SEIKITOKYU KOGYO CO., LTD
Consolidated Balance Sheetfor the year ended March 31, 2019
U.S. dollars

Yen(millions)
2019

Assets(thousands)(Note 3)2019

Liabilities and Net assets¥

15,736$

141,775

Short-term loans payable (Note 11)
Trade payables (Note 11)
Notes
Accounts
Total trade payables

665
3,694
83
4,441

5,992
33,280744
40,0162,000

18,020509
30,027(6)
32,5294,585
270,534(54)
293,085

Accumulated other comprehensive income:Unrealized gain on investment securities
Remeasurements of defined benefit plans
Total accumulated other comprehensive income

15(1,001)(986)

134(9,014)(8,881)

Total net assets

31,544284,204

4,959
354
5,312

44,677
3,187
47,864

8

75

2,603
48,23723,457434,603

19,417

174,940

225

2,028

Net assets:

1,361

12,262

Shareholders’ equity (Note 8):
Common stock
Authorized - 150,000,000 shares
Issued- 40,414,407 shares
Capital surplus
Retained earnings
Treasury stock - 11,648 shares
Total shareholders’ equity

Intangible assets:
Deferred tax assets-non-current:

Investments and long-term loans:
Investment securities
Other securities (Note 11)

254

2,284

Guarantee deposits and other investments

1,414

12,739Allowance for doubtful accounts

1,667

15,023¥70,907$

638,856

15,672

34,187
232
118
9,696
39,16323,649314,636

Inventories
Cost on uncompleted construction contracts
Raw materials and supplies
Total inventories

Property, plant and equipment (Notes 5 and 6):

$

3,794
26
13
1,076
4,347
2,625
34,921

25,003
196,430
221,433

Other current assets
Total current assets

1,739

78,814
113,105
191,920

2,775
21,802
24,577

Short-term loans receivable

¥

8,748
12,55421,301

Trade receivables (Notes 7 and 11)
Notes
Accounts
Net trade receivables

Total assets(thousands)(Note 3)2019

Current liabilities:

Current assets:
Cash and deposits (Note 11)

U.S. dollars

Yen(millions)
2019

Advances received on uncompleted construction contracts
Provision for warranties for completed construction
Provision for loss on construction contracts
Provision for bonuses
Allowance for losses on Anti-Monopoly Act
Other current liabilities
Total current liabilities
Long-term liabilities:
Long-term loans payable (Note 11)
Net defined benefit liability
Other long-term liabilities
Total long-term liabilities

Total liabilities and net assets

See accompanying notes to consolidated financial statements.
1¥

70,907$

638,856SEIKITOKYU KOGYO CO., LTD
Consolidated Statement of Income
for the year ended March 31, 2019

U.S. dollars(thousands)(Note 3)2019

Yen(millions)2019
Completed construction contracts:
Net sales
Cost of sales
Gross profit¥

Finished goods:
Net sales
Cost of sales
Gross profit

58,49651,5106,986$

527,043464,099
62,943

15,45012,4702,981

139,204
112,349
26,855

90
75
15

810
672
138

Total:Net sales
Cost of sales
Gross profit

74,03764,055
9,982

667,056
577,120
89,936

Selling, general and administrative expenses:
Operating income

4,418
5,564

39,80350,133

7
106
113

59
958
1,017

37
1,363
1,399

329
12,27812,607

4,278

38,542

849
(51)

7,650
(464)

3,480

31,356

Real estate business:
Net sales
Cost of sales
Gross profit

Other income:Interest and dividends
Other (Note 9)
Subtotal
Other expenses:
Interest
Other (Note 10)
Subtotal
Income before income taxes
Income taxes
Current
Deferred
Net income
Net income attributable to owners of parent

¥

2

3,480

$

31,356SEIKITOKYU KOGYO CO., LTD.
Consolidated Statement of Changes in Net Assets
for the year ended March 31, 2019

Shareholders' equity (Notes 3,8)
Common stock

Capital surplus

Retained earnings

Total shareholders'equityTreasury stock(Millions of yen)
Balance at April 1, 2018

¥

2,000

500

¥

¥

26,950¥(24)¥

29,426

Changes during the period
Dividend of surplus

(404)

(404)

Net income attributable to owners of parent

3,480

3,480

Purchase of treasury stock

(1)

19

28

9

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

Total changes during period
Balance as of March 31, 2019

(1)

¥

2,000

9
509

¥

¥

3,077
30,027

Accumulated other comprehensive income
Total accumulated
Unrealized gain on
Remeasurements ofother comprehensive
investment securities
defined benefit plansincome¥18(6)Total net assets(Millions of yen)
Balance at April 1, 2018

¥

24

¥

(1,352)¥(1,328)¥28,098Changes during the period
Dividend of surplus(404)

Net income attributable to owners of parent

3,480

Purchase of treasury stock(1)

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

28

Total changes during period
Balance as of March 31, 2019

¥

(9)

351

342

342

(9)
15

351
(1,001)

342
(986)

3,445
31,544

¥

3

¥

¥

¥

3,104
32,529SEIKITOKYU KOGYO CO., LTD.
Consolidated Statement of Changes in Net Assets
for the year ended March 31, 2019

Shareholders' equity (Notes 3,8)
Common stock

Capital surplus

Retained earnings

Total shareholders'equityTreasury stock(Thousands of U.S. dollars)
Balance at April 1, 2018$

18,020

$

4,505

$

242,814

$

(217)

$

265,122

Changes during the period
Dividend of surplus(3,637)(3,637)

Net income attributable to owners of parent

31,35631,356

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

80

Total changes during period
Balance as of March 31, 201980$

18,020$4,585

27,719$270,534

Accumulated other comprehensive income
Total accumulated
other comprehensive
Unrealized gain on
Retirement benefits
incomeinvestment securities
liability adjustments

$

(5)

(5)

169

248

164

27,962(54)

Total net assets(Thousands of U.S. dollars)
Balance at April 1, 2018

$

218

$

(12,180)$(11,961)$

253,161

Changes during the period
Dividend of surplus(3,637)

Net income attributable to owners of parent

31,356

Purchase of treasury stock(5)

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

248
(85)

3,166

3,081

3,081

Total changes during period

(85)

3,166

3,081

31,043

Balance as of March 31, 2019

$

134

$

(9,014)

4$(8,881)$

284,204$

293,085

Notes to Consolidated Financial Statements
1.

Summary of Significant Accounting Policies(a) Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements have been prepared from the accounts
maintained by SEIKITOKYU KOGYO CO., LTD. (the “Company”) and its consolidated subsidiaries
in accordance with the provisions set forth in the Financial Instruments and Exchange Act of Japanand the Companies Act of Japan and in conformity with accounting principles generally accepted inJapan, which may differ in some material respects from accounting principles generally accepted andapplied in countries and jurisdictions other than Japan.
Certain items presented in the Japanese consolidated financial statements have been reclassified forpresentation solely for the convenience of readers outside Japan.
In addition, the notes to the 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) Consolidation Policies
The accompanying consolidated financial statements include the accounts of the Company and its
significant subsidiaries. All significant intercompany accounts, intercompany transactions andunrealized profits have been eliminated in consolidation.
As of March 31, 2019, the number of consolidated subsidiaries was 7 and none of the subsidiaries andaffiliates are accounted for by the equity method.
(c) Closing dates for consolidated subsidiaries
All the subsidiaries are consolidated using their financial statements as of their respective fiscal year
end, which falls on March 31 as same as the consolidated fiscal year end.
(d) Method of Accounting for Construction Contracts
The Company and its consolidated subsidiaries recognize revenue and cost by applying the percentage
of completion method for the construction projects for which the percentage of completion can bereliably estimated at the end of the reporting period. To estimate the progress of such construction
project, a method to calculate the percentage 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 isapplied.
Revenue recognized by applying the percentage of completion method was ¥19,812 million(U.S.$178,504 thousand) for the year ended March 31, 2019.
(e) Inventories
Inventories are stated at cost, cost being determined by the identified cost method for 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.
5

(f)Investments
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 consolidated balance sheet, net of tax effect. Nonmarketable securities classified as other securities are carried at cost. The cost of other securities soldis computed based on the moving average method.

(g) Property, Plant and Equipment (Excluding leased assets)
The Company and its consolidated subsidiaries compute depreciation of Property, plant andequipment by the declining balance method, however, buildings (excluding structures attached to thebuildings) 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 ...................................................... 7~50 years
Machinery, vehicle, tools, furniture and fixtures ................ 5~ 7 years(h) Intangible Assets (Excluding leased assets)
Computer software for internal use is amortized by the straight-line method over the estimated useful
lives (5 years).
(i)

LeasesDepreciation of leased assets under finance leases that do not transfer ownership of the leased assets
to the lessee is calculated by the straight-line method over the lease period with a residual value of
zero.

(j)

Income Taxes
Deferred tax assets and liabilities have been recognized in the consolidated financial statements forthe year ended March 31, 2019 with respect to the differences between the financial reporting and tax
bases of assets and liabilities, and were measured using the enacted tax rates and laws which will be ineffect when the differences are expected to be reversed. Valuation allowances are provided for thedeferred tax assets that are not considered to be recoverable.

(k) 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.
(l)

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

(m) Provision for Loss on Construction Contracts
6

Provision for loss on construction contracts is recorded for estimated future losses related to theconstruction contracts in progress.
(n) Provision for Bonuses
Provision for bonuses is stated at the estimated amount of bonuses which the Company and its
consolidated subsidiaries are obliged to pay to their employees.
(o) Allowance for losses on Anti-Monopoly Act
Allowance for losses on Anti-Monopoly Act is provided based on an estimated amount of payment
for surcharges under the Anti-Monopoly Act.
(p) Net defined benefit liability
Net defined benefit liability for employees has been recorded as the amount of retirement benefit
obligations after deducting pension plan assets, calculated based on the estimated amounts of thebalance sheet dates. The retirement benefit obligation for employees is attributed to each period by thestraight-line method.
Prior service cost is amortized by the straight-line method over a period of principally 13 years, whichis 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.
Unrecognized prior service costs and unrecognized actuarial gains and losses are recorded asremeasurements of defined benefit plans in accumulated other comprehensive income in net assets
after consideration of tax effects.
(q) Consumption Taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes.
(r)Consolidated Taxes
Consolidated tax return filing system.

2.

Changes in Presentation
Changes due to the application of “Partial Revision of Accounting Standard for Tax EffectAccounting” (ASBJ Statement No. 28, February 16, 2018 (“Statement No. 28"))
The Companies applied Statement No.28 from the beginning of this fiscal year. Accordingly, theCompanies changed the presentation, such that Deferred tax assets-current is classified as part ofDeferred tax assets-non-current.

3.

Basis of Translation
The consolidated financial statements as of and for the year ended March 31, 2019 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 ¥110.99 = U.S.$1, the approximate rate of exchange in effect on March 31,
2019. This translation should not be construed as a representation that any of the yen amounts could be7

4.

converted into U.S. dollar amounts at the above or any other rate.
Dividends
1) Dividends paid

Resolution
Annual general meetingof the shareholders on
June 22, 2018

Type ofsharesCommonstock

Yen(millions)Total
dividends

U.S. dollars(thousands)
Total
dividends¥403$3,637

Source ofdividends
Retainedearnings

Yen
Dividends
per share

U.S. dollars
Dividends
per share¥10.00$0.09

Recorddate

Effective
date

March 31,2018

June 25,20182) Dividends with a record date in the year ended March 31, 2019 and an effective date in the year
ending March 31, 2020:

Resolution
Annual general meetingof the shareholders on
June21, 20195.

Type ofsharesCommonstock

Yen(millions)Total
dividends

U.S. dollars(thousands)
Total
dividends¥1,090$9,829Source ofdividends
Retainedearnings

Yen
Dividends
per share

U.S. dollars
Dividends
per share¥27.00$0.24

Recorddate
March 31,2019

Effective
date
June 24,2019

Property, Plant and Equipment
Property, plant and equipment at March 31, 2019 were as follows:

Buildings and structures
Machinery, equipment, vehicles, tools, furniture andfixtures
Land
Construction in progress
Total
6.

Yen
(millions)
2019

U.S. dollars(thousands)
2019¥ 2,771$ 24,964

3,244
13,100303¥19,417

29,223
118,025
2,727$174,940

Collateral Assets and Corresponding Liabilities
The following assets are provided as collateral for the borrowings at March 31, 2019:

Buildings
Land
Total

Yen
(millions)
2019

U.S. dollars(thousands)
2019

¥

$

433
9,921
¥10,3548

3,899
89,387$93,286

Corresponding Liabilities at March 31, 2019

Short-term loans payable
Long-term loans payable
Total
7.

U.S. dollars(thousands)
2019¥1,731665¥2,396$15,596
5,992$21,588

Receivables Fully Offset Against Allowance for Doubtful Accounts

Long-term trade receivables
8.

Yen(millions)
2019

Yen
(millions)
2019

U.S. dollars(thousands)
2019

¥498

$4,483

Shareholders’ 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.

9.

Other Income
The composition of ”Other income-Other” for the year ended March 31, 2019 is as follows:Yen(millions)
2019
Interest income
Dividend income
Rent income
Gain on sales of non-current assets
Fiduciary obligation fee
Other
Total

¥ 0
6
21
39
29
18
¥113

10. Other Expenses
9

U.S. dollars(thousands)
2019
$

1
58
191
347
260
160
$1,017

The composition of ”Other expenses-Other” for the year ended March 31, 2019 is as follows:

Interest expenses
Guarantee commission
Bill fluidizing commission
Loss on sales of non-current assets
Loss on retirement of non-current
Provision of allowance for losses on Anti-Monopoly Act
Penalty
Other
Total

Yen
(millions)
2019

U.S. dollars(thousands)
2019

¥ 21
16
6
0
25
1,310
11
11
¥1,399

$

188
141
55
1
223
11,804
96
100$12,607

11. Financial Instruments
Cash of the Company and its consolidated subsidiaries is managed through short-term deposits. Funds
are provided mainly by borrowings from banks.
Customers’ credit risk on trade receivables (notes and accounts) is mitigated through credit control.
The Company and its consolidated subsidiaries assess fair values of investment securities quarterly atmarket quotations.
Funds from short-term loans payable and long-term loans payable are used for operating funds andcapital investment.
The following table presents the carrying amounts of financial instruments on the consolidated balance
sheet and the fair value at March 31, 2019, and the difference thereof.

AssetsCash and deposits:
Trade receivables:
Notes and accounts
Investment securities:
Total

Carrying
amountYen (millions)
Fair
value

Unrealized
gain (loss)¥15,736¥15,736¥–

24,57750¥40,363

24,57750¥40,363––¥–

U.S. dollars (thousands)
Carrying
Fair
Unrealized
amountvalue
gain (loss)
Cash and deposits:
Trade receivables:
Notes and accounts
Investment securities:
Total

10

$141,775$141,775$–

221,433
453$363,661

221,433
453$363,661––$–

Liabilities

Carrying
amountYen (millions)
Fair
value

Trade payables:
Notes and accounts
Short-term Loans payable:
Long-term Loans payable:
Total¥21,301
8
2,396¥23,706¥21,301
8
2,396¥23,706

Unrealized
gain (loss)
¥–
–
–
¥–

U.S. dollars (thousands)
Carrying
Fair
Unrealized
amountvalue
gain (loss)
Trade payables:
Notes and accounts
Short -term Loans payable:
Long-term Loans payable:
Total$191,920
76
21,588$213,583$191,920
76
21,588$213,583

$–
–
–
$–

Note 1: Fair value calculation methods for financial instruments.
AssetsCash and deposits:
Since cash and deposits are settled on a short-term basis, the carrying amounts approximate fairvalues. The carrying amounts are therefore indicated as fair values.
Trade Receivables (notes and accounts):
Since these assets are settled on a short-term basis, the carrying amounts approximate fair values.
The carrying amounts are therefore indicated as fair values.
Investment securities:
The fair value of these assets is determined by the prices listed on stock exchange.
Liabilities
Trade payables (notes and accounts):
Since these liabilities are settled on a short-term basis, the carrying amounts approximate fairvalues. The carrying amounts are therefore indicated as fair values.
Short-term Loans payable:
Since these liabilities are settled on a short-term basis, the carrying amounts approximate fairvalues. The carrying amounts are therefore indicated as fair values.
Long-term Loans payable:
Fair values of long-term loans payable are based on the present value of the total of principal andinterest discounted by the interest rate to be applied if similar new loans were entered into.
In addition, the current portion of long-term loans payable which is included in short-term loans
payable under current liabilities (¥1,731 million (U.S.$15,596 thousand) on the consolidatedbalance sheet is included in “long-term loans payable” in the above table.
Note 2: Non-marketable securities (¥203 million (U.S.$1,829 thousand) recorded on the consolidatedbalance sheet for the fiscal year ended March 31, 2019) are not included in ”Investment
securities” above, because these securities are without quotations and future cash flows cannot
11

be estimated, which makes it extremely difficult to assess their fair values.
12. Amounts Per Share
Amounts per share as of and for the year ended March 31, 2019 are as follows:
As of March 31

Net assets

Yen
2019

U.S. dollars
2019¥780.73

$7.03

Yen
2019

U.S. dollars
2019¥86.16$0.78

For the year ended March 31

Net Income

13. Other Notes
In December 2016, the Company executed a syndicate loan contract with The Bank of Mitsubishi UFJ,
Ltd. serving as the arranger (of which, the term loan as of the end of fiscal year is ¥2,396 million(U.S.$21,588 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 the
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 sheet, consolidated statements of income, andconsolidated cash flow statement 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.

12