THE KINKI SHARYO CO., LTD.
AND CONSOLIDATED SUBSIDIARYCONSOLIDATED FINANCIAL STATEMENTS
AND INDEPENDENT AUDITOR'S REPORT
Years Ended March 31, 2024 and 2023

THE KINKI SHARYO CO., LTD. AND CONSOLIDATED SUBSIDIARYCONSOLIDATED BALANCE SHEETSMarch 31, 2024 and 2023
Millions of yen
2024
2023
LIABILITIES AND NET ASSETSASSETS
Current Assets
Cash and time deposits (Notes 5, 6 and 8)
Receivables
Notes and accounts - trade, and contract assets (Notes 6 and 19)
Other accounts
Allowance for doubtful receivables (Note 6)\

Inventories
Work-in-process (Note 9)
Raw materials and supplies

Other current assets
Total current assets

Property, Plant and Equipment
Land (Notes 8 and 17)
Buildings and structures (Notes 8 and 17)
Machinery and equipment
Leased assets
Right-of-use assets
Construction in progress
Accumulated depreciation

Investments and Other Assets
Stocks of subsidiaries and affiliates（Note 6）
Investment securities（Notes 6 and 7）
Intangible assets
Other assets
Allowance for doubtful receivables
Total assets\

11,726\

7,635

14,84625(27)
14,844

14,09729(26)
14,10012,125439
12,564

13,582525
14,1071,305
40,4391,563
37,405

2,582
15,38614,142
1,502
311
354
34,277(22,732)
11,545

2,582
15,23914,0151,433
529
91
33,889(21,631)
12,258

36
7,111
259
171
(4)
7,573
59,557

\

36
5,368
112
314
(4)
5,826
55,489Millions of yen
2024
2023

Current Liabilities
Short-term loans payable (Notes 6 and 10)\
Current portion of long-term loans payable (Notes 6, 8 and 10)
Lease obligations (Notes 6 and 10)
PayablesTrade accounts (Note 6)
Construction
Contract liabilities (Note 19)
Income and enterprise taxes payable
Accrued expenses
Provision for bonuses
Allowance for losses on contracts (Note 9)
Provision for product warranties
Other current liabilities
Total current liabilities

Noncurrent Liabilities
Long-term loans payable (Notes 6, 8 and 10)
Lease obligations (Notes 6 and 10)
Deferred income tax liabilities (Note 12)
Net defined benefit liability (Note 11)
Other noncurrent liabilities (Note 8)
Total liabilities

500
3,000
64

\

4,700
67

5,170
609
5,655
680
1,490
368
937
276
2,061
20,810

5,537
680
3,314
157
918
378
1,163
638
1,915
19,467

-

1,353
1,257
2,847
789
6,246
27,056

3,000
1,331
736
2,798
863
8,728
28,195

5,253

5,253

3,125
19,660(106)

3,125
15,630(106)

27,932

23,902

2,583
2,107
(121)
4,569
32,501
59,557

1,374
2,075
(57)
3,392
27,29455,489Net Assets (Note 13)
Shareholders' equity
Common stock
Authorized - 12,000,000 shares
Issued - 6,908,359 shares
Capital surplus
Retained earnings
Treasury stock, at cost
27,675 shares in March 2024
27,309 shares in March 2023
Total shareholders' equity
Accumulated other comprehensive income
Net unrealized holding gains on securities
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 to Consolidated Financial Statements.

\\

THE KINKI SHARYO CO., LTD. AND CONSOLIDATED SUBSIDIARYCONSOLIDATED STATEMENTS OF INCOME
Years Ended March 31, 2024 and 2023

Net sales (Notes 19 and 20)
Cost of sales (Note 15)
Gross profit
Selling, general and administrative expenses
Operating profit

Millions of yen
2024
2023
\
43,155\35,87434,90531,245
8,250
4,629
3,944
3,400
4,306
1,229

Other income (expenses)
Interest and dividend income
Interest expense
Foreign exchange gain
Commission fees
Other, net

Income before income taxes
Income taxes (Note 12)
Current
RefundDeferred
Net income
Net income attributable to non-controlling interests
Net income attributable to owners of the parent

\

262
(70)
556
(45)
703

129
(52)
151
(35)
(138)
55

5,009

1,284

(664)
37
(8)
4,374
―
4,374

\

(107)
6
1,183
―
1,183

\
\

171.9750.00

Yen
Amounts per share (Note 21)
Net income
Cash dividends applicable to the year\\

635.6150.00

See accompanying Notes to Consolidated Financial Statements.

THE KINKI SHARYO CO., LTD. AND CONSOLIDATED SUBSIDIARYCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended March 31, 2024 and 2023
Millions of yen
2024
2023
\
4,374
\
1,183

Net income
Other comprehensive income
Net unrealized holding gains (losses) on securities
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total other comprehensive income (Note 4)
Comprehensive income
Comprehensive income attributable toowners of the parent
Comprehensive income attributable tonon-controlling interests

\

1,209
32
(64)
1,177
5,551

\

172
1,646
25
1,843
3,026

5,551

3,026

-

-

See accompanying Notes to Consolidated Financial Statements.

THE KINKI SHARYO CO., LTD. AND CONSOLIDATED SUBSIDIARYCONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Years Ended March 31, 2024 and 2023
Millions of yen
Shareholders' equity
Number ofshares ofcommonstock
Balance at April 1, 2023

6,908,359

Commonstock\

Capitalsurplus

5,253

\

\

Net
unrealized
holding gains
on securities

Treasurystock

Retainedearnings

3,125

Accumulated other comprehensive income

15,630

\

(106)

\

1,374

Foreigncurrencytranslation
adjustments
\

2,075

Remeasurements ofdefinedbenefit plans
\

(57)

Total

\

27,294

Cash dividends paid at ￥50.00 per share（Note 13）

-

-

-

(344)

-

-

-

-

(344)

Net income

-

-

-

4,374

-

-

-

-

4,374

Purchase of treasury stock

-

-

-

-

(0)

-

-

-

(0)

-

-

-

-

1,209

32

(64)

1,177

Net changes during the year
Balance at March 31, 2024

6,908,359

Number ofshares ofcommonstock
Balance at April 1, 2022

6,908,359

\

5,253

Common
stock

\

\

3,125

Capitalsurplus

5,253

\

\

19,660\(106)

14,653

\

\

2,583

Net
unrealized
holding gains
on securities

Treasurystock

Retainedearnings

3,125

\

(105)

\

1,202

\

2,107

Foreigncurrencytranslation
adjustments
\

429

\

(121)

\

Remeasurements ofdefinedbenefit plans\(82)

32,501

Total\

24,475

Cash dividends paid at ￥30.00 per share（Note 13）

-

-

-

(206)

-

-

-

-

(206)

Net income

-

-

-

1,183

-

-

-

-

1,183

Purchase of treasury stock

-

-

-

-

(1)

-

-

-

(1)

Net changes during the year

-

-

-

-

-

172

1,646

25

1,843

Balance at March 31, 2023

6,908,359

\

5,253

\

3,125

\

15,630

\

(106)

\

See accompanying Notes to Consolidated Financial Statements.

1,374

\

2,075

\

(57)

\

27,294

THE KINKI SHARYO CO., LTD. AND CONSOLIDATED SUBSIDIARYCONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended March 31, 2024 and 2023
Millions of yen
2024
2023
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
Interest expense
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
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Income taxes refunded
Net cash provided by (used in) operating activities

\

5,009

\

1,284

1,268
(15)
(362)
(228)
(262)
70
2,217
1,576
(1,312)
344
444
8,749
262
(70)
(159)
151
8,933

1,230
(57)
60
(1,444)
(129)
52
7,757
1,453
(5,752)
263
934
5,651
129
(50)
(14)
203
5,919

(425)
-

(46)
46

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
Decrease (increase) in deposits pledged as collateral
Net cash provided by (used in) investing activities

(678)

(704)

0
3,686
2,583

6
45
(653)

Cash flows from financing activities
Net increase (decrease) 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(4,200)
(78)
(344)
(0)
(4,622)(11,000)
3,000
(3)
(47)
(206)
(0)
(8,256)

Effect of exchange rate changes on cash and cash equivalents

195

300

7,089
4,158
11,247(2,690)
6,848
4,158

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 5)\

See accompanying Notes to Consolidated Financial Statements.

\

THE KINKI SHARYO CO., LTD. AND CONSOLIDATED SUBSIDIARYNOTES 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 subsidiary 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 the subsidiary’s accounting
records maintained in conformity with generally accepted accounting principles in the UnitedStates of America (“US GAAP”) and partially reflect the adjustments which are necessary toconform with 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 one significant company 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 subsidiary's fiscal year-end- The consolidated overseas subsidiary has a fiscal
year 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 subsidiary (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.
(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 finance leases) - Property, plant and equipment
are carried at cost. Depreciation is calculated by the straight-line method over the estimateduseful life of the asset.

2. Significant accounting policies (cont’d.)(i) Intangible assets (except for finance leases) - Intangible assets are amortized by the straightline 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) Finance leases - Property, plant and equipment capitalized under finance leases that transfer
ownership of the lease assets are depreciated the same as the Companies’ non-lease assets.
Property, plant and equipment capitalized under finance leases that do not transfer ownershipof the lease assets 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 ¥278 million and ¥225 million for the years ended March
31, 2024 and 2023, respectively.
(m) Retirement and severance benefits for employees - Under the terms of the Company’s
unfunded lump-sum retirement plans, substantially all employees are entitled to a lump-sum
payment at the time of retirement.

The amount of the retirement benefit is, in general, basedon the length of service, base salary at the time of retirement 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 accrues the liability asof the end of the fiscal year in an amount based on the estimated projected benefit obligation.
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 -A provision for bonuses is provided at the balance sheet date basedon the estimated amounts to be paid to employees in the future.
(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.

2. Significant accounting policies (cont’d.)(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, 2024 and 2023 is not applicable because the Company had 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 revenue attributed to the Rolling Stock segment
is mainly from the sale of trains manufactured by the Company and the Company has theperformance obligations to transfer the products based on the contract with customers.
The Company's performance obligations in its contracts with customers are satisfied over time.
The Company estimates the completion status of the performance obligations and recognizes
revenue based on the status. In determining the status, the Company estimates the satisfactionof the performance obligations reasonably based on the number of trains transferred since theCompany can directly identify the goods or services transferred to the customers by the deliveryof the trains.
The Company’s overseas subsidiary also considers its performance obligations satisfied overtime. The subsidiary estimates the completion status of the performance obligations reasonably
and recognizes revenue based on the cost incurred, since the cost incurred reflects the progressof manufacturing the trains and the transfer of control of goods or service to customers withthat progress appropriately.
(u) Reclassifications - Certain prior year amounts have been reclassified to conform to the 2024
presentation.

3. Significant accounting estimates(a) Allowance for losses on contracts① Carrying amounts in the current year’s financial statements
In the consolidated balance sheets of the Company and its consolidated subsidiary as ofMarch 31, 2024 and 2023, allowances for losses on contracts of ¥937 million and ¥1,163
million, respectively, were recognized. Included in the amounts were ¥925 million and¥1,132 million of allowance for losses on contracts recognized by the Company as of March
31, 2024 and 2023, respectively.
② Information on the nature of significant accounting estimates for identified items
As described in Note 2 (p), “Significant accounting policies - Allowance for losses oncontracts,” an allowance for losses on contracts was provided for estimated future losses
on particular contracts. In recognizing the allowance, total costs, including direct selling
expenses corresponding to total revenue, needed to be reasonably estimated. The total
costs were estimated for each contract. Because raw material prices might change and work
hours for a contract could increase due to unexpected design or process amendments,
estimating the total costs involved a high degree of uncertainty, and management’s
judgment on raw material prices and work hours required for a contract had a significant
effect on the estimate of total costs.

4. 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:

Net unrealized holding gains (losses) on
securities
Increase (decrease) during the year
Reclassification adjustments
Subtotal, before tax
Tax (expense) or benefit
Subtotal, net of tax
Foreign currency translation adjustments
Increase (decrease) during the year
Reclassification adjustments
Subtotal, before tax
Tax (expense) or benefit
Subtotal, net of tax
Remeasurements of defined benefit plans
Increase (decrease) during the year
Reclassification adjustments
Subtotal, before tax
Tax (expense) or benefit
Subtotal, net of tax
Total other comprehensive income

Millions of yen

2024
¥

¥

1,742
1,742
(533)
1,209

2023

¥

249
249
(77)
172

32
32
32

1,646
1,646
1,646

(81)
17
(64)
(64)
1,177

(10)
35
25
25
1,843

¥

5. Cash flow information
The reconciliations of cash and time deposits in the consolidated balance sheets and cash andcash equivalents in the consolidated statements of cash flows at March 31, 2024 and 2023 are as
follows:
Millions of yen
2024
2023
Cash and time deposits (in balance sheets)¥

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

11,726

¥

7,635

(479)

-

-

(3,477)

11,247¥4,158

6. 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. On March 31, 2024, 96.7% 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 receivable and payable, 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 formarket prices or fair value provided by the financial condition of the corporations on aquarterly 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 capital,and long-term loans payable are used primarily for financing capital investments.
Lease obligations - Lease obligations are used primarily for financing capital investments.

6. 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, 2024 and 2023 are as follows:
Millions of yen
2024
Investment securities

Book value

Fair value

Difference

¥

¥

¥

7,083

7,083

-

Long-term loans payable(3,000)(3,000)-

Lease obligations(1,417)(1,404)

(13)

(856)

(856)

-

0

0

-

Derivatives
Not applying hedge accounting
Applying hedge accounting

Millions of yen
2023
Investment securities

Book value

Fair value

Difference

¥

¥

¥

5,340

5,340

-

Long-term loans payable(3,000)(3,000)-

Lease obligations(1,398)(1,371)

(27)

(818)

(818)

-

-

-

-

Derivatives
Not applying hedge accounting
Applying hedge accounting
Notes1) Cash and time deposits, Notes and accounts – trade, Trade accounts
payable and Short-term loans payable for the years ended March 31, 2024 and2023 have been omitted as Cash and time deposits is cash and the others aresettled in a short period of time and have the fair values approximating thebook value.
2) The figures in parentheses indicate liabilities.

6. Financial instruments: disclosure (cont’d.)
The fair value of the financial instruments in the table above approximates the book value incases in which the maturities are short. The value of derivatives is determined using the rateof the foreign currency forward exchange contract, and long-term loans payable is calculatedby discounting the principal and interest payments by the assumed discount rates for similar
new loans.
Financial instruments for which the fair value is difficult to determine are as follows:
Millions of yen
2024
2023
Unlisted stocks
¥
28
¥
28
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
2024
Within one year
Cash and time deposits¥

Trade notes and trade accounts

Over one year

11,726

¥

-

7,707

-

Millions of yen
2023
Within one year
Cash and time deposits
Trade notes and trade accounts

¥

7,635
8,904

Over one year¥-(c) Fair values of financial instruments
Based on the observability and the significance of the inputs used to determine the fairvalue, the fair value information of financial instruments is presented by categorizing themeasurements into the following three levels:
Level 1: fair value measured by quoted prices of identical assets or liabilities in active
markets.
Level 2: fair value measured using observable inputs other than Level 1.
Level 3: fair value measured using unobservable inputs.
When multiple inputs from different categories are used in measuring the fair value, theCompany and its subsidiary classify the fair value by the category to which the lowest
priority is assigned.

6. Financial instruments: disclosure (cont’d.)(1) Financial instruments measured at fair values in the consolidated balance sheet

Investment securities
Derivatives
Not applying hedge accounting
Applying hedge accounting

Investment securities
Derivatives
Not applying hedge accounting

Level 1
¥ 7,083-

Level 1
¥ 5,340-

Millions of yen
2024
Fair value
Level 2
Level 3¥¥856
0Millions of yen
2023
Fair value
Level 2
Level 3
¥
¥
818

-

Total
¥ 7,083
856
0

Total
¥ 5,340818(2) Financial instruments other than those measured at fair values in the consolidatedbalance sheet

Long-term loans payable
Lease obligations

Long-term loans payable
Lease obligations

Level 1¥-Millions of yen
2024
Fair value
Level 2
Level 3
¥ 3,000
¥
1,404
-

Total
¥ 3,000
1,404

Level 1¥-Millions of yen
2023
Fair value
Level 2
Level 3
¥ 3,000
¥
1,371
-

Total
¥ 3,000
1,371(Note) Valuation techniques and inputs used in measuring fair values
Investment securities
Investment securities are classified as Level 1 because they are exchanged in active markets.
Derivatives
Derivatives are measured based on forward exchange rate and are classified as Level 2.
Long-term loans payable and Lease obligations
Long-term loans payable and Lease obligations are calculated by discounting the principal
and interest payments by the assumed discount rates for similar new loans and leasetransactions and are classified as Level 2.

7. Securities
At March 31, 2024 and 2023, 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, 2024
and 2023 are as follows:
Securities with book value (fair value) that exceeds acquisition cost

Equity securities
Total

Equity securities
Total

Acquisition cost
¥
3,359
¥
3,359

Millions of yen
2024
Book value
¥
7,083
¥
7,083

¥
¥

Acquisition cost
¥
3,261
¥
3,261

Millions of yen
2023
Book value
¥
5,242
¥
5,242

Difference
¥
1,981
¥
1,981

Difference
3,724
3,724

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

Equity securities
Total

Equity securities
Total

Acquisition cost¥¥-

Millions of yen
2024
Book value¥¥-

Difference¥¥-

Acquisition cost
¥
98
¥
98

Millions of yen
2023
Book value
¥
98
¥
98

Difference
¥
(0)
¥
(0)

7. Securities (cont’d.)(d) For the years ended March 31, 2024 and 2023 , there are no sales of available-for-salesecurities (equity securities) and, therefore, no gain on such sales.

8. Pledged assets
At March 31, 2024 and 2023, the following assets are pledged as collateral for long-term loans
payable of ¥2,000 million:

Land

¥

Millions of yen
2024
2023
179
¥
179

At March 31, 2024 and 2023, the following assets are pledged as collateral for deposits fromtenants of ¥70 million for each of the two years (included in other noncurrent liabilities),
respectively:

Buildings, net book value¥

Millions of yen
2024
2023
289
¥
310

At March 31, 2024 and 2023, the following assets are pledged as collateral to issue a letter ofcredit, and there is no corresponding liability:

Cash and deposits¥

Millions of yen
2024
2023
¥
3,477

9. Allowance for losses on contracts
Inventories for contracts with anticipated losses and the allowance for losses on contracts are
not offset. For the years ended March 31, 2024 and 2023, the inventories associated with theallowance for losses on contracts are ¥659 million and ¥805 million, respectively, and included
in "Work-in-process."

10. Short-term loans payable, long-term loans payable and lease obligations
Short-term loans payable represents mainly short-term loans from banks at a weighted averageannual rate of 0.7% and 0.5% at March 31, 2024 and 2023, respectively.
Long-term loans payable as of March 31, 2024 are as follows:
Millions of yen
2024
Loans from banks, due through 2024 at an weighted
average rate of 0.4% in 2024
Less current portion

¥

3,000

¥

(3,000)-

The aggregate annual maturities of finance lease obligations subsequent to March 31, 2024 are
as follows:
Millions of yen
2024

Years ending March 31,
2025
2026
2027
2028
2029 and after

¥

¥

1,352
1
1,353

Long-term loans payable as of March 31, 2023 are as follows:
Millions of yen
2023
Loans from banks, due through 2024 at an weighted
average rate of 0.3% in 2023
Less current portion

¥

3,000

¥

3,000

10. Short-term loans payable, long-term loans payable and lease obligations (cont’d.)
The aggregate annual maturities of finance lease obligations subsequent to March 31, 2023 are
as follows:
Millions of yen
2023

Years ending March 31,
2024
2025
2026
2027
2028 and after

¥

¥

60
1,270
1
1,331

11. 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 overseas subsidiary provides a defined contribution pension plan.
1. Defined benefit plans(a) Movement in retirement benefit obligations, except for plans that applied the simplified
methodBalance at April 1, 2023 and 2022
Service cost
Interest cost
Actuarial loss (gain)
Benefits paid
Balance at March 31, 2024 and 2023¥¥

Millions of yen
2024
2023
2,798
¥
2,881
117
158
22
23
81
9
(171)
(273)
2,847
¥
2,798

(b) Reconciliation from retirement benefit obligations to liability for retirement benefits

Unfunded retirement benefit obligations¥
Total net liability for retirement benefits at March
31, 2024 and 2023
Net defined benefit liability
Total net liability for retirement benefits at March ¥31, 2024 and 2023

Millions of yen
2024
2023
2,847
¥
2,798
2,847

2,798

2,847

2,798

2,847

¥

2,798

(c) Retirement benefit costs

Service cost
Interest cost
Net actuarial loss amortization¥¥

Millions of yen
2024
2023
117
¥
158
22
23
17
35
156
¥
216

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

Actuarial gain (loss)¥¥

Millions of yen
2024
2023
(64)
¥
25
(64)
¥
25

¥
¥

Millions of yen
2024
2023
(121)
¥
(57)
(121)
¥
(57)

(e) Accumulated remeasurements of defined benefit plans

Unrecognized actuarial loss(f) Actuarial assumptions
The principal actuarial assumptions at March 31, 2024 and 2023 (expressed as weighted
averages) are as follows:

Discount rate
Expected rate of salary increase

2024
0.8%
1.8%

2023
0.8%
1.8%

2. Defined contribution plans
Contributions to the defined contribution plans in 2024 and 2023 are ¥275 million and ¥272
million, respectively.

12. Income taxes(a) Significant components of the Companies’ deferred tax assets and liabilities as of March 31,
2024 and 2023 are as follows:

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

Millions of yen
2024
2023
¥

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
Net unrealized holding gains on derivatives
Other
Total deferred income tax liabilities
Net deferred income tax liabilities
¥

1,295
855
286
61
750
924
84
113
183
473
5,024

¥

2,663
857
355
55
363
223
195
116
126
494
5,447

(1,295)(2,663)(3,729)(2,784)(5,024)-(5,447)-(1,140)(9)(108)(1,257)(1,257)

(607)
(30)
(99)
(736)
(736)

¥

Notes ＊1) The valuation reserve decreased by ¥423 million. The main reason for the decreaseis a ¥1,368 million decrease in the valuation reserve for net operating loss carryforwards.

12. 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, 2024
Year ending March
31,
Net operating loss
carryforwards ＊3

Millions of yen
2028

2029

2030 and
after

¥ 680

－

¥ 48

¥ 334

¥ 1,295

(233)

(680)

－

(48)

(334)

(1,295)

－

－

－

－

－

－

2025

2026

2027

－

¥ 233

Valuation reserve－

Net deferredincome tax assets

－

Total

＊3) Net operating loss carryforwards shown in the above table are amounts after
multiplying the statutory tax rate.
Previous Fiscal year ended March 31, 2023
Millions of yen

Year ending March
31,
Net operating loss
carryforwards ＊3

2024

2025

2026

2027

2028

2029 and
after

¥ 949

－

¥ 233

¥ 680

－

¥ 801

¥ 2,663

Valuation reserve

(949)

－

(233)

(680)

－

(801)

(2,663)Net deferred income
tax assets

－

－

－

－

－

－

－

Total

＊3) Net operating loss carryforwards shown in the above table are amounts after
multiplying the statutory tax rate.

(b) The following table summarizes the significant differences between the statutory tax rate
and the effective tax rate for the years ended March 31, 2024 and 2023 after tax effectaccounting is applied.

Statutory tax rate
Permanently nondeductible expenses
Permanently nontaxable expenses
Taxation on per capita basis
Change in valuation reserve
Loss carryforwards expiration
Research and development credit
Tax credits for promotion of salary increases
Other
Effective tax rate2024
30.6 %
0.2
(0.2)
0.2
(10.9)
4.8
(7.2)
(2.4)
(2.4)
12.7 %

2023
30.6 %
1.1
(0.5)
0.7
(59.7)
26.1
9.5
7.8 %

13. 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 asadditional 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 as additional 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 betransferred to other capital surplus and retained earnings, respectively, which are potentiallyavailable for dividends. The maximum amount that the Company can distribute as dividends
is calculated based on the nonconsolidated financial statements of the Company in accordancewith Japanese laws and regulations.
(a) Number and type of shares issued and number and type of shares of treasury stock

Common stock
Treasury stock

April 1, 2023
6,908,359
27,3092024
Number of shares
Increase
Decrease
366-

March 31, 2024
6,908,359
27,675The increase in treasury stock of 366 shares is due to the acquisition of fractional shares.

Common stock
Treasury stock

April 1, 2022
6,908,359
27,0082023
Number of shares
Increase
Decrease
301-

March 31, 2023
6,908,359
27,309The increase in treasury stock of 301 shares is due to the acquisition of fractional shares.

13. Net assets (cont’d)(b) Dividends
Dividends whose recorded date is during the year ended March 31, 2024, but whose effective
date is the following fiscal year are as follows.

Resolution adopted
Board of Directors’Meeting
on May 23, 2024

Type ofsharesMillions ofyen
Aggregate
amountAppropriationfrom

Common
stock

¥ 344

Retainedearnings

Yen
Amount per
share¥ 50.00

Record date

March 31,2024

Effective
date
June 11, 2024

Dividends whose recorded date is during the year ended March 31, 2023, but whose effective
date is the following fiscal year are as follows.
Resolution adopted
Board of Directors’Meeting
on May 22, 2023

Type ofsharesMillions ofyen
Aggregate
amountAppropriationfrom

Common
stock

¥ 344

Retainedearnings

Yen
Amount per
share¥ 50.00

Record date

March 31,2023

Effective
date
June 13, 2023

14. Related party transactions
At March 31, 2024 and 2023, Kintetsu Railway Co., Ltd. (“Kintetsu”) directly own 30.4% of theCompany’s outstanding common stock. For the year ended March 31, 2024 and 2023, there areno significant related party transactions.
15. Cost of sales
For the year ended March 31, 2024 and 2023, reversals of the allowance for losses on contracts
deducted from the cost of sales is ¥226 million and ¥1,431 million, respectively.

16. Derivative transactions
Derivatives for which hedge accounting had not been applied at March 31, 2024 is as follows:
Millions of yen
2024
Contract amount
Total

Fair value

Due after
one year

Realized
gain (loss)

Foreign currency forward exchange
contracts:
Selling
US dollar

¥

1,991

¥

-

¥

(856)

¥

(856)

Total

¥

1,991

¥

-

¥

(856)

¥

(856)

Derivatives for which hedge accounting had not been applied at March 31, 2023 is as follows:

Millions of yen
2023
Contract amount
Total

Fair value

Due after
one year

Realized
gain (loss)

Foreign currency forward exchange
contracts:
Selling
US dollar

¥

4,016

¥

-

¥

(818)

¥

(818)

Total

¥

4,016

¥

-

¥

(818)

¥

(818)

16. Derivative transactions (cont’d)Information on derivatives for which hedge accounting is applied at March 31, 2024 is asfollows:
Millions of yen
2024
Contract amount

Fair value

Due after

Total

one year

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

¥

1,454

¥

-

Total

¥

1,454

¥

-

＊1
¥

-

Note ＊1 Foreign currency forward exchange contracts for which the designation method isapplied are accounted for together with the receivables - 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.
At March 31, 2023, there are no derivatives for which hedge accounting have been applied.

17. Fair value of investment and rental property
The Company owns real estate for lease in Osaka and other prefectures. The income from thereal estate for lease is ¥708 million and ¥710 million for the years ended March 31, 2024 and 2023,
respectively. The book value (balance), net changes during the year and fair value of the realestate for lease are as follows:
Millions of yen
2024
Balance at April 1, 2023¥

Net changes during the year
Balance at March 31, 2024
Fair value at March 31, 2024

1,516
(25)

¥

1,491
10,251

17. Fair value of investment and rental property (cont’d)Millions of yen
2023
Balance at April 1, 2022

¥

1,542

Net changes during the year

(26)

Balance at March 31, 2023

¥

1,516

Fair value at March 31, 2023

10,307

18. Leases(a) Finance leases(As lessee)
Finance leases that transfer ownership of the leased assets
Leased assets consist of buildings and land.
Finance leases that do not transfer ownership of the leased assets
Leased assets consist of machinery and equipment.
(b) Operating leases(As lessee)
Obligations under non-cancellable operating leases at March 31, 2024 and 2023 are as
follows:
Millions of yen
2024
Payments due within one year¥

Payments due after one year
Total payments remaining

2023
1

¥

276
¥

277

35
259

¥

294

19. Revenue Recognition
1. Disaggregated revenue arising from contracts with customers
Information on disaggregated revenue arising from contracts with customers is included in
Note 20, “Segment information.”
2. Understanding revenue from contracts with customers
Basic information for understanding revenue from contracts with customers is included in Note
2 (t), “Significant Accounting Policies - Revenue and related cost recognition.”
3. Information on the relationship between fulfilment of performance obligations based oncontracts with customers and cash flow generated from the contracts and the amount andtiming of revenue expected to be recognized in current or subsequent fiscal years from acontract with customers that exists as of the end of the current consolidated fiscal year
Current Fiscal year ended March 31, 2024(a) The balance of contract assets and contract liabilities
Millions of yen
2024
Receivables arising from contracts with customers (opening balance)
Notes

¥

Accounts

8,904

¥

8,904

¥

-

Receivables arising from contracts with customers (ending balance)
Notes
Accounts

7,707
¥

7,707

Contract assets（opening balance）

5,192

Contract assets（ending balance）

7,140

Contract liabilities（opening balance）

3,314

Contract liabilities（ending balance）

5,655

Contract assets represent unbilled consideration for revenue recognized based on progress inthe fulfillment of performance obligations under construction contracts of the overseas
consolidated subsidiary. The contract assets are transferred to receivables arising from contracts
with customers when the right of the overseas subsidiary to the consideration becomes
unconditional and are invoiced after customer inspection and received at the contractual
collection time in accordance with the contract with the customer.
Contract liabilities relate to advances from customers under construction contracts for which
the Company and its overseas consolidated subsidiary recognize revenue over a period of time.
The contract liabilities are reversed upon revenue recognition.

19. Revenue Recognition (cont’d)
The amount of revenue recognized in the current consolidated fiscal year that was included in
the contract liabilities balance at the beginning of the period amounted to ¥659 million. The
increase of ¥1,948 million in contract assets in the current consolidated fiscal year was a resultof the construction progress at the overseas consolidated subsidiary. In addition, the increase of¥2,341 million in contract liabilities in the current consolidated fiscal year resulted mainly fromadvances received based on the contracts at the Company.
(b) Transaction price allocated to residual performance obligations
The total transaction price allocated to the residual performance obligation is ¥124,978 million,
and the Company and the overseas consolidated subsidiary expect to recognize revenue forthese residual performance obligations between 2024 and 2030 as the performance obligations
are fulfilled.

Previous fiscal year ended March 31, 2023
(a) The balance of contract assets and contract liabilities
Millions of yen
2023
Receivables arising from contracts with customers (opening balance)
Notes

¥

Accounts

9,370

¥

9,370

¥

-

Receivables arising from contracts with customers (ending balance)
Notes
Accounts

8,904
¥

8,904

Contract assets（opening balance）

8,959

Contract assets（ending balance）

5,192

Contract liabilities（opening balance）

1,610

Contract liabilities（ending balance）

3,314

Contract assets represent unbilled consideration for revenue recognized based on progress inthe fulfillment of performance obligations under construction contracts of the overseas
consolidated subsidiary. The contract assets are transferred to receivables arising from contracts
with customers when the right of the overseas subsidiary to the consideration becomes
unconditional and are invoiced after customer inspection and received at the contractual
collection time in accordance with the contract with the customer.

19. Revenue Recognition (cont’d)Contract liabilities relate to advances from customers under construction contracts for which
the Company and its overseas consolidated subsidiary recognize revenue over a period of time.
The contract liabilities are reversed upon revenue recognition.
The amount of revenue recognized in the current consolidated fiscal year that was included in
the contract liabilities balance at the beginning of the period amounted to ¥1,596 million. The
decrease of ¥3,767 million in contract assets in the current consolidated fiscal year was a resultof the progress in customer inspection and billing at the overseas consolidated subsidiary. In
addition, the increase of ¥1,704 million in contract liabilities in the current consolidated fiscal
year resulted mainly from advances received in connection with the conclusion of new contracts
at the Company.
(b) Transaction price allocated to residual performance obligations
The total transaction price allocated to the residual performance obligation is ¥106,622 million
and the Company and the overseas consolidated subsidiary expect to recognize revenue forthese residual performance obligations between 2023 and 2030 as the performance obligations
are fulfilled.
20. Segment information(a) General information about reportable segments
Reportable segment information of the Company is the obtainable financial information which
is made available to and used by the Officers Committee and Board of Directors to determine
the allocation of management resources and to evaluate business performance. The Company
has a Rail Transit Division that focuses on manufacturing rolling stock. It formulates strategy
and deals with business concerning trains and their related parts and maintenance for the JRgroup, public and private railways and subways in Japan and foreign countries. In addition, theCompany deals with the lease of real estate. Therefore, the reportable segments of the Company
are that of “Rolling Stock” and “Lease of Real Estate.”(b) Measurement of 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) Reportable segment profit or loss, segment assets, segment liabilities and other material items
and disaggregated revenue
Current fiscal year ended March 31, 2024:
Millions of yen
Reportable segments
Rolling Stock

Lease of Real Estate

Adjustment

Consolidated

Revenue fromcontractswith customers¥

42,338Other revenue

¥

-

¥

-

¥

42,338

-

817

-

817

Net sales

42,338817-

43,155

Segment profit

5,109

708

(1,511)

4,306

Segment assets

49,051

1,508

8,998

59,557

Segment liabilities

15,041

582

11,43327,056

1,178

25

65

1,268

776

-

41

817

Depreciation andamortization
Increase in tangible
and intangible assets

1. Adjustments are as follows:(a) The adjustment of segment profit of ¥(1,511) million is corporate expenses of ¥(1,511) million
that are not attributable to reportable segments and represents administrative expenses of theCompany.
(b) The adjustment of segment assets of ¥8,998 million is for surplus funds and assets that are
not allocable to any reportable segments.
(c) The adjustment of segment liabilities of ¥11,433 million is for liabilities that are not allocable
to any reportable segments.
(d) Depreciation and amortization of ¥65 million is depreciation and amortization that are notallocable to any reportable segments.
(e) The increase in tangible and intangible assets of ¥41 million is equipment investment that is
not allocable to any reportable segments.
2. Segment profit is adjusted to operating profit in the consolidated statements of income.

20. Segment information (cont’d)Previous fiscal year ended March 31, 2023:
Millions of yen
Reportable segments
Rolling Stock

Lease of Real Estate

Adjustment

Consolidated

Revenue fromcontractswith customers¥

35,060

Other revenue

¥

-

¥

-

¥

35,060

-

814

-

814

Net sales

35,060814-

35,874

Segment profit

1,626

710

(1,107)

1,229

Segment assets

51,183

1,534

2,772

55,489Segment liabilities

13,737597

13,86028,194

1,141

26

63

1,230

1,801

-

56

1,857

Depreciation andamortization
Increase in tangible
and intangible assets

1. Adjustments are as follows:(a) The adjustment of segment profit of ¥(1,107) million is corporate expenses of ¥(1,107) million
that are not attributable to reportable segments and represents administrative expenses of theCompany.
(b) The adjustment of segment assets of ¥2,772 million is for surplus funds and assets that are
not allocable to any reportable segments.
(c) The adjustment of segment liabilities of ¥13,860 million is for liabilities that are not allocable
to any reportable segments.
(d) Depreciation and amortization of ¥63 million is depreciation and amortization that are notallocable to any reportable segments.
(e) The increase in tangible and intangible assets of ¥56 million is equipment investment that is
not allocable 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, 2024 is as follows:(a) Net sales
Millions of yenJapan¥30,623

United States

Othersof America¥

10,883¥

1,649

Consolidated¥

43,155The principal countries and areas in each segment are as follows:
OthersChina (Hong Kong), United Arab Emirates, Arab Republic of Egypt,
State of Qatar, The Republic of the Philippines(b) Property, plant and equipment
Millions of yen
Japan
¥

9,127

United Statesof America
¥

2,418

Consolidated¥

11,545

Information of major customers for the year ended March 31, 2024 is as follows:
CustomerWest Japan Railway Company

Net sales (millions of yen)
11,127

Rolling stock

Tokyo Metro Co., Ltd.

10,837

Rolling stock

Los Angeles County Metropolitan

5,692

Rolling stock

Transportation Authority¥

Segment

20. Segment information (cont’d)Information for each country and area for the year ended March 31, 2023 is as follows:(a) Net sales
Millions of yen
United States

Japan
¥

of America

24,742¥

8,102

OthersConsolidated

¥

¥

3,030

35,874The principal countries and areas in each segment are as follows:
OthersUnited Arab Emirates, China (Hong Kong), State of Qatar,
The Republic of the Philippines, Arab Republic of Egypt(b) Property, plant and equipment
Millions of yen
United States

Japan
¥

of America

9,388

¥

2,870

Consolidated¥

12,258

Information for major customers for the year ended March 31, 2023 is as follows:
CustomerWest Japan Railway Company

Net sales (millions of yen)
5,404

Rolling stock

Osaka Metro Co., Ltd.

5,002

Rolling stock

Tokyo Metro Co., Ltd.

4,848

Rolling stock

Bureau of Transportation Tokyo

4,206

Rolling stock

Metropolitan Government¥

Segment

21. Per share information
Per share information for the years ended March 31, 2024 and 2023 is as follows:Yen
Net assets per share
Net income per share¥2024
4723.52635.61¥2023
3,966.58
171.97

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)

¥

2024
4,374

¥

2023
1,183

-

-

4,374

1,183

6,880,863

6,881,182

Independent auditor’s report
To the Board of Directors of THE KINKI SHARYO Co., Ltd.:

Report on the Audit of the Consolidated Financial Statements
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, 2024 and 2023, 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 and 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, 2024 and 2023, and its
consolidated financial performance and its consolidated cash flows for the years then ended inaccordance with accounting 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.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements of the current period. These matters were addressed in thecontext of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.

Reasonableness of the Company’s estimate of total costs related to the recognition of anallowance for losses on contracts
The key audit matter

How the matter was addressed in our audit

In the consolidated balance sheet of THE
KINKI SHARYO CO., LTD. (the“Company”) and its consolidated subsidiary
as of March 31, 2024, as described in Note3,“Significant accounting estimates”, anallowance for losses on contracts of ¥937
million was recognized. Included therein was¥925 million of an allowance for losses oncontracts recognized by the Company.

The primary procedures we performed to assess thereasonableness of the Company’s estimate of the total
costs related to the recognition of an allowance forlosses on contracts, included the following:

As described in Note2, “Significant
accounting policies, (p) Allowance for losses
on contracts”, an allowance for losses oncontracts was provided for estimated future
losses on particular contracts. In recognizing
the allowance, total costs including direct
selling expenses corresponding to total
revenue need to be reasonably estimated.
The total costs were estimated for eachcontract. Raw material prices might change
and work hours for a contract could increase
due to unexpected design or process
amendments. Accordingly, estimating thetotal costs involved a high degree of
uncertainty, and management’s judgment on
raw material prices and work hours for acontract had a significant effect on theestimate of total costs.
We, therefore, determined that thereasonableness of the estimate of total costs
related to the recognition of an allowance forlosses on contracts of the Company was of
most significance in our audit of theconsolidated financial statements for thecurrent fiscal year, and accordingly, a key
audit matter.

(1) Internal control testing
We tested the design and operating effectiveness ofcertain of the Company’s internal controls relevant to
the recognition process for an allowance for losses oncontracts. In this assessment, we focused our testing oncontrols relevant to the approval process of the resultsof the calculation of the allowance.
(2) Assessment of the reasonableness of the estimateof the total costs
In order to assess the reasonableness of key
assumptions applied to estimate the total costs for eachcontract, we performed the following procedures
among others:

agreed the estimated costs for each contract withthe supporting worksheets that calculated theaccumulated costs and compared them with actual
costs of similar contracts in the past;evaluated the accuracy of the estimated costs bycomparing the actual costs with their estimatedcosts and examining variances between the two,and assessed whether those variances werereflected in the updated estimated costs at the endof the current fiscal year, as necessary; andinquired of management of the Company and thehead of Business Planning Center regarding their
judgments on any changes in circumstances that
occurred after the start of a project and updates ofthe estimated costs, as well as assessed theconsistency of their responses with the estimatedcosts at the end of the current fiscal year.

Other Information
The other information comprises the information included in the disclosure documents that contain or
accompany the audited consolidated financial statements, but does not include the consolidated
financial statements and our auditor’s report thereon.We do not perform any work on the otherinformation as we determine such information does not exist.
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 with regard to 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, actions taken to eliminate threats or safeguards applied.
From the matters communicated with corporate auditors and the board of corporate auditors, we
determine those matters that were of most significance in the audit of the consolidated financial
statements of the current period and are therefore the key audit matters. We describe these matters in
our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in our reportbecause the adverse consequences of doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
Fee-related Information
Fees paid or payable to our firm and to other firms within the same network as our firm for audit
provided to the Company and its subsidiaries for the current year are 43 million yen, and there are nofees paid or payable for non-audit services.
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.

Seiko Ohashi
Designated Engagement Partner
Certified Public Accountant

Toshiyuki Maeda
Designated Engagement Partner
Certified Public Accountant

KPMG AZSA LLC
Osaka Office, Japan
August 30, 2024
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.