—

Provision for bonuses
Provision for loss on liquidation of subsidiaries andassociates
Other

33,88331,67766,496—*1

Total current liabilities

937,316*1

5,484,446

783,526
4,561,660

Non-current liabilities
Bonds payable*1

300,000*1

696,500

Long-term loans payable*1

5,083,856*1

4,495,106

Lease obligations

204,901

Long-term guarantee deposited*1

Deferred tax liabilities

2,515,903

178,542*1

23,385

Deferred tax liabilities for land revaluation*52,334,259

2,226,166
3,194

*5

2,212,849

Net defined benefit liability

258,712

248,096

Asset retirement obligations

49,362

44,132—

29,681

10,770,381

10,134,269

16,254,827

14,695,929

Capital stock

1,500,000

1,500,000

Capital surplus

503,375

503,375(2,937,000)(2,812,168)(7,012)(7,033)(940,636)(815,826)

Valuation difference on available-for-sale securities

41,034(23,462)

Deferred gains or losses on hedges

(648)

(484)

Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity

Retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income

Revaluation reserve for land*5

Foreign currency translation adjustment
Total accumulated other comprehensive income
Total net assets
Total liabilities and net assets

38

4,869,546*5

4,990,956

181,176

149,131

5,091,108

5,116,141

4,150,472

4,300,315

20,405,300

18,996,244

2) Consolidated statement of income and consolidated statement of comprehensive income
Consolidated statement of income(Thousands of yen)

Prior fiscal year

Current fiscal year

(From April 1, 2014
to March 31, 2015)(From April 1, 2015
to March 31, 2016)

Net sales
Cost of sales

5,937,473*1

Gross profit
Selling, general and administrative expenses

4,661,249

5,407,011*1

1,276,224*2

Operating income (loss)

1,508,834

4,100,505
1,306,506*2

927,705(232,610)

378,801

Interest income

247

201

Dividends income

5,050

7,790

Gain on sales of investment securities—

32,694Gain on sales of investments in capital
Share of profit of entities accounted for using equity
methodReversal of allowance for doubtful accounts―

11,539

544

4,572

2,360

—

Penalty income

6,798

14,765

Other

4,942

13,255

Total non-operating income

19,942

84,818263,223

249,542—

64,500Other

43,95774,780Total non-operating expenses

307,181

388,822(519,849)

74,797

Gain on transfer of business—

64,814

Total extraordinary income—

64,814Non-operating income

Non-operating expenses
Interest expenses
Commission for syndicate loan

Ordinary income (loss)
Extraordinary income

Extraordinary losses
Loss on valuation of inventories*3

17,787—

Penalty for cancellation
Provision for loss on liquidation of subsidiaries andassociates
Total extraordinary losses*3

11,067—*4

66,496—

95,352—(615,201)

139,612

Income taxes-current

30,12815,393

Income taxes-deferred(1,212)(613)

Total income taxes

28,916

14,780

Profit (loss)(644,117)

124,831

Profit (loss) attributable to owners of parent(644,117)

124,831

Profit (loss) before income taxes

39Consolidated statement of comprehensive income(Thousands of yen)
Prior fiscal year

Current fiscal year

(From April 1, 2014
to March 31, 2015)(From April 1, 2015
to March 31, 2016)

Profit (loss)(644,117)

124,831

Valuation difference on available-for-sale securities

34,830(64,497)

Deferred gains or losses on hedges

(682)

163

241,303

121,410

3,918(1,812)

24,764—60,932(30,231)

Other comprehensive income

Revaluation reserve for land
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net oftax
Share of other comprehensive income of entities
accounted for using equity method
Total other comprehensive income*

365,066*

25,032Comprehensive income(279,051)

149,864

Comprehensive income attributable toComprehensive income attributable to owners ofparentComprehensive income attributable tonon-controlling interests(279,051)

149,864——403) Consolidated statement of changes in equity
Prior fiscal year (From April 1, 2014 to March 31, 2015)(Thousands of yen)
Shareholders' equity
Capital stock
Balance at beginning ofcurrent period
Changes of items during
periodProfit (loss) attributableto owners of parent
Purchase oftreasury shares
Net changes of items
other than shareholders’equityTotal changes of items
during period
Balance at end ofcurrent period

1,500,000

Capital surplus Retained earnings Treasury shares
503,375(2,292,882)(6,989)(644,117)

Total
shareholders'equity(296,496)(644,117)
(22)

(22)

—

—

(644,117)(22)(644,139)

1,500,000

503,375(2,937,000)(7,012)(940,636)

Accumulated other comprehensive income

Balance at beginning ofcurrent period
Changes of items during
periodProfit (loss) attributableto owners of parent
Purchase oftreasury shares
Net changes of items
other than those inshareholders’ equity
Total changes of items
during period
Balance at end ofcurrent period

Valuationdifference on
available-forsale securities

Deferred gains
or losses onhedges

Revaluation
reserve for land

6,203

34

4,628,242

Total
Foreign currency Remeasurements accumulatedtranslationof defined benefit
otheradjustment
planscomprehensive
income116,325(24,764)

4,726,042

Total net
assets4,429,546(644,117)(22)
34,830(682)

241,30364,85024,764

365,066

365,066

34,830(682)

241,30364,85024,764

365,066(279,073)

41,034(648)

4,869,546

181,176—

5,091,108

4,150,472

41

Current fiscal year (From April 1, 2015 to March 31, 2016)(Thousands of yen)
Shareholders' equity
Capital stock
Balance at beginning ofcurrent period
Changes of items during
periodProfit (loss) attributableto owners of parent
Purchase of treasury
sharesNet changes of items
other than those inshareholders’ equity
Total changes of items
during period
Balance at end ofcurrent period

1,500,000

Total
shareholders'equityCapital surplus Retained earnings Treasury shares
503,375(2,937,000)(7,012)(940,636)

124,831

124,831
(21)

(21)

—

—

124,831(21)

124,8101,500,000

503,375(2,812,168)(7,033)(815,826)

Accumulated other comprehensive income

Balance at beginning ofcurrent period
Changes of items during
periodProfit (loss) attributableto owners of parent
Purchase oftreasury shares
Net changes of items
other than those inshareholders’ equity
Total changes of items
during period
Balance at end ofcurrent period

Valuationdifference on
available-forsale securities

Deferred gains orlosses on hedges

Revaluation
reserve for land

41,034(648)

4,869,546

Foreigncurrencytranslation
adjustment
181,176

Total
Remeasurements accumulatedof definedotherbenefit plans comprehensive
income—5,091,108

Total net
assets4,150,472

124,831(21)(64,497)

163

121,410(32,044)—

25,03225,032(64,497)

163

121,410(32,044)—

25,032

149,842(23,462)(484)

4,990,956

149,131—

5,116,141

4,300,315424) Consolidated statement of cash flows(Thousands of yen)

Prior fiscal year

Current fiscal year

(From April 1, 2014
to March 31, 2015)(From April 1, 2015
to March 31, 2016)

Cash flows from operating activities
Profit (loss) before income taxes(615,201)

Depreciation

443,469

419,871

Increase (decrease) in allowance for doubtful accounts(2,360)(28,426)

Increase (decrease) in provision for sales returns

231,543(361,200)

2,681(2,206)

Increase (decrease) in net defined benefit liability

19,716(10,615)Interest and dividend income(5,297)(7,991)

Loss (gain) on sales of investment securities—(32,694)

Loss (gain) on sales of investments in capital―(11,539)

263,223

249,542

Increase (decrease) in provision for bonuses

Interest expenses
Share of (profit) loss of entities accounted for using equity method

139,612(544)(4,572)—(64,814)

Decrease (increase) in notes and accounts receivable - trade142,149

522,839

Decrease (increase) in inventories
Decrease (increase) in claims provable in bankruptcy, claims provablein rehabilitation
Increase (decrease) in notes and accounts payable - trade(31,930)

182,14497

26,159(44,971)(498,521)

Increase (decrease) in guarantee deposits received

Loss (gain) on transfer of business(249,877)(293,141)

Decrease (increase) in other assets

42,923

1,600

Increase (decrease) in other liabilities

199,255(181,113)

Subtotal

394,877

44,930

5,276

7,986

Interest paid

(274,150)(248,753)

Income taxes paid

(33,577)(33,721)

Net cash provided by (used in) operating activities

92,427(229,557)(125,920)(94,121)—

10,000(1,285)(344)

Interest and dividend income received

Cash flows from investing activities
Purchase of property, plant and equipment and intangible assets
Proceeds from redemption of securities
Purchase of investment securities
Proceeds from sales of investment securities—

49,696

Payments for asset retirement obligations—(6,674)

Proceeds from transfer of business—

64,814

Proceeds from sales of investments in capital—

26,807

Other

85

85

(127,119)

50,264

Proceeds from long-term loans payable

1,876,000

2,140,000

Repayments of long-term loans payable(1,776,184)(2,631,806)

Net cash provided by (used in) investing activities
Cash flows from financing activities

Proceeds from issuance of bonds

300,000

650,000

Redemption of bonds(400,000)(184,500)

Repayments of lease obligations(26,838)(26,359)

(22)

(21)

(27,045)(52,686)

Decrease (increase) in treasury shares
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents

2,917

(689)

Net increase (decrease) in cash and cash equivalents(58,819)(232,669)

Cash and cash equivalents at beginning of the period

978,786

919,966

Cash and cash equivalents at end of the period*

43

919,966*

687,297

[Notes to Consolidated Financial Statements](Significant matters that provide the basis for preparing the consolidated financial statements)
1. Scope of consolidation(1) Number of consolidated subsidiaries: 4
The names of consolidated subsidiaries:
Daitobo Estate Co., Ltd.
Rockingham PENTA Co., Ltd.
Niigata Daitobo Co., Ltd.
DAITOBOSHOKU (SHANGHAI) CORPORATION(2) There are no unconsolidated subsidiaries
2. Equity method(1) Number of affiliated companies accounted for by the equity method: 1
The name of affiliated company:
NINGBO SHANJING APPAREL CO. LTD.
(2) The name of affiliated company not accounted for by the equity method:
Takara Textile Industry Co., Ltd.
Reason for exclusion of the affiliated company from consolidation
The affiliated company not accounted for by the equity method is a small-sized company, which does not havesignificant impact on the consolidated financial statements in terms of profit or loss (amount corresponding to theCompany’s equity) and retained earnings (amount corresponding to the Company’s equity), etc. Therefore, it has been
excluded from consolidation.
3. Accounting period of consolidated subsidiaries
Of the consolidated subsidiaries, DAITOBOSHOKU (SHANGHAI) CORPORATION closes its books of account on
December 31, and is consolidated by using its financial statements as of the closing date. However, necessary adjustments
are made to their financial statements to reflect any significant transactions from January 1 to March 31.
4. Significant accounting policies(1) Valuation standards and methods for significant assetsi) Securities
Held-to-maturity securities:
Stated at amortized cost (straight-line method).
Other securities:
Those with market value:
Market value method based on the market price, etc. as of the fiscal closing date (the valuation difference isdirectly included in net assets, and cost of sales is determined by the moving-average method.)Those without market value:
Cost method by the moving-average methodii) Derivative financial instruments
Market value method.
iii) Inventories
Stated at cost determined by the gross average method (carrying amount is written down book value due todecreased profitability).
(2) Depreciation method of significant depreciable assets:i) Property, plant and equipment (excluding leased assets)
Operating leased assets of the Company and the related assets thereto (some of which are depreciated using thedeclining-balance method), as well as those of foreign consolidated subsidiaries are depreciated using thestraight-line method. Other property, plant and equipment are depreciated using the declining-balance method.
All the buildings (excluding facilities attached to buildings) acquired on or after April 1, 1998 are depreciated using
the straight-line method.
Major useful lives are as follows:
Buildings and structures: 3-47 years
Machinery, equipment and vehicles: 6-10 yearsii) Intangible fixed assets (excluding leased assets)
Straight-line method
Software (for internal use) is amortized over the internally estimated useful lives (5 years).
iii) Leased assets
Leased assets related to finance lease transactions which do not transfer ownerships to the lessee
Leased assets are depreciated over the lease terms as useful lives, using the straight-line method without any
residual value.
44

(3) Basis for significant reservesi) Allowance for doubtful accounts
In order to prepare for possible credit losses on receivables, the Company and its subsidiaries record the estimatedamount of non-recoverable receivables based on the historical loss rate for general receivables and specificcollectability for specific doubtful receivables.
ii) Provision for sales returns
In order to prepare for sales returns anticipated after the last day of accounting period, necessary amount calculated
based on the anticipated final amount of return is recorded.
iii) Provision for bonuses
In order to prepare for payments of bonuses to the employees, the estimated payable amount is recorded asprovision for bonuses.
iv) Provision for loss on liquidation of subsidiaries and associates
In order to prepare for loss on liquidation of subsidiaries and associates, the estimated amount of loss at fiscal
year-end is recorded.
(4) Accounting for retirement benefits
In calculating net defined benefit liability and retirement benefit expenses, the Company and its consolidated
subsidiaries adopt the simplified method whereby the benefit obligation is deemed to be equal to the benefits payable
assuming the voluntary retirement of all employees at fiscal year-end.
Differences arising from changes in accounting standards are amortized evenly over 15 years.
(5) Translation of significant foreign currency denominated assets and liabilities into Japanese yen
Receivables and payables denominated in foreign currencies are translated into yen at the rates of exchange in effect atthe balance sheet date, and differences arising from the translation are charged or credited to income. Assets, liabilities,
incomes, and expenses of the foreign consolidated subsidiaries are translated into yen at the rates of exchange in effectat the balance sheet date of the subsidiaries, and differences arising from the translation are presented as foreign
currency translation adjustment in the net assets section.
(6) Significant hedge accounting methodi) Hedge accounting method
Deferred hedge accounting is applied for derivative instruments.
Appropriation treatment is applied for forward exchange contracts which are qualified for such treatment.
Special treatment is applied for interest rate swaps which are qualified for such treatment.
ii) Hedging instruments and hedged items
Hedging instruments
Hedged items
Interest rate swaps
Long-term loans payable
Forward exchange contracts
Receivables and payables denominated in foreign currenciesiii) Hedging policy
Derivative transactions regarding currency and interest rate are used to mitigate risks associated with foreign
currency exchange and interest rate fluctuations and to reduce fund-raising costs.
iv) Assessment of hedge effectivenessThe hedge effectiveness is assessed semi-annually based on the correlation between the change in aggregatedamount of cash flow of the hedged items and the change in aggregated amount of cash flow of the hedging
instruments. However, assessment of hedge effectiveness is omitted for interest rate swaps that are qualified forspecial treatment.
(7) Cash and cash equivalents in the consolidated statement of cash flows
Cash and cash equivalents consist of cash on hand, cash in banks which can be withdrawn at any time and short-term
investments with a maturity of three months or less when purchased which can easily be converted to cash and are
subject to little risk of change in value.
(8) Other significant matters for preparation of the consolidated financial statements
Accounting for consumption taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes.

45

(Changes in accounting policies)“Revised Accounting Standard for Business Combinations” (ASBJ Statement No. 21, released on September 13, 2013),“Revised Accounting Standard for Consolidated Financial Statements” (ASBJ Statement No. 22, released on September 13,2013), “Revised Accounting Standard for Business Divestitures” (ASBJ Statement No. 7, released on September 13, 2013)
and others have been applied effective from the fiscal year ended March 31, 2016. In addition, the presentation method of
profit, etc. was amended, and “Minority interests” has been changed to “Non-controlling interests.” To reflect these changes inpresentation, reclassifications have been made to the consolidated financial statements for the fiscal year ended March 31,
2015.

(Accounting standard to be adopted)“Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ Guidance No. 26, March 28, 2016)(1) Overview
Regarding the treatments on recoverability of deferred tax assets, ASBJ basically followed the framework of the
Auditing Guidance No.66, Auditing Treatment for Judgment of Recoverability of Deferred Assets, whereby companies
are categorized into five categories and deferred tax assets are calculated based on each of these categories, andconducted necessary review regarding the following treatments.
1) Treatment of companies that do not satisfy any of the category requirements for (Category 1) through (Category5)2) Category requirements for (Category 2) and (Category 3)3) Treatment related to future deductible temporary differences which cannot be scheduled in companies that
qualify as (Category 2)4) Treatment related to the reasonable estimable period of pre-adjusted taxable income such as future temporary
differences in companies that qualify as (Category 3)5) Treatment in cases wherein companies that satisfy the requirements for (Category 4) also qualify for (Category2) or (Category 3)(2) Planned date of application
April 1, 2016(3) Effect of the application of the accounting standard, etc.
The effect is under assessment as of the time of preparation of these consolidated financial statements.

(Changes in presentation)(For consolidated statement of income)“Purchase discounts,” which was included in “Non-operating income” in the prior fiscal year, has been included in “Other”
from the current fiscal year because it decreased to less than 10/100 of the total Non-operating income. To reflect thischange, the consolidated financial statements of the prior fiscal year have been reclassified.
As a result, ¥2,040 thousand of “Purchase discounts” included in “Non-operating income” and ¥2,901 thousand of “Other”
have been reclassified into ¥4,942 thousand of “Other” in the consolidated statement of income for the prior fiscal year.

46

(For consolidated balance sheet)*1

Assets pledged as collateral(Thousands of yen)
Prior fiscal year
(As of March 31, 2015)

Current fiscal year
(As of March 31, 2016)

80,00080,000

Buildings and structures

6,735,064

6,433,773

Land

9,316,589

9,261,351

Cash and deposits (deposits)

Investment securities

190,080

128,620

Total

16,321,734

15,903,746

Liabilities secured by the collateral(Thousands of yen)
Prior fiscal year
(As of March 31, 2015)

Current fiscal year
(As of March 31, 2016)

3,038,316

3,160,225

100,000

169,000

88,83388,833300,000

696,500

5,075,497

4,495,106

892,800

803,967

9,495,446

9,413,631

Short-term loans payable
Current portion of bonds
Other current liabilities (current
portion of guarantee deposits
received)
Bonds payable
Long-term loans payable
Long-term guarantee deposited
Total
*2

Breakdown of inventories(Thousands of yen)
Prior fiscal year
(As of March 31, 2015)

Current fiscal year
(As of March 31, 2016)

Merchandise and finished goods

600,497

414,405

Work in process

1,559

1,193

Raw materials and supplies

4,185

8,496

606,242424,094

Total
*3

*4

Accumulated depreciation of property, plant and equipment
Prior fiscal year
(As of March 31, 2015)

Current fiscal year
(As of March 31, 2016)

6,536,759

6,907,556

Capital of subsidiaries and associates are as follows.

Investment securities (stocks)*5(Thousands of yen)(Thousands of yen)

Prior fiscal year
(As of March 31, 2015)

Current fiscal year
(As of March 31, 2016)

36,65636,656

Revaluation of land
The Company revaluated land for business use in accordance with “Act on Revaluation of Land” (Act No. 34 promulgated on March
31, 1998) and the tax equivalent to this revaluation variance has been stated in Liabilities as “Deferred tax liabilities for land
revaluation,” while the deducted amount has been stated in Net Assets as “Revaluation reserve for land.”
Method of revaluation:
The land price for the revaluation is determined based on the “price computed based on the method established and published by the
Director General of National Tax Agency in order to calculate the land value for a basis of determining the taxable amount subject toland value tax prescribed by Article 16 of the Land-holding Tax Act” set forth in Article 2, Item 4 of “Order for Enforcement on Act
on Revaluation of Land” (Cabinet Order No. 119 promulgated on March 31, 1998) with reasonable adjustments.
Date of revaluation: March 31, 2002

6. Discounted notes receivables(Thousands of yen)
Prior fiscal year
(As of March 31, 2015)

Current fiscal year
(As of March 31, 2016)

54,35044,87847

(For consolidated statement of income)*1

The ending inventory balance is the book value after write-down as a result of reduced profitability, and the following loss on
valuation of inventories is included in the cost of sales.
(Thousands of yen)*2

Prior fiscal year
(From April 1, 2014
to March 31, 2015)

Current fiscal year
(From April 1, 2015
to March 31, 2016)

32,65540,586The main expense items and amounts under selling, general and administrative expenses are as follows.
(Thousands of yen)

*3

Prior fiscal year
(From April 1, 2014
to March 31, 2015)

Current fiscal year
(From April 1, 2015
to March 31, 2016)

Salaries

651,567

293,988

Provision for bonuses

25,41723,490Retirement benefit expenses
Provision of allowance for
doubtful accounts

19,12927,593—

15,720Loss on valuation of inventories and penalty for cancellation
Prior fiscal year (From April 1, 2014 to March 31, 2015)
The amount was incurred as a result of the decision to liquidate the business of Rockingham PENTA Co., Ltd., a consolidated
subsidiary of the Company.
Current fiscal year (From April 1, 2015 to March 31, 2016)
Not applicable*4

Provision for loss on liquidation of subsidiaries and associates
Prior fiscal year (From April 1, 2014 to March 31, 2015)
In order to prepare for loss on liquidation of Rockingham PENTA Co., Ltd., a consolidated subsidiary of the Company, theestimated amount of loss has been recorded.
Current fiscal year (From April 1, 2015 to March 31, 2016)
Not applicable48*(For consolidated statement of comprehensive income)
Reclassification adjustments and tax effects in relation to other comprehensive income
Prior fiscal year
(From April 1, 2014
to March 31, 2015)(Thousands of yen)
Current fiscal year
(From April 1, 2015
to March 31, 2016)

50,973(51,381)—(32,694)

Amount of tax effects

50,973(16,142)(84,075)
19,577

Valuation difference on available-for-sale securities

34,830(64,497)

(701)

163

Valuation difference on available-for-sale securities:
Amount arising during the period
Amount of reclassification adjustments
Before tax-effect adjustment

Deferred gains or losses on hedges:
Amount arising during the period
Amount of tax effects
Deferred gains or losses on hedges

19

—

(682)

163

Revaluation reserve for land:
Amount of tax effects

241,303

121,410Foreign currency translation adjustment:
Amount arising during the period

3,918(1,812)Remeasurements of defined benefit plans, net of tax:
Amount of reclassification adjustments

24,764—

Share of other comprehensive income of entities accounted for using
equity method:Amount arising during the period

60,932(30,231)

Total other comprehensive income

365,066

25,03249

(For consolidated statement of changes in equity)
Prior fiscal year (From April 1, 2014 to March 31, 2015)
1. Shares issued and treasury stock
Types of share

At the beginning ofcurrent fiscal year

Increase

Decrease(Shares)At the end of current
fiscal year

Shares issued:
Common stock
30,000,000——
30,000,000
Total
30,000,000——
30,000,000
Treasury stock:
Common stock (Note)
65,612300—
65,912
Total
65,612300—
65,912
Note: The increase of 300 shares in treasury stock of common stock is due to purchase of stocks of less than a standard unit.

2. Stock acquisition rights
Not applicable
3. Dividends
Not applicable

Current fiscal year (From April 1, 2015 to March 31, 2016)
1. Shares issued and treasury stock
Types of share

At the beginning ofcurrent fiscal year

Increase

Decrease(Shares)At the end of current
fiscal year

Shares issued:
Common stock
30,000,000——
30,000,000
Total
30,000,000——
30,000,000
Treasury stock:
Common stock (Note)
65,912
301—
66,213
Total
65,912
301—
66,213
Note: The increase of 301 shares in treasury stock of common stock is due to purchase of stocks of less than a standard unit.

2. Stock acquisition rights
Not applicable
3. Dividends
Not applicable*(For consolidated statement of cash flows)
Cash and cash equivalents as of the year-end are reconciled to the accounts reported in the consolidated balance
sheet as follows.

Cash and deposits
Time deposits as collateralTime deposits with maturities of more than
three months
Cash and cash equivalents

Prior fiscal year
(From April 1, 2014
to March 31, 2015)
1,010,131(Thousands of yen)
Current fiscal year
(From April 1, 2015
to March 31, 2016)
777,476(80,000)(80,000)(10,165)(10,179)

919,966

687,29750

(For lease transactions)
Finance lease transactions which do not transfer ownerships to the lessee (Lessees’ accounting)1) Leased assets
Property, plant and equipment
Leased assets primarily consist of air conditioning systems (facilities attached to buildings) at the commercial
facilities for the Commercial property business.
2) Depreciation method for leased assets
Described in “4. Significant accounting policies (2) Depreciation method of significant depreciable assets” underSignificant matters that provide the basis for preparing the consolidated financial statements.

(For financial instruments)
1. Financial instruments(1) Policies on financial instruments
Concerning fund management, the Group gives priority to safety and limits the management of funds to short-term
deposits, etc. with lower market risk for efficient operation. The Group secures funds mainly through borrowings frombanks. The Group’s policy for derivative transactions is to conduct derivative transactions based on the actual demandfor hedging, and not to conduct derivative transactions for speculative purposes or for trading profit.
(2) Description of financial instruments, related risks, and risk management system
Notes and accounts receivable-trade are exposed to credit risks of the customers. These risks are managed based on thecredit limit operational standard prepared in accordance with “Credit Limit Management Regulation.”
Investment securities are those issued by the companies with whom the Company maintains trading relations, and are
exposed to credit risk of the issuers, interest rate fluctuation risk, market price fluctuation risk, etc. They are managed
through periodic assessment of market value and credit status.
Credit risks associated with claims provable in bankruptcy, claims provable in rehabilitation and other are managed
through periodic assessment of credit status of each obligator.
Notes and accounts payable-trade are debts to suppliers and outsourcing partners, and are paid out in a short term.
Bonds payable are issued for the purpose of raising working capital.
Loans payable comprised of short-term loans from banks for working capital and long-term loans from banks for capital
expenditure are exposed to interest rate fluctuation risk. For this interest rate fluctuation risk, interest swap transactions are
conducted for some long-term loans to fix the amounts of interest payable.
Lease obligations pertaining to finance lease transactions are mainly those associated with the capital expenditure for air
conditioning systems at commercial facilities in Mishima area.
Guarantee deposits received are those associated with the rental properties in the Commercial property business.
Derivative transactions are forward foreign exchange contracts with the purpose of hedging exchange fluctuation risk
pertaining to operating payables denominated in foreign currencies and loans receivable denominated in foreign currencies
from foreign consolidated subsidiaries, and interest swap transactions with the purpose of hedging interest fluctuation risk
pertaining to loans payable. Forward foreign exchange contracts and interest swap transactions are exposed to fluctuation
risks in foreign currency exchange rate and interest rate fluctuation risk, respectively. The Company’s counterparties forderivative transactions are all highly creditworthy domestic financial institutions and, therefore, the Company believes that
it is exposed to almost no counterparty default risk. These fluctuation risks are managed through periodic assessment ofmarket value.
(3) Supplemental explanation on the fair value of financial instruments
Fair value of financial instruments includes value based on market prices and value reasonably determined when there is
no available market price. As variable factors are incorporated in determining the relevant value, such relevant value may
change by adopting different preconditions, etc. Contract amounts concerning derivative transactions presented in “Forderivative transactions” do not represent market risk of the derivative transactions.

51

2. Fair value of financial instruments
The following tables indicate the amount recorded in the consolidated balance sheet, the fair value and the difference asof March 31, 2015 and March 31, 2016 for various financial instruments. Assets and liabilities for which it is deemed
difficult to measure the fair value are not included in the tables below. (Refer to Note 2.)
Prior fiscal year (As of March 31, 2015)(Thousands of yen)

(1) Cash and deposits(2) Notes and accounts receivable-trade
Allowance for doubtful accounts(3) Securities and investment securities
1) Held-to-maturity securities
2) Other securities(4) Claims provable in bankruptcy, claims provable inrehabilitation and other
Allowance for doubtful accounts

Amount recorded in
the consolidatedbalance sheet
1,010,131
1,023,884(710)
1,023,174
9,994
232,983

Fair value

Difference

1,010,131―

1,023,174―

9,999
232,9834—

127,403(124,249)
3,153
2,279,438
890,409

3,153—
Total assets
2,279,442
4(1) Notes and accounts payable-trade890,409―(2) Short-term loans payable(excluding current portion of long-term loans
540,000
540,000―
payable)(3) Income taxes payable
23,49923,499―(4) Bonds payable
400,000
400,220220(including current portion of bonds)(5) Long-term loans payable(including current portion of long-term loans
7,615,496
7,668,202
52,706payable)(6) Lease obligations
231,260
199,263(31,997)(including current portion of lease obligations)(7) Guarantee deposits received(including current portion of guarantee deposits
2,759,377
2,710,996(48,381)
received)
Total liabilities
12,460,043
12,432,591(27,452)
Derivative transactions (*)
(648)
(648)
―
(*) Net receivables and payables, which were derived from derivative transactions, are presented in net amounts, and any item
for which the total becomes a net liability is indicated in parentheses.

52Current fiscal year (As of March 31, 2016)(Thousands of yen)

(1) Cash and deposits(2) Notes and accounts receivable-trade(3) Securities and investment securities
Other securities(4) Claims provable in bankruptcy, claims provable inrehabilitation and other
Allowance for doubtful accounts

Amount recorded in
the consolidatedbalance sheet
777,476
512,836
132,249

Fair value

Difference

777,476
512,836―—

132,249—

101,243(96,583)
4,660
1,427,223
401,870

4,660—
Total assets
1,427,223—(1) Notes and accounts payable-trade
401,870―(2) Short-term loans payable(excluding current portion of long-term loans
540,000
540,000―
payable)(3) Income taxes payable
7,002
7,002
―
(4) Bonds payable
865,500
870,485
4,985(including current portion of bonds)(5) Long-term loans payable(including current portion of long-term loans
7,123,690
7,150,055
26,365payable)(6) Lease obligations
204,901
181,823(23,078)(including current portion of lease obligations)(7) Guarantee deposits received(including current portion of guarantee deposits
2,466,236
2,470,818
4,582
received)
Total liabilities
11,609,200
11,622,055
12,855Derivative transactions (*)
(484)
(484)
―
(*) Net receivables and payables, which were derived from derivative transactions, are presented in net amounts, and any item
for which the total becomes a net liability is indicated in parentheses.
(Note 1) Calculation method of the fair value of financial instruments and matters relating to securities and derivative transactions
Assets:(1) Cash and deposits and (2) Notes and accounts receivable-trade
Fair value is calculated based on the book value as these assets are settled within a short time and the fair value is almost equal
to the book value.
(3) Securities and investment securities
Fair values of both stocks and bonds are based on the prices traded at the securities exchange.
(4) Claims provable in bankruptcy, claims provable in rehabilitation and other
Fair value of claims provable in bankruptcy, claims provable in rehabilitation and other are based on the balance sheet amountat the consolidated closing date less the currently estimated uncollectable amount as the fair value of these assets are almost
equal to such amount.
Liabilities:(1) Notes and accounts payable-trade, (2) Short-term loans payable and (3) Income taxes payable
Fair value is calculated based on the book value as these liabilities are settled within a short time and fair value is almost equal
to the book value.
(4) Bonds payable
Fair value of bonds payable is based on the present value estimated by discounting the total principal and interest, using
discount rates reflecting the remaining term and credit risk.
(5) Long-term loans payable
Fair value of long-term loans payable is calculated based on the present value estimated by discounting the total principal andinterest, using discount rates which would be applicable for similar new borrowings. In addition, total principal of thelong-term loans payable qualified for special treatment of interest rate swap transactions is calculated together with suchinterest rate swap transactions.
(6) Lease obligations
Fair value of lease obligations is calculated based on the present value estimated by discounting the total principal and interest,
using discount rates which would be applicable for similar new lease transactions.
(7) Guarantee deposits received
Fair value of guarantee deposits received is calculated based on the present value discounted at interest rate that takes into
account the period remaining until repayment date and credit risks of such guarantee deposits received.
Derivative transactions:
Refer to the notes in “For derivative transactions.”

53

(Note 2) The amounts of financial instruments recorded in the consolidated balance sheet for which it is deemed difficult to measure
the fair value(Thousands of yen)
Prior fiscal year
Current fiscal year
Classification(As of March 31, 2015)(As of March 31, 2016)
133,559

Unlisted stocks

133,559

Investments in capital of subsidiaries
593,260
567,601
and associates
These are not included in (3) Securities and investment securities under assets, as they are nonmarketable and deemed difficult tomeasure the fair value.

(Note 3) Redemption schedule after the balance sheet date for monetary receivables and securities with maturity dates
Prior fiscal year (As of March 31, 2015)(Thousands of yen)
Due within one year

Due after one year but within five years
959,430―

1,023,884―

Government and municipal bonds

10,000—Claims provable in bankruptcy, claims
provable in rehabilitation and other (*)

3,109

43

Deposits
Notes and accounts receivable-trade
Investment securities
Held-to-maturity securities(*)

1,996,425
43
Total
Of claims provable in bankruptcy, claims provable in rehabilitation and other, ¥124,249 thousand, of which expected
redemption amount cannot be estimated, is not included in the above table.

Current fiscal year (As of March 31, 2016)(Thousands of yen)
Due within one year

Due after one year but within five years

Deposits

727,029―

Notes and accounts receivable-trade

512,836

―

4,660

—

Claims provable in bankruptcy, claims
provable in rehabilitation and other (*)(*)

1,244,526—
Total
Of claims provable in bankruptcy, claims provable in rehabilitation and other, ¥96,583 thousand, of which expected redemption
amount cannot be estimated, is not included in the above table.

54

(Note 4) Redemption schedule after the balance sheet date for bonds payable, long-term loans payable, lease obligations and otherinterest-bearing debt
Prior fiscal year (As of March 31, 2015)(Thousands of yen)
Due after
four years but
Due after
within five
five years
years

Due within
one year

Due after one
year butwithin two
years

Due after
two years but
within threeyears

Due after
three years
but withinfour years

Short-term loans payable

540,000

―

―

―

―

―

Bonds payable

100,000―

300,000―――

2,531,640

2,251,256

2,164,560

571,560

71,56024,920

Lease obligations

26,35926,35926,35925,526

22,296104,361

Other interest-bearing debt

60,19960,20043,33043,33043,330213,360

Total

3,258,199

2,337,815

2,534,249

640,416

137,186

342,641

Due within
one year

Due after one
year butwithin two
years

Due after
two years but
within threeyears

Due after
three years
but withinfour years

Short-term loans payable

540,000

―

―

―

―

―

Bonds payable

169,000

469,000

122,500

70,00035,000―2,628,584

2,811,888

1,446,712

151,552

76,5948,360

Lease obligations

26,35926,35925,526

22,296

21,84582,515

Other interest-bearing debt

60,20043,33033,33033,33033,330

197,405

Total

3,424,143

3,350,577

1,628,068

277,178

166,769

288,281Long-term loans payable

Current fiscal year (As of March 31, 2016)

Long-term loans payable

55(Thousands of yen)
Due after
four years
Due after
but within
five years
five years

(For securities)
1. Held-to-maturity securities
Prior fiscal year (As of March 31, 2015)
Classification
Securities whose fair value exceeds theircarrying amount recorded in the
consolidated balance sheet
Securities whose fair value does notexceed their carrying amount recorded in
the consolidated balance sheet
Total

Carrying amount(Thousands of yen)
Difference

Fair value

Government andmunicipal bonds

9,994

9,999

4

Government andmunicipal bonds

—

—

—

9,994

9,999

4

Carrying amount

Acquisition cost

Stock

232,983

172,370

60,612

Stock

—

—

—

232,983

172,370

60,612Carrying amount

Acquisition cost

Stock

3,022

2,294

727

Stock

129,227

153,417(24,190)132,249

155,712(23,462)

Current fiscal year (As of March 31, 2016)
Not applicable
2. Other securities
Prior fiscal year (As of March 31, 2015)
Classification
Securities whose carrying amountrecorded in the consolidated balance
sheet exceeds their acquisition cost
Securities whose carrying amountrecorded in the consolidated balance
sheet does not exceed their acquisition
cost
Total

Current fiscal year (As of March 31, 2016)
Classification
Securities whose carrying amountrecorded in the consolidated balance
sheet exceeds their acquisition cost
Securities whose carrying amountrecorded in the consolidated balance
sheet does not exceed their acquisition
cost
Total

(Thousands of yen)
Difference(Thousands of yen)
Difference

3. Other securities sold during the fiscal year
Prior fiscal year (From April 1, 2014 to March 31, 2015)
Not applicable
Current fiscal year (From April 1, 2015 to March 31, 2016)
Type of securities
Stock

Sales proceeds
49,696

Total gain
32,694

56(Thousands of yen)
Total loss―(For derivative transactions)
1. Derivative transactions for which hedge accounting is not adopted
Prior fiscal year (As of March 31, 2015)
Not applicable
Current fiscal year (As of March 31, 2016)
Not applicable
2. Derivative transactions for which hedge accounting is adopted(1) Currency-related transactions
Prior fiscal year (As of March 31, 2015)
Method of hedge
accounting

Appropriation treatment
for forward exchange
contracts

Type of transactions
Forward foreign exchange
contracts:
Sell:
USD

Major hedged items

Long-term loans
receivable fromsubsidiaries andassociates

Notional
amounts

19,767(Thousands of yen)
Portion due
after one year
Fair value
included herein

―

(643)

Buy:
USD
Accounts payable-trade
21,073―
Note: Calculation of fair value is based on the prices presented from the financial institutions with which derivatives are transacted.

Current fiscal year (As of March 31, 2016)
Method of hedge
accounting

Appropriation treatment
for forward exchange
contracts

Type of transactions
Forward foreign exchange
contracts:
Sell:
USD

(4)

(Thousands of yen)
Major hedged items

Long-term loans
receivable fromsubsidiaries andassociates

Notional
amounts

4,432

Portion due
after one year
included herein

Fair value

―

(53)

Buy:
USD
Accounts payable-trade
13,999―(431)
Note: Calculation of fair value is based on the prices presented from the financial institutions with which derivatives are transacted.

(2) Interest-related transactions
Prior fiscal year (As of March 31, 2015)
Method of hedge
accounting
Special treatment forinterest rate swaps

Type of transactions

Major hedged items

Notional
amounts(Thousands of yen)
Portion due
after one year
Fair value
included hereinInterest rate swaps:

Long-term loans
4,395,000
3,457,000(Note)
payableNote: The fair value of interest rate swaps which are accounted using special treatment is included in that of corresponding hedged
long-term loans payable as those interest rate swaps are recorded as an adjustment to interest expense of hedged instruments under
the special treatment.
Receive floating/pay fixed

Current fiscal year (As of March 31, 2016)
Method of hedge
accounting
Special treatment forinterest rate swaps

Type of transactions

Major hedged items

Notional
amounts(Thousands of yen)
Portion due
after one year
Fair value
included hereinInterest rate swaps:

Long-term loans
4,300,332
3,288,996(Note)
payableNote: The fair value of interest rate swaps which are accounted using special treatment is included in that of corresponding hedged
long-term loans payable as those interest rate swaps are recorded as an adjustment to interest expense of hedged instruments under
the special treatment.
Receive floating/pay fixed57

(For retirement benefits)
1.

Description of retirement benefit plans
The Company and its domestic consolidated subsidiaries have reserve-type lump-sum benefit plans based on aretirement benefit regulation.
The lump-sum benefit plans of the Company and its domestic consolidated subsidiaries apply a simplified method
for calculation of net defined benefit liability and retirement benefit expenses.

2.

Defined-benefit pension plan
(1) Adjustments between the beginning and ending balances of net defined benefit liability for the plan adopting
the simplified method(Thousands of yen)
Prior fiscal year
(From April 1, 2014
to March 31, 2015)
238,996

Current fiscal year
(From April 1, 2015
to March 31, 2016)
258,712Retirement benefit expenses

22,00930,909Retirement benefits paid

(2,293)(41,525)

258,712

248,096

Net defined benefit liability at the beginning of the year

Net defined benefit liability at the end of the year

(2) Breakdown of retirement benefit expenses

Service cost
Amortization of net retirement benefit obligation at transition
Retirement benefit expenses for defined benefit plans

Prior fiscal year
(From April 1, 2014
to March 31, 2015)
22,00924,764(Thousands of yen)
Current fiscal year
(From April 1, 2015
to March 31, 2016)
30,909―46,77430,909(3) Remeasurements of defined benefit plans
Remeasurements of defined benefit plans consist of the following (before tax effects).
Prior fiscal year
(From April 1, 2014
to March 31, 2015)
24,764

Unrecognized net retirement benefit obligation at transition(4) Remeasurements of defined benefit plans
Not applicable

58(Thousands of yen)
Current fiscal year
(From April 1, 2015
to March 31, 2016)―

(For tax-effect accounting)
1. Significant components of deferred tax assets and liabilities(1) Current deferred tax assets and liabilities

Deferred tax assets:
Loss on valuation of inventories
Provision for sales returns
Provision for bonuses
Provision for loss on liquidation of subsidiaries and associates
Accrued expenses
Loss on liquidation of business
Other
Total gross deferred tax assets
Valuation allowance
Net deferred tax assets

Prior fiscal year
(As of March 31, 2015)(Thousands of yen)
Current fiscal year
(As of March 31, 2016)

31,016108,257
11,31732,73430,881
1,414
4,734
220,356(220,356)—

25,103—
10,016
—
1,633
—
2,081
38,835(38,835)—

Prior fiscal year
(As of March 31, 2015)(Thousands of yen)
Current fiscal year
(As of March 31, 2016)

36,54341,08783,88016,716686,379—
1,767
866,375(866,375)—

30,24929,57376,463
13,725
953,652
7,184
1,435
1,112,283(1,112,283)—(19,577)(3,807)(23,385)(23,385)—(3,194)(3,194)(3,194)(2,334,259)(2,212,849)(2) Non-current deferred tax assets and liabilities

Deferred tax assets:
Impairment loss
Allowance for doubtful accounts
Net defined benefit liability
Asset retirement obligations
Net operating loss brought forward
Valuation difference on available-for-sale securities
Other
Total gross deferred tax assets
Valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Valuation difference on available-for-sale securities
Property, plant and equipment (asset retirement expense)
Total gross deferred tax liabilities
Net deferred tax liabilities
Deferred tax liabilities for land revaluation
Revaluation reserve for land2.

The reconciliation between the effective tax rates reflected in the consolidated financial statements and the statutory
tax rate is summarized as follows:

Statutory tax rate
(Reconciliation)
Items such as entertainment expenses permanently not
deductible
Inhabitant tax on per capita basis
Change in valuation allowance
Different tax rates applied to consolidated subsidiaries
Other
Effective tax rates after adoption of tax-effect accounting

3.

Prior fiscal year
(As of March 31, 2015)

Current fiscal year
(As of March 31, 2016)

35.6%

33.1%

(2.8%)

7.5%(0.8%)(37.1%)
0.2%
0.2%

3.6%
(51.6%)
19.7%(1.6%)(4.7%)

10.7%

Amendments to deferred tax liabilities due to a change in the rate of corporation tax
In accordance with the “Act for Partial Amendment of the Income Tax Act” and the “Act for Partial Amendment of the
Local Tax Act” established in the parliament on March 29, 2016, the statutory tax rate used for calculating deferred tax
liabilities for the current fiscal year (limited to those to be eliminated on and after April 1, 2016) has been changed from59

32.3% for the prior fiscal year to 30.9% for deferred tax liabilities that are expected to be collected or paid during theperiod from April 1, 2016 to March 31, 2018, or 30.6% for deferred tax liabilities that are expected to be collected or
paid on or after April 1, 2018.
These tax rate changes resulted in a decrease of ¥164 thousand in deferred tax liabilities and a decrease of ¥121,410
thousand in deferred tax liabilities for land revaluation; an increase of ¥164 thousand in income taxes-deferred and anincrease of ¥121,410 thousand in revaluation reserve for land in the current fiscal year.

(For asset retirement obligations)
Asset retirement obligations recorded on consolidated balance sheet(1) Description of the asset retirement obligations
They are legal obligations required by laws and regulations such as Construction Material Recycling Act andFluorocarbons Recovery and Destruction Act pertaining to the real estate owned by the Company, and the cost for
returning leased building to original state based on lease agreements, etc.
(2) Calculation method of the asset retirement obligations
They are calculated by estimating expected period of use of each property and discounting it at a yield of corresponding
government bond.
(3) Increase and decrease in the total asset retirement obligations

Balance at the beginning of the year

Prior fiscal year
(From April 1, 2014
to March 31, 2015)
56,427(Thousands of yen)
Current fiscal year
(From April 1, 2015
to March 31, 2016)
57,670Adjustment due to passage of time

1,195

711

Decrease due to fulfillment of asset retirement obligations—(8,307)

Other increase (decrease)

47

(23)

57,67050,051

Balance at the end of the year

(For investment and rental property)
The Company Group has rental property, such as commercial facilities in Mishima area in Shizuoka Prefecture.
The carrying amount, increase/decrease thereof and fair value of rental property are as follows.
(Thousands of yen)

Commercial
facilities

Carrying
amountBalance at the beginning of the year

Prior fiscal year
(From April 1, 2014
to March 31, 2015)16,120,134

Current fiscal year
(From April 1, 2015
to March 31, 2016)
15,792,895

Increase (decrease) during the year

(327,239)(316,873)

Balance at the end of the year

15,792,895

15,476,022

18,861,000

18,591,000

Balance at the beginning of the year

377,356

378,396

Increase (decrease) during the year

1,040

(4,988)378,396

373,407349,311402,087

Fair value at the end of the year

Other

Carrying
amountBalance at the end of the year
Fair value at the end of the year

Notes: 1. The carrying amount shown here is calculated by deducting the relevant accumulated depreciation from theproperty’s acquisition cost.
2. Of increase (decrease) during the year of Commercial facilities, major increase for the prior fiscal year iscapital expenditure for “SUN TO MOON Kakitagawa” of ¥89,415 thousand, while major decrease isdepreciation of ¥416,654 thousand.
Major increase for the current fiscal year is capital expenditure for “SUN TO MOON Kakitagawa” of¥72,106 thousand, while major decrease is depreciation of ¥388,980 thousand.
3. Of increase (decrease) during the year of Other, major increase for the prior fiscal year is capital expenditureof ¥6,000 thousand, while major decrease is depreciation of ¥4,959 thousand.
Major decrease for the current fiscal year is depreciation of ¥4,988 thousand.
4. The fair value of major properties at the end of the year was mainly based on real-estate appraisal value
which was calculated by external real-estate appraisers. The fair value of other properties was calculated
internally based on “Real Estate Appraisal Standards”. However, if no significant fluctuations have occurredin a certain valuation or an index that is deemed to properly reflect the market price since the acquisition of60

the property from a third party or the most recent external valuation, the fair value is based on the valuationor the amount adjusted by using the index.
Profit or loss of rental property is as follows.

Commercial
facilities

Rent revenue

Prior fiscal year
(From April 1, 2014
to March 31, 2015)
2,382,201(Thousands of yen)
Current fiscal year
(From April 1, 2015
to March 31, 2016)
2,307,052

Rent expense

1,416,107

1,346,639

Difference

966,093

960,412——

Rent revenue

16,796

17,118Rent expense

8,390

8,474

Difference

8,405

8,643

—

—

Other (gain/loss on sale, etc.)

Other

Other (gain/loss on sale, etc.)

Note:

Rent revenue and rent expense are rent revenue and corresponding expenses thereto (depreciation, taxes anddues, insurance fees, etc.), and are recorded as “net sales and “cost of sales,” respectively.

61

(Segment information, etc.)
Segment information
1. General information about reportable segments
The reportable segments of the Group are components for which discrete financial information is available and whose
operating results are regularly reviewed by the Board of Directors of the Company to make decision about resource
allocation and to assess their performance.
The Group has Apparel Fashion & Uniform Business Headquarters, Health Care Business Headquarters, Commercial
Property Business Headquarters, and Business Management Headquarters in the Company. Each Headquarters draws
up domestic and overseas comprehensive sales strategies and conducts business activities in close cooperation withdomestic and overseas consolidated subsidiaries.
The Group consists of segments classified according to products and services based on each of the Company’s
Business Headquarters. The “textile and apparel business,” the “commercial property business,” and the “health carebusiness” constitute the three reportable segments of the Group.
The Group sells and manufactures apparel and uniforms, etc. in the “textile and apparel business.” In the “commercial
property business,” the Group operates and manages commercial facilities and rents real estate. In the “health carebusiness,” the Group sells and manufactures bed and bedding.
2. Changes in reportable segments, etc.
The Group has changed one of its reportable segments’ name from “real estate business” to “commercial property
business” effective from the current fiscal year. This change affects only the name of the segment and does notconstitute a change in segment information. The segment information for the prior fiscal year is also stated under thesegment name after the change.
3. Calculation method of net sales, profits or losses, assets and other items by reportable segments
The accounting method for the reportable segments is the same as those of “Significant matters that provide the basis
for preparing the consolidated financial statements.”
The reportable segment profits are based on operating income.
Inter-segment sales or transfers are based on market prices.
4. Net sales, profits or losses, assets and other items by reportable segments
Prior fiscal year (From April 1, 2014 to March 31, 2015)(Thousands of yen)
Textile andapparelbusiness
Net sales
Sales to third parties
Inter-segment sales ortransfers
Total
Segment profits (losses)
Segment assets
Other items
Depreciation
Investment amounts toequity method
companies
Increase amounts of fixed
assets and intangible
assetsReportable segments
Commercial
Health care
propertybusinessbusiness

Adjustments(Note 1)

Total

Carrying
amount(Note 2)

2,727,452

2,398,997

811,023

5,937,473―

5,937,473

44

456

—

500

(500)

―

2,727,496(711,463)
2,154,706

2,399,453
893,048
16,917,087

811,023
35,582359,842

5,937,973
217,166
19,431,636(500)(449,777)
973,663

5,937,473(232,610)
20,405,300

5,182

432,1132,169

439,464

4,005

443,469

593,260——

593,260―

593,260—

119,881

5,389

125,270

13,154

138,42462

Current fiscal year (From April 1, 2015 to March 31, 2016)(Thousands of yen)
Textile andapparelbusiness
Net sales
Sales to third parties
Inter-segment sales ortransfers
Total
Segment profits (losses)
Segment assets
Other items
Depreciation
Investment amounts toequity method
companies
Increase amounts of fixed
assets and intangible
assetsReportable segments
Commercial
Health care
propertybusinessbusiness

Total

Carrying
amount(Note 2)Adjustments(Note 1)

2,237,048

2,324,170

845,792

5,407,011―

5,407,011

546

456

—

1,002

(1,002)―

2,237,595(49,499)
1,175,358

2,324,626
883,882
16,556,532

845,792(10,408)
366,838

5,408,014
823,974
18,098,730(1,002)(445,173)
897,514

5,407,011
378,801
18,996,244

377

411,383

1,813

413,574

6,296

419,871567,601——

567,601―

567,601

12

91,952—

91,965

3,478

95,443

Notes: 1 Details of the Adjustments are as follows:
Segment profits (losses)(Thousands of yen)
Current fiscal year

Prior fiscal year

Corporate expense *(449,777)(445,173)* Corporate expense comprises the general and administrative expenses not attributed to reportable segments.

Segment assets(Thousands of yen)
Current fiscal year

Prior fiscal year

Corporate assets *973,663

897,514* Corporate assets mainly comprise cash and deposits not attributed to reportable segments.

Other items(Thousands of yen)
Current fiscal year

Prior fiscal year

Depreciation

4,005

6,296

Increase amounts of fixed assets andintangible assets*

13,154

3,478* Increase amounts of fixed assets and intangible assets are attributable to capital investments for the administrative division.
2 Segment profits are adjustment of operating income reported on the consolidated statement of income.

63

Related information
Prior fiscal year (From April 1, 2014 to March 31, 2015)
1. Information by product and service
This information is not provided here because the same information is provided under “Segment information.”
2. Information by geographical area
(1) Net sales
This information is not provided because the sales to third parties in Japan exceed 90% of the net sales recorded in
the consolidated statement of income.
(2) Property, plant and equipment
This information is not provided because the amount of property, plant and equipment which exist in Japanexceeds 90% of the amount of property, plant and equipment in the consolidated balance sheet.
3. Information by major customer
There was no particular customer to whom sales account for 10% or more of the net sales recorded in the consolidated
statement of income.
Current fiscal year (From April 1, 2015 to March 31, 2016)
1. Information by product and service
This information is not provided here because the same information is provided under “Segment information.”
2. Information by geographical area
(1) Net sales
This information is not provided because the sales to third parties in Japan exceed 90% of the net sales recorded in
the consolidated statement of income.
(2) Property, plant and equipment
This information is not provided because the amount of property, plant and equipment which exist in Japanexceeds 90% of the amount of property, plant and equipment in the consolidated balance sheet.
3. Information by major customer
There was no particular customer to whom sales account for 10% or more of the net sales recorded in the consolidated
statement of income.

Information about the impairment loss on fixed assets by reportable segments
Not applicable

Information about the amortization of goodwill and unamortized balance by reportable segments
Not applicable

Information about the gain recognized on negative goodwill by reportable segments
Not applicable

Information of related parties
Prior fiscal year (From April 1, 2014 to March 31, 2015)
Not applicable
Current fiscal year (From April 1, 2015 to March 31, 2016)
Not applicable64

(Per share information)(Yen)
Prior fiscal year
(From April 1, 2014
to March 31, 2015)

Current fiscal year
(From April 1, 2015
to March 31, 2016)

Net assets per share

138.65143.66

Basic earnings (loss) per share(21.52)

4.17

Notes: 1. Diluted earnings per share for the current fiscal year are not presented because the Company had no securities with dilutive effects.
Diluted earnings per share for the prior fiscal year are equivalent to net loss per share and not presented because the Company had
no securities with dilutive effects.
2. The basis for calculation of the basic earnings (loss) per share is as follows.
Prior fiscal year
Current fiscal year
(From April 1, 2014
(From April 1, 2015
to March 31, 2015)
to March 31, 2016)
Profit (loss) attributable to owners of parent(644,117)
124,831(Thousands of yen)Amount not attributable to common shareholders——(Thousands of yen)
Profit (loss) attributable to owners of parent relating(644,117)
124,831
to common stock (Thousands of yen)
Average number of shares of common stock during
29,934,203
29,933,933
the fiscal year (Shares)

65

(Significant subsequent events)(Syndicated loan agreement)
The Company entered into syndicated loan contracts, with Mizuho Bank, Ltd. acting as the arranger. The summary of thecontracts is as follows:
1. With an execution date of April 28, 2016
(1) Contract amount¥4,300,000 thousand (term loan)(2) Execution date
April 28, 2016(3) Borrowing period
From April 28, 2016 to March 31, 2021
(4) Participating financial institutions
Mizuho Bank, Ltd., THE SHIZUOKA BANK, LTD., and Sumitomo Mitsui Banking Corporation(5) Intended use of the proceeds
Refinancing of the existing borrowings from Sumitomo Mitsui Trust Bank, Limited, The Bank ofTokyo-Mitsubishi UFJ, Ltd., THE SHIMIZU BANK, LTD., ShinGinko Tokyo, Limited, and The Chiba Bank,
Ltd. in the aggregated amount of ¥3,657,251 thousand, and other(6) Assets pledged as collateral
Real estate of commercial facilities in Mishima area in Shizuoka Prefecture(7) Financial restraint clause
1) For the fiscal year ended March 31, 2016 and thereafter, the amount of net assets presented on consolidatedbalance sheet at the end of accounting period of each fiscal year shall be maintained at 75% or more of theamount of net assets presented on consolidated balance sheet at the end of the fiscal year ended March 31,
2015.
2) For the two consecutive fiscal years with the fiscal year ended March 31, 2016 or thereafter being the firstaccounting period, ordinary income (loss) presented in the consolidated statement of income for theaccounting period of each fiscal year shall not be loss for two consecutive fiscal years. The first
determination whether this item has been satisfied shall be made on the accounting for the fiscal year
ending March 31, 2017 and for the immediately preceding fiscal year.
2. With an execution date of June 30, 2016
(1) Contract amount¥5,100,000 thousand (term loan)(2) Execution dateJune 30, 2016(3) Borrowing period
From June 30, 2016 to March 31, 2021
(4) Participating financial institutions
Mizuho Bank, Ltd., THE SHIZUOKA BANK, LTD., Sumitomo Mitsui Banking Corporation, The Bank ofTokyo-Mitsubishi UFJ, Ltd., and ShinGinko Tokyo, Limited(5) Intended use of the proceeds
Refinancing of the existing borrowings from Mizuho Bank, Ltd., THE SHIZUOKA BANK, LTD., andSumitomo Mitsui Banking Corporation, and other(6) Assets pledged as collateral
Real estate of commercial facilities in Mishima area in Shizuoka Prefecture(7) Financial restraint clause
1) For the fiscal year ended March 31, 2016 and thereafter, the amount of net assets presented on consolidatedbalance sheet at the end of accounting period of each fiscal year shall be maintained at 75% or more of theamount of net assets presented on consolidated balance sheet at the end of the fiscal year ended March 31,
2015.
2) For the two consecutive fiscal years with the fiscal year ended March 31, 2016 or thereafter being the firstaccounting period, ordinary income (loss) presented in the consolidated statement of income for theaccounting period of each fiscal year shall not be loss for two consecutive fiscal years. The first
determination whether this item has been satisfied shall be made on the accounting for the fiscal year
ending March 31, 2017 and for the immediately preceding fiscal year.

(Capital transfer agreement)
The Company entered into a contract to transfer the equity interest in Shanjing Business Administration (Ningbo) Co.,
Ltd. in which the Company holds interest, as of May 26, 2016. As a result of this transfer, approximately ¥100,000
thousand will be posted for the first quarter of the fiscal year ending March 31, 2017.

66

(Introduction of stock option scheme)
Based on the stipulations of Article 361 of the Companies Act, the remuneration, etc. of the stock acquisition rights in theform of stock options for Directors (excluding Directors serving as Audit and Supervisory Committee Members andOutside Directors) of the Company was approved at the General Meeting of Shareholders held on June 24, 2016.
Details of the stock option scheme are stated in “4. Corporate Information 1. Information on the Company’s shares (9)Stock option plans.”

675) Consolidated supplemental schedules
Schedule of bonds payableCompany

Description

Date of Issuance

The Company

2nd unsecured bonds

September 30, 2013

The Company

3rd unsecured bonds

February 5, 2015

The Company

4th unsecured bonds

June 30, 2015

The Company

5th unsecured bonds

September 17, 2015

Total

Notes:—―

Balance at theBalance at the end
beginning of current
Interest rateof current fiscal year
Collateral
Maturity
fiscal year(%)
(Thousands of yen)(Thousands of yen)Unsecured
100,000―
0.5
March 31, 2016bonds
Unsecured
300,000
300,000
0.3
February 5, 2018bonds
250,500
Unsecured—
0.4
June 29, 2018bonds
(99,000)
315,000
Unsecured—
0.2
September 17, 2020
bonds
(70,000)
865,500
400,000―—―(169,000)

1. The amounts in parentheses presented under “Balance at the end of current fiscal year” represent the amounts scheduled to beredeemed within one year.
2. The redemption schedule of bonds for 5 years subsequent to March 31, 2016 is summarized as follows:(Thousands of yen)
Due after one year but Due after two years
Due after three years
Due after four years
Due within one year
within two years
but within three years but within four years but within five years
169,000

469,000

122,500

68

70,00035,000Schedule of loans payable(Thousands of yen)
Balance at the
beginning ofcurrent fiscal
year

Balance at theend of current
fiscal year

Averageinterest rate(%)

540,000

540,000

2.5―

Current portion of long-term loans payable(Note 3)2,531,640

2,628,584

2.8―

Current portion of lease obligations (Note 4)

26,35926,359—―Long-term loans payable (excluding current
portion)5,083,856

4,495,106

2.9

2017 to 2021

Lease obligations (excluding current portion)

204,901

178,542—2017 to 2024

60,19960,2002.0—

403,550

340,725

2.0

2017 to 2026

8,850,506

8,269,517――

Category

Short-term loans payable

Maturity

Other interest-bearing debt
Current portion of guarantee deposits
received (Note 5)
Guarantee deposits received (due after
one year) (Note 6)
Total

Notes: 1 The average interest rate represents the weighted-average rate applicable to the year-end balance.
2 Average interest rate of lease obligations is not recorded because the amount equivalent to interest included in total leaseamount is allocated equally to each consolidated fiscal year using the straight-line method.
3 “Current portion of long-term loans payable” is included in “short-term loans payable” in the consolidated balance sheet.
4 “Current portion of lease obligations” is included in “Other” under current liabilities in the consolidated balance sheet.
5 “Current portion of guarantee deposits received” is included in “Other” under current liabilities in the consolidated balance
sheet.
6 In addition to the figures shown above, there are interest-free guarantee deposits received (due after one year) in theamount of ¥2,112,353 thousand as of the beginning of the current fiscal year and ¥1,885,440 thousand at the end of thecurrent fiscal year.
7 The following table shows the aggregate annual maturities of long-term loans payable, lease obligations, and otherinterest-bearing debt (excluding the current portion) for 5 years subsequent to March 31, 2016.
(Thousands of yen)
Due after one year but Due after two years
Due after three years
Due after four years
within two years
but within three years but within four years
but within five years
Long-term loans payable

2,811,888

1,446,712

151,552

76,594

Lease obligations

26,35925,526

22,296

21,845

Other interest-bearing
debt

43,33033,33033,33033,330

Schedule of asset retirement obligations
The schedule of asset retirement obligations is not provided because the amounts of asset retirement obligations at the
beginning and the end of the fiscal year ended March 31, 2016 were less than one hundredth (1%) of the amounts of
total liabilities and net assets at the beginning and the end of the fiscal year ended March 31, 2016.

69

(2) Other
Quarterly financial information for the fiscal year ended March 31, 2016
(Thousands of yen)
4th Quarter(Fiscal year ended
March 31, 2016)
5,407,011

1st Quarter(Three months ended
June 30, 2015)
1,295,650

2nd Quarter(Six months ended
September 30, 2015)
2,809,659

3rd Quarter(Nine months ended
December 31, 2015)
4,149,465

Profit before income
taxes

74,508

190,954

243,184

139,612

Profit attributable toowners of parent

66,001

172,689

215,309124,831

Basic earnings per
share (Yen)

2.20

5.77

7.19

4.17

Each quarter

1st Quarter(From April 1, 2015
to June 30, 2015)

2nd Quarter(From July 1, 2015
to September 30, 2015)

3rd Quarter(From October 1, 2015
to December 31, 2015)

4th Quarter(From January 1, 2016
to March 31, 2016)

2.20

3.56

1.42

(3.02)

Cumulative period
Net sales

Basic earnings (loss)
per share (Yen)

70

2.

Non-Consolidated Financial Statements(1) Non-Consolidated financial statements
1) Non-consolidated balance sheet(Thousands of yen)
Prior fiscal year

Current fiscal year

(As of March 31, 2015)(As of March 31, 2016)

AssetsCurrent assets
Cash and deposits*1

Notes receivable-trade287,360*1

74,372

Accounts receivable-trade104,341

628,460

Inventories*2

Advance payments-trade467,401

266,674
374,273*2

413,5155248

Prepaid expenses

26,90522,878

Other

27,39484,038

Allowance for doubtful accounts

(760)

—

1,511,140

1,265,970

Total current assets
Non-current assets
Property, plant and equipment
Buildings
Accumulated depreciation
Buildings, net*1

Structures
Accumulated depreciation
Structures, net*1

Machinery and equipment

11,980,938

12,067,703(5,366,811)(5,712,657)

6,614,126*1

6,355,046

916,237

916,237(750,222)(779,805)

166,015*1

136,432

84,044

84,044(79,842)(79,842)

4,202

4,202

Tools, furniture and fixtures

318,360

324,239

Accumulated depreciation(292,762)(299,006)

25,59825,233

Accumulated depreciation
Machinery and equipment, net

Tools, furniture and fixtures, net
Land

*1

Leased assets

9,447,123*1

9,553,528

318,695

318,695

Accumulated depreciation(97,612)(122,644)

Leased assets, net

221,082

196,050

16,478,149

16,270,492

Software13,97010,725

Other

2,164

1,869

Total intangible assets

16,134

12,594

Total property, plant and equipment
Intangible assets71

(Thousands of yen)
Prior fiscal year

Current fiscal year

(As of March 31, 2015)(As of March 31, 2016)

Investments and other assets
Investment securities*1

290,297*1

228,257

Shares of subsidiaries and associates

66,656

66,656

Investments in capital

178,383

160,545

Investments in capital of subsidiaries and associates
Long-term loans receivable from subsidiaries andassociates
Long-term accounts receivable from subsidiaries
and associates
Claims provable in bankruptcy, claims provable inrehabilitation and other
Long-term prepaid expenses

436,987

436,987

2,012,716

204,107591,603—83,256

101,243

45,49526,264

81,15937,054

Allowance for doubtful accounts(2,652,602)(286,083)

Total investments and other assets

1,133,954

975,034

17,628,238

17,258,121

19,139,378

18,524,091

Notes payable-trade334,952

152,917

Accounts payable-trade477,385

253,152

Other

Total non-current assets
Total assets
Liabilities
Current liabilities

Short-term loans payable*1

540,000*1

540,000

Current portion of bonds*1

100,000*1

169,000

Current portion of long-term loans payable*1

2,531,640*1

2,628,584

Lease obligations

26,35926,359Accounts payable-other

64,653

17,622

Accrued expenses

43,611

37,631

Income taxes payable

13,134

3,379

Advances received

27,91525,901

Deposits received*1

246,578*1

242,909

Provision for bonuses

24,79023,490Other

13,65020,1684,444,670

4,141,116

Total current liabilities
Non-current liabilities
Bonds payable*1

300,000*1

696,500

Long-term loans payable*1

5,083,856*1

4,495,106

Lease obligations
Long-term guarantee deposited

204,901*1, *3

Deferred tax liabilities

2,529,008

178,542*1, *3

2,247,503

16,2473,194

2,334,259

2,212,849

Provision for retirement benefits

243,969

231,837

Asset retirement obligations

42,02436,870—29,681

10,754,268

10,132,085

15,198,939

14,273,201

Deferred tax liabilities for land revaluation

Other
Total non-current liabilities
Total liabilities

72

(Thousands of yen)
Prior fiscal year

Current fiscal year

(As of March 31, 2015)(As of March 31, 2016)

Net assets
Shareholders’ equity
Capital stock

1,500,000

1,500,000

Legal capital surplus

503,270

503,270

Other capital surplus

104

104

Total capital surplus

503,375

503,375

375,000

375,000(3,325,900)(3,087,462)(2,950,900)(2,712,462)(7,012)(7,033)(954,537)(716,119)

Valuation difference on available-for-sale securities

26,078(23,462)

Deferred gains or losses on hedges

(648)

(484)

Revaluation reserve for land

4,869,546

4,990,956

Total valuation and translation adjustments

4,894,976

4,967,009

3,940,439

4,250,889

19,139,378

18,524,091

Capital surplus

Retained earnings
Legal retained earnings
Other retained earnings
Retained earnings brought forward
Total retained earnings
Treasury shares
Total shareholders’ equity
Valuation and translation adjustments

Total net assets
Total liabilities and net assets732) Non-consolidated statement of income(Thousands of yen)

Prior fiscal year

Current fiscal year

(From April 1, 2014
to March 31, 2015)(From April 1, 2015
to March 31, 2016)

Net sales
Net sales of goods

3,548,582

Rent income and service revenue
Total net sales

2,748,543

1,526,553*1

5,075,136

1,516,914*1

4,265,457

Cost of sales
Cost of goods soldBeginning goods

401,585

467,401

Cost of purchased goods

3,340,967

2,434,410

Total

3,742,552

2,901,811

Transfer to other account*2

Ending goods

3,392

*2

3,594

467,401

413,515

Cost of goods sold3,271,759

2,484,702

Rent cost and service cost

619,039

597,179

3,890,799

3,081,881

Total cost of sales
Gross profit
Selling, general and administrative expenses

1,184,336*3

Operating income

846,350

1,183,575*3

337,985

806,493377,082

Non-operating income
Interest income*1

Dividends income

10,036

*1

5,903

4,947

7,737

―

11,539

Other

2,742

6,581

Total non-operating income

17,726

31,761

Interest expenses

262,400

248,849

Provision of allowance for doubtful accounts
Amortization of net retirement benefit obligation attransition
Commission for syndicate loan

805,140—

24,594——64,500Other

18,90956,962

1,111,044

370,311(755,331)

38,532

Reversal of allowance for doubtful accounts—

204,067

Total extraordinary income—

204,067(755,331)

242,600

Income taxes-current

15,486

4,772

Income taxes-deferred

(877)

(610)

Total income taxes

14,6084,161(769,940)

238,438

Gain on sales of investments in capital

Non-operating expenses

Total non-operating expenses
Ordinary income (loss)
Extraordinary income

Profit (loss) before income taxes

Profit (loss) attributable to owners of parent74

Schedule of rent cost and service cost
Prior fiscal year

Current fiscal year

(From April 1, 2014
to March 31, 2015)
AmountComposition(Thousands of yen)ratio (%)

(From April 1, 2015
to March 31, 2016)
AmountComposition(Thousands of yen)ratio (%)

1. Taxes and dues

153,36324.8

153,135

25.6

2. Depreciation

432,47369.8

405,987

68.0

3. Other cost

33,202

5.4

38,055

6.4

619,039100.0

597,179

100.0

Category

Rent cost and service cost
(Note)

No. in
Notes

Taxes and dues are mainly comprised of fixed asset tax.

753) Non-consolidated statement of changes in equity
Prior fiscal year (From April 1, 2014 to March 31, 2015)(Thousands of yen)
Shareholders' equity

Capitalstock

Balance at beginning ofcurrent period
Changes of items during
periodCapital surplus

Retained earnings

Other
capitalsurplusOtherretainedearnings
Retainedearnings
brought
forwardLegalcapitalsurplus1,500,000

503,270

104

Total
capitalsurplus503,375

Total
retainedearnings

TreasurysharesTotalshareholders'equity375,000 (2,555,960) (2,180,960)(6,989)(184,574)

Legalretainedearnings

Profit (loss)
Purchase of treasury
sharesNet changes of items
other thanshareholders' equity
Total changes of items
during period
Balance at end ofcurrent period(769,940)

—

—

—

—

1,500,000

503,270104

503,375(769,940)(769,940)
(22)

(22)

(769,940)(22)(769,962)

375,000 (3,325,900) (2,950,900)(7,012)(954,537)—(769,940)

Valuation and translation adjustments
Valuationdifference on
available-forsale securities
Balance at beginning ofcurrent period
Changes of items during
period4,916

Deferred gains
Total valuation Total net assets
Revaluation
or losses on
and translation
reserve for land
hedgesadjustments
34

4,628,242

4,633,194

Profit (loss)
Purchase of treasury
sharesNet changes of items
other thanshareholders' equity
Total changes of items
during period
Balance at end ofcurrent period

4,448,619(769,940)(22)
21,161(682)

241,303261,782

261,782

21,161(682)

241,303261,782(508,180)

26,078(648)

4,869,546

4,894,976

3,940,439

76

Current fiscal year (From April 1, 2015 to March 31, 2016)(Thousands of yen)
Shareholders' equity

Capitalstock

Balance at beginning ofcurrent period
Changes of items during
periodCapital surplus

Retained earnings

Other
capitalsurplusOtherretainedearnings
Retainedearnings
brought
forwardLegalcapitalsurplus1,500,000

503,270

104

Total
capitalsurplus503,375

Total
retainedearnings

TreasurysharesTotalshareholders'equity375,000 (3,325,900) (2,950,900)(7,012)(954,537)

Legal
retainedearnings

ProfitPurchase of treasury
sharesNet changes of items
other thanshareholders' equity
Total changes of items
during period
Balance at end ofcurrent period

238,438

—

—

—

—

1,500,000

503,270104

503,375

238,438

238,438(21)(21)

238,438(21)

238,417

375,000 (3,087,462) (2,712,462)(7,033)(716,119)—

238,438

Valuation and translation adjustments
Valuationdifference on
available-forsale securities
Balance at beginning ofcurrent period
Changes of items during
period26,078Deferred gains
Total valuation Total net assets
Revaluation
or losses on
and translation
reserve for land
hedgesadjustments(648)

4,869,546

4,894,976

Profit (loss)
Purchase of treasury
sharesNet changes of items
other thanshareholders' equity
Total changes of items
during period
Balance at end ofcurrent period

3,940,439

238,438(21)(49,541)

163

121,41072,032

72,032(49,541)

163

121,41072,032

310,450(23,462)(484)

4,990,956

4,967,009

4,250,889

77

[Notes to Non-consolidated Financial Statements](Significant accounting policies)
1. Valuation standards and methods for securities(1) Held-to-maturity securities
Stated at amortized cost (straight-line method).
(2) Shares of subsidiaries and affiliates
Cost method by the moving-average method(3) Other securitiesThose with market value:
Market value method based on the market price, etc. as of the fiscal closing date (the valuation difference isdirectly included in net assets, and cost of sales is determined by the moving-average method.)Those without market value:
Cost method by the moving-average method
2. Valuation standards for derivative financial instruments
Market value method
3. Valuation standards and methods for inventories
Stated at cost determined by the gross average method (carrying amount is written down book value due to decreased
profitability).
4. Depreciation and amortization of fixed assets(1) Property, plant and equipment (excluding leased assets)
Operating leased assets and the related assets thereto are depreciated mainly using the straight-line method, andsome of which are depreciated using the declining-balance method. Other property, plant and equipment are
depreciated using the declining-balance method.
All the buildings (excluding facilities attached to buildings) acquired on or after April 1, 1998 are depreciatedusing the straight-line method.
Major useful lives are as follows:
Buildings: 6-47 years
Structures: 3-30 years(2) Intangible fixed assets (excluding leased assets)
Straight-line method
Software (for internal use) is amortized over the internally estimated useful lives (5 years).
(3) Leased assets
Leased assets related to finance lease transactions which do not transfer ownerships to the lessee
Leased assets are depreciated over the lease terms as useful lives, using the straight-line method without any
residual value.
(4) Long-term prepaid expenses
Long-term prepaid expenses are depreciated over the period during which the service is received.
5. Translation of foreign currency denominated assets and liabilities into Japanese yen
Receivables and payables denominated in foreign currencies are translated into yen at the rates of exchange in effecton the last day of the period, and differences arising from the translation are charged or credited to income.
6. Basis for reserves(1) Allowance for doubtful accounts
In order to prepare for possible credit losses on receivables, the Company and its subsidiaries record the estimatedamount of non-recoverable receivables based on the historical loss rate for general receivables and specificcollectability for specific doubtful receivables.
(2) Provision for bonuses
In order to prepare for payments of bonuses to the employees, the estimated payable amount is recorded asprovision for bonuses.
(3) Provision for retirement benefits
Provision for retirement benefits are recorded at an amount calculated based on the retirement benefit obligation
at the end of the current fiscal year.
The benefit obligation is calculated using the simplified method.
Differences arising from changes in accounting standards are amortized evenly over 15 years.

787. Hedge accounting(1) Hedge accounting
Deferred hedge accounting is applied for derivative instruments.
Appropriation treatment is applied for forward exchange contracts which are qualified for such treatment.
Special treatment is applied for interest rate swaps which are qualified for such treatment.
(2) Hedging instruments and hedged items
Hedging instruments
Hedged items
Interest rate swaps
Long-term loans payable
Forward exchange contracts
Receivables and payables denominated in foreign currencies and others(3) Hedging policy
Derivative transactions regarding currency and interest rate are used to mitigate risks associated with foreign
currency exchange and interest rate fluctuations and to reduce fund-raising costs.
(4) Assessment of hedge effectivenessThe hedge effectiveness is assessed semi-annually based on the correlation between the change in aggregatedamount of cash flow of the hedged items and the change in aggregated amount of cash flow of the hedging
instruments. However, assessment of hedge effectiveness is omitted for interest rate swaps that are qualified forspecial treatment.
8. Other significant matters for preparation of the non-consolidated financial statements(1) Accounting for retirement benefit
The accounting methods for unsettled amount of differences arising from changes in accounting standards aredifferent from those of the consolidated financial statements.
(2) Accounting for the consumption taxes
Transactions subject to the consumption taxes are recorded at amounts exclusive of the consumption taxes.
(Changes in presentation)(For consolidated statement of income)“Purchase discounts,” which was included in “Non-operating income” in the prior fiscal year, has been included in “Other”
from the current fiscal year because it decreased to less than 10/100 of the total Non-operating income. To reflect thischange, the non-consolidated financial statements of the prior fiscal year have been reclassified.
As a result, ¥2,040 thousand of “Purchase discounts” included in “Non-operating income” and ¥701 thousand of “Other”
have been reclassified into ¥2,742 thousand of “Other” in the non-consolidated statement of income for the prior fiscal year.

79

(For non-consolidated balance sheet)*1

Assets pledged as collateral(Thousands of yen)
Prior fiscal year
(As of March 31, 2015)

Current fiscal year
(As of March 31, 2016)

80,00080,000

Buildings

6,555,118

6,301,469

Structures

165,728

136,197

Cash and deposits (deposits)Land

9,420,692

9,527,097

Investment securities

190,080

128,620

Total

16,411,619

16,173,385

Liabilities secured by the collateral(Thousands of yen)
Prior fiscal year
(As of March 31, 2015)

Current fiscal year
(As of March 31, 2016)

Short-term loans payable

540,000

540,000

Current portion of bonds
Current portion of long-term loans
payableDeposits received (current portionof guarantee deposits received)
Bonds payable

100,000

169,000

2,498,316

2,620,225

88,83388,833Long-term loans payable
Long-term guarantee deposited
Total
*2

696,500
4,495,106

892,800

803,967

9,495,446

9,413,631

Breakdown of inventories(Thousands of yen)
Prior fiscal year
(As of March 31, 2015)

Current fiscal year
(As of March 31, 2016)

467,401

413,515

Merchandise*3300,000
5,075,497

Assets and liabilities to subsidiaries and associates
Items included in each account other than those listed separately are as follows:

Long-term guarantee deposited(Thousands of yen)

Prior fiscal year
(As of March 31, 2015)

Current fiscal year
(As of March 31, 2016)

1,583,551

1,394,224

4 Discounted notes receivables(Thousands of yen)
Prior fiscal year
(As of March 31, 2015)

Current fiscal year
(As of March 31, 2016)

54,35044,87880

(For non-consolidated statements of income)*1

Transactions with subsidiaries and affiliates(Thousands of yen)
Prior fiscal year
(From April 1, 2014
to March 31, 2015)

Net salesInterest income

Current fiscal year
(From April 1, 2015
to March 31, 2016)

1,935,079

1,283,101

10,0145,881*2Transfer to other account is the value of in-house consumption of product samples, etc.

*3

Ratio of expenses under selling expenses is 42% and 40% for the prior fiscal year and current fiscal year, respectively. Ratio ofexpenses under general and administrative expenses is 58% and 60% for the prior fiscal year and current fiscal year, respectively.
Major components of selling, general and administrative expenses are as follows.
(Thousands of yen)
Prior fiscal year
(From April 1, 2014
to March 31, 2015)

Current fiscal year
(From April 1, 2015
to March 31, 2016)

Salaries

294,409274,341

Provision for bonuses

24,79023,490Retirement benefit expenses

18,511

27,205

Depreciation

6,277

7,112

Rent expenses
Provision of allowance for doubtful accounts

85,80079,747—

15,720(For securities)
The fair values of shares of subsidiaries and affiliates are not presented, as they do not have a market value and deemed
difficult to measure the fair value.
The amounts of shares of subsidiaries and affiliates recorded in the non-consolidated balance sheet for which it is deemed
difficult to measure the fair value are as follows.
Category
Subsidiaries’ shares

Prior fiscal year
(As of March 31, 2015)
30,000Affiliates’ shares
Total

81

(Thousands of yen)
Current fiscal year
(As of March 31, 2016)
30,00036,65636,656

66,656

66,656

(For tax-effect accounting)1.

Significant components of deferred tax assets and liabilities(1) Current deferred tax assets and liabilities

Deferred tax assets:
Loss on valuation of inventories
Provision for bonuses
Other
Total gross deferred tax assets
Valuation allowance
Net deferred tax assets

Prior fiscal year
(As of March 31, 2015)(Thousands of yen)
Current fiscal year
(As of March 31, 2016)

14,354
8,195
4,375
26,925(26,925)—

25,1037,249
3,715
36,068(36,068)—

Prior fiscal year
(As of March 31, 2015)(Thousands of yen)
Current fiscal year
(As of March 31, 2016)

3,230
42,589874,948
78,802324,861—
14,254
1,338,686(1,338,686)—

3,061
39,34087,59870,988944,421
7,184
11,3201,163,915(1,163,915)—(12,442)(3,805)(16,247)(16,247)—(3,194)(3,194)(3,194)(2,334,259)(2,212,849)(2) Non-current deferred tax assets and liabilities

Deferred tax assets:
Loss on valuation of shares of subsidiaries and associates
Impairment loss
Allowance for doubtful accounts
Provision for retirement benefits
Net operating loss brought forward
Valuation difference on available-for-sale securities
Other
Total gross deferred tax assets
Valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Valuation difference on available-for-sale securities
Property, plant and equipment (asset retirement expense)
Total gross deferred tax liabilities
Net deferred tax liabilities
Deferred tax liabilities for land revaluation
Revaluation reserve for land2.

The reconciliation between the effective tax rates reflected in the consolidated financial statements and the statutory
tax rate is summarized as follows:

Statutory tax rate
(Reconciliation)
Items such as entertainment expenses permanently not
deductible
Inhabitant tax on per capita basis
Change in valuation allowance
Other
Effective tax rates after adoption of tax-effect accounting

3.

Prior fiscal year
(As of March 31, 2015)

Current fiscal year
(As of March 31, 2016)

35.6%

33.1%

(2.2%)

4.1%(0.6%)(34.8%)
0.1%

2.0%(37.5%)
0.0%(1.9%)

1.7%

Amendments to deferred tax liabilities due to a change in the rate of corporation tax
In accordance with the “Act for Partial Amendment of the Income Tax Act” and the “Act for Partial Amendment of the
Local Tax Act” established in the parliament on March 29, 2016, the statutory tax rate used for calculating liabilities for thecurrent fiscal year (limited to those to be eliminated on and after April 1, 2016) has been changed from 32.3% for the priorfiscal year to 30.9% for deferred tax liabilities that are expected to be collected or paid during the period from April 1, 2016
to March 31, 2018, or 30.6% for deferred tax liabilities that are expected to be collected or paid on or after April 1, 2018.
These tax rate changes resulted in a decrease of ¥164 thousand in deferred tax liabilities and a decrease of ¥121,410
thousand in deferred tax liabilities for land revaluation; an increase of ¥164 thousand in income taxes-deferred and anincrease of ¥121,410 thousand in revaluation reserve for land in the current fiscal year.
82

(Significant subsequent events)(Syndicated loan agreement)
The Company entered into syndicated loan contracts with Mizuho Bank, Ltd. acting as the arranger. The summary of thecontracts is as follows:
1. With an execution date of April 28, 2016
(1) Contract amount¥4,300,000 thousand (term loan)(2) Execution date
April 28, 2016(3) Borrowing period
From April 28, 2016 to March 31, 2021
(4) Participating financial institutions
Mizuho Bank, Ltd., THE SHIZUOKA BANK, LTD., and Sumitomo Mitsui Banking Corporation(5) Intended use of the proceeds
Refinancing of the existing borrowings from Sumitomo Mitsui Trust Bank, Limited, The Bank ofTokyo-Mitsubishi UFJ, Ltd., THE SHIMIZU BANK, LTD., ShinGinko Tokyo, Limited, and The Chiba Bank,
Ltd. in the aggregated amount of ¥3,657,251 thousand, and other(6) Assets pledged as collateral
Real estate of commercial facilities in Mishima area in Shizuoka Prefecture(7) Financial restraint clause
1) For the fiscal year ended March 31, 2016 and thereafter, the amount of net assets presented on consolidatedbalance sheet at the end of accounting period of each fiscal year shall be maintained at 75% or more of theamount of net assets presented on consolidated balance sheet at the end of the fiscal year ended March 31,
2015.
2) For the two consecutive fiscal years with the fiscal year ended March 31, 2016 or thereafter being the firstaccounting period, ordinary income (loss) presented in the consolidated statement of income for theaccounting period of each fiscal year shall not be loss for two consecutive fiscal years. The first
determination whether this item has been satisfied shall be made on the accounting for the fiscal year
ending March 31, 2017 and for the immediately preceding fiscal year.
2. With an execution date of June 30, 2016
(1) Contract amount¥5,100,000 thousand (term loan)(2) Execution dateJune 30, 2016(3) Borrowing period
From June 30, 2016 to March 31, 2021
(4) Participating financial institutions
Mizuho Bank, Ltd., THE SHIZUOKA BANK, LTD., Sumitomo Mitsui Banking Corporation, The Bank ofTokyo-Mitsubishi UFJ, Ltd., and ShinGinko Tokyo, Limited(5) Intended use of the proceeds
Refinancing of the existing borrowings from Mizuho Bank, Ltd., THE SHIZUOKA BANK, LTD., andSumitomo Mitsui Banking Corporation, and other(6) Assets pledged as collateral
Real estate of commercial facilities in Mishima area in Shizuoka Prefecture(7) Financial restraint clause
1) For the fiscal year ended March 31, 2016 and thereafter, the amount of net assets presented on consolidatedbalance sheet at the end of accounting period of each fiscal year shall be maintained at 75% or more of theamount of net assets presented on consolidated balance sheet at the end of the fiscal year ended March 31,
2015.
2) For the two consecutive fiscal years with the fiscal year ended March 31, 2016 or thereafter being the firstaccounting period, ordinary income (loss) presented in the consolidated statement of income for theaccounting period of each fiscal year shall not be loss for two consecutive fiscal years. The first
determination whether this item has been satisfied shall be made on the accounting for the fiscal year
ending March 31, 2017 and for the immediately preceding fiscal year.

(Capital transfer agreement)
The Company entered into a contract to transfer the equity interest in Shanjing Business Administration (Ningbo) Co.,
Ltd. in which the Company holds interest, as of May 26, 2016. As a result of this transfer, approximately ¥100,000
thousand will be posted for the first quarter of the fiscal year ending March 31, 2017.

83

(Introduction of stock option scheme)
Based on the stipulations of Article 361 of the Companies Act, the remuneration, etc. of the stock acquisition rights in theform of stock options for Directors (excluding Directors serving as Audit and Supervisory Committee Members andOutside Directors) of the Company was approved at the General Meeting of Shareholders held on June 24, 2016.
Details of the stock option scheme are stated in “4. Corporate Information 1. Information on the Company’s shares (9)Stock option plans.”

844) Non-consolidated supplemental schedules
Schedule of fixed assets(Thousands of yen)
Balance at the
Depreciation
end of theorcurrent fiscal
amortization
year after
for the current
depreciation
fiscal year
andamortization

Balance at the
beginning of
the current
fiscal year

Increasein the current
fiscal year

Decrease in
the current
fiscal year

Balance at theend of thecurrent fiscal
year

Accumulated
depreciationor
amortization
at the end of
the current
fiscal year

Buildings———

12,067,703

5,712,657

345,845

6,355,046

Structures

—

—

—

916,237

779,805

29,583

136,432

Machinery andequipment
Tools, furnitureand fixtures

—

—

—

84,044

79,842

—

4,202

—

—

—

324,239

299,006

8,671

25,233

Land

—

—

—

9,553,528(7,203,805)
318,695
23,264,448(7,203,805)――

9,553,528

Type of assets

Property, plant andequipment

Leased assets———
122,644
25,032
196,050
Total property, plant———
6,993,955
409,132
16,270,492
and equipment
Intangible assets
Software———21,332
10,607
3,245
10,725
Other
—
—
—
3,928
2,059
295
1,869
Total intangible———
25,261
12,666
3,540
12,594assetsLong-term prepaid
166,437482
11,973
154,945
128,681
19,712
26,264
expenses
Notes: 1. The amounts in parentheses in the “Balance at the end of the current fiscal year” column are included in each balance amount,and represent the amounts of revaluated reserve for land for business use in accordance with “Act on Revaluation of Land” (ActNo. 34 promulgated on March 31, 1998).
2. Figures of “Balance at the beginning of the current fiscal year,” “Increase in the current fiscal year” and “Decrease in the current
fiscal year” are omitted as both increase and decrease of property, plant and equipment in the current fiscal year account for lessthan 5% of the total amount of property, plant and equipment at the end of the current fiscal year.
3. Figures of “Balance at the beginning of the current fiscal year,” “Increase in the current fiscal year” and “Decrease in the current
fiscal year” are omitted as the amount of intangible assets accounts for less than 1% of the total assets.

Detailed schedule of allowances(Thousands of yen)
Decrease in the
Balance at theDecrease in the
Balance at the
Increase in thecurrent fiscal year
Category
beginning of thecurrent fiscal year end of the current
current fiscal year (Amount used for
current fiscal year
(Other)fiscal year
each purpose)
204,827
Allowance for doubtful accounts
2,653,362
16,4802,178,932
286,083—
Provision for bonuses
24,79023,49024,79023,490Note: The amount of Allowance for doubtful accounts in the “Decrease in the current fiscal year (Other)” column comprises reviewed
amount based on the historical loss rate for general receivables of ¥760 thousand and reversal amount by collection of receivables of¥204,067 thousand.

(2) Details of major assets and liabilities
This information is omitted because the Company prepares consolidated financial statements.
(3) Other
Not applicable85

6. Information on Transfer and Repurchase of the Company’s Stock
Fiscal year

From April 1 to March 31

General Meeting of Shareholders

June

Record date for dividend

March 31

Record dates for dividend of
surplusNumber of shares per unit of theCompany’s stock
Repurchase of stocks of less thana standard unit
Address where repurchases areprocessed
Administrator of shareholders’register

September 30 and March 31
1,000 shares(Special account)
1-4-1 Marunouchi, Chiyoda-ku, Tokyo
Stock Transfer Agency Business Planning Dept., Sumitomo Mitsui Trust Bank,
Limited.
(Special account)
1-4-1 Marunouchi, Chiyoda-ku, Tokyo
Sumitomo Mitsui Trust Bank, Limited.

Offices available for
repurchase—

Charges for repurchase

No charge

Method of public notice

Public notices by the Company shall be done by electronic means; however, in theevent that accidents or other unavoidable reasons prevent public notice byelectronic means, the notice will be posted in the The Nikkei.
URL for public notice
http://www.daitobo.co.jp/

Special benefits to shareholders

None

Note: According to the Company’s Articles of Incorporation, shareholders who hold stocks of less than a standard unit are
not entitled to exercise the rights other than the rights stipulated in each item of Article 189, Paragraph 2, of theCompanies Act; the right to make a claim in accordance with Article 166, Paragraph 1, of the Companies Act; theright to subscribe for new shares or new share subscription rights in proportion to the number of the shares owned
by said shareholder; and the right to request sale of stocks of less than a standard unit.

86

7.

Reference Information on the Company

1. Information on the parent company or equivalent of the Company
The Company has no parent company or equivalent as prescribed in Article 24-7, Paragraph 1 of the Financial Instruments
and Exchange Law.
2. Other reference information
The Company filed the following documents between the beginning of the fiscal year ended March 31, 2016 and the datewhen this Securities Report (Yukashoken-Hokokusho) was filed.
(1) Securities Report and Accompanying Documents and Confirmation Note
The 195th Fiscal Year (from April 1, 2014 to March 31, 2015)
Submitted to the Director of the Kanto Local Finance Bureau on June 25, 2015.
(2) Internal Control Report and Accompanying Documents
Submitted to the Director of the Kanto Local Finance Bureau on June 25, 2015.
(3) Quarterly Securities Reports and Confirmation Notes
The 1st Quarter of 196th Fiscal Year (from April 1, 2015 to June 30, 2015)
Submitted to the Director of the Kanto Local Finance Bureau on August 12, 2015.
The 2nd Quarter of 196th Fiscal Year (from July 1, 2015 to September 30, 2015)
Submitted to the Director of the Kanto Local Finance Bureau on November 12, 2015.
The 3rd Quarter of 196th Fiscal Year (from October 1, 2015 to December 31, 2015)
Submitted to the Director of the Kanto Local Finance Bureau on February 12, 2016.
(4) Extraordinary Report
The Extraordinary Report according to the provision of Article 19, Paragraph 2, Item 9-2 (results of exercise of voting
rights at the general meetings of shareholders) of the Cabinet Office Ordinance on Disclosure of Corporate Affairs, etc.
Submitted to the Director of the Kanto Local Finance Bureau on June 26, 2015.
The Extraordinary Report according to the provision of Article 19, Paragraph 2, Item 9-4 (Changes in Certified Public
Accountants, etc.) of the Cabinet Office Ordinance on Disclosure of Corporate Affairs, etc.
Submitted to the Director of the Kanto Local Finance Bureau on May 17, 2016.

87

Part II Information on Guarantors for the Company
Not applicable88Independent Auditors’ Report (filed under the Financial Instruments and Exchange Act of Japan)
NOTE TO READERS:
Following is an English translation of the Independent Auditors’ Report filed under the Financial Instruments and Exchange
Act of Japan. This report is presented merely as supplemental information.

(TRANSLATION)

INDEPENDENT AUDITOR’S REPORT(filed under the Financial Instruments and Exchange Act of Japan)

June 24, 2016
To the Board of Directors of
Daito Woolen Spinning & Weaving Company, Limited
Deloitte Touche Tohmatsu LLC
Designated Limited Liability Partner,
Engagement Partner,
Certified Public Accountant:

Masato Yoshimizu

Designated Limited Liability Partner,
Engagement Partner,
Certified Public Accountant:

Tatsuya Nakajima

Audit of Financial Statements
Pursuant to the first paragraph of Article 193-2 of the Financial Instruments and Exchange Act, we have audited theconsolidated financial statements included in the Financial Information, namely, the consolidated balance sheet as ofMarch 31, 2016 of Daito Woolen Spinning & Weaving Company, Limited (the "Company") and its consolidated
subsidiaries, and the consolidated statements of income, comprehensive income, changes in equity and cash flows forthe fiscal year from April 1, 2015 to March 31, 2016, including the significant matters that provide the basis for preparing
the consolidated financial statements, the other related notes, and the consolidated supplemental schedules.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements inaccordance with accounting principles generally accepted in Japan, and for designing and operating such internal control
as management determines is necessary to enable the preparation and fair presentation of the consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted
our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the consolidated financial statements are free frommaterial misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks ofmaterial misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk
assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of theconsolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but notfor the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made bymanagement, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Audit Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, theconsolidated financial position of Daito Woolen Spinning & Weaving Company, Limited and consolidated subsidiaries
as of March 31, 2016, and their consolidated financial performance and cash flows for the year then ended in conformity
with accounting principles generally accepted in Japan.

89

Audit of Internal Control
Pursuant to the second paragraph of Article 193-2 of the Financial Instruments and Exchange Act, we have audited
management’s report on internal control over financial reporting of the Company as of March 31, 2016.
Management’s Responsibility for the Report on Internal Control
The Company’s management is responsible for designing and operating effective internal control over financial
reporting and for the preparation and fair presentation of its report on internal control in accordance with assessment
standards for internal control over financial reporting generally accepted in Japan.
There is a possibility that misstatements may not be completely prevented or detected by internal control over financial
reporting.
Auditor’s Responsibility
Our responsibility is to express an opinion on management’s report on internal control based on our internal control
audit as independent position. We conducted our internal control audit in accordance with auditing standards for internal
control over financial reporting generally accepted in Japan. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether management’s report on internal control is free from material
misstatement.
An internal control audit involves performing procedures to obtain audit evidence about the results of the assessment ofinternal control over financial reporting in management’s report on internal control. The procedures are selected dependon the auditors’ judgment, including the significance of effects on reliability of financial reporting. An internal control
audit includes examining representations on the scope, procedures and results of the assessment of internal control overfinancial reporting made by management, as well as evaluating the overall presentation of management’s report oninternal control.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
OpinionIn our opinion, management’s report on internal control over financial reporting referred to above, which represents thatthe internal control over financial reporting of the Company as of March 31, 2016 is effectively maintained, presents
fairly, in all material respects, the results of the assessment of internal control over financial reporting in accordancewith assessment standards for internal control over financial reporting generally accepted in Japan.
Interest
Our firm and the engagement partners do not have any interest in the Company for which disclosure is required under
the provisions of the Certified Public Accountants Act.

Notes:
1. The above is a digitization of the text contained in the original copy of the Independent Auditors’ Report on Financial
Statements and Internal Controls, which is in the custody of the Company—the submitter of this Securities Report.
2. The XBRL data is not included in the range of Audit.

90

(For Translation Purposes Only)
INDEPENDENT AUDITOR’S REPORT
June 24, 2016
To the Board of Directors of
Daito Woolen Spinning & Weaving Company, Limited
Deloitte Touche Tohmatsu LLC
Designated Limited Liability Partner,
Engagement Partner,
Certified Public Accountant:

Masato Yoshimizu

Designated Limited Liability Partner,
Engagement Partner,
Certified Public Accountant:

Tatsuya Nakajima

Pursuant to the first paragraph of Article 193-2 of the Financial Instruments and Exchange Act, we have audited thenon-consolidated financial statements of Daito Woolen Spinning & Weaving Company, Limited (the "Company") for
the 196th fiscal year from April 1, 2015 to March 31, 2016 included in the Financial Information, namely, thenon-consolidated balance sheet and the non-consolidated statements of income, changes in equity and cash flows,
including the significant accounting policies, the other related notes, and the non-consolidated supplemental schedules.
Management’s Responsibility for the Non-Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these non-consolidated financial statements inaccordance with accounting principles generally accepted in Japan, and for designing and operating such internal control
as management determines is necessary to enable the preparation and fair presentation of the non-consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these non-consolidated financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the non-consolidated financial statements arefree from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
non-consolidated financial statements. The procedures are selected depend on the auditors’ judgment, including theassessment of the risks of material misstatement of the non-consolidated financial statements, whether due to fraud or
error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fairpresentation of the non-consolidated financial statements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An
audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the non-consolidated financial
statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Audit Opinion
In our opinion, the non-consolidated financial statements referred to above present fairly, in all material respects, thefinancial position of Daito Woolen Spinning & Weaving Company, Limited as of March 31, 2016, and its financial
performance for the fiscal year then ended in conformity with accounting principles generally accepted in Japan.
Interest
Our firm and the engagement partners do not have any interest in the Company for which disclosure is required under
the provisions of the Certified Public Accountants Act.

Notes:
1. The above is a digitization of the text contained in the original copy of the Independent Auditors’ Report on Financial
Statements and Internal Controls, which is in the custody of the Company—the submitter of this Securities Report.
2. The XBRL data is not included in the range of Audit.

91