SEIKITOKYU KOGYO CO., LTD.
Non Consolidated Financial Statements forthe year ended March 31, 2017

This document has been translated from the original Japanese as a guide for non-Japanese readers. It may
contain forward-looking statements based on a number of assumptions and beliefs made by management inlight of information currently available. Actual financial results may differ materially depending on a numberof factors, including changing economic conditions, legislative and regulatory developments, delay in new
product and service launches, and pricing and product initiatives of competitors.

SEIKITOKYU KOGYO CO., LTD
Non Consolidated Balance Sheetfor the year ended March 31, 2017

U.S. dollars

Yen(millions)
2017

AssetsU.S. dollars(thousands)(Note 3)2017

Liabilities and Net assets(thousands)(Note 3)2017

Current liabilities:

Current assets:
Cash and deposits
Trade receivables:
Notes
Accounts
Allowance for doubtful accounts
Net trade receivables

Yen(millions)2017¥

12,062$

107,518

1,424
18,105(3)
19,526

12,690161,382(26)
174,046

Deferred tax assets-current (Note 9)Inventories:
Cost on uncompleted construction contracts
Real estate for sale
Raw materials and supplies
Total inventories

991

8,833

8,043
1
289
8,333

71,694
5
2,576
74,275

Short-term loans receivable
Other current assets
Total current assets

21
2,694
43,627

188
24,003388,863

18,637

166,119

Intangible assets

175

1,563

Deferred tax assets-non-current (Note9)

259

2,312

Property, plant and equipment (Notes 3 and 4)

Short-term loans payable
Trade payables:
Notes
Accounts
Total trade payables

¥

1,958

$

17,454

8,503
11,446
19,94975,791102,022
177,813

5,334
68
230
1,133
1,183
29,85547,547603
2,050
10,096
10,548266,111

4,000
3,080
560
37,49535,65427,453
4,989
334,207

Shareholders’ equity (Note 6)
Common stock
Capital surplus
Retained earnings
Treasury stock - 47,808 shares
Total shareholders’ equity

2,000
500
23,789(24)
26,265

17,827
4,457
212,045(211)
234,118

Unrealized gain on investment securities
Total net assets

26
26,291

229
234,347

Advances received on uncompleted construction contracts
Provision for warranties for completed construction
Provision for loss on construction contracts
Provision for bonuses
Other current liabilities
Total current liabilities

Long-term loans payable
Provision for retirement benefits (Note 4)
Other liabilities
Total liabilities

Net assets:
Investments and long-term loans:
Investment securities:
Subsidiaries and affiliates
Other securities
Long-term loans receivable
Long-term trade receivables (Note 5)
Guarantee deposits and other investments
Allowance for doubtful accounts (Note 5)
Total investments and long-term loans
Total assets

307
257
32
3
511
(21)
1,088
¥

63,786

2,732
2,289
283
23
4,556
(187)
9,696
$

568,554

Total liabilities and net assets

See accompanying notes to non consolidated financial statements.

1¥

63,786$

568,554SEIKITOKYU KOGYO CO., LTD
Non Consolidated Statement of Income
for the year ended March 31, 2017

U.S. dollars(thousands)(Note3)2017

Yen(millions)2017
Completed construction contracts:
Net sales
Cost of sales
Gross profit¥

49,53044,6704,860$

441,483
398,168
43,315

Finished goods:
Net sales
Cost of sales
Gross profit

20,396
15,691
4,705

181,798
139,858
41,940Total:Net sales
Cost of sales
Gross profit

69,92660,361
9,565

623,281
538,026
85,255

Selling, general and administrative expenses:
Operating income

3,796
5,769

33,832
51,424

Other income (Note 7):
Interest and dividends
Other
Subtotal

6
282
288

54
2,511
2,565

Other expenses (Note 8):
Interest
Other
Subtotal

21
324
345

187
2,891
3,078

5,712

50,911

370
77

3,299
683

Income before income taxes
Income taxes:
Current
Deferred
Net income

¥

2

5,265

$

46,929SEIKITOKYU KOGYO CO., LTD.
Non Consolidated Statement of Changes in Net Assets
for the year ended March 31, 2017

Shareholders' equity (Notes 3,7)
Capital stock

Capital surplus

Retained earnings

Total shareholders'equityTreasury stock(Millions of yen)
Balance at April 1, 2016

¥

2,000

¥

500

¥

19,211¥(24)¥

21,687

Changes during the year
Dividend of surplus

(686)

(686)

Net income for the period

5,265

5,265
(0)

Purchase of treasury stock(0)

Disposal of treasury stock
Net changes of items other thanshareholders' equity
Total changes during period
Balance as of March 31, 2017

¥

2,000

Accumulated othercomprehensive
Unrealized gain on
investment securities¥

500

Total net assets(Millions of yen)
Balance at April 1, 2016

¥

12

¥

21,699Changes during the year
Dividend of surplus(686)

Net income for the period

5,265

Purchase of treasury stock(0)

Disposal of treasury stock
Net changes of items other thanshareholders' equity
Total changes during period
Balance as of March 31, 2017

¥

14

14

14
26

4,592
26,291

¥

3

¥

4,578
23,789

¥

(0)
(24)

¥

4,578
26,265SEIKITOKYU KOGYO CO., LTD.
Non Consolidated Statement of Changes in Net Assets
for the year ended March 31, 2017

Shareholders' equity (Notes 3,7)
Capital stock

Capital surplus

Retained earnings

Total shareholders'equityTreasury stock(Thousands of U.S. dollars)
Balance at April 1, 2016$

17,827

$

4,457

$

171,233

$

(210)

$

193,307

Changes during the year
Dividend of surplus(6,117)

Net income for the period

46,929(6,117)46,929Purchase of treasury stock

(1)

(1)

Disposal of treasury stock
Net changes of items other thanshareholders' equity
Total changes during period
Balance as of March 31, 2017$17,827

Accumulated othercomprehensive
Unrealized gain on
investment securities

$

4,457

Total net assets(Thousands of U.S. dollars)
Balance at April 1, 2016

$

110

$

193,418

Changes during the year
Dividend of surplus(6,117)

Net income for the period

46,929Purchase of treasury stock(1)

Disposal of treasury stock
Net changes of items other thanshareholders' equity

119

Total changes during period
Balance as of March 31, 2017

119

119
$

229

40,931$

234,347

4

40,812$

212,045

(1)
$

(211)

40,812$

234,118

Notes to Non Consolidated Financial Statements

1.

Summary of Significant Accounting Policies(a) Basis of Presenting Non Consolidated Financial Statements
The accompanying non consolidated financial statements have been prepared from the accounts
maintained by the SEIKITOKYU KOGYO CO., LTD. (the “Company”) in accordance with theprovisions set forth in the Financial Instruments and Exchange Act of Japan and the Companies Act ofJapan and in conformity with accounting principles generally accepted in Japan, which may differ insome material respects from accounting principles generally accepted and applied in countries andjurisdictions other than Japan.
Certain items presented in the Japanese non consolidated financial statements have been reclassified
for presentation solely for the convenience of readers outside Japan.
In addition, the notes to the non consolidated financial statements include certain information which is
not required under accounting principles generally accepted in Japan but is presented herein as
additional information.
(b) Method of Accounting for Construction Contracts
The Company recognizes revenue and cost by applying the percentage of completion method for theconstruction projects for which the percentage of completion can be reliably estimated at the end of
the reporting period. To estimate the progress of such construction project, method to calculate thepercentage of the cost incurred to the estimated total project cost (i.e. cost to cost method) is applied.
For other construction projects, the completed-contract method is applied.
(c) Inventories
Inventories are stated at cost, cost being determined by the identified cost method for real estate forsale and cost on uncompleted construction contracts or by the moving average method for raw
materials and supplies, and adjusted for any substantial permanent decline in value.
Each item of inventory is initially recorded at acquisition cost, and when net realizable value is lessthan the cost (i.e., profitability of inventory has declined), the amount of cost is reduced to net
realizable value.
(d) Investments
Investments in subsidiaries and affiliates are carried at cost. The cost of subsidiaries and affiliates soldis computed based on the moving average method.
Other securities (securities which are neither trading, held-to-maturity securities nor investments in
subsidiaries and affiliates) with market value are carried at the market value on the balance sheet date.
The difference between the acquisition cost and the market value of other securities is recognized as
unrealized gain on investment securities in the balance sheet, net of tax effect. Non-marketablesecurities classified as other securities are carried at cost. The cost of other securities sold is computed
based on the moving average method.
(e) Property, Plant and Equipment (Excluding leased assets)
The Company computes depreciation of Property, plant and equipment by the declining balancemethod, however, buildings (excluding structures attached to the buildings) and building facilities and5structures acquired on or after April 1, 1998 are depreciated by the straight-line method. Rates fordepreciation are based on the estimated useful lives of the assets according to their general class, typeof construction, and use.

The estimated useful lives are principally as follows:
Buildings and structures ...................................................... 7 to 50 years
Machinery, equipment and vehicles .................................... 5 to 7 years(f)Intangible Assets (Excluding leased assets)
Computer software for internal use is amortized by the straight-line method over the estimated useful
lives (5 years).

(g) Leases
Depreciation of leased assets under finance leases that do not transfer ownership of the leased assets tothe lessee is calculated by the straight-line method over the lease period with a residual value of zero.
(h) Income Taxes
Deferred tax assets have been recognized in the non consolidated financial statements for the year
ended March 31, 2017 with respect to the differences between the financial reporting and tax bases ofassets and liabilities, and were measured using the enacted tax rates and laws which will be in effectwhen the differences are expected to be reversed. Valuation allowances are provided for the deferred
tax assets that are not considered to be recoverable.
(i)

Allowance for Doubtful Accounts
General provision for doubtful accounts is recorded by applying a certain reserve percentage of thereceivables based on the experience from past transactions. When considered necessary, specificreserves are provided based on the assessment of individual receivables.

(j)

Provision for Warranties for Completed Construction
Provision for warranties for completed construction is recorded at an estimated amount, based on theactual level of defects and related warranty costs stipulated in completed construction contracts.

(k) Provision for Loss on Construction Contracts
Provision for loss on construction contracts is recorded for estimated future losses related to theconstruction contracts in progress.
(l)Provision for Bonuses
Provision for bonuses is stated at an estimated amount of bonuses which the Company is obliged to
pay to its employees.

(m) Provision for Retirement Benefits
Provision for retirement benefits for employees has been recorded mainly at an amount calculated
based on the retirement benefit obligations and the fair values of the pension plan assets as of thebalance sheet date, as adjusted for unrecognized actuarial gain or loss. The retirement benefit
obligations are allocated to each period by the straight-line method over the estimated years of serviceof the eligible employees.
6Prior service cost is amortized by the straight-line method over a period of 13 years, which is shorter
than the average remaining years of service of the employees.
Actuarial gains and losses are amortized from the following year in which the gains or losses arerecognized. Amortization is primarily calculated by the straight-line method over 10 years, which isshorter than the average remaining years of service of the employees.
(n) Consumption Taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes.
(o) Consolidated Taxes
Consolidated tax return filing system.

2.

Additional Information
Effective from the fiscal year, the Company has applied the “Revised Implementation Guidance on
Recoverability of Deferred Tax Assets” (ASBJ Guidance No.26, March 28, 2016).

3.

Basis of Translation
The non consolidated financial statements as of and for the year ended March 31, 2017 presented herein
are denominated in Japanese yen, and solely for the convenience of the readers, have been translated
into U.S. dollars at the rate of ¥112.19 = U.S.$1, the approximate rate of exchange in effect on March
31, 2017. This translation should not be construed as a representation that any of the yen amounts could
be converted into U.S. dollar amounts at the above or any other rate.

4.

Property, Plant and Equipment
Property, plant and equipment at March 31, 2017 were as follows:

Buildings and structures
Machinery, equipment, vehicles, tools, furniture andfixtures
Land
Construction in progress
Subtotal
Less: Accumulated depreciation
Net property, plant and equipment

7

Yen(millions)
2017

U.S. dollars(thousands)
2017¥ 7,054$ 62,877

15,46014,033110
36,657(18,020)¥ 18,637

137,800
125,084977
326,738(160,620)$ 166,118

5.

Collateral Assets and Corresponding Liabilities
The following assets are provided as collateral for the borrowings at March 31, 2017:

Buildings
Land
Total

Yen
(millions)
2017

U.S. dollars(thousands)
2017

¥ 494
11,053¥11,547$ 4,399
98,522$102,921

Yen(millions)
2017

U.S. dollars(thousands)
2017¥1,0004,000¥5,000$ 8,91335,654$ 44,567

Corresponding Liabilities at March 31, 2017

Short-term loans payable
Long-term loans payable
Total

6.

Receivables Fully Offset Against Allowance for Doubtful Accounts

Long-term trade receivables

7.

Yen(millions)
2017

U.S. dollars(thousands)
2017

¥532

$4,740Shareholders’ Equity
In accordance with the Companies Act of Japan (the “Act”), the Company provides legal retained
earnings, which is included in retained earnings. The Act requires that an amount equal to at least 10%of the amounts to be disbursed as distribution of earnings be appropriated to the legal retained earnings
until the total of the legal retained earnings plus the legal capital surplus or either of them equals 25% of
the common stock account.
The Act further provides that neither legal capital surplus nor the legal retained earnings is available forthe payment of dividends, but either may be used to reduce or eliminate accumulated deficits by aresolution of the shareholders, or may be transferred to the common stock account by a resolution of theshareholders. The Act also provides that, if the total amount of legal capital surplus and the legal
retained earnings exceeds 25% of the amount of common stock, the excess may be distributed to theshareholders, either as a return of capital or as dividends, subject to the approval of the shareholders.

88.

Other Income
The composition of ”Other income-Other” for the year ended March 31, 2017 is as follows:

Interest income
Dividend income
Rent income
Fiduciary obligation fee
Gain on sales of non-current assets
Subsidy income
Other
Total

9.

Yen
(millions)
2017

U.S. dollars(thousands)
2017

¥ 0
6
26
150
82
15
9
¥ 288

$ 3
51
233
1,336
728
135
79
$ 2,565

Other Expenses
The composition of ”Other expenses-Other” for the year ended March 31, 2017 is as follows:

Interest expenses
Guarantee commission
Composition expenses for syndicate loan
Loss on sales of non-current assets
Loss on retirement of non-current assets
Penalties
Other
Total

9

Yen
(millions)
2017

U.S. dollars(thousands)
2017

¥ 21
18
66
57
20
138
26
¥345

$187
162
586
512
175
1,228
228
$3,078

10. Income Taxes
The tax effects of temporary differences which gave rise to significant portions of deferred tax assets
and deferred tax liabilities as at March 31, 2017 are summarized as follows:Yen(millions)2017
Deferred tax assets:
Allowance for doubtful accounts
Provision for retirement benefits
Loss on valuation of golf club membership
Impairment loss
Provision for bonuses
Penalties
Loss carried forward
Other
Gross deferred tax assets
Less: Valuation allowances
Total deferred tax assets¥

Deferred tax liabilities:
Asset retirement obligations
Total deferred tax liabilities
Net deferred tax assets¥

10

U.S. dollars(thousands)
2017

170
1,097
130
733
350
147
4,097
339
7,063
(5,808)1,255$ 1,517
9,781
1,157
6,531
3,116
1,306
36,5183,021
62,947(51,770)
11,117

4
4

32
32

1,251

$ 11,085

11. Related Party Transactions
Transactions with related party, for the year ended March 31, 2017 are as follows:(a) Name(b) Type(c) Relationship(d) Percentage of equity ownership held by
the Company

Yen(millions)
Description oftransaction or balance

U.S. dollars(thousands)
AmountAmount¥3,007$26,803

492

4,385

341

3,048

839

7,480

600

5,348

78

699

1,627

14,504

1,050

9,356

(a) TOKYU CONSTRUCTION CO., LTD Transactions: (Note 1)(b) Principal shareholder
Completed construction(c) Interlocking directors and undertaking
contracts-Net sales
construction (Note 2)
Balances: (Note 1)(d) (22.1%) (directly)
Accounts receivable from:electronically recordedmonetary claims-operating
Completed construction
contracts(a) TOKYU CORPORATION CO., LTD(b) Principal shareholder(c) Interlocking directors and undertaking
construction (Note 4)(d) (3.8%) (directly)(a) SHINSEIKI KOGYO CO., LTD.
(b) Subsidiaries(c) Interlocking directors and distributing
paving materials (Note 5)(d) 100% (directly)

Advances received on
uncompleted construction
contracts
Transactions: (Note 3)
Land transfer
Balances: (Note 3)
Gain on sales of non-current
assetsTransactions: (Note 1)
Finished goods-Net sales
Balances: (Note 1)
Accounts receivable

Note 1: Consumption taxes are not included in the transaction amounts, however, balances areaccounted for with consumption taxes
Note 2: Construction services with related parties are carried out on an arm’s-length basis consistent
with third party transactions, presenting a quotation for each of constructions.
Note 3:

Both the transaction amounts and balances exclude consumption taxes.

Note 4:

Conditions of transactions such as pricing are determined based on the negotiations taking
market prices into account.

Note 5: Unit prices are determined taking market prices and total costs into account.

1112. Monetary Receivables and Monetary Payables to Affiliated Companies

Short-term monetary receivables
Long-term monetary receivables
Short-term monetary liabilities

Yen(millions)
2017

U.S. dollars(thousands)
2017¥2,29298
2,118$20,432878
18,875Yen(millions)
2017

U.S. dollars(thousands)
2017¥5,4061,075
143$48,182
9,580
1,279

13. Transactions with Affiliated Companies

Operating transactions
Net sales
Cost of sales
Non–operating transactions

14. Amounts per Share
Amounts per share as of and for the year ended March 31, 2017 are as follows:
As of March 31

Net assets

Yen
2017

U.S. dollars
2017¥651.32

$5.81

Yen
2017

U.S. dollars
2017¥130.43$1.16

For the year ended March 31

Net Income

15. Other Notes
In December 2016, the Company executed a syndicate loan contract with Tokyo Mitsubishi UFJ Bank
serving as the arranger (of which, the term loan as of the end of fiscal year is ¥5,000 million(U.S.$44,567 thousand)) .
The following financial covenants are attached to the syndicate loan mentioned above;(a) The amount of net assets recorded on the balance sheet and consolidated balance sheet on the final
day of each accounting period in and after the fiscal year ended March 31, 2017 must be
maintained to at least 75% of the amount of net assets recorded on the balance sheet andconsolidated balance sheet for the fiscal year immediately preceding said fiscal year or for the12fiscal year ended March 31, 2016, whichever is the higher amount.
(b) Ordinary losses must not be recorded in two consecutive periods on the statements of income orconsolidated statements of income in and after the fiscal year ended March 31, 2017.
(c) Net losses must not be recorded in two consecutive periods on the statements of income orconsolidated statements of income in and after the fiscal year ended March 31, 2017.
(d) The total coverage ratio for the consolidated balance sheets, consolidated statements of income,and consolidated cash flow statements in and after the fiscal year ended March 31, 2017 must be
maintained at 15.0 or lower.
It is stipulated under the loan that, in the event of changes in accounting standards, all concerned
parties shall consult on the abovementioned financial covenants to determine the impact of the saidchanges.

13

SEIKITOKYU KOGYO CO., LTD.
Related Supplementary Schedules
for the year ended March 31, 2017
1.

Details of Changes in Property, Plant and Equipment and Intangible assets
Changes in Property, plant and equipment at March 31, 2017 were as follows:
U.S. dollars(thousands)

Yen(millions)Type of Assets
Buildings and structures
Machinery, equipment andvehiclesTools, furniture and fixtures
Land
Construction in Progress
Total

Type of Assets
Buildings and structures
Machinery, equipment andvehiclesTools, furniture and fixtures
Land
Construction in progress
Total

Openingbalance

Increase

Decrease

Endingbalance¥ 1,821

¥ 447

¥16

¥ 7,054$ 62,877

2,058
105
10,7192¥14,705

855
42
3,915
110
¥5,369

9
1
600
2
¥628

14,536924
14,033
110¥36,657

129,564
8,237
125,084977$326,739

Acquisition
cost

Yen
(millions)
Accumulated
depreciation Depreciation

U.S. dollars(thousands)
Net bookvalue¥ 7,054¥ 4,970¥169¥ 2,084$ 18,573

14,536924
14,033
110¥36,657

12,240810－－¥18,020

608
31
－
－
¥809

2,296
114
14,033
110¥18,637

20,4641,021
125,084
977$166,119

Changes in Intangible assets at March 31, 2017 were as follows:Yen(millions)Type of Assets
Intangible assets
Total

Type of Assets
Intangible assets
Total

U.S. dollars(thousands)

Openingbalance

Increase

Decrease

Endingbalance

¥66
¥66

¥122
¥122

¥–
¥–

¥219
¥219

Acquisition
cost
¥219
¥219

Yen
(millions)
Accumulated Amortizatio
depreciation
n
¥44
¥44

¥12
¥12

$1,954$1,954
U.S. dollars(thousands)

Net book
value
¥175
¥175

$1,563$1,563(Note) 1. The amount for land in the current period increases mainly due to the land at Myoukenjima
material plant: ¥3,513 million (U.S.$31,314 thousand).
14

2.

Details of Allowances and Provisions
Allowances and Provisions at March 31, 2017 were as follows:

Opening

Allowance for doubtful
accounts
Provision for warranties
for completed
construction
Provision for loss on
construction contracts
Provision for bonuses
Provision for retirement
benefit

Balance

Increase

¥ 705

¥

8

Yen
(millions)
DecreaseAmountused asOther
intendedbalance¥U.S. dollars(thousands)Ending

683

¥6

¥ 24

$ 213

73

30

35

－

68

603

244
1,099

30
1,133

44
1,099

－
－

230
1,133

2,050
10,096

3,340

582

842

－

3,080

27,453(Note) 1. “Decreases (Others): ¥6 million (U.S.$52 thousand)” in Allowance for doubtful accounts is due
to ¥4 million (U.S.$34 thousand) added back via the reversal method and ¥2 million (U.S. $18
thousand) added back due to collections.
3.

Details of Selling, General and Administrative Expenses
Selling, general and administrative expenses for the year ended March 31, 2017 were as follows:

Selling, general and administrative expenses:
Directors' compensation
Employees' salaries and allowances
Retirement benefit expenses
Legal welfare expenses
Welfare expenses
Repair and maintenance
Stationery expenses
Transportation expenses
Construction utilities expenses
Research study expenses
Advertising expenses
Provision of allowance for doubtful accounts
Entertainment expenses
Contributions
Rents
Depreciation
Taxes and dues
Insurance expenses
Miscellaneous expenses
Total
15

Yen
(millions)
2017

U.S. dollars(thousands)
2017

¥ 146
1,854
199
324
155
19
91
285
15
144
44
△21
41
0
118
45
233
18
86
¥3,796$ 1,297
16,528
1,773
2,891
1,385
167
809
2,542
133
1,287
396
△185
369
4
1,048
403
2,078
160
747
$33,832