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

This document has been translated from the Japanese-language original for reference purposes only. While thisEnglish translation is believed to be generally accurate, it is subject to, and qualified by, in its entirety, theJapanese-language original. Such Japanese-language original shall be the controlling document for all purposes.

(Provided Documents)
Business Report(From April 1, 2020 to March 31, 2021)
1.
(1)

Current Status of the Corporate Group
Status of Business in the Consolidated Accounting Year Under Review(i) Developments in and Results of BusinessIn regard to the economic environment surrounding the Company Group in the
consolidated accounting year under review, the economy in Japan was sluggish due torestrictions on economic activity caused by a state of emergency being declared twice dueto the spread of COVID-19. Overseas, economic activity in China was resumed early, andthe resumption of economic activity in the United States is progressing due to factors suchas large-scale economic measures and an increasing number of people being vaccinated. In
Europe, however, restrictions on economic activity have been prolonged due to a repeatedrise in infections caused by the English variant and other variants of COVID-19. Overall,
the status of the global economy is one in which the future is uncertain as variants continue
to spread despite vaccinations being performed, while there also continues to be trade
friction between the United States and China.
Amidst these circumstances, the Company Group has promoted its business activities
using means such as webinars and web conferencing for the purpose of preventing the spreadof COVID-19. Additionally, while promoting efforts to reduce the cost of products andendeavoring to control fixed costs, the Company Group has endeavored to differentiate itself
from other companies by continuing to actively invest in growth areas in order to respond to
the diverse needs of customers and society, as well as changes in those needs.
As a result, net sales in the consolidated accounting year under review were 48,424
million JPY (a decrease of 1.6% compared to the previous consolidated accounting year),
operating profit was 4,404 million JPY (an increase of 19.0% compared to the previous
consolidated accounting year), ordinary profit was 4,564 million JPY (an increase of 33.0%

compared to the previous consolidated accounting year), and profit attributable to parent
company shareholders was 3,339 million JPY (an increase of 111.8% compared to theprevious consolidated accounting year).
The business results of each segment are as follows.
Measuring and Weighing Instrument Business
In Japan, due to the spread of COVID-19, demand was sluggish and capital investments
were postponed, and sales decreased year-on-year across the board, particularly in regard to
weighing instruments and measuring, control, and simulation systems (DSP systems), withprofit decreasing as well. Devices related to semiconductor production also saw a decreasein sales despite achieving the planned sales figures.
In the Americas, although sales decreased year-on-year in regard to measuring, control,and simulation systems (DSP systems), orders received began to recover from the second
half. Additionally, while sales of weighing instruments failed to grow due to the effects of
COVID-19, an increase in profit was achieved as a result of efforts to reduce costs.
In Asia and Oceania, sales of weighing instruments, such as metal detectors andweighcheckers, as a whole increased in Australia, while sales were strong in South Korea
and India as economic activity steadily recovered. Furthermore, due partly to sales by the
Taiwan company (A&D SCIENTECH TAIWAN LIMITED) that was made a subsidiary in
the fourth quarter of the previous consolidated accounting period, sales and profit increased
year-on-year.
As a result, net sales in the measuring and weighing instrument business were 26,662
million JPY (a decrease of 13.3% compared to the previous consolidated accounting year)
and operating profit was 1,693 million JPY (a decrease of 33.5% compared to the previous
consolidated accounting year).
Medical and Health Equipment Business
In Japan, sales in the health equipment business increased greatly mainly around noncontact thermometers due to the spread of COVID-19, while in regard to medical equipment,
medical weighing instruments recovered steadily and achieved strong sales, resulting inlarge increases in both sales and profit.
In the Americas, in addition to continued shipments of products for large-scale projects
in the United States, sales of blood pressure monitors and body-weight scales with
telecommunication functions increased due to increased demand for telemedicine, while in
Canada, sales and profit both increased as blood pressure monitors for home use sold wellat major retailers.
In Europe, sales increased in England due to a prolonged lockdown and good performancein e-commerce. In Russia, sales in local currency increased as blood pressure monitors andthermometers performed well, but as the ruble continued to be weak, sales in yen decreased.
However, an increase in profit was achieved through efforts to reduce costs.
As a result, net sales in the medical and health equipment business were 21,762 million
JPY (an increase of 17.9% compared to the previous consolidated accounting year) andoperating profit was 4,608 million JPY (an increase of 116.4% compared to the previous
consolidated accounting year).
2Net Sales by Business Segment of the Corporate Group
Comparison to Previous
Consolidated Accounting Year(%)

Amount(million JPY)

Segment

Ratio(%)

Measuring and Weighing
Instruments

26,662(13.3)

55.1

Medical and Health
Equipment

21,76217.9

44.9

48,424

(1.6)

100.0

Total

(ii) Status of Capital Investments
The amount of capital investments in the consolidated accounting year under review was
1,696 million JPY in total, of which 1,128 million JPY in capital investments were made forpurposes including the acquisition of land and the construction of a new main factory for
Holon Co., Ltd., a consolidated subsidiary of the Company.
Additionally, a total of 484 million JPY of investments were made in order to acquire
software.
(iii) Status of Financing
There are no applicable matters.
(iv) Status of Business Transfers, Absorption-type Splits, and Incorporation-type Splits
There are no applicable matters.
(v)

Status of Business Transfers Received
There are no applicable matters.

(vi) Succession of Rights and Obligations Relating to Businesses of Other Corporations,etc. Through Absorption-type Mergers and Absorption-type Splits
There are no applicable matters for the consolidated accounting year under review.
The Company performed an absorption-type merger with MBS Co., Ltd. and San-ei
Instruments Inc., consolidated subsidiaries of the Company, on April 1, 2021 and succeeded
to all of the rights and obligations relating to the businesses of both companies.
(vii) Status of Acquisition or Disposal of Shares, Other Equity, or Share Options, etc. of
Other Companies
The Company acquired 246,500 shares of Holon Co., Ltd., its subsidiary, for 1,121
million JPY on September 8, 2020. There was no change in shareholding ratios due to thisacquisition.
(2)

Changes in Status of Property and Profits and Losses
Item

41st fiscal year
(FY 2017)

42nd fiscal year
(FY 2018)
3

43rd fiscal year
(FY 2019)

44th fiscal year(Consolidated
accounting year
under review)(FY 2020)
Net sales (million
JPY)

44,12048,34449,19748,424

Ordinary profit(million JPY)

2,332

2,683

3,432

4,564

Profit attributableto parent company
shareholders(million JPY)

1,827

1,900

1,576

3,339

Basic earnings per
share (JPY)

89.22

92.74

76.88

161.87

Total assets(million JPY)

47,04850,98149,302

54,119Net assets (million
JPY)

15,93918,09018,57623,387Note 1:

Note 2:(3)

Basic earnings per share is calculated using the average total number of issued shares during
the relevant fiscal year.
The shares of the Company remaining in trusts that were recorded as treasury shares undershareholder equity include treasury shares that were deducted from the calculation of theaverage number of shares during the relevant fiscal year when calculating basic earnings per
share.
“Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Statement
No. 28, February 16, 2018), etc. was applied from the start of the 42nd fiscal year, and the total
assets for the 41st fiscal year stated above is the amount after retroactively applying thatstandard, etc.

Status of Significant Parent Companies and Subsidiaries(i) Status of Parent Companies
There are no applicable matters.
(ii)

Status of Significant Subsidiaries

Company NameKENSEI KOGYO Co.,Ltd.

Capital81,800 thousand JPY

Contribution
Ratio

Main Business Details

100.0%

Manufacture of electronic balancesand medical equipment

Litra Co., Ltd.

200,000 thousand JPY

100.0%

Manufacture of indicators, loadcells, and electronic platform
scales and separation/sorting
equipment

ORIENTEC CO., LTD.

268,640 thousand JPY

100.0%

Manufacture of measuring
instruments

SUM Electro Mechanics
Co., Ltd.

330,000 thousand JPY

100.0%

Manufacture and distribution ofvarious testing instruments4

100.0%Development, manufacture, anddistribution of environmental
measuring instruments

1,764,024 thousand JPY

51.0%

Development, manufacture, anddistribution of semiconductor
electron beam measurement andinspection equipment

A&D ENGINEERING,
INC.

200 thousand USD

100.0%

Distribution of the Company’s
products (US)A&D ELECTRONICS(Shenzhen) CO., LTD.

45,000 thousand HKD

100.0%

Manufacture of electronic bloodpressure monitors and weighing
instruments

A&D RUS CO., LTD.

505,247 thousand RUB

100.0%

Distribution of the Company’s
products (Russia)

Best Instruments Co.,Ltd.

Holon Co., Ltd.

Note 1:

Note 2:
Note 3:20,000 thousand JPY

The Company has 22 consolidated subsidiaries, including the significant subsidiaries statedabove. The consolidated business results for the consolidated accounting year under review
are as stated in “Developments in and Results of Business”.
The Company performed an absorption-type merger with MBS Co., Ltd. and San-ei
Instruments Inc. on April 1, 2021.
There are no subsidiaries that constitute a specified wholly-owned subsidiary.

(4)

Tasks To Be Addressed
The Company Group develops its business with a focus on “measuring” and handles avariety of products, from measurement, control, and simulation systems (DSP systems) toelectronic measuring instruments, weighing instruments, blood pressure monitors, and othersuch equipment. The recent spread of COVID-19 has brought changes to the values of society
and the structure of industry, and innovations in digital technologies such as AI, IoT, and RPA
are accelerating. At the same time, it has become necessary to shift to a carbon neutral society
in order to address the issue of climate change.
Due to this, efforts in the industrial world to respond to 5G (fifth-generation mobile
communication systems) and the shift to electric vehicles and automobile electronization are
accelerating, and it is necessary for the Company to develop advanced measuring technologies
to respond to changes in the industrial world. Therefore, the Company is implementing
measures such as contributing to telemedicine by providing an ample range of health equipmentwith ICT (information and communication technology) functionality, supporting the promotionof the shift to electric vehicles through DSP systems, and increasing the precision ofsemiconductor testing equipment in line with the increasing miniaturization of semiconductors.
The Company Group has accumulated many differentiated technologies through its
development investments up to the present and will endeavor to achieve the sustainable growthof its businesses by making effective use of those technologies while promoting the measuresstated above.
(5)

Main Business Details (as of March 31, 2021)
The Company Group is engaged in the manufacture and distribution of the products statedbelow.
Segment

Main Products

5Measuring andWeighing Instruments

Measuring Instruments
Measuring, control, and simulation systems; noise and vibration analysis
equipment; A/D and D/A convertors; electron guns; material testing equipment;
viscoelasticity testing equipment; friction and wear testing equipment; oilpressure testing equipment; exhaust gas measuring equipment; viscometers;
ultrasonic flaw detectors
Weighing Instruments
Analytical electronic balances; general purpose electronic balances; platform
scales; counting scales; indicators; load cells; checkweighers; metal detectors; xray inspection equipment; truck scales; batcher scales, weighing systems;
industrial measuring instruments

Medical and Health
Equipment

Blood pressure monitors for home and medical use; weighing instruments for
medical use; health-related equipment(6)

Main Business Locations (as of March 31, 2021)
Head office

Toyoshima-ku, Tokyo

Sales offices

Yokohama-shi; Nagoya-shi;
Osaka-shi; Hiroshima-shi;
Fukuoka-shi

Business officeTajimi-shi, Gifu

R&D center

Kitamoto-shi, Saitama

KENSEI KOGYO Co., Ltd.

Head office

Shimotsuma-shi, Ibaraki

Litra Co., Ltd.

Head office

Hidaka-shi, Saitama

ORIENTEC CO., LTD.

Head office

Fukaya-shi, Saitama

A&D Company, Limited

SUM Electro Mechanics Co., Ltd. Head officeMizuho-cho, Nishitama-gun,
TokyoBest Instruments Co., Ltd.

Head office

Yawata-shi, Kyoto

MBS Co., Ltd.

Head officeKitamoto-shi, Saitama

San-ei Instruments Inc.

Head office

Toyoshima-ku, Tokyo

Holon Co., Ltd.

Head office

Tokorozawa-shi, Saitama

A&D ENGINEERING, INC.

Head office

United States

A&D Australasia Pty Ltd

Head office

Australia

A&D INSTRUMENTS LIMITED Head office

England

A&D KOREA Limited

Head officeSouth Korea

A&D SCALES CO., LTD.

Head officeSouth Korea

A&D ELECTRONICS(Shenzhen) CO., LTD

Head office

China

A&D Technology Inc.

Head Office

United States

A&D RUS CO., LTD.

Head office

RussiaA&D Technology Trading(Shanghai) Co., Ltd.

Head office

China

A&D INSTRUMENTS INDIA
PRIVATE LIMITED

Head office

India
6

A&D Europe GmbH

Head office

Germany

A&D Vietnam Limited

Head officeVietnamA&D Instruments Canada Inc.

Head office

CanadaA&D SCIENTECH TAIWAN
LIMITED

Head officeTaiwanNote:(7)

The Company performed an absorption-type merger with MBS Co., Ltd. and San-ei
Instruments Inc. on April 1, 2021.

Status of Employees (as of March 31, 2021)(i) Status of Employees of the Corporate Group
Segment

Increase or Decrease Compared to
End of Previous Consolidated
Accounting Year

Number of Employees

Measuring and Weighing
Instruments

1,251

54 (decrease)

Medical and Health Equipment

1,241

35 (decrease)

52

—

2,544

89 (decrease)All companies (shared)
Total

(ii)

Status of Employees of the Company

Number of Employees

Increase or Decrease
Compared to End ofPrevious Business Year732

16 (increase)

Note:

(8)

Average Years ofService

Average Age

42.6

16.0

The number of employees does not include employees seconded to other companies or parttime employees, which total 185 employees.

Status of Main Lenders (as of March 31, 2021)
LenderBorrowed Amount

Saitama Resona Bank, Limited

3,332 million JPY

Ashikaga Bank, Ltd.

2,560 million JPY

Sumitomo Mitsui Banking Corporation

1,641 million JPY

MUFG Bank, Ltd.

1,572 million JPY

Mizuho Bank, Ltd.

1,554 million JPY

(9)

2.
(1)

Other Significant Matters Relating to the Current Status of the Corporate Group
There are no applicable matters.
Current Status of the Company
Status of Shares (as of March 31, 2021)
7

(i)
(ii)
(iii)
(iv)

Total Number of Shares Authorized To Be Issued:
Total Number of Issued Shares:
Number of Shareholders:Major Shareholders (Top Ten)
Shareholder Name

40,000,000 common shares
22,579,700 common shares
5,492 shareholders

Number of Shares Held(Thousands of Shares)

Shareholding Ratio

Master Trust Bank of Japan, Ltd. (trust
account)

1,386

6.61%

A&D Employee Shareholder Association

1,159

5.53%

MLI FOR CLIENT GENERAL OMNI NONCOLLATERAL NON TREATY-PB

1,128

5.38%

STATE STREET BANK AND TRUSTCLIENT OMNIBUS ACCOUNT OMO2505002

1,090

5.20%

Custody Bank of Japan, Ltd. (trust account)

846

4.04%

Saitama Resona Bank, Limited

606

2.89%

BBH FOR FIDELITY LOW-PRICEDSTOCK FUND (PRINCIPAL ALL SECTORSUBPORTFOLIO)

589

2.81%

The Nomura Trust and Banking Co., Ltd.
(trust account)

499

2.39%

Ashikaga Bank, Ltd.

490

2.34%

Satoshi Furukawa

350

1.67%

Note 1:

Note 2:(v)(2)

The Company holds 1,616,070 treasury shares in the name of the submitting company but has
been excluded from the major shareholders stated above. The treasury shares do not include
the 335,400 shares of the Company owned by the Custody Bank of Japan, Ltd. (formerly Trust& Custody Services Bank, Ltd.) (Trust E Account) established when introducing a board benefit
trust.
Shareholding ratios have been calculated after deducting the number of treasury shares fromthe total number of issued shares.

Other Significant Matters Relating to Shares
There are no applicable matters.
Status of Share Options, etc.
Status of Share Options Held by Company Officers Delivered as Consideration for the
Performance of Duties (as of March 31, 2021)
Share Options Pursuant to a Resolution of the Annual General Meeting of
Shareholders Held on June 28, 2005 (Share Options Issued as Stock Options Pursuant
to Article 280-20 and Article 280-21 of the Former Commercial Code)

Number of share options

471

Class and number of shares subject to share options 47,100 common shares
Paid-in amount for share options

No consideration

8

Value of property to be contributed upon exercise of
1 JPY per share
share options
Capitalization amount in case of issuing shares upon
1 JPY per share
exercise of share options
Period during which share options can be exercised From September 1, 2005 to August 31, 2035••

Conditions for exercise of share options••

Holding status ofCompany officers

A share option holder can exercise share options
only if he or she has left his or her position as an
officer (a director or corporate auditor) of theCompany. However, in this case, the shareoption holder can exercise share options only
during the period from the day following the dayon which he or she left his or her position as an
officer (the “Option Exercise Start Date”) to the
day on which ten days have passed from the
Option Exercise Start Date. However, a shareoption holder cannot exercise part of his or her
share options or part of a single share option.
The approval of the board of directors of theCompany is required for the transfer of shareoptions, and share options cannot be pledged orotherwise disposed of in any way.
If a share option holder dies, then among the heirsof the share option holder, only his or her spouse,children, or lineal ascendants within the first
degree of kinship can exercise share options.
However, the heirs can exercise share options
only until the day on which three months havepassed from the day following the day on which
the officer died.
Other conditions for the exercise of share options
are as provided for in the share option allotment
agreements executed between the Company andthe persons receiving allotments of share options
pursuant to resolutions of the general meeting ofshareholders and resolutions of the board of
directors.

Number of holders: 2
Number of share options: 471
Number of shares subject to share options: 47,100

Directors
Corporate auditors—(3)

Other Significant Matters Relating to Share Options, etc.
There are no applicable matters.

(4)

Status of Company Officers(i) Status of Directors and Corporate Auditors (as of March 31, 2021)
Position in Company

Status of Responsibilities andSignificant Concurrent Positions

Name

Representative Director, President
Yasunobu Morishima& CEO
9Director and Senior Managing
Executive Officer

In charge of sales; global marketing HQ
executive

Masatake Eto

Director and Managing Executive
Yutaka Murata
Officer

In charge of R&D

Director and Managing Executive
Sadao Ito
Officer

In charge of business management

Director and Executive Officer

Shingo Takada

In charge of production

Director and Executive Officer

Satoshi Furukawa

Sales HQ executive

Director

Steven Plunkett

CEO of A&D ENGINEERING, INC.
CEO of A&D Instruments Canada, Inc.

Director

Hiroshi Kawada

Director

Yasuhiro Daisho

Director

Yutaka Inui

Full-time Corporate Auditor

Takaaki Suga

Corporate Auditor

Katsumi Aya

Corporate Auditor

Terumi Haraguchi

Corporate Auditor

Hideo Umezawa

Note 1:
Note 2:

Note 3:Note 4:

Representative partner of Tokiwa Law
OfficeMr. Yutaka Inui was newly elected and assumed office as a director at the 43rd Annual General
Meeting of Shareholders held on June 25, 2020.
Mr. Hiroshi Kawada, Mr. Yasuhiro Daisho, and Mr. Yutaka Inui are outside directors. The
Company has designated them as independent officers pursuant to provisions of the Tokyo
Stock Exchange, and has notified the Tokyo Stock Exchange of such designation.
Mr. Katsumi Aya, Mr. Terumi Haruguchi and Mr. Hideo Umezawa are outside corporate
auditors. The Company has designated them as independent officers pursuant to provisionsof the Tokyo Stock Exchange, and has notified the Tokyo Stock Exchange of such designation.
Mr. Hideo Umezawa, corporate auditor, has many years of experience with financial
institutions and possesses a significant level of knowledge regarding finance and accounting.

(ii) Directors and Corporate Auditors Who Resigned During the Business Year
There are no applicable matters.
(iii) Summary of Contents of Agreements Limiting Liability
Pursuant to Article 427, Paragraph (1) of the Companies Act, the Company has executed
agreements limiting liability with each director and corporate auditor limiting damages tothe minimum liability amount provided for in Article 425, Paragraph (1) of the CompaniesAct.
(iv) Summary of Contents of Directors and Officers Liability Insurance (D&O Insurance)
The Company has executed directors and officers liability insurance (D&O insurance)
agreements under which the directors and corporate auditors are insured, and damage, etc.
in cases where directors, etc. bear liability for damage arising from their duties will be
indemnified. The Company bears the entire amount of the insurance premiums. Claims
for damages arising due to willful misconduct or gross negligence are not covered by theabove insurance agreements.
10

(v)

Total Amount of Compensation, etc. of Directors and Corporate Auditors
A. Matters Concerning Policies for Determining Details of Compensation, etc. of
Individual Directors
The compensation of Company officers is composed of base compensation,
performance-based compensation (which is linked to consolidated business performance),and share compensation (the purpose of which is to improve performance over the midto long-term).
The base compensation of directors is a fixed amount per month and is determinedwithin the range of monthly compensation resolved on by the general meeting ofshareholders. The board of directors has the authority to determine the amount ofmonthly compensation of directors and the policies relating to the determination of themethods for calculating that amount. Additionally, the compensation of corporate
auditors of the Company consists only of base compensation, which is determinedthrough discussion among the corporate auditors based on the duties thereof within therange of monthly compensation resolved on by the general meeting of shareholders.
Performance-based compensation is paid to directors who are officers engaged inbusiness execution in a lump sum of 2% of profit before taxes and other adjustments(consolidated) before recording the performance-based compensation as expenses after
account closing figures are determined, with the upper limit being the total payment
amount resolved on by the general meeting of shareholders. Profit before taxes andother adjustments was chosen as a performance indicator because the Company aims toincrease corporate value by increasing profit levels each period, and profit before taxes
and other adjustments was determined to be appropriate as a performance indicator forthat purpose. In the business year under review (April 1, 2020 to March 31, 2021), profit
before taxes and other adjustments (consolidated) before recording performance-based
compensation as expenses was 4,629 million JPY.
Share compensation is performance-based share compensation in which Company
shares are acquired through a trust using money contributed by the Company, andCompany shares, etc. are paid to directors who are officers engaged in business execution
through the trust in accordance with the Officer Share Payment Regulations establishedby the Company. In principle, directors receive the payment of Company shares, etc.
when they leave their positions as directors. Directors are granted a determined numberof points based on factors such as their position and the level at which the Company
achieved its targeted business performance in each business year. The formula for
calculating the number of points granted is as follows.
FormulaBase points based on position as of June 30 of the year before the points are to be granted(Table 1) × Performance multiplier based on business performance for the period being
evaluated (Table 2)(Fractions of points will be rounded down.)
If there is a change in position during the period of service, the number of points to be
granted on the immediately following point granting date will be the total of the points
set out below (fractions of points will be rounded down).

11

The month in which a change in position occurs will be deemed to count towards thepost-change position.
(1) Points based on period in pre-change position
Base points based on pre-change position (Table 1) × Performance multiplierbased on business performance for the period being evaluated (Table 2) ×
(Number of months of the service period in the pre-change position ÷ 12)(2) Points based on period in post-change position
Base points based on post-change position (Table 1) × Performance multiplierbased on business performance for the period being evaluated (Table 2) ×
(Number of months of the service period in the post-change position ÷ 12)
In addition to the above, if the Company determines it necessary, the Company
may grant points on the day that it determines to be necessary; however, in thiscase, the number of points to be granted will be determined by the board of
directors.
Table 1: Base Points
Position

Base Points

Representative Director, President & CEO

11,300

Director and Senior Managing Executive Officer

7,500

Director and Managing Executive Officer

6,400

Director and Executive Officer

5,600

Table 2: Performance MultiplierOperating Profit Achievement Ratio

MultiplierLess than 50%

0.0

50% to less than 90%

0.5

90% to less than 110%1.0

110% to less than 120%

1.1

120% or more

1.2

The operating profit achievement ratio is the achievement ratio as compared to the operating
profit (consolidated) budget amount at the beginning of the period.
If the consolidated operating profit is negative, the performance multiplier will be 0.0,
regardless of achievement ratio.

Consolidated operating profit in the business year under review (April 1, 2020 toMarch 31, 2021) was 4,516 million JPY, compared to the operating profit (consolidated)budget amount of 1,130 million JPY, which is the basis for the calculation of sharecompensation. Operating profit was chosen as a performance indicator because theCompany determined it to be appropriate as an indicator of growth potential andefficiency in order to achieve the sustainable increase of corporate value.
B.

Matters Concerning Resolutions of the General Meeting of Shareholders Regarding
Compensation, etc. of Directors and Corporate Auditors
12

The compensation limit for the base compensation of directors was resolved to bewithin 20 million JPY per month at the 36th Annual General Meeting of Shareholders
held on June 25, 2013. The number of directors as of the close of that annual general
meeting of shareholders was eight (of whom none were outside directors).
The total payment amount of performance-based compensation was resolved to bewithin 500 million JPY at the 30th Annual General Meeting of Shareholders held on June27, 2007. The number of directors as of the close of that annual general meeting ofshareholders was seven.
The implementation of a share compensation system was resolved at the 39th Annual
General Meeting of Shareholders held on June 23, 2016. The number of directors as of
the close of that annual general meeting of shareholders was eight.
The compensation limit for corporate auditors was resolved to be within 3 million JPY
per month at the 29th Annual General Meeting of Shareholders held on June 28, 2006.
The number of corporate auditors as of the close of that annual general meeting ofshareholders was three.
C.

Matters Concerning Delegation of Decision of Compensation, etc. of Individual
Directors
The amount of base compensation of each director is decided by Representative
Director, President & CEO Yasunobu Morishima, to whom such decisions have beendelegated by a resolution of the board of directors, within the range of total compensation
amounts resolved on by the general meeting of shareholders. These decisions are madebased on reports from the Nomination and Compensation Advisory Committee and after
comprehensively taking into account matters such as the position and duties of eachdirector, the compensation levels of other companies, and the business performance of
the Company.
Decisions on compensation amounts were delegated to theRepresentative Director, President & CEO because it was determined that he has the mostthorough knowledge of matters such as the business condition of the Company Group andthe external environment and is able to comprehensively decide officer compensation
amounts, and in order to provide appropriate oversight by third parties, decisions are madebased on the results of deliberations by the Nomination and Compensation Advisory
Committee. Additionally, the board of directors also respects the results of those
deliberations and has determined that they comply with the policies for determining
compensation.
The method of distributing performance-based compensation was delegated to theboard of directors by a resolution at the 41st Annual General Meeting of Shareholders
held on June 26, 2018. Specifically, it has been decided that performance-based
compensation will be distributed at a ratio of 100 for each representative director,
president and CEO, 40 for each director and senior managing executive officer, 30 foreach director and managing executive officer, and 20 for each director and executive
officer.
In regard to individual compensation, etc. for share compensation, a determined
number of points are granted to each director based on factors such as their position andthe level at which the Company achieved its targeted business performance in eachbusiness year. Additionally, the maximum amount of total points that can be granted toa director per five business years is 400,000 points (equivalent to 400,000 common sharesof the Company). The points granted to directors are converted to one common shareof the Company per point when share compensation is paid.
13

D.

Total Amount, etc. of Compensation, etc. of Directors and Corporate Auditors

Officer
Category

Total Amount ofCompensation, etc.
(million JPY)

Directors(Outside
Directors)

Total Amount of Compensation by Type(million JPY)

Number of
Officers
Receiving
Share
Compensation Compensation

Base
Compensation

Performance-based
Compensation

275
(16)

163
(16)

92
(0)

19
(0)

10
(3)

Corporate
Auditors(Outside
Corporate
Auditors)

31
(19)

31
(19)

0
(0)

0
(0)

4
(3)

Total

307
(35)

195
(35)

92
(0)

19
(0)

14
(6)

Note 1:
Note 2:

The amounts paid to directors do not include the employee salaries of directors who are also
employees.
Other than the above, the outside officers did not receive any compensation, etc. fromsubsidiaries of the Company as officers for the business year under review.

(vi) Matters Concerning Outside Officers
Directors
A. Status of Significant Concurrent Positions with Other Corporations, etc. andRelationships to Those Other Corporations, etc.
There are no applicable matters.
B.

C.

Relationships with Specified Related Business Operators Such as Major
Transaction Partners
There are no applicable matters.
Status of Main Activities in the Business Year Under Reviewa.
Status of Attendance of Board of Directors Meetings
Board of Directors Meetings
Number of Meetings Attended

Attendance Rate (%)

Director Hiroshi Kawada

18

100.0

Director Yasuhiro Daisho

18

100.0

Director Yutaka Inui

15

100.0

Note:

In regard to Mr. Yutaka Inui, the above table states the status of his attendance of board of
directors meetings held after he assumed office on June 25, 2020.

b.

Status of Statements at Board of Directors Meetings

14Outside Director Hiroshi Kawada has provided advice and opinions in order toensure the appropriateness and propriety of decisions of the board of directors basedon his rich experience and broad insight as a corporate manager.
Outside Director Yasuhiro Daisho has asked questions as appropriate and provided
advice and opinions at board of directors meetings from his expert perspective utilizing
his rich experience and broad insight as a college professor.
Outside Director Yutaka Inui has provided advice and opinions in order to ensure
the appropriateness and propriety of decisions of the board of directors based on his
rich experience and deep knowledge of capital markets as a manager of a securities
company.
c.

Summary of Duties Performed in Relation to Roles Expected To Be Fulfilled by
Outside Directors
The outside directors have overseen management and conflicts of interests, etc.
from an independent and objective perspective through providing advice andopinions at board of directors meetings. In addition, at the voluntarily-established
Nomination and Compensation Advisory Committee, Mr. Hiroshi Kawada, who
serves as the chairman thereof, and Mr. Yutaka Inui, who serves as a member thereof,
deliberated on the appropriateness and propriety of compensation of director
candidates and officers. and provided a report thereon to the board of directors.

Corporate Auditors
A. Status of Significant Concurrent Positions with Other Corporations, etc. andRelationships to Those Other Corporations, etc.
There are no applicable matters.
B.

Relationships with Specified Related Business Operators Such as Major
Transaction Partners
There are no applicable matters.

C.

Status of Main Activities in the Business Year Under Reviewa.
Status of Attendance of Board of Directors Meetings and Board of Corporate
Auditors Meetings
Board of Directors Meetings

Board of Corporate Auditors Meetings

Number of Meetings
Attended

AttendanceRate (%)

Number of Meetings
Attended

AttendanceRate (%)

Corporate Auditor
Katsumi Aya

18

100.0

14

100.0

Corporate Auditor
Terumi Haraguchi

18

100.0

14

100.0

Corporate Auditor
Hideo Umezawa

18

100.0

14

100.0

b.

Status of Statements at Board of Directors Meetings and Board of Corporate
Auditors Meetings
15

Each outside corporate auditor appropriately made statements necessary for the
deliberation of agenda items at board of directors meetings and expressed opinions on
audit methods and other matters regarding the performance of duties of the corporate
auditors at board of corporate auditors meetings.
Outside Corporate Auditor Katsumi Aya provided advice and opinions to ensure
the appropriateness and propriety of the decision-making of the board of directors
based on his expert knowledge as an attorney.
Outside Corporate Auditor Terumi Haraguchi provided advice and opinions toensure the appropriateness and propriety of the decision-making of the board of
directors based on his wide range of work experience including many years ofmanagement of a business company and his high level of knowledge.
Outside Corporate Auditor Hideo Umezawa provided advice and opinions to ensure
the appropriateness and propriety of the decision-making of the board of directors
based on his many years of experience at a financial institution, abundant knowledgeof finance and accounting, and high level of knowledge concerning management.
(5)

Status of Accounting Auditor(i) Name: KPMG AZSA LLC(ii) Amount of Compensation, etc.
Payment Amount•Amount of compensation, etc. as accounting auditor for thebusiness year under review

58 million JPY•

Total amount of money and other economic benefits to be paid
to the accounting auditor by the Company and its subsidiaries

58 million JPY

Note 1:In the audit agreement between the Company and the accounting auditor, no distinction is madebetween audit compensation for audits under the Companies Act and audits under the Financial
Instruments and Exchange Act, and such distinction cannot substantially be made; therefore,
the amount of compensation, etc. as accounting auditor for the business year under review
indicates the total compensation for both types of audits.
Note 2: Taking into consideration the “Practical Guidelines for Coordination with Accounting Auditors”
released by the Japan Audit & Supervisory Board Members Association, the board of corporate
auditors of the Company confirmed and considered matters such as the results of an analysis
and evaluation of the audit results of the previous business year and the appropriateness of theplanned auditing hours, personnel allocation and the estimated compensation amount in theaudit plan for the business year under review based on that analysis and evaluation, as a resultof which the board of corporate auditors gave the consent provided for in Article 399, Paragraph(1) of the Companies Act in regard to the compensation, etc. of the accounting auditor.
Note 3: Of the significant subsidiaries of the Company, Holon Co., Ltd., A&D ENGINEERING, INC.,
A&D ELECTRONICS (SHENZHEN) CO., LTD., and A&D RUS CO., Ltd. are audited by acertified public accountant or auditing firm other than the accounting auditor of the Company.

(iii) Policies on Determination of Dismissal or Non-reappointment of Accounting Auditor
If the board of corporate auditors of the Company finds there to be grounds for dismissal
provided for in Article 340 of the Companies Act or other grounds equivalent thereto, theaccounting auditor will be dismissed or will not be reappointed.
(iv) Summary of Contents of Agreements Limiting Liability
There are no applicable matters.
16

(6)

Systems to Ensure the Appropriateness of Operations(i) Systems To Ensure That the Performance of Duties by the Directors and Employeesof the Company and Its Subsidiaries Conforms to Laws, Ordinances, and the Articles
of Incorporation(1) The Company shall establish the “A&D Group Ethics Charter” and base all of its
corporate activities on compliance with laws and ordinances and conformity tosocial ethics.
(2) The Company shall establish the Compliance Committee, chaired by an officer incharge of compliance who is appointed by the board of directors, as a body topromote compliance systems and thereby endeavors to ensure thorough compliancein the Company Group.
(3) The board of corporate auditors and Internal Audit Office shall cooperate to audit
systems for compliance with laws, ordinances, and internal regulations, etc., as wellas the effectiveness thereof, and thereby endeavor to ensure appropriateness.
(4) In regard to financial reports, the Company shall develop and operate appropriate
internal control systems in order to ensure the reliability of the financial informationof the Company Group.
(5) The Company shall develop systems to sever all relationships with anti-social
forces or groups and to firmly refuse all demands therefrom.
(6) The Company shall develop whistleblowing systems for misconduct, etc. andendeavor to achieve the prevention, early detection, and early resolution of issues.
(ii)

Systems Relating to the Retention and Management of Information Concerning the
Performance of Duties by the Directors of the Company
Documents concerning the performance of duties by the directors shall be recorded inwriting or electromagnetic media and appropriately manage in accordance with laws,
ordinances, and internal regulations. These documents shall be available for viewing at any
time by the directors and corporate auditors.

(iii) Regulations and Other Systems Relating to the Management of Risks of Loss of theCompany and Its Subsidiaries
The Company shall establish the Risk Management Committee in order to deliberate on
issues relating to the group-wide promotion of risk management, and conduct overallmanagement in accordance with the “Risk Management Regulation”. Each department shallestablish systems to manage its own risks.
(iv) Systems to Ensure the Efficient Performance of Duties by the Directors of theCompany and Its Subsidiaries(1) The Company shall adopt an executive officer system, thereby separate thedecision-making and oversight functions of management from the businessexecution function and endeavor to strengthen and improve the efficiency of eachof those functions.
(2) The Company and its subsidiaries shall establish matters such as the division ofduties, official powers and authority, and business operation procedures in internal
regulations and endeavor to appropriately implement those regulations.
17

(3)

The Internal Audit Office shall perform internal audits of the Company and its
subsidiaries, make recommendations for the correction or improvement, etc. of
operations as necessary, and promote the efficient operations of the Company
Group.

(v)

Systems Relating to Reports to the Company of Matters Concerning the Performanceof Duties by the Directors, etc. of Its Subsidiaries
Subsidiaries manage the performance of duties pursuant to the “Related Company
Management Regulations”, in addition to which the relevant departments in charge or the
Corporate Strategic Planning Department receive reports on matters such as businessconditions periodically and whenever appropriate, and report significant matters to the boardof directors of the Company.
(vi) Matters Concerning Employees Assigned to Assist Corporate Auditors in Cases
Where Corporate Auditors Request Such Employees be Assigned to Assist in
Performing Their Duties(1) If the corporate auditors request employees to assist them in performing their duties,
the Company shall assign employees, either dedicated solely to assisting thecorporate auditors or with other duties, with the capabilities and knowledge to assistin audits as necessary, and the selection of those employees shall be determinedthrough discussions between the directors and corporate auditors.
(2) The authority to issue instructions to those employees during the period that they
assist the corporate auditors in performing their duties shall be deemed to betransferred to the corporate auditors, and those employees shall not be required tocomply with instructions or orders from directors or other employees.
(vii) Systems Relating to Reports to the Corporate Auditors of the Company
The directors and employees of the Company and its subsidiaries shall immediately reportto the corporate auditors when a matter that would cause significant loss to the company has
occurred or is at risk of occurring or when an illegal act or misconduct is discovered, and if
the corporate auditors request a report, the directors and employees shall promptly comply
with that request. Additionally, disadvantageous treatment of a person who made such areport due to having done so shall be prohibited.
(viii) Other Systems to Ensure That Audits by Corporate Auditors Are Performed
Effectively(1) If the corporate auditors incur expenses such as advance payments in the course of
performing their duties, the Company shall promptly pay those expenses or debts
as claimed by the corporate auditors.
(2) In order to understand significant decision-making processes and the status ofbusiness execution, the corporate auditors may attend significant meetings of theCompany, view documents relating to business execution, and request explanations
from directors and employees as necessary.
(3) The corporate auditors shall exchange information with the Internal Audit Officeand the accounting auditor and mutually cooperate as necessary therewith.

18

(ix) Basic Views and Systems in Order To Exclude Anti-social Forces
The Company Group firmly opposes anti-social forces and groups that threaten the orderand safety of civil society and resolutely faces demands therefrom. This stance is set out
in the “A&D Group Ethics Charter” and made known to all officers and employees of theCompany Group. Additionally, the Company endeavors to gather information fromsources such as related administrative agencies at all times, and the Company has establisheda system to communicate closely with related administrative agencies and legal experts when
an incident occurs and to promptly and appropriately handle the incident.
(7)

Summary of Operation Status of Internal Control Systems(i) Overall Internal Control Systems
The internal audit department of the Company monitors the development and operation
status of the overall internal control systems of the Company and its subsidiaries and makes
improvements to the systems. Additionally, the internal audit department performs“evaluations of the effectiveness of internal controls in regard to financial reporting”
pursuant to the Financial Instruments and Exchange Act and reports to the board of directors
in regard thereto.
(ii) Compliance
The Company has established an external whistleblowing hotline to develop a system toenable appropriate reporting and consultation, and made it known to all of the officers andemployees of the Company Group. The Company thereby endeavors towards the early
detection and improvement of issues within the Company Group.
(iii) Risk Management
The Risk Management Committee met four times pursuant to the Risk Management
Regulations and reported on the status of the management of risks provided for in theregulations, thereby continuing to monitor the corporate risks of the Company Group.
(iv) Performance of Duties by Directors
The board of directors met 18 times in the business year under review, deliberated on anddetermined significant matters requiring resolutions of the board of directors pursuant tolaws, ordinances, and the articles of incorporation, and oversaw the performance of duties
by the directors.
(v)

Performance of Duties by Corporate Auditors
The corporate auditors oversee the performance of duties by the directors through theattendance of all corporate auditors at meetings of the board of directors, attendance at othersignificant meetings, and the viewing of significant documents such as written decisions, inaddition to which the corporate auditors monitor the overall internal control systems of theentire Company Group through exchanging information and opinions at “three-party
meetings” with the accounting auditor and Internal Audit Office.

19

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Note:

Amounts and numbers of shares in this Business Report are rounded down to the nearest unit inwhich those amounts or numbers are displayed.

20Consolidated Balance Sheet(As of March 31, 2021)(Unit: Million JPY)
AssetsItem

Liabilities
AmountItem

AmountCurrent assets

40,028Current liabilities

24,588Cash and deposits

13,118Bills and accounts payable

4,290

Bills and accounts receivable

13,108

Short-term borrowings

11,374

Products

6,583

Long-term borrowings to be repaid
within one year

2,867

Unfinished goods

2,259

Lease obligations

295

Raw materials and supplies

3,606

Accrued corporate taxes, etc.

850

Other

1,453

Provision for bonuses

Allowance for doubtful accounts(100)

Provision for product warranties

Fixed assets

14,091

Other

3,520

Tangible fixed assets

10,185

Fixed liabilities

6,143

Buildings and structures

2,792

Corporate bonds

500

1,211
178

Machinery, equipment, and vehicles

320

Long-term borrowings

Tools, furniture, and fixtures

612

Lease obligations

366

Provision for product warranties

62

Land

5,104

3,825

Lease assets

277

Retirement benefit liabilities

954

Right-of-use assets

354

Provision for directors’ share benefits

79

Construction in progress

723

Asset retirement obligations

29

Other

325

Intangible fixed assets

1,638

Goodwill

210

Trademark rights

25

Total liabilities

30,731
Net assets

Shareholders’ equity

23,252

Share capital

6,388

2,267

Share capital surplus

6,413

Investment securities

164

Retained earnings

11,506Retirement benefit assets

78

Treasury shares(1,056)

1,440

Accumulated other comprehensive
income(2,479)

Other

585

Unrealized gains on other marketablesecurities

28

Allowance for doubtful accounts(2)

Foreign currency translation
adjustments(2,907)

Accumulated adjustments on
retirement benefits

399

Software

1,322

Other

80

Investments, etc.

Deferred tax assets

Non-controlling interests

21

2,614

Total assets

54,119Total net assets

23,387

Total liabilities and net assets

54,11922

Consolidated Statement of Income(From April 1, 2020 to March 31, 2021)(Unit: Million JPY)
Item

AmountNet sales

48,424

Cost of sales

26,787Gross profit

21,636

Selling, general, and administrative expenses

17,232

Operating profit

4,404

Non-operating income
Interest income

59

Dividend income

13

Foreign exchange gains

89

Rental income from land and buildings

39

Subsidy income

151

Other

94

447

Non-operating expenses
Interest expenses

165

Sales discounts

20

Other

101

Ordinary profit

287
4,564

Extraordinary income
Gain on sale of fixed assets

2

2

Extraordinary loss
Loss on sale of fixed assets

1

Loss on retirement of fixed assets

2

Impairment losses

25

Profit before taxes

29
4,536

Corporate tax, resident income tax, and business tax

1,338

Corporate tax adjustments(386)

Profit952
3,584

Profit attributable to non-controlling shareholders’ equity

245

Profit attributable to parent company shareholders

3,339

23

Consolidated Statement of Changes in Shareholders’ Equity(From April 1, 2020 to March 31, 2021)(Unit: Million JPY)
Shareholders’ equity

Balance at beginning of
period under review

Share capital

Share capitalsurplusRetainedearnings

TreasurysharesTotalshareholders’equity

6,338

6,442

8,586

(1,056)

20,361

Changes during period
Dividends of surplus

(419)

(419)

Profit attributable to parent
company shareholders

3,339

3,339

Purchase of treasury shares(0)Changes in equity due tocapital increase of
consolidated subsidiaries

(28)

(0)
(28)

Net changes in items otherthan shareholders’ equity
during period
Total changes during period
Balance at end of period
under review

—

(28)

2,919

(0)

2,891

6,388

6,413

11,506(1,056)23,252

Accumulated other comprehensive income
Unrealized
gains onothermarketablesecurities
Balance at beginningof period underreview

14

Accumulated
Total
Foreignadjustments accumulated
currencyonothertranslation
retirement comprehensive
adjustments
benefits
income(3,529)357(3,157)

Shareoptions

Noncontrollinginterests

Total net
assets10

1,362

18,576

Changes during
periodDividends ofsurplus(419)

Profit attributable toparent company
shareholders

3,339

Purchase of treasury
shares(0)Changes in equity
due to capitalincrease of
consolidated
subsidiaries

1,050

24

1,021

Net changes in
items other thanshareholders’ equity
during period

13

622

41

678

(10)

202

870

Total changes during
period

13

622

41

678

(10)

1,252

4,811

Balance at end of
period under review

28(2,907)399(2,479)—2,614

23,38725

Balance Sheet(As of March 31, 2021)(Unit: Million JPY)
AssetsItem

Liabilities
AmountItem

AmountCurrent assets

18,031

Current liabilities

17,219Cash and deposits

4,035

Bills payable - trade

Bills receivable - trade3,206

Accounts payable - trade

3,036

Accounts receivable - trade

6,434

Short-term borrowings

6,763

Products

1,929

Long-term borrowings to be repaid
within one year

2,378

283

Unfinished goods

224

Lease obligations

Raw materials and supplies

779

Accounts payable - other

Advance payments

110

Accrued corporate taxes, etc.

661

Provision for bonuses

938

Accounts receivable - other

1,179

111
2,439

Other

207

Provision for product warranties

55

Allowance for doubtful accounts

(76)

Other

551

Fixed assets

20,885

Fixed liabilities

4,497

Tangible fixed assets

4,394

Corporate bonds

500

Buildings

844

Long-term borrowings

Structures

235

Lease obligations

124

Machinery and equipment

12

Provision for retirement benefits

496

Vehicles0

Provision for directors’ share benefits

79

Other

292

Tools, furniture, and fixtures
Land

406
2,640

Lease assets

216

Construction in progress

38

Total liabilities

3,005

21,717
Net assets

Shareholders’ equity

17,171Intangible fixed assets

1,222

Share capital

6,388

Software

1,207

Share capital surplus

6,452

Other

14

Legal capital surplus

6,404

15,268Other capital surplus

47

Investments, etc.
Investment securities

Retained earnings

100

5,386

Shares of subsidiaries and affiliates

9,907

Legal retained earnings

72

Investment in capital of subsidiaries
and affiliates

4,472

Other retained earnings

5,314Long-term loans receivable

6

General reserve

Deferred tax assets

643

Retained earnings brought forward

Other

210

Treasury shares

Allowance for doubtful accounts(2)

Valuation and translation
adjustments
26

555
4,759
(1,056)28

Allowance for investment loss

Total assets

Valuation difference on availablefor-sale securities(71)

38,91728

Total net assets

17,199Total liabilities and net assets

38,91727

Statement of Income(From April 1, 2020 to March 31, 2021)(Unit: Million JPY)
Item

AmountNet sales

33,135

Cost of sales

21,743Gross profit

11,392

Selling, general, and administrative expenses

9,401

Operating profit

1,990

Non-operating income
Interest and dividend income

648

Foreign exchange gains

151

Other

71

870

Non-operating expenses
Interest expenses

54

Other

70

Ordinary profit

125
2,735

Extraordinary income
Gain on sale of fixed assets

00Extraordinary loss
Loss on sale of fixed assets

0Provision of allowance for investment loss

11

Profit before taxes

11
2,724

Corporate tax, resident income tax, and business tax

603

Corporate tax adjustments

37

Profit

640
2,083

28

Statement of Changes in Shareholders’ Equity(From April 1, 2020 to March 31, 2021)(Unit: Million JPY)
Shareholders’ equity
Share capital surplus

Balance at beginning of
period under review

Retained earnings

SharecapitalLegalcapitalsurplus

Othercapitalsurplus

Total
share
capitalsurplus

6,338

6,404

47

6,452

Other retained
earnings

Legal
Total
Retained retained
retainedearnings General earnings earnings
reserve brought
forward
72

555

3,095

3,722

Dividends of surplus

(419)

(419)

Profit

2,083

2,083

Changes during business
year

Purchase of treasury
sharesNet changes in items
other than shareholders’equity during period
Total changes duringbusiness year

—

—

—

—

—

—

1,664

1,664

Balance at end of period
under review

6,388

6,404

47

6,452

72

555

4,759

5,386

Valuation and translation
adjustments

Shareholders’ equity

Balance at beginningof period underreview

TreasurysharesTotalshareholders’equity(1,056)

15,506

Valuation
Total valuationdifference onand translation
available-foradjustments
sale securities
14

14

Share options

Total net assets

10

15,531

Changes duringbusiness year
Dividends ofsurplus

(419)

(419)

Profit

2,083

2,083

(0)

(0)

Purchase of treasury
shares(0)

Net changes in
items other thanshareholders’ equity
during business
year

13

29

13

(10)

3

Total changes duringbusiness year

(0)

1,664

13

13

(10)

1,667

Balance at end of
period under review(1,056)

17,17128

28—

17,19930

Audit Report of Accounting Auditor Regarding Consolidated Financial Statements
Audit Report of Independent Auditor
May 27, 2021
To: Board of Directors of A&D Company, Limited
KPMG AZSA LLC
North Kanto Office
Designated Limited Liability Partner & Engagement Partner
Tsutomu Fukushima, Certified Public Accountant
Designated Limited Liability Partner & Engagement Partner
Takayuki Narita, Certified Public Accountant
Audit Opinion
Pursuant to Article 444, Paragraph (4) of the Companies Act, we have audited theconsolidated financial statements, which consist of the consolidated balance sheet, consolidated
statement of income, consolidated statement of changes in shareholders’ equity, and notes toconsolidated financial statements, of A&D Company Limited for the consolidated accounting
year from April 1, 2020 to March 31, 2021.
In our opinion, the consolidated financial statements referred to above present fairly, in allmaterial respects, the status of the assets, profits, and losses of the corporate group consistingof A&D Company, Limited and its consolidated subsidiaries for the period regarding which theconsolidated financial statements were prepared, based on accounting principles generally
accepted as fair and appropriate in Japan.
Basis for the Audit Opinion
We conducted our audit based on auditing standards generally accepted as fair andappropriate in Japan. Our responsibilities under the auditing standards are stated in“Responsibilities of the Auditor for the Audit of the Consolidated Financial Statements.” Inaccordance with regulations regarding professional ethics in Japan, we are independent fromthe company and its consolidated subsidiaries, and we have fulfilled all other ethicalresponsibilities as an auditor. We have judged that we obtained sufficient and appropriate
audit evidence on which to base our opinion.
Responsibilities of the Management, the Corporate Auditors, and the Board of Corporate
Auditors for the Consolidated Financial Statements
The management is responsible for preparing and fairly presenting the consolidated financial
statements based on accounting principles generally accepted as fair and appropriate in Japan.
This includes developing and implementing the internal controls that the management
determines to be necessary in order to prepare and fairly present the consolidated financial
statements without any material misstatement due to fraud or error.
31

In preparing the consolidated financial statements, the management is responsible forassessing whether or not it is appropriate to prepare the statements on a going concern basis
and, if it is necessary to disclose matters relating to a going concern under accounting principles
generally accepted as fair and appropriate in Japan, to disclose those matters.
The corporate auditors and the board of corporate auditors are responsible for overseeing thedirectors’ performance of their duties in developing and implementing the financial reporting
process.
Responsibilities of the Auditor for the Audit of the Consolidated Financial Statements
The responsibility of the auditor is to obtain, through the audit performed by the auditor, areasonable assurance regarding whether or not there is any material misstatement due to fraud
or error in the consolidated financial statements as a whole and to express an opinion regarding
the consolidated financial statements from an independent position in the audit report.
Misstatements may occur due to fraud or error and are judged to be material if, whether
individually or in total, they are reasonably expected to influence the decisions made by theusers of the consolidated financial statements.
In accordance with auditing standards generally accepted as fair and appropriate in Japan,
throughout the auditing process, the auditor makes professional judgments and maintains
professional skepticism while implementing the following procedures.
•
The auditor identifies and assesses the risk of material misstatements due to fraud or error
and develops and implements audit procedures in response to the risk of material
misstatements. Audit procedures are chosen and applied at the discretion of the auditor.
Additionally, the auditor obtains sufficient and appropriate audit evidence on which tobase its opinion.
•
The purpose of the audit of the consolidated financial statements is not to express an
opinion on the effectiveness of internal controls, but when assessing risks, the auditor
considers internal controls relevant to the audit in order to develop appropriate audit
procedures that suit the circumstances.
•
The auditor assesses the appropriateness of the accounting policies adopted by the
management, the appropriateness of the method of the application of those policies, thereasonableness of the accounting estimates made by the management, and theappropriateness of the notes related to those estimates.
•
The auditor concludes whether or not it is appropriate for the management to prepare theconsolidated financial statements on a going concern basis and, based on the audit
evidence obtained, whether or not any material uncertainty is found regarding events orcircumstances that would cause a material doubt regarding the assumption of thecompany being a going concern. If a material doubt regarding the assumption of thecompany being a going concern is found, it is necessary to call attention in the audit reportto the notes to the consolidated financial statements, and if the notes to the consolidated
financial statements regarding the material uncertainty are not appropriate, it is necessary
to express a qualified opinion on the consolidated financial statements. The conclusionof the auditor is based on the audit evidence obtained up to the date of the audit report,
but it is possible that the company cannot remain a going concern due to future events orcircumstances.
•
The auditor assesses whether or not the statements in and notes to the consolidated
financial statements are in compliance with accounting principles generally accepted asfair and appropriate in Japan; assesses the statements, composition, and details of theconsolidated financial statements, including the related notes; and assesses whether or not32

the consolidated financial statements fairly present the transactions and accounting eventson which they are based.
•
The auditor obtains sufficient and appropriate audit evidence regarding the financial
information of the company and its consolidated affiliates in order to express an opinion
on the consolidated financial statements. The auditor is responsible for the direction,
supervision, and implementation of the audit of the consolidated financial statements.
The auditor is solely responsible for the audit opinion.
The auditor reports to the corporate auditors and the board of corporate auditors regarding
the scope of the planned audit, when it will be implemented, material matters discovered during
the audit (including material deficiencies in internal controls identified in the audit process),and other matters required by auditing standards.
The auditor reports to the corporate auditors and the board of corporate auditors regarding
the fact that the auditor complied with regulations on professional ethics in Japan in regard to
its independence, any matters that can reasonably be considered to affect the independence of
the auditor, and, if any safeguards have been implemented in order to eliminate or reduce
impediments to the audit, the details thereof.
Interests
Neither KPMG AZSA LLC nor any of the engagement partners have any interests in thecompany or its consolidated subsidiaries that should be stated pursuant to the Certified Public
Accountants Act.
End

33

Audit Report of Accounting Auditor
Audit Report of Independent Auditor
May 27, 2021
To: Board of Directors of A&D Company, Limited
KPMG AZSA LLC
North Kanto Office
Designated Limited Liability Partner & Engagement Partner
Tsutomu Fukushima, Certified Public Accountant
Designated Limited Liability Partner & Engagement Partner
Takayuki Narita, Certified Public Accountant
Audit Opinion
Pursuant to Article 436, Paragraph (2), Item (i) of the Companies Act, we have audited thenon-consolidated financial statements, which consist of the balance sheet, statement of income,statement of changes in shareholders’ equity, notes to financial statements, and supplementaryschedules (the “Financial Statements, Etc.”) of A&D Company, Limited for its 44th businessyear from April 1, 2020 to March 31, 2021.
In our opinion, the Financial Statements, Etc. referred to above present fairly, in all material
respects, the status of the assets, profits, and losses of A&D Company, Limited for the period
regarding which the Financial Statements, Etc. were prepared, based on accounting principles
generally accepted as fair and appropriate in Japan.
Basis for the Audit Opinion
We conducted our audit based on auditing standards generally accepted as fair andappropriate in Japan. Our responsibilities under the auditing standards are stated in“Responsibilities of the Auditor for the Audit of the Financial Statements, Etc.” In accordancewith regulations regarding professional ethics in Japan, we are independent from the company,
and we have fulfilled all other ethical responsibilities as an auditor. We have judged that we
obtained sufficient and appropriate audit evidence on which to base our opinion.
Responsibilities of the Management, the Corporate Auditors, and the Board of Corporate
Auditors for the Financial Statements, Etc.
The management is responsible for preparing and fairly presenting the Financial Statements,
Etc. based on accounting principles generally accepted as fair and appropriate in Japan. This
includes developing and implementing the internal controls that the management determines tobe necessary in order to prepare and fairly present the Financial Statements, Etc. without any
material misstatement due to fraud or error.
In preparing the Financial Statements, Etc., the management is responsible for assessing
whether or not it is appropriate to prepare the statements on a going concern basis and, if it is34necessary to disclose matters relating to a going concern under accounting principles generally
accepted as fair and appropriate in Japan, to disclose those matters.
The corporate auditors and the board of corporate auditors are responsible for overseeing thedirectors’ performance of their duties in developing and implementing the financial reporting
process.
Responsibilities of the Auditor for the Audit of the Financial Statements, Etc.
The responsibility of the auditor is to obtain, through the audit performed by the auditor, areasonable assurance regarding whether or not there is any material misstatement due to fraud
or error in the Financial Statements, Etc. as a whole and to express an opinion regarding the
Financial Statements, Etc. from an independent position in the audit report. Misstatements
may occur due to fraud or error and are judged to be material if, whether individually or in total,they are reasonably expected to influence the decisions made by the users of the Financial
Statements, Etc.
In accordance with auditing standards generally accepted as fair and appropriate in Japan,
throughout the auditing process, the auditor makes professional judgments and maintains
professional skepticism while implementing the following procedures.
•
The auditor identifies and assesses the risk of material misstatements due to fraud or error
and develops and implements audit procedures in response to the risk of material
misstatements. Audit procedures are chosen and applied at the discretion of the auditor.
Additionally, the auditor obtains sufficient and appropriate audit evidence on which tobase its opinion.
•
The purpose of the audit of the Financial Statements, Etc. is not to express an opinion on
the effectiveness of internal controls, but when assessing risks, the auditor considers
internal controls relevant to the audit in order to develop appropriate audit procedures thatsuit the circumstances.
•
The auditor assesses the appropriateness of the accounting policies adopted by the
management, the appropriateness of the method of the application of those policies, thereasonableness of the accounting estimates made by the management, and theappropriateness of the notes related to those estimates.
•
The auditor concludes whether or not it is appropriate for the management to prepare the
Financial Statements, Etc. on a going concern basis and, based on the audit evidence
obtained, whether or not any material uncertainty is found regarding events orcircumstances that would cause a material doubt regarding the assumption of thecompany being a going concern. If a material doubt regarding the assumption of thecompany being a going concern is found, it is necessary to call attention in the audit reportto the notes to the Financial Statements, Etc., and if the notes to the Financial Statements,
Etc. regarding the material uncertainty are not appropriate, it is necessary to express aqualified opinion on the Financial Statements, Etc. The conclusion of the auditor isbased on the audit evidence obtained up to the date of the audit report, but it is possiblethat the company cannot remain a going concern due to future events or circumstances.
•
The auditor assesses whether or not the statements in and notes to the Financial
Statements, Etc. are in compliance with accounting principles generally accepted as fair
and appropriate in Japan; assesses the statements, composition, and details of the
Financial Statements, Etc., including the related notes; and assesses whether or not the
Financial Statements, Etc. fairly present the transactions and accounting events on which
they are based.
35

The auditor reports to the corporate auditors and the board of corporate auditors regarding
the scope of the planned audit, when it will be implemented, material matters discovered during
the audit (including material deficiencies in internal controls identified in the audit process),and other matters required by auditing standards.
The auditor reports to the corporate auditors and the board of corporate auditors regarding
the fact that the auditor complied with regulations on professional ethics in Japan in regard to
its independence, any matters that can reasonably be considered to affect the independence of
the auditor, and, if any safeguards have been implemented in order to eliminate or reduce
impediments to the audit, the details thereof.
Interests
Neither KPMG AZSA LLC nor any of the engagement partners have any interests in thecompany that should be stated pursuant to the Certified Public Accountants Act.
End

36

Audit Report of Board of Corporate Auditors
Audit Report
In regard to the directors’ performance of their duties for the 44th business year from April
1, 2020 to March 31, 2021, the board of corporate auditors has prepared this Audit Report after
deliberations based on the audit reports prepared by each corporate auditor and reports asfollows.
1.

Method and Details of Audits by the Corporate Auditors and the Board of Corporate
Auditors(1) The board of corporate auditors determined the audit policies and division of duties,
etc. and received reports from each corporate auditor regarding the implementation
status and results of their audits, in addition to which it received reports from thedirectors, etc. and the accounting auditor regarding the status of the performance of
their duties and requested explanations as necessary.
(2) In compliance with the corporate auditor audit standards established by the boardof corporate auditors and in accordance with the audit policies and division of duties,
etc., each corporate auditor communicated with the directors, the internal audit
department, and other employees, etc., endeavored to gather information anddevelop the audit environment, and conducted audits using the following methods.
(i) The corporate auditors attended meetings of the board of directors and otherimportant meetings, received reports from directors and employees, etc.
regarding the status of the performance of their duties, requested explanations
as necessary, viewed important decision-making documents, etc., andinspected the status of operations and assets at the head office and main
business locations. Additionally, in regard to subsidiaries, the corporate
auditors communicated and exchanged information with the directors andcorporate auditors, etc. of subsidiaries and requested business reports fromsubsidiaries as necessary.
(ii) In regard to the content of a resolution of the board of directors regarding thedevelopment of systems to ensure that the directors’ performance of theirduties complies with laws, ordinances, and the articles of incorporation andother systems provided for in Article 100, Paragraph (1) and Paragraph (3) of
the Ordinance for Enforcement of the Companies Act as systems necessary
to ensure the appropriateness of operations of the corporate group composedof a stock company and its subsidiaries, as well as the systems developed
pursuant to that resolution (i.e., internal control systems) stated in the business
report, the corporate auditors periodically received reports from directors andemployees, etc. regarding the status of the establishment and operation of
those systems, requested explanations as necessary, and expressed opinions
in regard thereto. The corporate auditors received reports from directors, etc.
and KPMG AZSA LLC regarding the status of the assessment and auditingof internal controls relating to financial reporting and requested explanations
as necessary.
(iii) The corporate auditors oversaw and verified whether the accounting auditor
maintained an independent position and conducted an appropriate audit,
received reports from the accounting auditor on the status of the performanceof its duties, and requested explanations as necessary. Additionally, the37corporate auditors received notification from the accounting auditor that, in
accordance with the “Quality Control Standards for Audits” (BusinessAccounting Council, October 28, 2005), etc., it had developed systems inorder to ensure that its duties (the matters stated in the items of Article 131 of
the Regulation on Corporate Accounting) are appropriately performed andrequested explanations as necessary.
Using the methods above, the board of corporate auditors examined the business report, thesupplementary schedules thereto, the financial statements (i.e., the balance sheet, statement ofincome, statement of changes in shareholders’ equity, and notes to financial statements), thesupplementary schedules to the financial statements, and the consolidated financial statements(i.e., the consolidated balance sheet, consolidated statement of income, consolidated statementof changes in shareholders’ equity, and notes to consolidated financial statements) for thebusiness year.
2.

Audit Results(1) Results of audit of business report, etc.
(i) We find that the business report and the supplementary schedules thereto
correctly present the status of the company in accordance with laws,
ordinances, and the Articles of Incorporation.
(ii) We do not find any misconduct in relation to the directors’ performance of
their duties nor any material fact in violation of laws or ordinances or inbreach of the Articles of Incorporation.
(iii) We find the content of the resolutions of the board of directors regarding
internal control systems to be reasonable. Additionally, we do not find any
matters that should be commented upon in regard to the statements in thebusiness report relating to the internal control systems or the directors’
performance of their duties. In regard to internal controls relating tofinancial reporting, we have received reports from the directors, etc. and
KPMG AZSA LLC to the effect that as of the preparation of this Audit Report,
there are no material deficiencies to be disclosed.
(2) Results of audit of financial statements and supplementary schedules
We find the methods and results of the audit by the accounting auditor, KPMG AZSA
LLC, to be reasonable.
(3) Results of audit of consolidated financial statements
We find the methods and results of the audit by the accounting auditor, KPMG AZSA
LLC, to be reasonable.

May 28, 2021
A&D Company, Limited; Board of Corporate Auditors
Full-time Corporate Auditor: Takaaki Suga
Outside Corporate Auditor:
Katsumi Aya
Outside Corporate Auditor:
Terumi Haraguchi
Outside Corporate Auditor:
Hideo Umezawa

38

End

39