THE KINKI SHARYO CO., LTD.
AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
AND INDEPENDENT AUDITOR'S REPORT
Years Ended March 31, 2020 and 2019

THE KINKI SHARYO CO., LTD. AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED BALANCE SHEETSMarch 31,2020 and 2019
Millions of yen
2020
2019
LIABILITIES AND NET ASSETSASSETS
Current Assets
Cash and time deposits（Note 6 and 7）
Receivables
Notes and accounts - trade（Note 7 and 15）
Other accounts
Allowance for doubtful receivables（Note 7）\

Inventories
Work-in-process（Note 10）
Raw materials and supplies

Other current assets
Total current assets

Property, Plant and Equipment
Land（Note 9 and 18）
Buildings and structures（Note 9 and 18）
Machinery and equipment
Leased assets
Construction in progress
Accumulated depreciation

Investments and Other Assets
Stocks of subsidiaries and affiliates（Note 7）
Investment securities（Note 7 and 8）
Intangible assets
Deferred income tax assets（Note 13）
Other assets
Allowance for doubtful receivables
Total assets

5,224

1,923

26,882989(37)
27,83438,06016(15)
38,061

20,638586
21,224

16,034598
16,632

3,403
57,685

4,607
61,223

2,582
14,671
12,377912
204
30,746(18,992)
11,754

2,583
14,63912,536911
204
30,873(18,168)
12,705

36
5,797
213

\

\

-

438
(10)
6,474
75,913

\

36
8,702
108
352
612
(11)
9,799
83,727

Current Liabilities
Short-term loans payable（Note 7, 9 and 11）
Current portion of long-term loans payable（Note 7 and 11）
Lease obligations （Note 7 and 11）
PayablesTrade accounts（Note 7）
Construction
Advances received
Income and enterprise taxes payable
Accrued expenses
Provision for bonuses
Allowance for losses on contracts（Note 10）
Provision for product warranties
Other current liabilities
Total current liabilities

Millions of yen
2020
2019

\

Noncurrent Liabilities
Long-term loans payable（Note 7 and 11）
Lease obligations （Note 7 and 11）
Deferred income tax liabilities（Note 13）
Net defined benefit liability（Note 12）
Other noncurrent liabilities（Note 9）
Total liabilities
Net Assets（Note 14）
Shareholders' equity
Common stock
Authorized - 12,000,000 shares
Issued - 6,908,359 shares
Capital surplus
Retained earnings
Treasury stock, at cost
26,310 shares in March 2020
26,097 shares in March 2019
Total shareholders' equity
Accumulated other comprehensive income
Net unrealized holding gains on securities
Net unrealized holding gains on derivatives
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Total net assets
Total liabilities and net assets

See accompanying Notes.

\

15,561
1,062
120

\

25,225
7,071
116

7,325
389
11,577
76
1,214
328
3,464
650
355
42,121

8,328
392
1,232
89
2,066
303
5,191
695
1,061
51,769

6,244
453
1,042
2,845
757
11,34153,462

2,319
568
1,891
2,678
852
8,308
60,077

5,253

5,253

3,125
11,491(105)

3,125
10,786(104)

19,76419,060

2,136
(6)
691
(134)
2,687
22,45175,913

3,934
782
(126)
4,590
23,65083,727\

THE KINKI SHARYO CO., LTD. AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME
Years Ended March 31, 2020 and 2019

Net sales (Note 15)
Cost of sales (Note 16)
Gross profit
Selling, general and administrative expenses
Operating profit (loss)

Millions of yen
2020
2019
\
41,054\65,33938,34260,036
2,712
5,303
3,008
2,922
(296)
2,381

Other income (expenses)
Interest and dividend income
Interest expense
Foreign exchange gain (loss)
Commission fees
Insurance Income(Note 23)
Gain on sales of investment securities(Note 8)
Gain on sales of noncurrent assets(Note 22)
Loss on disaster(Note 24)
Other, net

Income before income taxes
Income taxes(Note 13)
Current
RefundDeferred
Net income
Net income attributable to non-controlling interests
Net income attributable to owners of the parent

\

168
(372)
(376)
(74)
1,012
1,013
(47)
1,324

144
(486)
176
325
324
(991)
(22)
(530)

1,028

1,851

(33)
(290)
705
―
705

\

(52)
68
(63)
1,804
―
1,804

\
\

262.11―

Yen
Amounts per share(Note 21)
Net income
Cash dividends applicable to the year(Note 14)
See accompanying Notes.

\\

102.41―

THE KINKI SHARYO CO., LTD. AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended March 31, 2020 and 2019
Millions of yen
2020
2019
\
705
\
1,804

Net income
Other comprehensive income
Net unrealized holding gains (losses) on securities
Net unrealized holding gains (losses) on derivatives
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total other comprehensive income (Note 5)
Comprehensive income
Comprehensive income attributable toowners of the parent
Comprehensive income attributable tonon-controlling interests
See accompanying Notes.

\(1,798)
(6)
(91)
(8)
(1,903)(1,198)(1,198)
-

\

591
(261)
(504)
131
(43)
1,761

1,761
-

THE KINKI SHARYO CO., LTD. AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Years Ended March 31, 2020 and 2019
Millions of yen
Shareholders' equity
Number ofshares ofcommonstock
Balance at April 1, 2019

6,908,359

Commonstock\

Capitalsurplus

5,253\

Retainedearnings

3,125\

Accumulated other comprehensive income
Net
Net
RemeasureForeign
unrealized
unrealized
ments ofcurrency
holding
holdingdefinedtranslation
gains
gains
adjustments benefit plansonon securities
derivatives

Treasurystock

10,786

\

(104)

\

3,934

-

\

\

782

\

(126)

Total

\

23,650Net income

-

-

-

705

-

-

-

-

-

705

Purchase of treasury stock

-

-

-

-

(1)

-

-

-

-

(1)

-

-

-

-

(1,798)

(6)

(91)

(8)

(1,903)

Net changes during the year
Balance at March 31, 2020

6,908,359

Number ofshares ofcommonstock
Balance at April 1, 2018

6,908,359

\

5,253

Common
stock

\

\

3,125

Capitalsurplus

5,253

\

\

11,491Retainedearnings

3,125

\

\

(105)

\

2,136

Net
unrealized
holding
gains
on securities

Treasury
stock

8,982

\

(104)

\

3,343

\

(6)

Net
unrealized
holding
gains
onderivatives
\

\

691

Foreigncurrencytranslation
adjustments

261

\

1,286

\

(134)

\

Remeasurements ofdefinedbenefit plans
\

(257)

22,451

Total\

21,889Net income

-

-

-

1,804

-

-

-

-

-

1,804

Purchase of treasury stock

-

-

-

-

(0)

-

-

-

-

0

Net changes during the year

-

-

-

-

-

591

(261)

(504)

131

(43)

Balance at March 31, 2019

6,908,359

\

5,253

\

3,125

\

10,786\

See accompanying Notes.

(104)

\

3,934

\

-

\

782

\

(126)

\

23,650THE KINKI SHARYO CO., LTD. AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended March 31, 2020 and 2019
Millions of yen
2020
2019
Cash flows from operating activities
Income before income taxes
Adjustments to reconcile income (loss) before income taxes
to net cash provided by (used in) operating activities
Depreciation and amortization
Increase (decrease) in net defined benefit liability
Increase (decrease) in provision for product warranties
Increase (decrease) in allowance for losses on contracts
Interest and dividend income
Insurance income
Interest expense
Commission fees
Loss on disaster
Decrease (increase) in trade notes and accounts receivable
Decrease (increase) in inventories
Increase (decrease) in trade accounts payable
Increase (decrease) in accounts payable and accrued expenses
Other, net
Subtotal
Payments for loss on disaster
Interest and dividends received
Insurance income received
Interest paid
Income taxes paid
Income taxes refund
Net cash provided by (used in) operating activities

\

1,028

\

1,851

1,349
158
(44)
(1,727)(168)(1,012)372
74
21,273(4,405)160(459)(2,430)14,169
(680)
168
1,012
(406)
(47)
158
14,374

1,462
173
(424)
(1,384)
(144)
486
991
(9,946)
6,938(6,125)74(290)(6,338)
(88)
144
(393)
(82)
121
(6,636)

(9)
9

(38)
38

Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Acquisitions of property, plant and equipment
and intangible assets
Proceeds from sales of property, plant and equipment
and intangible assets
Proceeds from sales of investment securities
Net cash provided by (used in) investing activities

(557)

(785)

4
1,327
774

410
434
59

Cash flows from financing activities
Net increase in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Repayments of lease obligations
Cash dividends paid
Purchases of treasury stock
Net cash provided by (used in) financing activities(9,587)
4,926(7,057)
(111)
(1)
(0)
(11,830)

5,217(1,135)
(112)
(0)
(1)
3,969

Effect of exchange rate changes on cash and cash equivalents

(17)

(41)

3,301
1,914
5,215

(2,649)
4,563
1,914

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year(Note 6)

See accompanying Notes.

\\

THE KINKI SHARYO CO., LTD. AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of presenting consolidated financial statements
The accompanying consolidated financial statements of THE KINKI SHARYO CO., LTD. (the“Company”) and its consolidated subsidiaries have been prepared in accordance with theprovisions set forth in the Japanese Financial Instruments and Exchange Law and its related
accounting regulations and in conformity with accounting principles generally accepted inJapan (“Japanese GAAP”) which are different in certain respects as to application and disclosure
requirements from International Financial Reporting Standards.
The accounts of the Company’s overseas subsidiary are based on their accounting records
maintained in conformity with generally accepted accounting principles in the United States ofAmerica (“US GAAP”) and partially reflect the adjustments which are necessary to conformwith Japanese GAAP. The accompanying consolidated financial statements have been
restructured and translated into English from the consolidated financial statements of theCompany prepared in accordance with Japanese GAAP and filed with the appropriate Local
Finance Bureau of the Ministry of Finance as required by the Japanese Financial Instruments
and Exchange Law. Certain supplementary information included in the statutory Japanese
language consolidated financial statements, but not required for fair presentation, is notpresented in the accompanying consolidated financial statements.
2. Significant accounting policies(a) Consolidation - The consolidated financial statements include the accounts of the Company
and two significant companies over which the Company has power of control through majority
voting rights or the existence of certain other conditions evidencing control. There are no equity
method affiliates. Intercompany transactions and accounts have been eliminated.
(b) Consolidated subsidiaries’ fiscal year-ends - The consolidated overseas subsidiary has fiscal
years ending on December 31. Significant transactions between December 31 and March 31, thefiscal year-end of the Company, are reflected in the consolidated financial statements.
(c) Cash flow statements - In preparing the consolidated statements of cash flows, cash on hand,readily available deposits and short-term highly liquid investments with maturities notexceeding three months at the time of purchase are considered to be cash and cash equivalents.

2. Significant accounting policies (cont’d.)(d) Allowance for doubtful receivables - The Company and its consolidated subsidiaries (the“Companies”) provide for doubtful accounts principally at an amount based on management’s
estimate of the bad debt ratio plus the estimated uncollectible amount of certain individual
receivables.
(e) Securities - Available-for-sale securities with available fair market values are stated at fairmarket value. Unrealized gains and unrealized losses on these securities are reported, net of
applicable income taxes, as a separate component of net assets. Realized gains and losses on thesale of such securities are computed using moving average cost. Securities with no available fairmarket values, including equity securities issued by subsidiaries and affiliates which are notconsolidated or accounted for using the equity method, are stated at moving average cost.
(f) Derivatives and hedge accounting - The Companies state derivative financial instruments atfair value and recognize a change in the fair value as gain or loss unless the derivative financial
instrument is accounted for with hedge accounting. If derivative financial instruments are usedas hedges and meet certain hedging criteria, the Companies defer recognition of gain or loss
resulting from a change in the fair value of the derivative financial instrument until the related
loss or gain on the hedged item is recognized. However, in cases in which forward foreignexchange contracts are used as hedges and meet certain hedging criteria, the contracts and thehedged items are accounted for in the following manner:① If a forward foreign exchange contract is executed to hedge an existing foreign currency
receivable or payable,(i) the difference, if any, between the Japanese yen amount of the hedged foreign currency
receivable or payable translated using the spot rate at the inception date of the contract andthe book value of the receivable or payable is recognized in the statement of income in the
period which includes the inception date, and(ii) the discount or premium on the contract (the difference between the Japanese yen amountof the contract translated using the contracted forward rate and that translated using the
spot rate at the inception date of the contract) is recognized over the term of the contract.
② If a forward foreign exchange contract is executed to hedge a future transaction denominatedin a foreign currency, the future transaction is recorded using the contracted forward rate,
and no gain or loss on the forward foreign exchange contract is recognized.

2. Significant accounting policies (cont’d.)(g) Inventories - Work-in-process is stated mainly at identified cost. Raw materials and supplies
are stated at cost determined by the moving average method. For balance sheet valuation, in theevent that an impairment in the value of inventory is determined, the inventory is written down
to the lower of cost or market using net realizable value.
(h) Property, plant and equipment (except for capitalized leases) - Property, plant andequipment are carried at cost. Depreciation is calculated by the straight-line method over theestimated useful life of the asset.
(i) Intangible assets (except for capitalized leases) - Intangible assets are amortized by thestraight-line method over the estimated useful life of the asset.
(j) Software costs - The Companies include software used for internal purposes in intangible
assets and amortize it using the straight-line method over the estimated useful life of five years.
(k) Capitalized leases - Property, plant and equipment capitalized under finance leases are
depreciated over the term of the lease.
(l) Research and development expenses - The Companies charge research and development
expenses to selling, general and administrative expenses as incurred. Research anddevelopment expenses amounted to ¥179 million and ¥140 million for the years ended March
31, 2020 and 2019, respectively.
(m) Retirement and severance benefits for employees - Under the terms of the Company’s andits consolidated domestic subsidiary’s unfunded lump-sum retirement plans, substantially all
employees are entitled to a lump-sum payment at the time of retirement. The amount of theretirement benefit is, in general, based on the length of service, base salary at the time ofretirement and the reason for retirement. The Company also has a funded noncontributory
pension plan which covers a portion of total retirement benefits.
In order to provide for the employees’ retirement benefits, the Company and its consolidated
domestic subsidiary accrue the liability as of the end of the fiscal year in an amount based on
the estimated projected benefit obligation and value of plan assets. Actuarial gains and losses
are recognized in expenses using the straight-line method over 10 years, which is within the
average of the estimated remaining service years of employees, commencing from the following
period.
(n) Provision for bonuses - Provision for bonuses at the balance sheet date are based on theestimated amounts to be paid to employees in the future.

2. Significant accounting policies (cont’d.)(o) Provision for product warranties - A provision for product warranties is provided at thebalance sheet date when future losses for product warranties can be reasonably estimated andat an amount based on management's estimate of the past expense ratio for sales.
(p) Allowance for losses on contracts - An allowance for losses on contracts is provided at thebalance sheet date when future losses on particular contracts can be reasonably estimated.
(q) Income taxes - Income taxes comprise corporate tax, prefectural and municipal inhabitants
taxes and enterprise tax. The asset-liability approach is used to recognize deferred tax assets andliabilities for the expected future tax consequences of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes.
(r) Translation of foreign currencies - Monetary assets and liabilities denominated in foreign
currencies are translated into Japanese yen at exchange rates prevailing at the balance sheet date.
Financial statements of the consolidated overseas subsidiary are translated at the rates in effectat the balance sheet date, except for net assets accounts, which are translated at historical rates,
and revenue and expense accounts, which are translated at the average exchange rates in effectduring the year. The resulting translation adjustments are reflected in the consolidated financial
statements as “foreign currency translation adjustments.”(s) Net income and cash dividends per share - Basic net income per share is computed by
dividing income available to common shareholders by the weighted average number of sharesof common stock outstanding during the respective year. Diluted net income per share for theyears ended March 31, 2020 and 2019 is not applicable because the Company has no dilutive
common shares. Cash dividends per share presented in the accompanying consolidated
statements of income are dividends applicable to the respective years, including dividends tobe paid after the end of the year.
(t) Revenue and related cost recognition – The Company generally records the revenues andrelated costs on construction contracts by the percentage-of-completion method if the progressof the construction activity can be reliably measured, otherwise, the completed contract method
is applied. The progress, or percent of the contract completed, as of the end of the reporting
period is measured by the proportion of the cost incurred as of the end of the period to theestimated total cost.
Consolidated US subsidiary applies ASU 2014-09 “Revenue from Contracts with Customers.”
The amount expected to be received in exchange for promised goods or services is recognized
as revenue at the time control of those goods or services is transferred to the customer.
(u) Reclassifications - Certain prior year amounts have been reclassified to conform to the 2020
presentation.

3. Change in accounting policies(Adoption of ASU2014-09 “Revenue from Contracts with Customers”)
A consolidated US subsidiary which apply U.S. GAAP have adopted ASU 2014-09 “Revenue
from Contracts with Customers.” from the beginning of the current fiscal year.
The effect of this adjustment on the consolidated financial statements for the full year of thecurrent fiscal year was immaterial.

4. Accounting standards issued but not yet adopted
The Company and its consolidated domestic subsidiary
The following standard and guidance have been issued but not yet adopted.
- “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020)- “Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ
Guidance No. 30, March 31, 2020)(a) Overview
The above standard and guidance provide comprehensive principles for revenue recognition.
Under the standard and guidance, revenue is recognized by applying the following 5 steps:
Step1: Identify contract(s) with customers.
Step2: Identify the performance obligations in the contract.
Step3: Determine the transaction price.
Step4: Allocate the transaction price to the performance obligation in the contract.
Step5: Recognize revenue when (or as) the entity satisfies a performance obligation.
(b) Effective date
Effective from the beginning of the fiscal year ending March 31, 2022.
(c) Effects of application
The Company and its consolidated domestic subsidiary are currently in the process ofdetermining the effects of these new standards on the consolidated financial statements.
- “Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error
Corrections” (ASBJ Statement No.24, issued on March 31, 2020)(a) Overview
This standard is revised to improve disclosures related to accounting principles andprocedures when the alternative accounting standards are unclear.
(b) Effective dateThis standard is effective from fiscal year ending on March 31, 2021.
- “Accounting Standard for Disclosure of Accounting Estimates” (ASBJ Statement No.31,
issued on March 31, 2020)(a) Overview
This standard is intended for financial statement preparers to disclose the basis foraccounting estimates which are likely to have a material impact on financial statements of thesubsequent year, of the estimated amounts recorded in the current year.
(b) Effective dateThis standard is effective from fiscal year ending on March 31, 2021.

4. Accounting standard issued but not yet adopted (cont’d.)- “Accounting Standard for Fair Value Measurement” (ASBJ Statement No.30, issued on July4, 2019)- “Implementation Guidance on Accounting Standard for Fair Value Measurement” (ASBJ
Guidance No.31, issued on 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, issued on July 4,
2019)- “Implementation Guidance on Disclosure about Fair Value of Financial Instruments” (ASBJ
Guidance No.19, issued on March 31, 2020)(a) Overview
In order to enhance comparability with internationally recognized accounting standards,“Accounting Standard for Fair Value Measurement” and “Implementation Guidance on
Accounting Standard for Fair Value Measurement” (together, hereinafter referred to as “Fair
Value Accounting Standards”) were developed and issued. The Fair Value AccountingStandards are applicable to financial instruments in “Accounting Standard for Financial
Instruments” and inventories held for trading purposes in “Accounting Standard for
Measurement of Inventories”.
Depending on inputs, the fair value of Financial instruments are classified either Level 1, 2 and3 which determines the extent of disclosure.
(b) Effective dateThis standard and guidance is effective from the beginning of the fiscal year ending March
31, 2022.
(c) Effects of application
The Company and its consolidated domestic subsidiary are currently in the process ofdetermining the effects of these new standards on the consolidated financial statements.

5. Comprehensive income information
Amounts reclassified to net income (loss) in the current period that are recognized in othercomprehensive income in the current or previous periods and the tax effects for each componentof other comprehensive income are as follows:
Millions of yen
2020
2019
Net unrealized holding gains (losses) on
securities
Increase during the year¥
(1,578)¥1,179
Reclassification adjustments(1,013)(326)
Subtotal, before tax(2,591)853
Tax (expense) or benefit
793
(262)
Subtotal, net of tax(1,798)591
Net unrealized holding gains on derivatives
Decrease during the year
(6)
(376)
Reclassification adjustments
Subtotal, before tax
(6)
(376)
Tax (expense) or benefit
115
Subtotal, net of tax
(6)
(261)
Foreign currency translation adjustments
Increase (decrease) during the year
(91)
(504)
Reclassification adjustments
Subtotal, before tax
(91)
(504)
Tax (expense) or benefit
Subtotal, net of tax
(91)
(504)
Remeasurements of defined benefit plans
Increase (decrease) during the year
(39)
66
Reclassification adjustments
31
65
Subtotal, before tax(8)131Tax (expense) or benefit
Subtotal, net of tax(8)
131
Total other comprehensive income¥(1,903)¥(43)

6. Cash flow information
The reconciliation of cash and time deposits in the consolidated balance sheets and cash andcash equivalents in the consolidated statements of cash flows at March 31, 2020 and 2019 are as
follows:
Millions of yen
2020
2019
Cash and time deposits (in balance sheets)¥

Time deposits maturing after three months
Cash and cash equivalents (in statements of cash flows)

5,224

¥

(9)
¥

5,215

1,923
(9)

¥

1,914

7. Financial instruments: disclosure(a) Qualitative information on financial instruments
Short-term deposits - The Companies use short-term deposits to manage excess funds.
Trade notes and accounts receivable - Because of the nature of the business, the credit risk
associated with trade notes and accounts receivable is concentrated with a limited numberof major customers with high creditworthiness. At March 31, 2020, 99.2% of the operatingreceivables are due from specific major customers. The Companies decrease the risk bymanaging the notes and receivables according to internal credit control rules.
Foreign currency forward exchange contracts - The Company uses foreign currency
forward exchange contracts only to hedge foreign currency exchange risk associated withtrade accounts receivables and payables, not for speculative purposes, and enters into suchcontracts according to the Company’s internal rules.
Investment securities - Investment securities comprise mostly stocks and are evaluated forfair value or prices provided by the financial condition of corporations on a quarterly basis.
Trade accounts payable - Payment terms of payable are less than one year.
Loans payable - Short-term loans payable are used mainly for financing operating capitaland long-term loans payable are used primarily for financing capital investments.
Lease obligations - Lease obligations are used primarily for financing capital investments.

7. Financial instruments: disclosure (cont’d.)(b) Fair values of financial instruments
The book values of the financial instruments included in the consolidated balance sheets
and their fair values at March 31, 2020 and 2019 are as follows:
Millions of yen
2020
Cash and time deposits

Book value

Fair value

Difference

¥

¥

¥

5,224

5,224

-

Notes and accounts receivable - trade ＊1

26,845

26,845-Investment securities

5,758

5,758

-

Trade accounts payable(7,325)(7,325)-

Short-term loans payable(15,561)(15,561)-Long-term loans payable(7,306)(7,300)

(6)

(573)

(573)

(0)

-

-

-

(6)

(6)

-

Lease obligations
Derivatives
Not applying hedge accounting
Applying hedge accounting

Millions of yen
2019
Cash and time deposits

Fair value

Difference

¥

¥

¥

1,923

1,923

-

Notes and accounts receivable - trade ＊1

38,04538,045-Investment securities

8,662

8,662

-

Trade accounts payable(8,328)(8,328)-

Short-term loans payable(25,225)(25,225)-

Long-term loans payable(9,390)(9,370)

(20)

(684)

(684)

(0)

Lease obligations
Notes

Book value＊1 Allowance for doubtful receivables associated with notes and accounts receivablehas been deducted.
＊2 The figures in parentheses indicate liabilities.

7. Financial instruments: disclosure (cont’d.)
The fair value of the financial instruments in the table above approximates the book value
in case in which the maturities are short. The value of derivatives are determined using therate of the foreign currency forward exchange contract, and long-term loans payable andlease obligations are calculated by discounting the principal and interest payments by theassumed discount rates for similar new loans or lease transactions.
Financial instruments for which the fair value is difficult to determine are as follows:
Millions of yen
2020
2019
Unlisted stocks
¥
40
¥
40
Stocks of subsidiaries and affiliates (unlisted stocks)
36
36
Unlisted stocks and stocks of subsidiaries and affiliates (unlisted stocks) are not included ininvestment securities above because they have no estimated fair value.
Maturity value after closing dateMillions of yen
2020
Within one year
Cash and time deposits¥

Trade notes and trade accounts

Over one year

5,224

¥

-

26,882-Millions of yen
2019Within one year
Cash and time deposits
Trade notes and trade accounts

¥

1,923
38,060Over one year¥-

8. Securities
At March 31, 2020 and 2019, information on securities is as follows:(a)

Trading securities: None(b) Bonds intended to be held to maturity with readily determinable fair values: None(c) Available-for-sale securities with readily determinable fair value as of March 31, 2020
and 2019 are as follows:
Securities with book value (fair value) that exceed acquisition cost

Equity securities
Total

Equity securities
Total

Acquisition cost
¥
2,502
¥
2,502

Millions of yen
2020
Book value
¥
5,629
¥
5,629

¥
¥

Difference
3,127
3,127

Acquisition cost
2,893
2,893

Millions of yen
2019Book value
¥
8,570
¥
8,570

¥
¥

Difference
5,677
5,677

¥
¥

Securities with book value (fair value) that don’t exceed acquisition cost

Equity securities
Total

Equity securities
Total

Acquisition cost
¥
176
¥
176

Millions of yen
2020
Book value
¥
129
¥
129

Difference
¥
(47)
¥
(47)

Acquisition cost
¥
98
¥
98

Millions of yen
2019Book value
¥
92
¥
92

¥
¥

Difference(6)(6)

8. Securities (cont’d.)(d)

For the years ended March 31, 2020 and 2019, total sales of available-for-sale securities(equity securities) are ¥1,327 million and ¥434 million respectively, and the gain on thesales are ¥1,013 million and ¥325 million respectively.

(e)

Loaned securities classified as securities as of March 31, 2020 and 2019 are as follows:
Millions of yen
2020
Equity securities

¥

2019
-

¥

7,938

9. Pledged assets
At March 31, 2020 and 2019, the following assets are pledged as collateral for short-term loans
payable of ¥2,000 million:
Millions of yen
2020
2019
Land
¥
179
¥
179
At March 31, 2020 and 2019, the following assets are pledged as collateral for deposits oncontracts of ¥167 million and ¥248 million, respectively, and deposits from tenants of ¥70 million(included in other noncurrent liabilities):
Millions of yen
2020
2019
Buildings, net book value
¥
371
¥
391

10. Allowance for losses on contracts
Inventories for contracts with anticipated losses and allowance for losses on contracts are notoffset. For the years ended March 31, 2020 and 2019, the inventories associated with theallowance for losses on contracts are ¥1,078 million and ¥2,346 million, respectively.
These amounts are included in "Work-in-process."

11. Short-term loans payable, long-term loans payable and lease obligations
Short-term loans payable substantially represent short-term loans from banks at a weighted
average annual rate of 1.3% and 1.5% at March 31, 2020 and 2019, respectively.
Long-term loans payable as of March 31, 2020 are as follows:

Loans from banks, due through 2022 at an weighted
average rate of 0.8% in 2020
Less current portion

Millions of yen
2020
¥

7,306

¥

1,062
6,244

The aggregate annual maturities of long-term loans payable outstanding at March 31, 2020 are
as follows:
Millions of yen
2020
Years ending March 31,
2022
2023
2024 and after

¥

¥

6,241
3
6,244

The aggregate annual maturities of finance lease obligations subsequent to March 31, 2020 are
as follows:
Millions of yen
2020
Years ending March 31,
2021
2022
2023
2024
2025
2026 and after¥¥Long-term loans payable as of March 31, 2019 are as follows:

Loans from banks, due through 2022 at an weighted
average rate of 0.9% in 2019
Less current portion

120
436
11
5
1
573
Millions of yen
2019

¥

9,390

¥

7,071
2,319

11. Short-term loans payable, long-term loans payable and lease obligations (cont’d.)
The aggregate annual maturities of long-term loans payable outstanding at March 31, 2019 are
as follows:
Millions of yen
2019Years ending March 31,
2021
2022
2023
2024 and after

¥

¥

1,073
1,243
3
2,319

The aggregate annual maturities of finance lease obligations subsequent to March 31, 2019 are
as follows:
Millions of yen
2019Years ending March 31,
2020
2021
2022
2023
2024
2025 and after

¥

¥

116
118
435
10
5
684

The Company enters into contracts with financial institutions for committed credit lines.
As of March 31, 2020 and 2019, the amounts of unexercised committed credit lines are as
follows:
Millions of yen
2020
2019
Total committed credit lines¥¥
10,200Unexercised committed credit lines¥¥-12. Retirement and severance benefits
The Company provides for employee’ retirement and severance benefits under two plans, adefined contribution pension plan and unfunded lump-sum benefits plan. The Company’s
consolidated domestic subsidiary provides an unfunded lump-sum benefits plan, and its
consolidated overseas subsidiary provides a defined contribution pension plan.
Defined benefit plans(a) Movement in retirement benefit obligations, except for plans that applied the simplified
methodMillions of yen
2020
2019
Balance at April 1, 2019 and 2018
¥
2,678
¥
2,635
Service cost
229
189
Interest cost
21
20
Actuarial loss (gain)
40(65)
Benefits paid
(123)
(101)
Balance at March 31, 2020 and 2019
¥
2,845
¥
2,678
(b) Reconciliation from retirement benefit obligations to liability for retirement benefits
Millions of yen
2020
2019
Unfunded retirement benefit obligations
¥
¥
2,845
2,678
Total net liability for retirement benefits at March ¥
¥
2,845
2,678
31, 2020 and 2019
Net defined benefit liability
Total net liability for retirement benefits at March ¥31, 2020 and 2019(c) Retirement benefit costs

Service cost
Interest cost
Net actuarial loss amortization
Net prior service cost amortization

¥

¥

2,845
2,845

2,678
¥

2,678

Millions of yen
2020
2019
229
¥
189
21
20
31
55
11
281
¥
275

12. Retirement and severance benefits (cont’d.)(d) Remeasurements of defined benefit plans

Prior service cost
Actuarial gain(loss)¥

Millions of yen
2020
2019
¥
11
(9)
120
(9)
¥
131

¥

Millions of yen
2020
2019
(134)
(126)
(134)
¥
(126)

¥

(e) Accumulated remeasurements of defined benefit plans

Unrecognized actuarial loss(f) Actuarial assumptions
The principal actuarial assumptions at March 31, 2020 and 2019 (expressed as weighted
averages) are as follows:
2020
2019
Discount rate
0.8%
0.8%
Expected salary increase rate
1.8%
1.8%
Defined contribution plans
Contributions to the defined contribution plans in 2020 and 2019 are ¥335 million and ¥343
million, respectively.

13. Income taxes(a) Significant components of the Companies’ deferred tax assets and liabilities as of March 31,
2020 and 2019 are as follows:

Deferred income tax assets:
Net operating loss carryforwards ＊2
Allowance for losses on contracts
Net defined benefit liability
Valuation loss on inventories
Provision for product warranties
Research and development expenses
Excess depreciation
Provision for bonuses
Loss on disaster
Other

Millions of yen
2020
2019
¥

Valuation reserve for net operating loss
carryforwards ＊2
Valuation reserve for deductible
temporary differences
Valuation reserve -total ＊1
Total deferred income tax assets
Deferred income tax liabilities:
Net unrealized holding gains on securities
Accelerated depreciation
Other
Total deferred income tax liabilities
Net deferred income tax liabilities
¥

3,368
1,050
870
199
199
117
116
101
49
464
6,533

¥

2,850
1,587
821
215
213
122
183
93
304
380
6,768

(3,368)(2,831)(3,165)(3,510)(6,533)-(6,341)
427

(943)
(99)
(1,042)(1,042)(1,736)(72)(158)(1,966)(1,539)¥Notes ＊1 The valuation reserve increased by ¥192 million. The main reason for this increaseis a ¥538 million decrease in the consolidated US subsidiary's valuation reserve for net operating
loss carryforwards.

13. Income taxes (cont’d.)＊2 Net operating loss carryforwards and deferred income tax assets by expiration periods
are as follows:
Current Fiscal year ended March 31, 2020
Year ending March
31,
Net operating loss
carryforwards ＊3
Valuation reserve
Net deferred income
tax assets

Millions of yen
2021

2026 and
after

Total

－

¥ 1,530¥ 3,368(949)－(1,530)(3,368)

－

－

－

－

2022

2023

2024

－

－

¥ 889

¥ 949

－

－

(889)

－

－

－

2025

＊3 Net operating loss carryforwards shown in the above table are after multiplying thestatutory tax rate.
Previous Fiscal year ended March 31, 2019Year ending March
31,
Net operating loss
carryforwards ＊3
Valuation reserve
Net deferred income
tax assets

Millions of yen
2020

2021

2022

－

－

－
－

2025 and
after

2023

2024

－

¥ 907

¥ 949

¥ 994

¥ 2,850

－

－

(907)

(949)

(975)

(2,831)

－

－

－

－

¥

19

Total

¥

19

＊3 Net operating loss carryforwards shown in the above table are after multiplying thestatutory tax rate.
(b) The following table summarizes the significant differences between the statutory tax rate and theeffective tax rate for the years ended March 31, 2020 and 2019 after tax effect accounting is applied.

Statutory tax rate
Permanently nondeductible expenses
Permanently nontaxable expenses
Taxation on per capita basis
Change in valuation reserve
Other
Effective tax rate

2020
- %
- %

2019
30.6 %
0.9
(3.9)
0.4
(30.4)
4.9
2.5 %The significant differences between the statutory tax rate and effective tax rates for the year
ended March 31, 2020 has been omitted as the total difference was less than 5% of the statuory
tax rate.

14. Net assets
Under Japanese laws and regulations, the entire amount paid for new shares is required to be
designated as common stock. However, a company may, by a resolution of the Board of Directors,
designate an amount not exceeding one half of the price of the new shares as additional paid-in capital,
which is included in capital surplus.
Under the Japanese Corporate Law (the “Law”), in cases in which a dividend distribution of surplus
is made, the smaller of an amount equal to 10% of the dividend or the excess, if any, of 25% of common
stock over the total of additional paid-in capital and legal earnings reserve must be set aside asadditional paid-in capital or legal earnings reserve. Legal earnings reserve is included in retained
earnings in the accompanying consolidated balance sheets.
Under the Law, both of these appropriations generally require a resolution of the shareholders’meeting.
Under the Law, all additional paid-in capital and all legal earnings reserve may be transferred toother capital surplus and retained earnings, respectively, which are potentially available fordividends.
The maximum amount that the Company can distribute as dividends is calculated based on thenonconsolidated financial statements of the Company in accordance with Japanese laws andregulations.
(a) Number and type of shares issued and number and type of shares of treasury stock

Common stock
Treasury stock

April 1, 2019
6,908,359
26,0972020
Number of shares
Increase
Decrease
213-

March 31, 2020
6,908,359
26,310The increase in treasury stock of 213 shares is due to the acquisition of fractional shares.
2019
Number of shares
April 1, 2018
Increase
Decrease March 31, 2019
Common stock
6,908,359
6,908,359
Treasury stock
25,753344
26,097The increase in treasury stock of 344 shares is due to the acquisition of fractional shares.

14. Net assets (cont’d)(b) Dividends
At March 31, 2020 and 2019, there is no dividends paid.

15. Related party transactions
At March 31, 2020, Kintetsu Railway Co., Ltd. (“Kintetsu”) directly own 30.4% of the Company’s
outstanding common stock. The Company’s sales to Kintetsu for the year ended March 31, 2020
amounted to ¥2,790 million. Receivables from Kintetsu at March 31, 2020 were ¥16 million.
At March 31, 2019, there is no significant related party transactions.

16. Cost of Sales
For the years ended March 31, 2020 and 2019, reversals of the allowance for losses on contracts
deducted from the cost of sales is ¥1,727 million and ¥1,383 million, respectively.

17. Derivative transactions
At March 31, 2020 and 2019, there are no derivatives for which hedge accounting have not been
applied.
Information on derivatives for which hedge accounting is applied at March 31, 2020 is as follows:
Millions of yen
2020
Contract amount
Fair value

Due after

Total

one year

Foreign currency forward exchange
contracts:
BuyingEuro（forecasted transaction）¥

Euro（payables - trade）＊1
Total

562

¥

46
¥

608

-

¥

¥

-

(6)
-

¥

(6)

Fair values in the above table are calculated based on future exchange rates.
Note ＊1 Foreign currency forward exchange contracts for which the designation method is applied
are accounted for together with the payables - trade that are the hedged items. As a result,the fair values of those contracts are included in the fair values of the payables - trade.

17. Derivative transactions (cont’d)Information on derivatives for which hedge accounting is applied at March 31, 2019 is as follows:
Millions of yen
2019
Contract amount
Fair value

Due after

Total

one year

Foreign currency forward exchange
contracts:
Selling
US dollar（receivables - trade）＊1

¥

5,979

¥

-

¥

-

Total

¥

5,979

¥

-

¥

-

Note ＊1 Foreign currency forward exchange contracts for which the designation method is applied
are accounted for together with the payables - trade that are the hedged items. As a result,the fair values of those contracts are included in the fair values of the receivables - trade.

18. Fair value of investment and rental property
The Company owns real estate for lease in Osaka and other prefectures. The income from the realestate for lease is ¥692 million and ¥687 million for the years ended March 31, 2020 and 2019,respectively. The book value (balance), net changes during the year and fair value of the real estate
for lease are as follows:
Millions of yen
2020
Balance at April 1, 2019¥

Net changes during the year
Balance at March 31, 2020

1,591
(23)

¥

Fair value at March 31, 2020

1,568
10,012Millions of yen
2019

Balance at April 1, 2018¥

Net changes during the year
Balance at March 31, 2019
Fair value at March 31, 201919. Leases

1,617
(26)

¥

1,591
9,943

(a) Finance leases(As lessee)
Non-ownership-transfer Finance lease transactions
Leased assets consist mainly of machinery and equipment of factory and tools, furniture andfixtures at the head office and software for server at the head office.
(b) Operating leases(As lessee)
Obligations under operating leases at March 31, 2020 and 2019 are as follows:
Millions of yen
2020
Payments due within one year¥

Payments due after one year
Total payments remaining

2019
118

¥

502
¥

620

136
627

¥

763

20. Segment information(a) General information about reportable segments
Reportable segment information of the Company is the obtainable financial information which ismade available to and used by the Officers Committee and Board of Directors to determine theallocation of management resources and to evaluate business performance. The Company has a RailTransit Division that focuses on manufacturing rolling stock. It formulates strategy and deals withbusiness concerning trains and the related parts and maintenance for the JR group, public and private
railways and subways in Japan and foreign countries. In addition, the Company deals with the leaseof real estate. Therefore, the reportable segments of the Company are that of “Rolling Stock” and“Lease of Real Estate.”(b) Basis of measurement for reportable segment profit or loss, segment assets, segment liabilities andother material items
The accounting policies for reportable segment information are basically the same as in Note 2,“Significant accounting policies.”20. Segment information (cont’d)(c) Information about reported segment profit or loss, segment assets, segment liabilities and othermaterial items
Current Fiscal year ended March 31, 2020 :Millions of yen
Reportable segments
Rolling Stock
Net sales¥

40,261

Lease of Real Estate¥

793

Adjustment¥

Consolidated(0)¥41,054

Segment
Profit (loss)

(45)

692

(943)

(296)

Segment assets

69,539

1,586

4,788

75,913

Segment liabilities

29,991808

22,66353,462

1,274

23

52

1,349

462

-

92

554

Depreciation andamortization
Increase in tangible
and intangible assets

1. Adjustments are as follows:(a) Adjustment of segment loss of ¥(943) million is corporate expenses of ¥(943) million that are not
attributable to reportable segments and represents administrative expenses of the Company.
(b) Adjustment of segment assets of ¥4,788 million is for surplus funds and assets that are not allocable
to any reportable segments.
(c) Adjustment of segment liabilities of ¥22,663 million is for liabilities that are not allocable to any
reportable segments.
(d) Depreciation and amortization of ¥52 million is depreciation and amortization that are notallocable to any reportable segments.
(e) Increase in tangible and intangible assets of ¥92 million is equipment investment that is notallocable to any reportable segments.
2. Segment profit (loss) is adjusted to operating loss in the consolidated statements of income.

20. Segment information (cont’d)Previous Fiscal year ended March 31, 2019 :Millions of yen
Reportable segments
Rolling Stock
Net sales¥

64,546

Lease of Real Estate¥

794

Adjustment¥

Consolidated(1)¥

65,339Segment
Profit

2,579

687

(885)

2,381

Segment assets

78,497

1,609

3,621

83,727

Segment liabilities

24,109903

35,06560,077

1,395

26

41

1,462

823

-

48

871

Depreciation andamortization
Increase in tangible
and intangible assets

1. Adjustments are as follows:(a) Adjustment of segment profit of ¥(885) million is corporate expenses of ¥(885) million that are not
attributable to reportable segments and represents administrative expenses of the Company.
(b) Adjustment of segment assets of ¥3,621 million is for surplus funds and assets that are not allocable
to any reportable segments.
(c) Adjustment of segment liabilities of ¥35,065 million is for liabilities that are not allocable to any
reportable segments.
(d) Depreciation and amortization of ¥41 million is depreciation and amortization that are notallocable to any reportable segments.
(e) Increase in tangible and intangible assets of ¥48 million is equipment investment that is notallocable to any reportable segments.
2. Segment profit is adjusted to operating profit in the consolidated statements of income.

20. Segment information (cont’d)Related information
Information for each country and area for the year ended March 31, 2020 is as follows:(a) Net sales
Millions of yenJapan¥

19,413

United States

State ofof America

Qatar

¥

17,450

¥

2,338

¥

Other

Consolidated

1,853

¥

41,054The principal countries and areas in each segment are as follows:
China (Hong Kong), United Arab Emirates,
Arab Republic of Egypt

Other(b) Property, plant and equipment
Millions of yen
Japan¥

10,128

United Statesof America
¥

1,626

Consolidated¥

11,754

Information for major customers for the year ended March 31, 2020 is as follows:
Customer

Net sales (millions of yen)

Los Angeles County Metropolitan¥

Segment

12,736

Rolling stock

Tokyo Metro Co., Ltd.

4,289

Rolling stockWest Japan Railway Company

4,149

Rolling stock

Transit Authority

Information for each country and area for the year ended March 31, 2019 is as follows:(a) Net sales
Millions of yen
Japan¥

19,087

United States

State ofof America

Qatar

¥

26,970¥17,898¥

Other

Consolidated

1,384

¥

65,339The principal countries and areas in each segment are as follows:
Other

China (Hong Kong), United Arab Emirates,
Arab Republic of Egypt, Republic of the Philippines20. Segment information (cont’d)(b) Property, plant and equipment
Millions of yenJapan¥

10,601

United Statesof America
¥

2,104

Consolidated¥

12,705

Information for major customers for the year ended March 31, 2019 is as follows:
CustomerLos Angeles County Metropolitan

Net sales (millions of yen)¥Segment

22,110

Rolling stock

Mitsubishi Corporation

18,309Rolling stockWest Japan Railway Company

8,377

Rolling stock

Transit Authority

21. Per share information
Per share information for the years ended March 31, 2020 and 2019 is as follows:
Yen
2020
2019
Net assets per share¥
3,262.20¥ 3,436.43
Net income per share
102.41
262.11
Notes : (1) Diluted net income per share is not disclosed because there are no dilutive shares.
(2) Net income per share is calculated on the following basis.

Net income (millions of yen)Amounts not attributable to ordinary shares(millions of yen)
Net income attributable to ordinary shares(millions of yen)
Average number of shares outstanding during eachyear (shares)

2020
705

2019
1,804

-

-

705

1,804

6,882,190

6,882,465

22. Gain on sale of noncurrent assets
For the fiscal year ended March 31, 2019, gain on the sale of noncurrent assets is gain on the sale ofland.

23. Insurance income
Insurance income is the insurance claim of ¥1,012 million received for damage caused by Typhoon
No. 21 on September 4, 2018 and damage caused by heavy snowfall at the consolidated US
subsidiary on March 9, 2018.

24. Loss on disaster
Loss on disaster of ¥991 million is a loss for damage to the Company’s inventories and buildings
caused by Typhoon No. 21 on September 4, 2018.

Independent auditor’s report
To the Board of Directors of THE KINKI SHARYO Co., Ltd.:
OpinionWe have audited the accompanying consolidated financial statements of THE KINKI SHARYO Co.,
Ltd. (“the Company”) and its consolidated subsidiaries (collectively referred to as “the Group"), which
comprise the consolidated balance sheets as at March 31, 2020 and 2019, the consolidated statements ofincome, comprehensive income, changes in net assets and cash flows for the years then ended, andnotes, comprising a summary of significant accounting policies, other explanatory information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at March 31, 2020 and 2019, and its
consolidated financial performance and cash flows for the years then ended in accordance withaccounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Consolidated Financial Statements section of our report. We are independent of the Groupin accordance with the ethical requirements that are relevant to our audit of the consolidated financial
statements in Japan, and we have fulfilled our other ethical responsibilities in accordance with theserequirements. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our opinion.
Responsibilities of Management and Corporate auditors and the board of corporate auditors for
the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with accounting principles generally accepted in Japan, and for such internal
control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern inaccordance with accounting principles generally accepted in Japan.
Corporate auditors and the board of corporate auditors are responsible for overseeing the directors’
performance of their duties including the design, implementation and maintenance of the Group’s
financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’sreport that includes our opinion. Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with auditing standards generally accepted in Japan
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, andobtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The riskof not detecting a material misstatement resulting from fraud is higher than for one resulting fromerror, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or theoverride of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances, while the objective of the audit is not to express an
opinion on the effectiveness of the Group’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis of accounting
and based on the audit evidence obtained, whether a material uncertainty exists related to events orconditions that may cast significant doubt on the Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’sreport to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Group tocease to continue as a going concern.



Evaluate whether the presentation and disclosures in the consolidated financial statements are inaccordance with accounting standards generally accepted in Japan, the overall presentation,
structure and content of the consolidated financial statements, including the disclosures, andwhether the consolidated financial statements represent the underlying transactions and events in amanner that achieves fair presentation.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the group audit. We remainsolely responsible for our audit opinion.

We communicate with corporate auditors and the board of corporate auditors regarding, among othermatters, the planned scope and timing of the audit, significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also provide corporate auditors and the board of corporate auditors with a statement that we havecomplied with relevant ethical requirements regarding independence, and communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, and whereapplicable, related safeguards.

Interest required to be disclosed by the Certified Public Accountants Act of Japan
We do not have any interest in the Group which is required to be disclosed pursuant to the provisions of
the Certified Public Accountants Act of Japan.

Yasuhiro Wada
Designated Engagement Partner
Certified Public Accountant

Seiko Ohashi
Designated Engagement Partner
Certified Public Accountant

KPMG AZSA LLC
Osaka Office, Japan
September 4, 2020
Notes to the Reader of Independent Auditor’s Report:
This is a copy of the Independent Auditor’s Report and the original copies are kept separately by theCompany and KPMG AZSA LLC.