ｆAnnual Report 2021
Year ended March 31, 2021

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

2
8
10
12
13
14
15
16
57
61
62

Operational Results2

1. Operational Results(1) Analysis of Operational Results<Summary of Operational Results for the Consolidated Fiscal Year ended March 31, 2021>
In the fiscal year under review, Japan saw a rapid decline in economic
and social activities due to the spread of COVID-19. We began to see
light at the end of the tunnel with the lifting of the state of emergency.
However, hope for an economic resurgence dimmed with the emergenceof the second and third waves that continued to drag the economy down
and put a damper on consumer spending and corporate capital investment.
With the COVID-19 pandemic still not under control, the outlook remains
unpredictable and bleak.
Working against this backdrop, our Group strived to continue its business
Representative Director,
activities while placing the highest priority on the safety of customers,
President, CEOlocal residents, and employees.
Tatsuya Nunohara
At the same time, we implemented various measures and worked to generate
profits with an eye to improving our corporate quality and deepening our social value, as we moved
forward with the second year of our medium-term management plan 2019–21 “To the Growth Cycle” (3year plan; April 1, 2019 – March 31, 2022).
As a result, in the current consolidated fiscal year, net sales decreased by 3,003 million yen (2.5%)
compared with the preceding consolidated fiscal year to 117,170 million yen. Operating income increased
by 586 million yen (6.9%) to 9,080 million yen, and the current net income attributable to owners of theparent increased by 701 million yen (11.5%) to 6,774 million yen.
We would like to present the summary of business on a consolidated basis by segment in comparison withthe preceding fiscal year.
i) Specialty Truck Segment
Overall domestic demand remained strong despite some delays in business negotiations due to
COVID-19. The Group continued production activities while implementing infection-control measures at
its plants in addition to securing orders through IT-assisted telecommuting and other measures.
The Group also leveraged its technological capabilities to actively launch new products. It released apps
for IoT-based fleet management systems, including one designed for garbage trucks in July 2020 andanother designed for tailgate lifters in March 2021, while enhancing after-sales services. In August 2020,
the Group released a safety support system equipped with image recognition AI as an option for garbage
trucks, followed by the release of the PY120B-26D, a new mass-market 26-meter class concrete pumptruck model, in November 2020.
In overseas markets, the Group made India’s Satrac Engineering Private Limited a wholly-owned
subsidiary on September 9, 2020. The Group plans to use its acquisition of Satrac’s excellent production
and customer bases in India to strengthen its business foundation and grow its special purpose vehicles
business in India with an eye to making further inroads.
Net sales in the Specialty Truck Segment decreased by 2,525 million yen (2.5%) to 99,551 million yen.
Segment profit increased by 463 million yen (7.2%) to 6,880 million yen due to cost increase, etc.

Operational Results

3

New sprinkler truck

New piston concrete pump truck
PY120B-26D”
New dump truck( GVW20t ・ HARDOX body )Plant of SATRAC ENGINEERINGPRIVATE LIMITED (India)ii) Environmental Equipment and Systems Segment
In the plant construction business, as a result of the Group’s efforts to win new plant construction projects, it
was awarded the Komaoka Incineration Plant renovation and operation project by the City of Sapporo in
Hokkaido in May 2020. It was also awarded a non-burnable waste recycling center construction project by the
Kazuno Wide-Area Administrative Union in Akita Prefecture in June 2020, and the Nansatsu Area Clean
Center (tentative name) facility construction and operation project by the Nansatsu Area Sanitation
Management Union in Kagoshima Prefecture in February 2021. In addition to construction work for facilities it
has already won projects for, the Group focused on the stock-type business such as maintenance and entrusted
operation.
Net sales in the Environmental Equipment and Systems Segment decreased by 444 million yen (3.9%) to
11,028 million yen. Segment profit increased by 181 million yen (10.0%) to 1,994 million yen.

Thermal recycling factory in Nishi-Tenboku

Recycle center in Yao

Operational Results

4iii) Real Estate Rental Segment
For multistory parking systems, in addition to engaging in activities to win new contracts for new
facilities, the Group focused on the stock-type business such as renewal and maintenance. For
coin-operated parking, the Group strove to expand profits by cutting total costs despite declining
operating rates at all of its business locations due to the impact of COVID-19.
Net sales in the Real Estate Rental Segment decreased by 57 million yen (0.8%) to 7,131 million
yen. Segment profit decreased by 2 million yen (0.2%) to 1,140 million yen.

Multi-story parking equipment

Toll parking (Coin-operated)<Forecast of Operations for the Next Consolidated Fiscal Year ending March 31, 2022>
The Japanese economy is expected to face a challenging situation for some time before the
COVID-19 pandemic comes to an end.
The Group has established a basic policy for COVID-19 and projected the impact of the spread of
COVID-19 as follows.
The Group has established a basic policy for COVID-19 as “Giving top priority to the safety ofcustomers, local communities, and Group employees while ensuring balance with business
continuation.” Through the implementation of various measures, the Group has striven to reduce
the risk of infection. The Group’s current situation and countermeasures are as provided below.
1. Employees who tested positive for COVID-19 all had mild symptoms, and there was no
impact on business operations.
2. Implemented teleworking/staggered work hours and allowed commuting by personal car.
3. Promoted digitization to continue business amid stay-at-home requests using videoconferencing and online meetings.
4. Plants and service bases continued to run normally while implementing sufficient
infection-control measures.
For the Group’s mainstay Specialty Truck Segment, the Group has a backlog of orders ofapproximately 55 billion yen (as of March-end 2021) which is equivalent to over six months’
worth of consolidated net sales of the Specialty Truck Segment. No major problems have occurredin plants’ production activities.
Concerns about a prolonged impact of COVID-19 and further spread of infections are as listed
below.

Operational Results5

1. Delay and cancellation of new business negotiations during sales activities.
2. Delay in installation of truck chassis in production activities and impact on supply chains,
including procurement of parts.
The Environmental Equipment and Systems Segment is operating normally without any delay, etc.
in construction work due to the nature of public works that are essential to people’s daily lives.
Entrusted operations, etc. have also been busy with a higher operating rate caused partly byincreases in household waste. It is expected that there will be almost no impact on businessperformance in the segment.
In the Real Estate Rental Segment, the coin-operated parking business and others haveexperienced lower operating rates in all business locations, due to a decline in customer trafficcaused by restrictions on going out, impacting net sales.
Under these circumstances, the Group will continue to implement priority strategies based on thebasic policy stipulated in the medium-term management plan 2019–21 “To the Growth Cycle” (3year plan; April 1, 2019 – March 31, 2022) and make all-out efforts to expand sales and profits andto improve its corporate value as it wraps up the final year of the plan. Meanwhile, the Group will
pay close attention to the current and future trends and respond flexibly such as by considering andimplementing policy revisions, etc. as needed.

Operational Results

6(2) Analysis on Financial Conditionsi) Situations of Assets, Liabilities and Net WorthIn the current consolidated fiscal year, total assets increased by 6,161million yen (4.5%) from the end of
the preceding fiscal year to 142,740 million yen.
Current assets increased by 1,570 million yen (1.9%) to 84,323 million yen, due to increases in cash anddeposits, etc.
Non-current assets (property, plant and equipment, intangible assets and investments and other assets)
increased by 4,591 million yen (8.5%) to 58,417 million yen, due to the rise in market prices ofinvestment securities, etc.
Regarding liabilities, current liabilities decreased by 1,873 million yen (4.9%) to 36,742 million yen due todecreases in electronically recorded monetary obligations, repayment of short-term loans, etc. Non-current
liabilities increased by 14 million yen (0.3%) to 5,411 million yen due to increases in deferred tax liability,
etc.
Total net assets increased by 8, 020 million yen (8.7%) to 100,587 million yen due to the posting of net
profit, etc. attributable to owners of parent.
As a result, the capital adequacy ratio stood at 70.3% as of the end of the current fiscal year (67.5% at theend of the preceding fiscal year).
ii) Cash Flow Situation
Consolidated cash and cash equivalents at the end of period increased by 1,174 million yen (5.9%)
compared with the end of the preceding fiscal year to 21,240 million yen. Cash flow by activity type issummarized as follows:
Cash Flow from Operating Activities
Net cash provided by operating activities amounted to 8,263 million yen (an increase of 2,464 million
yen compared with the preceding fiscal year). This was because of the posting of net profit before tax, etc.
Cash Flow from Investing Activities
Net cash used in investing activities was 4,304 million yen (a decrease of 1,557 million yen comparedwith the preceding fiscal year). This was because of purchases of non-current assets, etc.
Cash Flow from Financing Activities
Net cash used by financing activities amounted to 2,771 million yen (a decrease of 487 million yen
compared with the preceding fiscal year). This was because of dividends paid, repayment of long-termloans, etc.

Operational Results

7(3) Principal policy for return of profits to shareholders and payment of dividends for the current
year and next year
The Kyokuto Kaihatsu Kogyo Group regards the return of profits to shareholders as one of the most importantmanagement’s policies. Taking the development of business in the future and business environments into
account, management has been striving to meet investors’ expectations through the improvement of businessperformance and the strengthening of its financial position.
The Meeting of Shareholders on June 25th, 2021 resolved and passed to pay a dividend of 24 yen per share at
the end of March 2021 as originally proposed by management, making its annual dividend 42 yen per shareincluding an interim dividend, increased by 2 yen compared with the preceding fiscal year.
For the year ending March 2022, management plans to pay an annual dividend of 44 yen per share (including
an interim dividend of 22 yen), increased by 2 yen compared with the preceding fiscal year.
same amount with the preceding fiscal year.

Management Policy

8

2. Management Policy(1) Basic Management Policy of the Company
The management philosophy of the Kyokuto Kaihatsu Group is "Value technology and trust, make concerted
efforts to develop the company, and widely contribute to the society."
Our ultimate goal in the management policy is to implement corporate policy recognizing a social role andresponsibility as a public company in a strong relationship with various stakeholders such as customers,
business partners, shareholders, employees, and local societies. In addition, by providing safe, effective andhigh quality products and services through our fair and sound business activities, the Kyokuto Kaihatsu Groupseeks to bring about greater contribution to our society and maximize corporate value.
With this management policy, we devote ourselves to three major business domains including Specialty Truck,
Environmental Equipment and Systems, and Real Estate Rental.
(2) Mid-to-Long Term Management Strategy
Under the medium term management plan 2019-21 “To the Growth Cycle” (3 year plan; April 1, 2019 - March
31, 2022), we are promoting priority strategies for the growth of the group based on the following basic policy.
Basic policies
With the goal of being a global company that responds flexibly to changes, our group is steadily taking
measures that increase productivity and profit margins while balancing contribution to social issues withbusiness growth. The group is aggressively channeling management resources into these measures.
(1) Improving productivity and enhancing profitability
Maximizing the effects of capital investments aimed at enhancing the earnings base. In addition, striving to
make effective use of the IoT, AI, and other technologies and providing higher added value and higher
quality products and services.
(2) Creating future earnings sources
Aggressively channeling management resources while utilizing the Group’s existing resources, alliances,and M&A aimed at solidly establishing an earnings base for the overseas business and businesses in new
areas.
(3) Improving corporate quality and deepening social value
Promoting workstyle reforms, talented personnel development, and social contribution through businessactivities based on thorough enforcement of safety and compliance.
Key Strategies(1) Special purpose vehicles business[1] Streamlining overall business and expanding profits through Group-wide seamless activities from sales
to design and production.
[2] Expanding sales and improving productivity by effectively using facilities in which investments weremade prior to the end of the previous plan and making new capital investment.
[3] Differentiating brands and securing earnings through the provision of services with high customer
satisfaction.
[4] Promoting the development of products that capture the needs of the times, such as automation andenergy saving in operation and safety.

Management Policy

9(2) Environmental business[1] Securing orders for plants through differentiation focusing on proprietary technologies and safety andpromotion of alliances with other companies.
[2] Maintaining a stable base by enhancing capabilities to propose services and respond to construction
works.
[3] Promoting entry and establishment of businesses in new fields through development of new coreproducts and systems.
(3) Parking business[1] For mechanical multistory parking equipment, focusing on renewal projects and promoting thedevelopment of differentiated products and proposal activities.
[2] For pay-by-the-hour parking lots, focusing on securing earnings in each location and engaging inselective order-winning activities for new business locations.
[3] Promoting cultivation of new overseas markets and development of new products for the future.
(4) Overseas business[1] For overseas bases, investing resources to establish an earnings base.
[2] Achieving total optimization by promoting cross-border business expansion through Group-wide
collaboration including in Japan and China.
(5) Other[1] Enhancing added value of products and services and promoting streamlining and automation of internal
operations through proactive use of the IoT, AI, and other technologies.
[2] Creating a work environment that enables each employee to focus on high value added operations bypromoting an approach to develop human resources as a team and conduct workstyle reforms.
[3] Achieving sustainable growth and increasing added value as a company by addressing social issues
through business activities as the society is now at a turning point.

(3) Targeted management index
We set management targets of sales of 110 billion yen or more and operating profit of 9 billion yen or more on aconsolidated base for the term ending March 2022, the last fiscal year of the medium term management plan
2019-21 “To the Growth Cycle” (3 year plan; April 1, 2019 - March 31, 2022).

Consolidated Statements of Comprehensive Income

10

CONSOLIDATED BALANCE SHEETSAt March 31, 2021 and 2020

Thousands of
U.S. dollars(Note 1)Millions of yen
ASSETS
Current assets:
Cash and deposits (Notes 9 & 10)
Short-term securities (Notes 9 & 10)
Trade notes and accounts receivable (Note 10)
Electronically recorded monetary claims - operating (Note 10)
Merchandise & finished goods
Work in process
Raw materials & supplies
Other current assets (Note 10)
Allowance for doubtful accounts
Total current assets

2021¥

Property, plant and equipment (Note 11):Land (Note 5)
Buildings and structures (Note 5)
Machinery, equipment and vehicles
Construction in progress
Other
Total
Accumulated depreciation
Net property, plant and equipment

Intangible assets
Goodwill
Customer-related assets
Other
Total
Investments and other assets:
Investment securities (Notes 3, 6 & 10)
Deferred tax assets (Note 15)
Long-term loans receivable (Note 10)
Other assets
Allowance for doubtful accounts (Note 10)
Total investments and other assets
Total non-current assets
Total
The accompanying notes are an integral part of these statements.

¥

2020

2021

9,703 ¥
12,20035,129
7,886
1,772
6,588
8,613
2,495
(63)
84,323

7,804
12,89035,905
6,815
1,368
5,798
9,484
2,751
(62)
82,75321,01834,773
20,368291
5,440
81,890(41,955)
39,93520,36033,816
18,351
1,012
5,105
78,644(39,597)
39,047

189,844
314,096
183,976
2,628
49,140739,684(378,967)
360,717

803
449
817
2,069

701
701

7,257
4,057
7,374
18,688

11,685
259
1,166
1,676
(708)
14,07853,826
136,579

129,962
2,387
17,734
17,888(19,714)148,257
527,662
1,289,323

14,388
264
1,964
1,980
(2,182)
16,41458,418142,741 ¥$$

87,645
110,198
317,306
71,231
16,00759,50577,80022,542(573)
761,661

Consolidated Statements of Comprehensive Income

Thousands of
U.S. dollars(Note 1)Millions of yen
LIABILITIES AND NET ASSETS
Current liabilities:
Short-term bank loans (Notes 4 & 10)
Current portion of long-term bank loans (Notes 4 & 10)
Trade notes and accounts payable (Note 10)
Electronically recorded obligations - operating (Note 10)
Accrued expenses
Income taxes payable
Other current liabilities (Note 4)
Total current liabilities

2021¥

Non-current liabilities:
Bonds payable (Notes 4 & 10)
Long-term bank loans (Notes 4 & 10)
Net defined benefit liabilities (Note 7)
Liabilities for directors' retirement benefits
Deferred tax liabilities (Note 15)
Other non-current liabilities (Notes 4, 5 & 10)
Total non-current liabilities
Total liabilities

Net assets:
Shareholders' equity:
Common stock (Note 13):
Authorized-170,950,672 shares
Issued-42,737,668 shares in 2021 and 2020
Capital surplus (Note 13)
Retained earnings
Treasury stock, at cost (Note 13):
3,011,295 shares in 2020
2,978,781 shares in 2021
Total shareholders' equity
Accumulated other comprehensive income (Note 16):
Unrealized gain on available-for-sale securities
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total
The accompanying notes are an integral part of these statements.

¥

11

2020

2021

740 ¥
23
16,547
9,150
4,814
2,096
3,372
36,742

1,464
637
15,993
10,629
4,569
1,570
3,753
38,615

$

282
340
152
2,295
2,343
5,412
42,154

50
56
968
168
1,600
2,556
5,398
44,013

2,544
3,067
1,376
20,734
21,16048,881
380,758

11,90011,82173,997

11,90011,67968,733

107,487
106,774
668,389(2,249)95,469(2,153)90,159(20,318)
862,332

4,931
53
(170)
4,814
304
100,587
142,741 ¥

2,553
127
(657)
2,023
384
92,566
136,579

44,539485(1,539)43,485
2,748
908,565
1,289,323

$

6,682
211
149,464
82,65043,48318,93330,454
331,877

Consolidated Statements of Comprehensive Income

12

CONSOLIDATED STATEMENTS OF INCOME
Years ended March 31, 2021 and 2020

Thousands of
U.S. dollars(Note 1)Millions of yen
Net sales
Cost of sales (Note 17)
Gross profit
Selling, general and administrative expenses (Note 14)
Operating income
Other income (expenses):
Interest and dividend income
Interest expense
Gain (loss) on sales of investment securities
Gain (loss) on sales or disposition of property and equipment, net
Equity in losses of affiliates
Loss on valuation of investment securities (Note 3)
Loss on sale of investment in a subsidiary
Provision of allowance for doubtful accounts
Foreign exchange gain (loss)
Other-net
Other expenses -net
Income before income taxes and non-controlling interests
Income taxes (Note 15):
Current
Deferred
Total income taxes
Net income
Net loss attributable to non-controlling interests
Net income attributable to owners of the parent

¥

¥

2021
117,170 ¥
94,00923,161
14,081
9,080

2020
120,174
97,22822,946
14,452
8,494

$

618
(42)
(20)
83
(16)
(104)
(489)
91
(74)
47
9,127

382
(50)
712
(52)
(192)
(8)
(601)
(34)
49
206
8,700

5,579
(383)
(180)
746
(142)
(942)
(4,418)
827
(667)
420
82,439

3,178
(770)
2,408
6,719
(55)
6,774 ¥

2,756
(26)
2,730
5,970
(103)
6,073

28,708(6,959)21,74960,690(499)
61,189$U.S. dollars(Note 1)

Yen
2021
Amounts per shares:
Basic net income
Diluted net income
Cash dividends applicable to earnings of the year
The accompanying notes are an integral part of these statements.

¥

2021
1,058,353
849,144
209,209
127,19082,019170.49 ¥
42.00

2020
152.87
40.00

2021
$

1.54
0.38

Consolidated Statements of Comprehensive Income

13

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended March 31, 2021 and 2020

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

Other comprehensive income (Note 16):
Unrealized gain on available-for-sale securities
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Share of other comprehensive income in affiliates accounted forby the equity method
Total other comprehensive income
Comprehensive income
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interests
The accompanying notes are an integral part of these statements.

¥

2021
6,719 ¥

2020
5,970

$

2021
60,690

2,377
(74)
486
(23)

(2,324)
66
(195)
72

21,472
(670)
4,394
(214)

2,766

(2,381)

24,9829,485 ¥

3,589

9,565
(80)

3,679
(90)

$

85,67286,394(722)

105,492

107,487

107,487

surplusstock

106,774

1,282

Capital11,821

142

11,679Common11,90011,900(40)

11,719surplus11,900stock

The accompanying notes are an integral part of these statements.

Balance, March 31, 2021

Other net changes in the year

Cash dividends paid

Appropriation

Net income attributable to owners of the parent

Disposal of treasury stock$$

Balance, March 31, 2020

Purchases of treasury stock

¥

¥

¥

Balance, March 31, 2021

Other net changes in the year

Cash dividends paid

Appropriation

Net income attributable to owners of the parent

Disposal of treasury stock

Purchases of treasury stock

Balance, March 31, 2020

Other net changes in the year

Cash dividends paid

Appropriationtransactions with non-controlling interests

Change in scope of consolidation
Change in ownership interest of parent due to

Net income attributable to owners of the parent

Purchases of treasury stock

Balance, March 31, 2019

CapitalCommonCONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Years ended March 31, 2021 and 2020

668,389(13,636)

61,189620,836

earnings

Retained

Shareholders' equity

73,997(1,510)6,774

68,733(1,549)(20,318)

862,332(13,636)

61,1893,022(2,608)1,740

814,365(2,608)equityshareholders'

Total

95,469(19,450)

stock

Treasury(2,249)(1,510)

6,774

335

(289)

(289)
193

90,159(2,153)(1,549)

(40)

(71)

(71)

(0)

(0)
6,073

85,746equity(2,153)

stock

Total
shareholders'

Treasury

6,073

64,280earnings

Retained

Shareholders' equity

44,53921,47523,064

sale securities

available-for-gain onUnrealized

4,931

2,378

2,553

(2,325)

4,878

sale securities

available-for-gain onUnrealized

plans

(170)

487

(657)

(194)

(463)

of defined benefit

Remeasurements

485

(668)

1,153

adjustments

translation

currency

Foreign(1,539)4,398(5,937)plans

of defined benefit

Remeasurements

Accumulated other comprehensive income

53

(74)

127

124

6

(3)

adjustments

translation

currency

Foreign

Accumulated other comprehensive income
Total

43,48525,20518,280incomecomprehensive

otheraccumulated

Total

4,814

2,791

2,023

(2,395)6

4,412

incomecomprehensive

otheraccumulated
Non-

Total

100,587

2,711(1,510)

6,774

335

(289)

92,566(2,710)(1,549)

(40)

(65)

6,073

(0)

90,857

net assets

2,748

(722)

3,470

interests

controllingNon-

908,565

24,483(13,636)

61,1893,022(2,608)836,115

assetsTotal netThousands of U.S. dollars

304

(80)

384

(315)

699

interests

controlling

Millions of yen

Consolidated Statements of Changes 14
in Shareholders’ Equity

Consolidated Statements of Cash Flows

15

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended March 31, 2021 and 2020

Thousands of
U.S. dollars(Note 1)Millions of yen
2021
Operating activities:
Income before income taxes and non-controlling interests
Depreciation and amortization
Amortization of goodwill
Loss on valuation of investment securities
Loss (gain) on sales of investment securities, net
Equity in losses of affiliates
Loss (gain) on sales or disposition of property and equipment, net
Interest and dividend income
Interest expenses
Decrease (increase) in trade notes and accounts receivable
Decrease (increase) in inventories
Increase (decrease) in trade notes and accounts payable
Increase (decrease) in net defined benefit liabilities
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in allowance for others
Increase (decrease) in consumption taxes payable
Other, net
Sub totalInterest and dividend income received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities¥

Investing activities:
Purchases of securities and investments
Proceeds from sales of securities and investments
Proceeds from maturity of securities and investments
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments for sales of shares of subsidiaries resulting in change in scopeof consolidation
Purchase of shares of subsidiaries resulting in change in scope of
consolidation (Note 18)
Net decrease (increase) in short-term loans receivable
Disbursement of loans receivableCollection of loans receivable
Other,net
Net cash used in investing activities

2020

2021

9,127 ¥
2,805
40
104
20
16
(125)
(618)
42
(76)
(96)
(1,504)
65
492
(121)
(36)
370
10,505637(41)(2,837)
8,264

8,700
2,625
8
(111)
192
18
(382)
50
1,128
(565)
(1,481)
(94)
(8)
(64)
348
(1,717)
8,647
389
(34)
(3,203)
5,799$

82,43925,337
362
942
180
142
(1,127)(5,579)
383
(689)
(869)
(13,587)589
4,443(1,097)(325)
3,340
94,884
5,758(375)(25,624)
74,643

(47)
101
586
(3,356)
172

(440)
1,200
633
(3,467)
295

(422)
914
5,292
(30,312)
1,557

-

(692)

-

(1,822)(10)71(0)(4,305)

23
(316)
15
2
(2,747)(16,457)
(90)
643
(5)
(38,880)

Financing activities:
Net increase (decrease) in short-term bank loans
Proceeds from long-term bank loans
Repayment of long-term bank loans
Payment for redemption of bonds
Payment of finance lease obligations
Purchases of treasury stock
Proceeds from sales of treasury stock
Dividends paid
Payments from changes in ownership interests in subsidiaries that do
not result in change in scope of consolidation
Net cash used in financing activities

(822)
288
(675)
(50)
(49)
(289)
335
(1,509)

96
(637)
(55)
(0)
(1,549)(7,425)2,601(6,100)(452)(441)(2,608)
3,022(13,632)(2,771)(138)(2,283)(25,035)

Foreign currency translation adjustments on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents from a newly consolidated subsidiary
Cash and cash equivalents at end of year (Note 9)

(13)
1,175
20,065
21,240 ¥(5)764
19,084217
20,065(115)
10,613
181,242
191,855

The accompanying notes are an integral part of these statements.

¥$

Independent Auditor’s Report16

1. Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements of Kyokuto Kaihatsu Kogyo
Co., Ltd. (the “Company”) and its consolidated subsidiaries (collectively the“Group”) have been prepared in accordance with the provisions set forth in theJapanese Financial Instruments and Exchange Act and its related accounting
regulations, and in conformity with accounting principles generally accepted inJapan, which are different in certain respects as to the application and disclosure
requirements of International Financial Reporting Standards.
In preparing the accompanying consolidated financial statements, certain
reclassifications have been made to the consolidated financial statements issued
domestically, in order to present them in a form which is more familiar to readers
outside Japan.
In addition, the notes to consolidated financial statements include additional
information which is not required under generally accepted accounting principles
and practices in Japan.
The financial statements presented herein are expressed in Japanese yen and,solely for the convenience of the readers, have been translated into U.S. dollars
at the rate of ¥110.71=US$1, the approximate exchange rate on March 31, 2021.
These translations should not be construed as representations that the Japanese
yen amounts actually are, have been or could be converted into U.S. dollar
amounts.

Independent Auditor’s Report17

2. Summary of Significant Accounting Policies(a) Consolidation
The consolidated financial statements include the accounts of the Company andits 11 significant subsidiaries. Investments in 5 nonconsolidated subsidiaries and
1 affiliated company are accounted for by the equity method.
Under the concept of control or significant influence, those companies in which
the Company, directly or indirectly, is able to exercise control over operations are
fully consolidated, and those companies which the Group has the ability to
exercise significant influence (affiliated companies) are accounted for by theequity method.
On March 31, 2021, 5 subsidiaries are excluded from scope of consolidation. As tothese, investments in all nonconsolidated subsidiaries are accounted for by theequity method. These companies are not material in terms of total assets, net
sales, net income and retained earnings and do not have any significant impact
on the consolidated financial statements.
During the fiscal year ended March 31, 2021, SATRAC ENGINEERINGPRIVATE LIMITED has been included into the scope of consolidation, since theCompany purchased its all shares. FE-ONE Co., Ltd. (consolidated subsidiary)
merged by absorption with FE-Tech Co., Ltd. (consolidated subsidiary) andchanged its corporate name to FE-Auto Co., Ltd. Also, MITHRA KYOKUTO
SPECIAL PURUPOSE VEHICLE Co., PVT. LTD. has been excluded from thescope of equity method, since the board of the Company resolved to sell its all
shares, on March 30, 2021.
Among the consolidated subsidiaries, the balance sheet date for Kyokuto
Kaihatsu(Kunshan)

Machinery

Co.,

Ltd.,

and

PT.

KyokutoIndomobil

Manufacturing Indonesia is December 31. They are consolidated using thefinancial statements as of their balance sheet date. Significant inter-company
transactions between their balance sheet date and consolidated balance sheet
date are adjusted for consolidation.
Furthermore, the balance sheet date for Kyokuto Special Automobile Trading(Shanghai) Co., Ltd. under the equity method is different from the consolidatedbalance sheet date, but no adjustments were made.
All significant inter-company balances and transactions have been eliminated in
the consolidated financial statements. All material unrealized gains resulting frominter-company transactions have been eliminated.

Independent Auditor’s Report

18

Assets and liabilities of the consolidated subsidiaries at the time of investment
are all valued at fair value. The goodwill is being amortized on a straight-line
basis over estimated useful lives or 5 years in situations in which the useful lives
cannot be estimated. However, insignificant goodwill is charged to expenses
when incurred.

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

(c) Short-term Securities and Investment Securities
The Group classifies their securities which have readily determinable fair values
as held-to-maturity debt securities, available-for-sale securities, depending on
management’s intent.
(Held-to-maturity debt securities)
Held-to-maturity debt securities are stated at amortized cost.
(Available-for-sale securities)
Marketable available-for-sale securities are stated at fair value, with unrealized
gains or losses, net of applicable taxes, and reported in accumulated othercomprehensive income. The cost of available-for-sale securities sold is determinedbased on the moving average method.
Non-marketable securities are stated at cost determined by the moving averagemethod.
(d) Inventories
Merchandises are stated at cost determined by the specific identification method,or if lower, the net realizable value.
Raw materials, finished goods and work in process are stated at cost determinedby the periodic average method, or if lower, the net realizable value.
Supplies are stated at cost determined by the last purchase cost method, or if
lower, the net realizable value.

Independent Auditor’s Report

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

(f) Retirement Benefits
Net defined benefit liabilities are recorded for employees’ pension and severance
payments based on the projected benefit obligations and the fair value of plan
assets at the balance sheet date.
In calculating the projected retirement obligations, the straight-line attribution
is applied for allocation of projected benefits to the periods until the end of thecurrent fiscal year.
Actuarial gains or losses are amortized by declining-balance method over statedyears that do not exceed the average remaining service period of the employees(10 years) beginning with the year following the year which incurred.

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

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

Independent Auditor’s Report

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

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

(k) Leases
Finance lease transactions, except for immaterial or short-term finance leasetransactions which are accounted for as operating leases, are capitalized torecognize lease assets and lease obligations in the balance sheet. Suchcapitalized lease assets are depreciated by the straight-line method over thelease terms assuming no residual value.

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

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

Independent Auditor’s Report

21(n) Per Share Information
Basic net income per share is computed based on net income available to common
stockholders and the weighted average number of shares of common stock
outstanding during each period. The average numbers of shares used in thecomputations are 39,734 and 39,726 thousand shares for 2021 and 2020,
respectively.
Diluted net income per share is not disclosed because the Company had nopotentially dilutive shares outstanding at these balance sheet dates.
Cash dividends per share shown in the statements of income are the amounts
applicable to the respective years.

(o) Significant Accounting Estimates(Goodwill and Customer-related assets)(i)

Amount recorded in the consolidated financial statements for the fiscal year

ThousandsofMillions of yen

U.S. dollars

Goodwill¥

803$ 7,257

Customer-related assets¥

449$ 4,057(ii) Information concerning significant accounting estimates for identifiable items
Goodwill and Customer-related assets of the newly consolidated subsidiary areamortized under the straight-line method, using rates based on the estimated useful
lives of assets, below. The recognition and measurement of Goodwill andCustomer-related assets are based on estimates or assumptions set using somefactors such as future cash flow and discount rates. However, when theseassumptions may be affected by changes in uncertain future economic conditions,the impairment losses related these assets may be recognized in the future.
Estimated useful lives

Years

Goodwill10

Customer-related assets

16Independent Auditor’s Report

22(Impairment losses of Property, plant and equipment)(i)Amount recorded in the consolidated financial statements for the fiscal year

There is not applicable for the fiscal year.
(ii) Information concerning significant accounting estimates for identifiable items
The impairment losses of the assets which have indication of impairment were notrecognized since carrying amount of the assets exceeds the estimated future cash
flow calculated under the business plans of each segment. The assets which haveindication of impairment are below. However, when the business plan will be needed
the review or update since affection of future market environment, the impairment
losses of the assets may be recognized in the future.

ThousandsofMillions of yen

U.S. dollars¥

538$ 4,857

647

5,850

−

−

¥ 1,185$ 10,707

Specialty truck business
Environmental equipment andsystems business
Real estate rental business
Total(p) Accounting Standards issued but not yet applied-“Accounting Standard for Revenue Recognition” (Accounting Standards Boardof Japan (ASBJ) Statement No.29, March 31, 2020)-“Implementation Guidance on Accounting Standard for Revenue Recognition”(ASBJ Guidance No.30, March 26, 2021)-“Implementation Guidance on Disclosures about Fair Value of Financial
Instruments” (ASBJ Guidance No.19, March 31, 2020)(1) Overview
The International Accounting Standards Board (IASB) and the Financial
Accounting Standards Board (FASB) in the United States jointly developed acomprehensive accounting standard for revenue recognition and publishedthe “Revenue from Contracts with Customers” (as IFRS 15 in the IASB and
Topic 606 in the FASB) in May 2014, respectively. IFRS 15 was applied tofiscal years beginning on or after January 1, 2018 and Topic 606 was applied
from fiscal years beginning after December 15, 2017. Considering thissituation, the ASBJ developed a comprehensive accounting standard forIndependent Auditor’s Report23

revenue recognition and implementation guidance and issued them together.
In developing the accounting standards for revenue recognition, the ASBJ
basically integrated the core principles of IFRS 15 from a comparability point
in view of the financial statements, which is one of the benefits of ensuringconsistency with IFRS 15. If there are any items which should be consideredin current practices in Japan, alternative treatments would be added to theextent to which comparability is not impaired.
(2) Scheduled date of application
To be applied from the beginning of the fiscal year ending March 2022.
(iii) Effects of application of these standards
The effects of the application of the aforementioned standard and guidance on
the Company’s consolidated financial statements are currently under theassessment.
-“Accounting Standard for Fair Value Measurement” (ASBJ Statement No.30,

July 4, 2019)-“Accounting Standard for Measurement of Inventories (ASBJ Statement No.9,

July 4, 2019)-“Accounting Standard for Financial Instruments” (ASBJ Statement No.10,

July 4, 2019)-“Implementation

Guidanceon

AccountingStandard

for

Fair

Value

Measurement” (ASBJ Guidance No.31, July 4, 2019)-“Implementation Guidance on Disclosures about Fair Value of Financial
Instruments” (ASBJ Guidance No.19, March31, 2020)(i) Overview
IASB and FASB in the United States established almost the same detailed
guidance

regarding

fair

value

measurement

(IFRS

13

“Fair

Value

Measurement” in IFRS and Topic 820 “Fair Value Measurement” in FASB).
Considering this situation, the ASBJ has worked for consistency between
Japanese accounting standards and international accounting standards
regarding fair value of financial instruments and disclosure and issued“Accounting Standard for Fair Value Measurement” and others above.

Independent Auditor’s Report

24

The basic approach taken by the ASBJ in the development of the accounting
standards for fair value measurement was, to incorporate essentially all
details of IFRS 13 in order to improve the comparability with financial
statements of Japan and overseas. If there are any items which should beconsidered in current practices in Japan, exceptional treatments would be
added to the extent to which the comparability is not impaired significantly.
(ii) Scheduled date of application
To be applied from the beginning of the fiscal year ending March 2022.
(iii) Effects of application of these standards
The effects of the application of the aforementioned standards and guidanceon the Company’s consolidated financial statements are currently under theassessment.

(q) Changes in presentation methods(Consolidated balance sheets)
From fiscal year ended March 31, 2021, “Long-term loans receivable” which was
included in “Other assets” under “Investments and other assets” in the previous
fiscal year,

is presented separately because its amount has become significant.

The financial statements for the previous fiscal year have been reclassified toreflect this change in presentation method.
As a result, ¥2,842 million which was presented in “Other assets” on the
consolidated balance sheets for the previous fiscal year has been reclassified as¥1,166 million in “Long-term loans receivable” and ¥1,676 million in “Other
assets”.
(Application of Accounting Standard for Disclosure of Accounting Estimates)
The Accounting Standard for Disclosure of Accounting Estimates (ASBJ Guidance No.
31, March 31, 2020) has been applied in the fiscal year ended March 31, 2021, andnotes regarding significant accounting estimates are included in the consolidated
financial statements. However, information for the previous fiscal year is notdescribed in the notes in accordance with the transitional treatment prescribed in theproviso of paragraph 11 of this accounting standard.

Independent Auditor’s Report25(r) Additional information(Accounting estimates of the impacts of the COVID-19 infection)
The Company believes that it is difficult to predict how the impacts of the
COVID-19 infection will spread or when they will converge. However, we makethe accounting estimates based on the assumption which the impact on financial
position and operating results of the Group will continue for a certain period in
the fiscal year ending March 31, 2022 based on external information available atthis time.
(Granting Company Stock to Employees through a Trust)The board of directors held on November 11, 2020 resolved to introduce a"Trust-type Employee Stockholding Incentive Plan [E-Ship🄬]"(hereinafter, “thisPlan”). The objective is to incentivize all employees to improve the Company's
corporate value in the medium-to-long term, enhance employee benefits, andencourage growth of the Company constantly through employee’s motivation towork by equity participation as a shareholder. The Company is accounting forthis Plan in according with “Practical Solution on Transactions of Delivering theCompany’s Own Stock to Employees etc. through Trusts” (ASBJ PITF No. 30,
March 26, 2015).
(1) Incentive plan overview
This Plan is available to all employees who belong to the Kyokuto Kaihatsu
Employee Shareholding Association (hereinafter, “Shareholding Association”).
Under this Plan, the Company establishes a trust, called the "Kyokuto Kaihatsu
Employee Shareholding Association Exclusive Trust" (hereinafter "the Employee
Shareholding Association Trust") through a trust bank. The Employee
Shareholding Association Trust will estimate the number of shares that the
Employee Shareholding Association is likely to acquire over the three years after
the establishment of the trust, and will accept this amount in advance throughthird-party allotment from the Company. The fund will be borrowed fromfinancial institutions. The Employee Shareholding Association Trust will thencontinuously sell shares to the Shareholding Association, and if an amountequivalent to net gain on sale of the shares has accumulated in the Employee
Shareholding Association Trust at the end of the trust period, the said amountwill be distributed as residual assets to the members of the Employee
Shareholding Association who meet the beneficiary eligibility criteria. Note that
the Company will guarantee loans taken to accept the shares and thus will repay
any outstanding portion of the loans, if an amount equivalent to loss on sale ofIndependent Auditor’s Report

26

shares has accumulated in the Employee Shareholding Association Trust at theend of the trust period due to a drop in the market price of the Company's shares.
(2) Residual Company shares held in the Employee Shareholding Association
Trust
Any residual shares of the Company held in the Employee Shareholding
Association Trust have been recorded at the Employee Shareholding Association
Trust's book value (excluding incidental expenses) as treasury stock under Net
assets in the accompanying consolidated balance sheets. The book value of thetreasury stock is ¥ 242 million ($ 2,181 thousand), and the number of shares is
171,400 shares at the end of fiscal year.
(3) Book value of debt recorded through the application of the total amountmethodThe book value of debt recorded through the application of the total amountmethod is ¥249 million ($ 2,253 thousand) at the end of fiscal year.

Independent Auditor’s Report27

3. Securities
The following is a summary of held-to-maturity securities and available-for-salesecurities at March 31, 2021 and 2020, but at March 31, 2021, held-to-maturity
securities is not applicable:
Millions of yen

Held-to-maturity securities

March 31, 2020

Gross

Gross

Carrying

unrealized

unrealized

amountgains

losses¥¥Fair value

Debt securities,
whose fair value exceeds
carrying amount

¥

−

−

¥

−

−

whose fair value does
not exceed carrying
amount
Total

600
¥

(2)

−
¥

600

¥

−

598

(2)

¥

598

Millions of yen

Available-for-sale securities

March 31, 2021

Gross

Gross

Book Value

unrealized

unrealized(Estimatedgains

lossesfair value)

Cost

Market value available:
Equity securities¥ 5,372

Other securities

229

Subtotal¥ 5,601

¥

7,192

¥

7,192

¥

(5)

−
¥

(71)

¥

(76)

224
¥

Market value not available:
Total

12,493
12,717
1,671¥

14,388

Independent Auditor’s Report

28

Millions of yen

Available-for-sale securities

March 31, 2020

Gross

Gross

Book Value

unrealized

unrealized(Estimatedgains

lossesfair value)

(273)

¥

Cost

Market value available:
Equity securities¥ 5,372

Other securities

229

Subtotal¥ 5,601

¥

3,982

¥

(4)

−
¥

3,982

¥

(277)

9,081
225

¥

Market value not available:

9,306
1,779

Total

¥

11,085

Thousands of U.S. dollars

Available-for-sale securities
Gross

Gross

Book Value

unrealized

unrealized(Estimated

Cost

gains

lossesfair value)

Equity securities$ 48,519$ 64,959$ (638)$ 112,840

Other securities

2,066

−

(42)

2,024

$ 50,585$ 64,959$ (680)$ 114,864

March 31, 2021
Market value available:

SubtotalMarket value not available:
Total

15,098$ 129,962

Impairment losses of available-for-sale securities were recorded during the fiscal year
ended March 31, 2021

and 2020. They were immaterial.

29

Independent Auditor’s Report

4. Short-term Bank Loans and Long-term Debts
The annual average interest rates applicable to short-term bank loans at March
31, 2021 and 2020 were 1.09% and 0.48%, respectively.
Long-term debts at March 31, 2021 and 2020 consisted of the following:Thousands ofMillions of yen

Bonds payable

U.S. dollars

2021

2020

2021

¥

¥

50

$

−

−

Long-term bank loans

305

693

2,755

Lease obligations

159

158

1,436

Other

210

439

1,902

674

¥ 1,340$ 6,093

Total¥

Aggregate annual maturities of long-term debts subsequent to March 31, 2021
were as follows:
Thousands ofYear ending March 31

Millions of yen

U.S. dollars¥

279$ 2,517

2023

61

556

2024

43

387

2025

16

146

2026 and thereafter

26

234

425

$ 3,840

2022

Total

¥

Long-term bank loans for Trust-type Employee Stockholding Incentive Plan
[E-Ship🄬] (¥ 249 million, $ 2,253 thousand) are not included in the aboveschedule, since it is difficult to calculate the amount of the annual maturities.
To set up a commitment line by multiple finance institutions, the Company
renewed an agreement with a syndicate of 6 banks for the years ended March 31,
2021 and 2020, respectively.
The unexecuted balance of lending commitments of the Company at March 31,
2021 and 2020 were as follows:30

Independent Auditor’s ReportThousands ofMillions of yen

Total lending commitments

2021

2020

2021

¥ 5,000¥ 5,000$ 45,163−−−¥ 5,000¥ 5,000$ 45,163

Less amounts currently executed
Unexecuted balance

U.S. dollars

5. Pledged Assets
The following assets were pledged as collateral for the following borrowings at
March 31, 2021 and 2020:
Thousands ofMillions of yen

Land
Buildings
Total

U.S. dollars

2021

2020

2021

¥

¥

$

750

750

6,771

1,487

1,565

13,432¥ 2,237¥ 2,315$ 20,203
Thousands ofMillions of yen

U.S. dollars

2021

2020

2021

Other non-current liabilities¥ 1,087¥ 1,320$ 9,822

Total¥ 1,087¥ 1,320$ 9,822

6. Lending Securities
Out of investment securities, ¥ 41 million was for lending securities at March 31,
2020.

7. Retirement Benefits
The Company, a domestic subsidiary and 2 foreign subsidiaries have defined
benefit corporate pension plans and lump-sum retirement benefit plans. Other
domestic subsidiaries join the Smaller Enterprise Retirement Allowance Mutual
Aid Scheme which is a kind of defined contribution plans.

Independent Auditor’s Report

31

The changes in defined benefit obligations for the year ended March 31, 2021 and2020 were as follows:
Thousands ofMillions of yen

U.S. dollars

2021

2020

2021

¥ 7,996¥ 7,698$ 72,225

Service cost

522

502

4,717

Interest cost

10

14

90

Actuarial gains or losses

99

128

895

Retirement benefits paid

(373)

(346)

(3,371)

8

−

76

(1)

0

(10)

7,996

$ 74,622

Benefit obligations at beginning of year

Increase of benefit obligation due to a newly
consolidated subsidiary
Translation adjustments
Benefit obligations at end of year

¥

8,261

¥

The changes in plan assets for the year ended March 31, 2021 and 2020 were as
follows:
Thousands ofPlan assets at beginning of year

Millions of yen

U.S. dollars

2021

2020

2021

¥

¥

6,918

$ 63,486

7,028

Expected return on plan assets

141

138

1,270

Actuarial gains or losses

605

(289)

5,467

Contributions from employers

466

546

4,211

Retirement benefits paid

(319)

(285)

(2,879)7,028$ 71,555

Plan assets at end of year

¥

7,921

¥

Independent Auditor’s Report

32

The reconciliation of the defined benefit obligations and plan assets to the net
defined benefit liabilities recognized in the consolidated balance sheet as ofMarch 31, 2021 and 2020 were as follows:
Thousands ofFunded benefit obligations

Millions of yen

U.S. dollars

2021

2020

2021

¥

¥

7,978

$ 74,335

7,921

7,028

71,555

308

950

2,780

32

18

287

8,229

Plan assets at end of year
Non funded benefit obligations
Net

amountofliabilities

andassetsrecognized in consolidated balance sheet
Net defined benefit liabilities

¥

340

¥

968

$

3,067

¥

340

¥

968

$

3,067

Net defined benefit assets
Netamountofliabilities−
andassetsrecognized in consolidated balance sheet

¥

340

−
¥

968

−
$

3,067

The retirement benefit expenses for the year ended March 31, 2021 and 2020
were as follows:
Thousands ofService cost

Millions of yen

U.S. dollars

2021

2020

2021

¥

¥

$

522

Interest cost

502

4,717

10

14

90

Expected return on plan assets

(141)

(138)

(1,270)Recognition of actuarial gains or losses

195

137

1,761

Severance and pension costs

¥

586

¥

515

$

5,298

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

U.S. dollars

2021

2020

2021

Recognized actuarial gains or losses

¥

701

¥

(281)

$

6,332

Total

¥

701

¥

(281)

$

6,332

33

Independent Auditor’s Report

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

U.S. dollars

2021

2020

2021

Unrecognized actuarial gains or losses

¥

245

¥

947

$

2,216

Total

¥

245

¥

947

$

2,216

The components of plan assets as of March 31, 2021 and 2020 were as follows:
Ratio

2021

2020

Bonds

54%

57%

Securities

22%

19%

General account asset

17%

17%

Other

7%

7%

Total

100%

100%

The major actuarial assumptions for the year ended March 31, 2021 and 2020
were as follows:
2021

2020

The Company and a domestic subsidiary

0.0 to 0.6%

0.0 to 0.3%

A foreign subsidiary

3.7 to 8.0%

5.8 to 8.6%

The Company and a domestic subsidiary

2.0%

2.0%

A foreign subsidiary−%−%

The Company and a domestic subsidiary

4.3 to 8.8%

4.3 to 7.3%

A foreign subsidiary

7.0 to 10.0%

7.0%

Discount rateLong-term rate of return on plan assets

Future salary increaseLong-term rate of return on plan assets was determined by considering thecurrent and future portfolio of plan assets and the current and future long-term
performance of various assets comprise the plan assets.
The required amount of the defined contribution pension plan were ¥ 126 million($ 1,138 thousand) and ¥ 118 million for the year ended March 31, 2021 and 2020in the Company and other domestic subsidiaries.

34

Independent Auditor’s Report

8. Contingencies
At March 31, 2021 and 2020, the Group was contingently liable as follows:
Thousands ofMillions of yen

U.S. dollars

2020

2021

2021
As a guarantor of indebtedness of :
Other
Total

¥

7

¥

9

$

64

¥

7

¥

9

$

64

The Company guarantees all liabilities which MITHRA KYOKUTO SPECIALPURPOSE VEHICLE CO., PVT. LTD. is liable for in the transactions with thespecified customer. As of the end of the current consolidated fiscal year, there are notransactions for which the Company might perform our obligations.

9. Cash and cash equivalents
Cash and cash equivalents at March 31, 2021 and 2020 were as follows:
Thousands ofMillions of yen

U.S. dollars

2021

2020

2021

Cash and deposits¥ 9,703¥ 7,804$ 87,645

Short-term securities

12,20012,890110,198

(600)

(590)

(5,420)

(39)

(39)

(352)

(24)

−

(216)

¥ 21,240¥ 20,065$ 191,855

Securities with redemption term of over 3
monthsTime deposits with an original maturity ofover 3 months
Guarantee for issuance of a letter of credit
to the bank
Cash and cash equivalents

Independent Auditor’s Report35

10. Financial Instruments and Related Disclosures(1) Policy for financial instruments
The Group manages funds by utilizing short-term deposits, etc. The Group
raises money by borrowing from financial institutions and by issuing bonds.
Derivatives are used, not for speculative nor trading purpose, but to hedge
the exposure to foreign exchange rate risks with the debts and credits
denominated in foreign currencies and interest rate risks associated withcertain interest payments on borrowings.
(2) Types of financial instruments and related risk, and risk management for
financial instruments
Trade notes and accounts receivable are exposed to credit risk in relation tocustomers. In order to monitor credit risk, the Group manages, according to
the credit management guideline of the Group, the due date and the balanceof operating receivables from customers.
Investment securities consist of mainly held-to-maturity securities andequity securities issued by the Group’s business partners and these securities
are exposed to market risk. The Group periodically monitors the fair value ofsuch equity securities, which is reported to the board meeting.
Trade notes and accounts payable have payment due dates mainly within one
year. Trade notes and accounts payable denominated in foreign currencies are
exposed to the market risk of fluctuation in foreign currency exchange rate.
Such risk is hedged principally by forward foreign currency contract.
Short-term bank loans are raised mainly in connection with businessactivities and long-term bank loan and bonds payable, which are due mainly
within five years, are raised principally for the purpose of making capital
investments.
Long-term debts with variable interest rates are exposed to interest rate
fluctuation risk, so the Group enters into interest rate swap transactions tomanage such interest rate exposure.
Derivatives are managed in accordance with policies and procedures for risk
assessment (see Note 12 “Derivatives”) and also the Group enters into
derivative transactions only with financially stable financial institutions to
reduce institutions’ credit risk.
Based on a report from the Company and consolidated subsidiaries, theGroup prepares and updates its cash flow plans on a monthly basis to manage
the Group’s liquidity.

Independent Auditor’s Report

36(3) Supplementary explanation of the estimated fair value of financial
instruments
With regard to the below mentioned contract prices etc. of derivatives, thecontract prices themselves do not present the market risk on the derivativetransactions.
Summarized in the table below are the carrying amounts and the estimated fairvalue of financial instruments outstanding at March 31, 2021 and 2020.
Financial instruments for which it is extremely difficult to determine the fairvalue are not included in the table below.
Millions of yen

Carrying

Unrecognized

March 31, 2021

amountFair value

gain/loss

Cash and deposits¥ 9,703¥ 9,703¥

Trade notes and accounts receivable

35,12935,129

−

7,886

7,886

−

Short-term securities

12,20012,200−Investment securities

12,717

12,717−Long-term loans receivable (*1)

1,990

Allowance for doubtful accounts (*2)

(1,475)
515

516

1

(16,547)(16,547)−(9,150)(9,150)−

Short-term bank loans

(740)

(740)

−

Long-term bank loans (*1)

(305)

(305)

−

−

−

−

(210)

(215)

(55)

−

−

−

Electronically recorded monetary claims- operating

Trade notes and accounts payable
Electronically recorded obligations- operating

Bonds payable
Long-term deposits
Derivatives−

Independent Auditor’s Report

37

Millions of yen

Carrying

Unrecognized

March 31, 2020

amountFair value

gain/loss

Cash and deposits¥ 7,804¥ 7,804¥

Trade notes and accounts receivable

35,90535,905

−

6,815

6,815

−

Short-term securities

12,89012,890−Investment securities

9,906

9,904

(2)

Long-term loans receivable

1,166

1,168

2

(15,993)(15,993)−(10,629)(10,629)−(1,464)(1,464)−Long-term bank loans (*1)

(693)

(691)

2

Bonds payable

(50)

(50)

(0)

Long-term deposits

(439)

(453)

(14)

−

−

−

Electronically recorded monetary claims- operating

Trade notes and accounts payable
Electronically recorded obligations- operating
Short-term bank loans

Derivatives−

Thousands of U.S. dollars

Carrying
March 31, 2021
Cash and deposits
Trade notes and accounts receivable$

Unrecognizedaccount

Fair value

87,645$87,645gain/loss$−

317,306

317,306−

71,231

71,231−

Short-term securities

110,198

110,198−

Investment securities

114,864

114,864−

Long-term loans receivable (*1)

17,970Allowance for doubtful accounts (*2)

(13,321)
4,649

4,661

12

(149,464)(149,464)−(82,650)(82,650)−

Short-term bank loans(6,682)(6,682)−Long-term bank loans (*1)(2,755)(2,755)

−

−

−

−

(1,902)(1,944)

(42)

−

−

−

Electronically recorded monetary claims- operating

Trade notes and accounts payable
Electronically recorded obligations- operating

Bonds payable
Long-term deposits
Derivatives

Independent Auditor’s Report38(*1) The carrying amount of current portion of long-term loans receivable amounting¥ 26 million ($236 thousand) which is disclosed in “Other Current Assets” andcurrent portion of long-term bank loans is included in Long-term loans receivable andLong term bank loans respectively.
(*2) The amount is the allowance for doubtful accounts with respect to long-termloans receivable individually.
Methods to determine the estimated fair value of financial instruments and othermatters related to securities and derivative transactions:
(a)

“Cash

and

deposits”,“Tradenotes

andaccounts

receivable”

and“Electronically recorded monetary claims - operating”
Their carrying amounts approximate fair value because of their short maturity.
(b) “Short-term securities”
The fair values of held-to-maturity debt securities are based on quotes provided
by the financial institutions.
The carrying amounts of the other securities than the above debt securities
approximate fair value because of their short maturity.
(c) “Investment securities”
The fair values of marketable securities are based on quoted market prices. The
fair values of debt securities are based on quotes provided by the financial
institutions. For information on securities classified by holding purpose, pleaserefer to Note 3 “Securities”.
(d) “Long-term loans receivable”
The fair value of long-term loans receivable is estimated based on present valueof the total of principal and interest discounted by an interest rate that would beapplied to a similar new loan.
(e) “Trade notes and accounts payable”, “Electronically recorded obligations operating” and “Short-term bank loans”
Their carrying amounts approximate fair value because of their short maturity.

Independent Auditor’s Report

39(f) “Long-term bank loans”
The fair value of long-term bank loans is estimated based on present value of thetotal of principal and interest discounted by an assumed current interest rate forloans with similar terms and remaining maturities. In addition, the carrying
amount of the long-term bank loan for the Trust accompanying introduce of“Trust-type Employee Stockholding Incentive Plan [E-Ship🄬]” approximates fairvalue because its interest rate reflects the market rate.
(g) “Bonds payable”
The fair value of bonds payable is estimated based on present value of the total ofprincipal and interest discounted by an assumed interest rate based on debt’s
maturity and credit risk.
(h) “Long-term deposit”
The fair value of long-term deposit is estimated based on present value of thetotal of principal and interest discounted by an assumed interest rate, if possible,
based on debt’s maturity and credit risk.
(i) “Derivatives”
Please refer to Note 12 “Derivatives”.
Financial instruments for which it is extremely difficult to determine the fairvalue at March 31, 2021 and 2020 consist of the following:Thousands ofMillions of yen

Non-listed equity securities
Long-term deposit

U.S. dollars

2021

2020

2021

¥

¥

1,779

$15,098

1,422

12,831

1,671
1,421

Independent Auditor’s Report

40

The annual maturities of financial assets and investment securities with
contractual maturities subsequent to March 31, 2021 and 2020 were as follows:
Millions of yen
Due in one year
or less

March 31, 2021

Due after one

Due after five

year throughyears throughfive years

ten years¥¥

Cash and deposits¥ 9,703

Trade notes and accounts receivable

35,129

−

−

7,886

−

−

12,200−−Electronicallyrecordedmonetaryclaims - operating
Short-term securities

Total¥ 64,918

¥

−

−

¥

−

−

Millions of yen
Due in one year

March 31, 2020or less

Due after one

Due after five

year throughyears throughfive years

ten years¥¥

Cash and deposits¥ 7,804

Trade notes and accounts receivable

35,905

−

−

6,815

−

−

Short-term securities

12,890−−Investment securities

−

600

−

Electronically recorded monetary claims- operating

Total¥ 63,414

¥

−

600

¥

−

−

Thousands of U.S. dollars
Due after one

Due after fiveDue in one year

year throughyears throughMarch 31, 2021

or less

five years

ten years

Cash and cash equivalents$ 87,645

Trade notes and accounts receivable

317,306−−

71,231−−

110,198−−

Electronically recorded monetary claims- operating
Short-term securities
Total$ 586,380

$

$

−

−

$

$

−

−

Independent Auditor’s Report41

11. Investment Property
The company and certain subsidiaries hold some rental properties including landin Tokyo and other areas (“investment properties”). The amounts of net income
related to investment properties (rental income is recognized in operating
revenue and rental expense is principally charged to operating expenses) were
¥ 765 million ($ 6,906 thousand) and ¥ 952 million for the year ended March 31,
2021 and 2020, respectively.
The carrying amount, changes in such balances and market prices of investment
properties were as follows:
Millions of yen

Carrying amount

Fair value

Increase/
April 1, 2020

¥ 6,912(decrease)¥ 209

March 31, 2021

March 31, 2021

¥ 7,121¥ 19,931
Millions of yen

Carrying amount

Fair value

Increase/
April 1, 2019

¥ 6,980(decrease)¥ (68)March 31, 2020

March 31, 2020

¥ 6,912¥ 10,045

Thousands of U.S. dollars

Carrying amount

Fair value

Increase/
April 1, 2020

$ 62,433(decrease)$ 1,891

March 31, 2021

March 31, 2021

$ 64,324$ 180,028(a) Carrying amount is net of accumulated depreciation and accumulated
impairment losses, if any.
(b) Increase during the year ended March 31, 2021 was mainly due to theexpenditure of land for the relocation of Tohoku branch in amount of ¥ 328
million ($ 2,959 thousand). Decrease during the year ended March 31, 2021
was mainly due to depreciation in an amount of ¥ 134 million ($ 1,213
thousand).

Independent Auditor’s Report

42

Increase during the year ended March 31, 2020 was mainly due to theexpenditure for provision of site for lent in amount of ¥ 32 million. Decreaseduring the year ended March 31, 2020 was mainly due to depreciation in an
amount of ¥ 135 million.
(c) Fair value at March 31, 2021 and 2020 were principally measured based on thereal estate appraisal assessed by the external real estate appraiser. In the casethat there was a certain sales price under a contract, the sales price was adopted
as the fair value.

12. Derivatives
Derivative financial instruments are utilized by the Company principally to
reduce interest rate risk and foreign exchange rate risk. The Company has
established a control environment which includes policies and procedures for risk
assessment and for the approval, reporting and monitoring of transactions
involving derivative financial instruments. The Company does not hold or issue
derivative financial instruments for trading purposes.
At March 31, 2021 and 2020,

the notional amounts and the estimated fair valueof derivative financial instruments, for which deferred hedge accounting has
been applied or has not been applied were none, respectively.

13. Shareholders’ Equity
Changes in common stock and additional paid-in capital have resulted from thefollowing:

Millions of yen

Balance at March 31, 2019
Movement of stock during 2020
Balance at March 31, 2020
Movement of stock during 2021
Balance at March 31, 2021

Number ofCommonCapitalShares issued

Stock

Surplus42,737,668¥ 11,900¥ 11,719

−

−

(40)

42,737,668

11,90011,679−−142¥ 11,900¥ 11,821

42,737,668

Independent Auditor’s Report

43

Thousands of U.S. dollars

Balance at March 31, 2020

CommonCapitalStocksurplus$ 107,487$ 105,492

−

1,282

$ 107,487$ 106,774

Movement of stock during 2021
Balance at March 31, 2021

Increase of capital surplus during 2021 was due to the disposal of treasury stock.
Decrease of capital surplus during 2020 was change in ownership interest due totransactions with non-controlling interests.
The Company adopted 100 shares of common stock as “unit amount of shares”. A
holder of shares representing less than one unit cannot exercise any voting rights
with respect to such shares. However, the holder is entitled to receive dividends
and other distributions. A holder of a fraction of a unit may at any time request
the Company to purchase such shares at the prevailing market price.
The shares held by the Employee Shareholding Association (171,400 shares)
were included in the number of treasury stock at March 31, 2021. They were notapplicable at March 31, 2020.
During 2021, the increase of treasury stock was due to the purchase of odd-lot
shares (538 shares) and the acquisition by the Employee Shareholding
Association (204,400 shares), The decrease of treasury stock were due to thesales of odd-lot shares (52shares), the sales to the Employee Shareholding
Association (204,400shares) and the sales to Shareholding Association from the
Employee Shareholding Association (33,000shares).
During 2020, the decrease of treasury stock was due to the purchase of odd-lot
shares (429 shares).

14. Research and Development
Research and development expenditure which is included in “Selling, generaland administrative expenses” were ¥ 1,509 million ($ 13,634 thousand) and¥ 1,479 million for the years ended March 31, 2021 and 2020, respectively.

Independent Auditor’s Report44

15. Income Taxes
The Company and its domestic subsidiaries are subject to several taxes based on
income, which in the aggregate resulted in a statutory tax rate of approximately
30.58% for the years ended March 31, 2021 and 2020. Foreign subsidiaries are
subject to income taxes of the countries in which they operate.
The tax effects of significant temporary differences which resulted in deferred
tax assets and liabilities at March 31, 2021 and 2020 were as follows:
Thousands ofMillions of yen

U.S. dollars

2020

2021

2021
Deferred tax assets:
Tax loss carry forward

¥

175

¥

230

$

1,582

Allowance for doubtful accounts

380

237

3,429

Accrued Bonuses

762

730

6,882

Provision for product warranties

269

300

2,426

Accrued corporation enterprise tax

155

135

1,399

Loss on valuation of inventories

142

146

1,282

Forecast of construction cost

40

41

358

Net defined benefit liabilities

101

295

915

200

256

1,806

231

231

2,090

438

33

3,961

Excess depreciation

385

344

3,481

Other

703

702

6,350

3,981

3,680

35,961

(174)

(214)

(1,570)(928)(1,111)(8,385)

Valuation allowance sub-total(1,102)(1,325)(9,955)

Total deferred tax assets¥2,879¥2,355$ 26,006

Fixed assets – elimination ofintercompany profits
Loss on impairment of long-lived assets
Loss on valuation of investment for
subsidiaries and affiliates

Deferred tax assets sub-total
Less valuation allowance
relevant to tax loss carryforward
Less valuation allowance
relevant to total deductible
temporary differenceIndependent Auditor’s Report

45

Thousands ofMillions of yen

U.S. dollars

2021

2020

2021

¥ (2,179)¥ (1,134)$ (19,683)(1,369)(1,380)(12,365)(1,311)(1,131)(11,846)

(51)

(51)

(459)

(4,910)(3,696)(44,353)¥ (2,031)¥ (1,341)$ (18,347)

Deferred tax liabilities:
Unrealized gain on investment securities
Reduction reserve for fixed assets
Unrealized gain on subsidiaries’ fixed
assets by revaluation at the
beginning of consolidation
Other
Total deferred tax liabilities
Net deferred tax assets (liabilities)(Note) Tax loss carry forward and related deferred tax assets by expiration
periods were as follows.
At March 31, 2021
Millions of yen

After 1After 2After 3After 4

year

year

year

year

throughthroughthroughthrough

2years

3years

4years

5years

33

5

60

57

20

−

175

(33)

(5)

(60)

(57)

(19)

−

(174)

−

−

−

−

1

−

1

Within
1
year

After
5

Total

years

Tax losscarryforwardValuation
allowance
Deferredtax assets

46

Independent Auditor’s Report

At March 31, 2020
Millions of yen

After 1After 2After 3After 4

year

year

year

year

throughthroughthroughthrough

2years

3years

4years

5years

67

34

7

62

60

−

230

(67)

(34)

(7)

(62)

(44)

−

(214)

−

−

−

−

16

−

16

After 1After 2After 3After 4

year

year

year

year

throughthroughthroughthrough

2years

3years

4years

5years

296

48

543

514

181

−

1,582

(296)

(48)

(543)

(514)

(169)

−

(1,570)

−

−

−

−

12

−

12

Within
1
year

After
5

Total

years

Tax losscarryforwardValuation
allowance
Deferredtax assets
At March 31, 2021
Thousands of U.S. dollars

Within
1
year

After
5

Total

years

Tax losscarryforwardValuation
allowance
Deferredtax assets(a) Tax loss carry forward is shown as an amount multiplied by the statutory tax
rate.
(b) The deferred tax assets of ¥ 1 million ($ 12 thousand) and ¥ 16 million wererecognized for the balance of tax loss carry forward (an amount multiplied by
the statutory tax rate) of ¥ 175 million ($ 1,582 thousand) and ¥ 230 million
at March 31, 2021 and 2020, respectively.
Valuation allowance has not been recognized in the portion of tax loss
carryforward based on judgement of recoverability through future taxable
income.

Independent Auditor’s Report

47

The reconciliation between the statutory tax rate and the effective income tax
rate for the year ended March 31, 2021 and 2020 were as follows:
2021
Statutory tax rate

2020

30.58%−

Non-deductible expenses for income tax purpose

0.40

−

Non-taxable dividend income(0.39)−

Inhabitant per capita tax

0.99

−

Tax credit(1.33)−

Change in valuation allowance(5.11)−

Equity in earnings of affiliated companies

0.05

−

Other

1.19

−

26.38%−

Effective tax rate

The reconciliation between the statutory tax rate and the effective income tax rate forthe year ended March 31, 2020 was omitted because the difference is less than 5% of
the statutory income tax rate.

Independent Auditor’s Report48

16. Comprehensive Income
The components of other comprehensive income for the year ended March 31, 2021
and 2020 were as follows:
Thousands ofMillions of yen

2021

U.S. dollars

2020

2021

Unrealized gain on available-for-sale securities:
Gains (Losses) arising during the year

¥

3,400

Reclassification adjustments for gain (loss)¥(2,627)$30,717

22

(704)

196

Amount before income tax effect

3,422(3,331)30,913

Income tax effect(1,045)

1,007(9,441)

Total

¥

2,377

¥

(2,324)$

21,472Foreign currency translation adjustments:
Adjustments arising during the year¥

Reclassification adjustments for gain (loss)
Amount before income tax effect
Income tax effect
Total

(74)

¥

60

$

(670)

−

6

−

(74)

66

(670)

−

−

−

¥

(74)

¥

506

¥

66

$

(670)

(418)

$

4,571

Remeasurements of defined benefit plans:
Gains (Losses) arising during the year¥

Reclassification adjustments for gain (loss)

195

137

1,761

Amount before income tax effect

701

(281)

6,332

Income tax effect

(215)

86

(1,938)

Total

¥

486

¥

(195)

$

4,394

¥

(50)

¥

72

$

(455)

Share of other comprehensive income in affiliates
accounted for by equity method:
Gains (Losses) arising during the year
Reclassification adjustments for gain (loss)

27

Total
Total other comprehensive income

¥
¥

(23)
2,766

241

−
¥

72

$

(214)

¥ (2,381)$

24,982

49

Independent Auditor’s Report

17. Provision of reserve for Losses on Construction Contracts
Provision of reserve for losses on construction contracts included in Cost of Sales
were ¥ 97 million ($ 876 thousand) and ¥ 55 million for the years ended March
31, 2021 and 2020, respectively.

18. Supplemental cash flow information
Assets and liabilities of SATRAC ENGINEERING PRIVATE LIMITED (“SATRAC”)
that have been included in the scope of consolidation as a result of the purchase of allshares, the purchase amount of shares and the expenditures associated with thepurchase of shares were as follows:
Thousands ofMillions of yen

Current assets
Non-current assets¥

583

U.S. dollars

$

5,268

1,165

10,521807

7,287

Current liabilities(526)(4,749)Non-current liabilities(203)(1,830)Purchase amount of shares of SATRAC

1,826

16,497

Cash and cash equivalents of SATRAC

(4)

(40)

¥ (1,822)$ (16,457)

Goodwill

Expenditures associated with the purchase of shares

19. Business Combination(Business combination through acquisitions)(a) Summary of the business combination(i) Name of the acquired company and its business description
Name: SATRAC ENGINEERING PRIVATE LIMITED (“SATRAC”)
Business description: Manufacturing and sales of specialty trucks

Independent Auditor’s Report50(ii) Major reason for the business combination
SATRAC is a manufacturer of specialty trucks such as tippers, trailers andtankers located in Bengaluru, South India and is expanding its business toearn the trust of major truck manufacturers and trailer users through its
high quality of products, technical capabilities and service system. In recent
years, SATRAC is working on further improvement of the quality of products
to have introduced Japanese style production control system and IT based
quality control system.
The market of specialty truck in India is temporarily stagnant due to making
the loan of financial institutions stricter in the last year and the pandemic of
COVID-19. However, the demand of the vehicles for construction andlogistics is expected to expand through the implementation of the large
infrastructure-building projects and the growth of logistics and steel area.
And, the demand of the vehicles for environment such as garbage truck isalso expected to expand by the increase of garbage due to the growth of
population and economic growth and “Clean India” and “Smart City” politics
that India government drives forward.
In this situation, the Group can strengthen the operating base in India
through the securement of the outstanding manufacturing base andcustomer relationship by grouping SATRAC and has a policy to expand anddevelop the specialty truck business in India utilizing the business andtechnical platform that the Group has been cultivating.
(iii) Date of the business combination
September 9, 2020
The date of acquisition for preparing the consolidated financial statements is
September 30, 2020.
(iv) Legal form of the business combination
Share acquisition(v) Name of the acquired company after the business combination
Not changed(vi) Ratio of the acquired voting rights
100%(vii) Basis for determination of the acquiring company
The Group has acquired the 100% of the shares of SATRAC. Therefore,
SATRAC has become the consolidated subsidiary of the Company.

Independent Auditor’s Report

51(b) Period for which the operation of the acquired company is included in theaccompanying consolidated financial statements
From October 1, 2020 to March 31, 2021(c) Acquisition cost and details of the consideration by its classThousands ofMillions of yen

Consideration for acquisition

by cash¥1,826

U.S. dollars$

16,497(d) Major acquisition-related costs and their natures
Thousands ofMillions of yen

Advisory fees and commissions etc.

¥

U.S. dollars

106

$

961

(e) Amount of goodwill recognized, reasons for recognition and method and period ofamortization of goodwill(i) Amount of goodwill recognized¥ 807 million ($ 7,287 thousand)(ii) Reasons for recognition
Goodwill arose from expected excess earnings power from businessdevelopment in the future.
(iii) Method and period of amortization of goodwill
Goodwill is amortized on a straight-line basis over 10 years.
(f) Amounts of the assets acquired and the liabilities assumed on the businesscombination date and their major details
Thousands ofMillions of yen

Current assets¥

Non-current assets

583

U.S. dollars

$

1,165

5,268
10,521

Total assets

¥

1,748

$

15,789Current liabilities

¥

526

$

4,749

Non-current liabilities
Total liabilities

203
¥

729

1,830
$

6,579

Independent Auditor’s Report

52(g) Amounts allocated to the intangible assets except for goodwill, their major details
and weighted average period of amortization
Thousands ofPeriod of

U.S. dollars

amortization

3,995

16years286

5months

Millions of yen

Customer-related assets¥

442

Backlog of orders$

32(h) If the business combination had been completed at the beginning of the current
year, the estimated financial effects on the consolidated statement of income forthe current year would have been as follows.
Thousands ofMillions of yen

Net sales
Operating income¥

717

U.S. dollars

$

6,476

54

490

(Method of calculating estimated financial effects)
The estimated financial effects are the differences between net sales andprofit/loss information calculated assuming that the business combination had
been completed at the beginning of the current year, and net sales and profit/loss
information of the acquired company in the consolidated statement of income.
This note is unaudited.

20. Segment Information(1) Description of reportable segments
The Group’s reportable segments are those for which separately financial
information is available and regular evaluation by the Board of Directors is being
performed in order to decide how resources are allocated among the Group. The
Group conducts several types of businesses including specialty truck business,environmental equipment and systems and real estate rental business. The
Company and its consolidated subsidiaries are engaged in each business as anindependent management unit. The Group consists of three reportable segments,
which are “Specialty truck business” (Industry A), “Environmental equipment
and systems business” (Industry B) and “Real estate rental business” (Industry
C). Industry A manufactures and distributes specialty trucks such as dump
trucks, tailgate lifters, tank trucks, refuse trucks, trailers, etc. Industry B
manufactures and distributes recycle facilities, including maintenance and53

Independent Auditor’s Reportconsignment business. Industry C manufactures multistory parking equipment
and offers operating services for toll parking and real estate rental services.
(2) Methods of measurement for the amounts of sales, profit, assets, liabilities
and other items for each reportable segment
The accounting policies of each reportable segment are consistent to those
disclosed in Note 2, “Summary of Significant Accounting Policies”. Intersegment
sales or transfers are based on the market prices.
(3) Information about sales, profit, assets and other items for the years ended
March 31, 2021 and 2020 are as follows:
Millions of yen
Reportable segments
Consolidated(Note a)(Note b)Industry

IndustryA

BC¥ 99,534¥ 11,028¥ 6,608¥ 117,170

－

17

0

524

541

(541)

－

99,551

11,0287,132

117,711(541)

117,170

Segment profit

6,881

1,995

1,140

10,016

(936)

9,080

Segment assets

82,8497,833

12,482

103,164

39,577

142,741

2,346

68

373

2,787

1

2,788

2,334

41

669

3,044

－

3,044

2021

Total

Reconciliations

Industry

Net sales:
External customers
Intersegment sales or transfers
Total

¥

117,170

Other items:
Depreciation
Increase in tangible andintangible fixed assets(a) Reconciliations of segment profit in an amount of ¥ (936) million which
consists of elimination of intersegment transactions in an amount of ¥ 12 million
and corporate expenses which are not allocated to each reportable segment in an
amount of ¥ (948) million. Corporate expenses are mainly general administrative
expenses not attributable to any other reportable segments.
Reconciliations of segment assets are surplus fund (cash and deposits andsecurities) and long-term investment fund (investment securities) of theCompany.
(b) Segment profit is reconciled with operating income in the consolidated
statements of income.

Independent Auditor’s Report

54

Millions of yen
Reportable segments
Consolidated(Note a)(Note b)Industry

IndustryA

B

C¥ 102,035¥ 11,472¥ 6,667¥ 120,174

－

42

1

522

565

(565)

－

102,077

11,4737,189

120,739(565)

120,174

Segment profit

6,417

1,814

1,143

9,374

(880)

8,494

Segment assets

80,904

8,244

11,810100,958

35,621

136,579

2,168

59

368

2,595

1

2,596

3,626

108

239

3,973

－

3,973

2020

Total

Reconciliations

Industry

Net sales:
External customers
Intersegment sales or transfers
Total

¥

120,174

Other items:
Depreciation
Increase in tangible andintangible fixed assets(a) Reconciliations of segment profit in an amount of ¥ (880) million which
consists of elimination of intersegment transactions in an amount of ¥ 9 million
and corporate expenses which are not allocated to each reportable segment in an
amount of ¥ (889) million. Corporate expenses are mainly general administrative
expenses not attributable to any other reportable segments.
Reconciliations of segment assets are surplus fund (cash and deposits andsecurities) and long-term investment fund (investment securities) of theCompany.
(b) Segment profit is reconciled with operating income in the consolidated
statements of income.

55

Independent Auditor’s ReportThousands of U.S. dollars
Reportable segments
Consolidated(Note a)(Note b)Industry

IndustryA

B

C$ 899,051$ 99,612$ 59,690$ 1,058,353－$ 1,058,353

156

4

4,731

4,891

(4,891)－

899,207

99,61664,421

1,063,244(4,891)

1,058,353

Segment profit

62,15318,01810,30390,474(8,455)82,019Segment assets

748,347

70,752

112,743931,842

357,481

1,289,323

21,194620

3,366

25,180

6

25,18621,083366

6,046

27,495－27,495

2021

Total

Reconciliations

Industry

Net sales:
External customers
Intersegment sales or transfers
Total

Other items:
Depreciation
Increase in tangible andintangible fixed assets(a) Reconciliations of segment profit in an amount of $ (8,455) thousand which
consists of elimination of intersegment transactions in an amount of $ 111
thousand and corporate expenses which are not allocated to each reportablesegment in an amount of $ (8,566) thousand. Corporate expenses are mainly
general administrative expenses not attributable to any other reportablesegments.
Reconciliations of segment assets are surplus fund (cash and deposits andsecurities) and long-term investment fund (investment securities) of theCompany.
(b) Segment profit is reconciled with operating income in the consolidated
statements of income.
(4) Amortization and unamortized balances of goodwill by reportable segment
for the year ended March 31, 2021 are as follows:
Millions of yen

2021

Industry

Industry

IndustryA

B

C

Reconciliations

Amortization

¥ 40

¥ －

¥ －

¥ －

Unamortized balances

803

－

－

－

Consolidated
¥

40
803

56

Independent Auditor’s ReportThousands of U.S. dollars
Industry

Industry

Industry

2021

A

B

C

Amortization$

Unamortized balances

Reconciliations

Consolidated

362

$ －

$ －

$ －

$ 362

7,257

－

－

－

7,257

There were not applicable for amortization and unamortized balances of goodwill forthe year ended March 31, 2020.

21. Subsequent Event
The following appropriations of the Company’s retained earnings in respect of
the year ended March 31, 2021 were as proposed by the Board of Directors andapproved by the shareholders at the annual general meeting held on June 25,
2021.
Thousands ofAppropriations
Cash dividends of ¥ 24 ($ 0.22) per share

Millions of yen¥

958

U.S. dollars

$

8,656

Independent Auditor’s Report57Independent Auditor’s Report58Independent Auditor’s Report59Independent Auditor’s Report60Board of Directors andStatutory
Auditors
Corporate
Information
CORPORATE INFORMATION
Kyokuto Kaihatsu Kogyo Co., Ltd.
Established: June 1, 1955
Paid-in Capital: 11,899,867,400 yen (March 31, 2021)
Number of Employees: consolidated 3,050; non-consolidated 1,089 (March 31, 2021)
Headquarters:
6-1-45, Koshienguchi, Nishinomiya-shi, Hyogo, 663-8545 Japan
Tel.+81-798-66-1000, Fax.+81-798-66-8146
Tokyo Office (Overseas Business Department):
3-15-10, Higashi-shinagawa, Shinagawa-ku, Tokyo, 140-0002, Japan
Tel.+81-3-5781-9828, Fax+81-3-5781-3431
Plants:Yokohama Plant
Occupies 96,657 ㎡
Located in Yamato, Kanagawa (Japan)
Nagoya Plant
Occupies 109,611 ㎡
Located in Komaki, Aichi (Japan)
Miki Plant
Occupies 100,728 ㎡
Located in Miki, Hyogo (Japan)
Fukuoka Plant
Occupies 43,503 ㎡
Located in Iizuka, Fukuoka (Japan)
Head Plant of NIPPON TREX Co., Ltd.
Occupies 125,285 ㎡
Located in Toyokawa, Aichi (Japan)
Otowa Plant of NIPPON TREX Co., Ltd.
Occupies 20,889 ㎡
Located in Toyokawa, Aichi (Japan)
Mito Plant of NIPPON TREX Co., Ltd.
Occupies 36,367 ㎡
Located in Toyokawa, Aichi (Japan)
Plant of KYOKUTO KAIHATSU (KUNSHAN) MACHINERY CO., LTD.
Occupies 83,140 ㎡
Located in Kunshan, Jiangsu (China)
Plant of SATRAC ENGINEERING PRIVATE LIMITED
Occupies 24,292 ㎡
Located in Nidavanda Village, Nelmangala, Bangalore (India)
Plant of PT KYOKUTO INDOMOBIL MANUFACTURING INDONESIA
Occupies 20,028 ㎡
Located in Purwakarta, Jawa Barat (Indonesia)

61

Board of Directors and Statutory Auditors

BOARD OF DIRECTORS AND STATUTORY AUDITORS
Kazuya Takahashi,

Representative Director, Chairperson

Tatsuya Nunohara,

Representative Director, President, CEO

Takeo Norimitsu,

Director, Associate Senior Executive Officer

Kazuhiko Harada,

Director, Associate Senior Executive Officer

Sadanobu Kato,

Director, Associate Senior Executive Officer

Noboru Horimoto,Director,Executive Officer

Yoji Kido,

Outside Director

Akira Michigami,

Outside Director

Harumi Sugimoto,Standing Auditor

Soichiro Ochi,

AuditorYoshihiko Norikura,

Outside Corporate Auditor

Kuniaki Fujiwara,

Outside Corporate Auditor

Mitsuhiko Nakashima,

Associate Senior Executive Officer

Teruyuki Kizu,

Associate Senior Executive Officer

Akira Sakurai,

Executive Officer

Yukihiro Hosozawa,

Executive Officer

Shinichi Takahama,Executive Officer

Yutaka Yoshida,

Executive Officer

Masashi Ushio,

Executive Officer

Shinsaku Chijiiwa,

Executive Officer

Tatsuya Nomura,

Executive Officer

Keisuke Iwata,

Executive Officer

62