2025 Consolidated Financial Statements

Independent Auditor's Report

The Board of Directors

CHUGOKU MARINE PAINTS, LTD.

We have audited the accompanying consolidated financial statements of CHUGOKU MARINE PAINTS, LTD. and its consolidated subsidiaries (the Group), which comprise the consolidated balance sheet as at March 31, 2025, and the consolidated statements of income, comprehensive income, changes in net assets, and cash flows for the year then ended, and notes to the consolidated financial statements.

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, 2025, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with accounting principles generally accepted in Japan.

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 Group in 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 these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

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 the context of the audit of the consolidated financial statements as a whole, and in forming the auditor's opinion thereon, and we do not provide a separate opinion on these matters.

Determination of whether to recognize impairment losses on non-current assets used by Kobe Paints, Ltd.

Other information comprises the information included in disclosure documents that contain audited consolidated financial statements, but does not include the consolidated financial statements and our auditor's report thereon.

We have concluded that other information does not exist. Accordingly, we have not performed any work related to other information.

Management is responsible for the preparation and fair presentation of these 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 and disclosing, as required by accounting principles generally accepted in Japan, matters related to going concern.

The Corporate Auditor and the Board of Corporate Auditors are responsible for overseeing the Group's financial reporting process.

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's report that includes our opinion. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an 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, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

  
  
  

• Consider internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances for our risk assessments, while the purpose of the audit of the consolidated financial statements is not expressing 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 or conditions 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's report 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 to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation in accordance with accounting principles generally accepted in Japan.

• Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business units within the Group as a basis for forming an opinion on the consolidated financial statements. We are responsible for the direction, supervision and review of the group audit. We remain solely responsible for our audit opinion.

We communicate with the Corporate Auditor and the Board of Corporate Auditors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Corporate Auditor and the Board of Corporate Auditors with a statement that we have complied with the ethical requirements regarding independence that are relevant to our audit of the consolidated financial statements in Japan, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied to reduce threats to an acceptable level.

From the matters communicated with the Corporate Auditor 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 report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Our firm and its designated engagement partners 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.

Ernst & Young ShinNihon LLC Tokyo, Japan

August 8, 2025

剣持 宣昭

Noriaki Kenmochi

Designated Engagement Partner Certified Public Accountant

増田 晋一

Shinichi Masuda

Designated Engagement Partner Certified Public Accountant

1. Basis for preparation of the consolidated financial statements

   The consolidated financial statements of CHUGOKU MARINE PAINTS, LTD. (the "Company") are prepared in accordance with the "Regulation on Terminology, Forms, and Preparation Methods of Consolidated Financial Statements" (Ministry of Finance Order No. 28 of 1976).

2. Audit certification

   The consolidated financial statements for the fiscal year from April 1, 2024 to March 31, 2025 were audited by Ernst & Young ShinNihon LLC in accordance with Article 193-2, paragraph (1) of the Financial Instruments and Exchange Act.

3. Special efforts to ensure the appropriateness of consolidated financial statements

The Company takes remarkable efforts to ensure fair presentation of consolidated financial statements. To be specific, the Company has joined the Financial Accounting Standards Foundation and regularly attends training seminars held by audit firms in order to establish a system that enables to properly understand details of accounting standards and other rules.

1. Consolidated Financial Statements

   1. Consolidated Balance Sheet

      (Millions of yen)

      As of March 31, 2024 As of March 31, 2025

      Assets

      Current assets
      Cash and deposits		32,890	36,768
      Notes receivable - trade	*4	4,434	1,943
      Accounts receivable - trade		32,393	34,088
      Electronically recorded monetary claims - operating	*4	3,037	4,148
      Securities		-	954
      Merchandise and finished goods		13,283	15,697
      Work in process		646	813
      Raw materials and supplies		9,481	11,758
      Other		1,815	2,776
      Allowance for doubtful accounts		(601)	(575)
      Total current assets		97,379	108,373
      Non-current assets
      Property, plant and equipment
      Buildings and structures		20,691		20,945
      Accumulated depreciation		(15,400)		(15,475)
      Buildings and structures, net		5,290		5,470
      Machinery, equipment and vehicles		18,906		19,836
      Accumulated depreciation		(15,194)		(15,637)
      Machinery, equipment and vehicles, net		3,712		4,199
      Tools, furniture and fixtures		5,463		5,551
      Accumulated depreciation		(4,818)		(4,754)
      Tools, furniture and fixtures, net		645		797
      Land	*2	13,504	*2	12,635
      Leased assets		2,622		2,247
      Accumulated depreciation		(950)		(885)
      Leased assets, net		1,672		1,361
      Construction in progress		174		136
      Total property, plant and equipment		25,000		24,599
      Intangible assets		331		440
      Investments and other assets
      Investment securities		8,040		8,229
      Retirement benefit asset		329		1,113
      Deferred tax assets		860		1,316
      Other		1,050		1,311
      Allowance for doubtful accounts		(587)		(607)
      Total investments and other assets		9,693		11,363
      Total non-current assets		35,025		36,403
      Total assets		132,404		144,777

      (Millions of yen)

      As of March 31, 2024 As of March 31, 2025

      Liabilities

      Current liabilities
      Notes and accounts payable - trade		12,432	14,630
      Electronically recorded obligations - operating	*4	2,197	1,910
      Short-term borrowings		22,017	17,086
      Current portion of long-term borrowings		1,000	1,700
      Lease liabilities		217	224
      Accounts payable - other		2,969	3,870
      Accrued expenses		2,992	3,685
      Income taxes payable		1,347	1,647
      Provision for bonuses		194	265
      Provision for product warranties		151	141
      Other		2,001	1,105
      Total current liabilities		47,520	46,268
      Non-current liabilities
      Long-term borrowings		1,700		1,000
      Lease liabilities		651		780
      Long-term accounts payable - other		16		-
      Deferred tax liabilities		2,305		2,586
      Deferred tax liabilities for land revaluation	*2	2,223	*2	1,975
      Retirement benefit liability		1,363		2,190
      Other		448		541
      Total non-current liabilities		8,708		9,073
      Total liabilities		56,229		55,342
      Net assets
      Shareholders' equity
      Share capital	11,626		11,626
      Capital surplus	6		-
      Retained earnings	48,852		58,787
      Treasury shares	(4,902)		(4,891)
      Total shareholders' equity	55,582		65,522
      Accumulated other comprehensive income
      Valuation difference on available-for-sale securities		3,795		3,867
      Revaluation reserve for land	*2	3,798	*2	3,125
      Foreign currency translation adjustment		6,941		10,770
      Remeasurements of defined benefit plans		398		245
      Total accumulated other comprehensive income		14,933		18,009
      Non-controlling interests		5,659		5,903
      Total net assets		76,175		89,435
      Total liabilities and net assets		132,404		144,777

   2. Consolidated Statement of Income and Consolidated Statement of Comprehensive Income Consolidated Statement of Income

      (Millions of yen)

      Fiscal year ended March 31, 2024

      Fiscal year ended March 31, 2025

      Net sales	*1	116,174	*1	131,152
      Cost of sales	*2, *4	80,830	*2, *4	88,553
      Gross profit		35,343		42,599
      Selling, general and administrative expenses	*3, *4	23,158	*3, *4	27,217
      Operating profit		12,185		15,381
      Non-operating income
      Interest income		372		548
      Dividend income		296		344
      Royalty income		123		121
      Technical advisory fee income		68		78
      Foreign exchange gains		345		323
      Rental income from real estate		96		87
      Other		242		343
      Total non-operating income		1,545		1,848
      Non-operating expenses
      Interest expenses		518		506
      Loss on retirement of non-current assets		51		75
      Other		135		166
      Total non-operating expenses		705		748
      Ordinary profit		13,025		16,481
      Extraordinary income
      Gain on sale of non-current assets	*5	77	*5	2,500
      Gain on sale of investment securities		144		5
      Other		-		188
      Total extraordinary income		222		2,694
      Extraordinary losses
      Loss on sale of non-current assets	*6	0	*6	0
      Impairment losses	*7	644	*7	928
      Loss on sale of investment securities		0		-
      Loss on valuation of investment securities		-		19
      Total extraordinary losses		646		947
      Profit before income taxes		12,601		18,228
      Income taxes - current		2,345		3,260
      Income taxes - deferred		(346)		(557)
      Total income taxes		1,998		2,703
      Profit		10,602		15,525
      Profit attributable to non-controlling interests		709		1,803
      Profit attributable to owners of parent		9,892		13,721

      Consolidated Statement of Comprehensive Income

      (Millions of yen)

      Fiscal year ended March 31, 2024

      Fiscal year ended March 31, 2025

      Profit	10,602		15,525
      Other comprehensive income
      Valuation difference on available-for-sale securities	1,925		72
      Revaluation reserve for land	-		(32)
      Foreign currency translation adjustment	3,168		4,248
      Remeasurements of defined benefit plans, net of tax	252		(140)
      Total other comprehensive income	* 5,346	*	4,147
      Comprehensive income	15,949		19,672
      Comprehensive income attributable to
      Comprehensive income attributable to owners of parent	14,893		17,438
      Comprehensive income attributable to non-controlling 1,055 2,234 interests

   3. Consolidated Statement of Changes in Net Assets

Fiscal year ended March 31, 2024

(Millions of yen)

Fiscal year ended March 31, 2025

(Millions of yen)

(Millions of yen)

(Significant Accounting Policies for Preparation of Consolidated Financial Statements)

1. Scope of consolidation

   The Company has consolidated all its subsidiaries. Number of consolidated subsidiaries 23

   Names of major consolidated subsidiaries

   Ohtake-Meishin Chemical Co., Ltd., Kobe Paints, Ltd. CHUGOKU MARINE PAINTS (Hong Kong), Ltd.

   CHUGOKU MARINE PAINTS (Shanghai), Ltd. CHUGOKU MARINE PAINTS (Guangdong), Ltd. CHUGOKU SAMHWA PAINTS, Ltd.

   CHUGOKU MARINE PAINTS (Singapore) Pte. Ltd. CHUGOKU PAINTS (Malaysia) Sdn. Bhd.

   TOA-CHUGOKU PAINTS Co., Ltd. CHUGOKU PAINTS B.V.

2. Application of equity method

   There are no unconsolidated subsidiaries or associates.

3. Fiscal years, etc. of consolidated subsidiaries

   The fiscal year-end of 22 consolidated subsidiaries is December 31, except for Kobe Paints, Ltd. In preparing consolidated financial statements, the Company uses their financial statements as of and for the year ended December 31 except for Kobe Paints, Ltd. with necessary consolidation adjustments made to reflect any significant transactions which occurred between January 1 and March 31.

4. Accounting policies

   1. Accounting policy for measuring significant assets

      1. Securities

         1. Held-to-maturity securities

            Stated at amortized cost (straight-line method).

         2. Available-for-sale securities

            Other than equity securities, etc. whose market prices are not available

            Stated at market value (net unrealized gains and losses are reported as a separate component of net assets and the cost of securities sold is calculated based on the moving average method).

            Equity securities, etc. whose market prices are not available Stated at cost based on the moving average method.

      2. Derivatives

         Stated at market value.

      3. Inventories

         Mainly stated at cost using the moving average method (balance sheet amounts are written down based on the decreased profitability).

   2. Accounting policy for depreciation of significant assets

      1. Property, plant and equipment (excluding leased assets) Stated at straight-line method.

      2. Intangible assets (excluding leased assets) Stated at straight-line method.

         Software for internal use is amortized using the straight-line method over the internally expected useful life (three to ten years).

      3. Leased assets

         Leased assets related to finance lease transactions that do not transfer ownership

         Depreciated by the straight-line method over the lease period that is deemed as the useful life, assuming no residual value.

         Certain overseas consolidated subsidiaries that adopt International Financial Reporting Standards ("IFRS") have applied IFRS 16 "Leases" ("IFRS 16"). Under IFRS 16, a lessee in a lease records, in principle, all leases as assets and liabilities on balance sheet, and right-of-use assets that were recognized on balance sheet are depreciated by the straight-line method.

   3. Accounting policy for significant provisions

      1. Allowance for doubtful accounts

         To prepare for losses from bad debts, an estimated uncollectible amount is provided either by making an estimation using the historical rate of credit loss in the case of general receivables, or based on individual consideration of collectibility in the case of specific receivables such as highly doubtful receivables.

      2. Provision for bonuses

         To prepare for payment of bonuses to employees, certain consolidated subsidiaries record the amount attributed to services rendered during the year based on the estimated amount of bonus payment.

      3. Provision for product warranties

         To prepare for warranty costs incurred based on the warranty period of sold products, provision for product warranties is recorded in view of the ratio of actual warranty costs incurred for the year against the annual sales.

   4. Accounting policy for retirement benefits

      1. Method for attributing estimated retirement benefits to periods

         In calculating retirement benefit obligations, the expected retirement benefits are attributed to the period up to the end of the current fiscal year based on the benefit formula method.

      2. Amortization method of actuarial gains and losses

         Actuarial gains or losses are amortized in the year following the year in which the gains or losses are recognized by the straight-line method over a certain period (ten years) that is within the average remaining years of services of the eligible employees when the gains or losses occur.

      3. Application of simplified accounting method used by small-sized companies

         In calculating retirement benefit liability and retirement benefit expenses, certain consolidated subsidiaries apply a simplified method in which an assumed amount of benefits to be paid for voluntary base retirement at the fiscal year-end is deemed as retirement benefit obligations.

   5. Accounting policy for significant revenues and expenses

      The Company and its consolidated subsidiaries (the "Group") are mainly engaged in manufacturing and selling paints. As for sales of products, the Group considers that at the time of delivery of products, customers obtain control of the products and performance obligations are satisfied, and recognizes revenue at the time of delivering the relevant products. However, as for domestic sales of products, applying the alternative treatment provided for in paragraph 98 of the "Implementation Guidance on Accounting Standard for Revenue Recognition," the Group recognizes revenue at the time of shipment, if the period from the shipment to the transfer of control of the product to the customer is a normal period. Consideration for performance obligations is received within approximately one year after they are satisfied, and does not include any significant financial component.

      In addition, as for "buy-sell back transactions" in which the Group manufactures products from raw materials, etc. purchased from a customer and sells the products to the same customer, revenue is recognized at the net amount calculated by deducting the purchase price of raw materials, etc. from consideration.

   6. Standards for the yen conversion of significant assets and liabilities denominated in foreign currencies

      Monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at the spot exchange rates at the fiscal year end. The foreign exchange gains and losses from translation are recognized as profit and loss.

      Assets and liabilities of overseas consolidated subsidiaries are translated into Japanese yen at the spot exchange rates at the fiscal year end, and revenues and expenses of overseas consolidated subsidiaries are translated into Japanese yen at the average exchange rates. Translation adjustments are included in foreign currency translation adjustment and non-controlling interests in net assets on the consolidated balance sheet.

   7. Significant hedge accounting method

      1. Hedge accounting method

         Certain consolidated subsidiaries translate monetary receivables and payables denominated in foreign currencies hedged by forward exchange contracts at the foreign exchange rates stipulated in the contract (furiate-shori).

      2. Hedging instruments and hedged items

         Hedging instrument Hedged item

         Forward exchange contracts Monetary receivables and payables

         denominated in foreign currencies

      3. Hedging policy

         Forward exchange contracts

         Forward exchange contracts are used to the extent necessary to avoid risk of fluctuations in foreign exchange rates on monetary receivables and payables denominated in foreign currencies.

      4. Method of assessing the hedge effectiveness

         At inception, forward exchange contracts at the same amount and the same maturing as the hedged items are allocated to the respective hedged items in accordance with the Company's risk management. Because the correlative relations with subsequent fluctuations in foreign exchange rates have been fully ensured, assessment of the hedge effectiveness at the fiscal year end is omitted.

   8. Method and period for amortization of goodwill

      Goodwill is amortized over five years on a straight-line basis.

   9. Scope of cash and cash equivalents in consolidated statement of cash flows

Cash and cash equivalents consist of cash on hand, demand deposits, and short-term investments that are readily convertible to known amounts of cash and subject to insignificant risk of change in value and due within three months from the date of acquisition.

(Changes in Accounting Policies)

Application of "Accounting Standard for Current Income Taxes," Etc.

The Company has applied the "Accounting Standard for Current Income Taxes" (Accounting Standards Board of Japan (ASBJ) Statement No. 27, October 28, 2022; the "Revised Accounting Standard of 2022"), etc. from the beginning of the current fiscal year.

Revisions to categories for recording current income taxes (taxation on other comprehensive income) conform to the transitional treatment in the proviso of paragraph 20-3 of the Revised Accounting Standard of 2022 and to the transitional treatment in the proviso of paragraph 65-2(2) of the "Guidance on Accounting

Standard for Tax Effect Accounting" (ASBJ Guidance No. 28, October 28, 2022; the "Revised Guidance of 2022"). This change in accounting policies has no impact on the consolidated financial statements.

In addition, for changes related to the revised treatment in consolidated financial statements when a gain or loss on sale arising from the sale of shares of subsidiaries, etc. among consolidated companies is deferred for tax purposes, the Revised Guidance of 2022 has been applied from the beginning of the current fiscal year. This change in accounting policies has been applied retrospectively, and is reflected in the consolidated financial statements for the previous fiscal year. This change in accounting policies has no impact on the consolidated financial statements for the previous fiscal year.

(New Accounting Standards Not Yet Applied)

• "Accounting Standard for Leases" (ASBJ Statement No. 34, September 13, 2024, ASBJ)

• "Implementation Guidance on Accounting Standard for Leases" (ASBJ Guidance No. 33, September 13, 2024, ASBJ), Etc.

  1. Overview

     As part of its efforts for ensuring that Japanese GAAP is consistent with international accounting standards, the ASBJ conducted a review, taking into consideration international accounting standards, toward the development of the Accounting Standard for Leases for recognizing assets and liabilities for all leases held by a lessee. Accordingly, the ASBJ issued the Accounting Standard for Leases, etc., which were developed under a basic policy with the aim of being simple and highly convenient by incorporating only the key provisions of IFRS 16 instead of all the provisions, despite being based on the single accounting model of IFRS 16, while also making revisions basically unnecessary even when the provisions of IFRS 16 are applied for non-consolidated financial statements.

     Regarding the method for allocating the lessee's lease expenses in the lessee's accounting treatment, a single accounting model is applied for recording the depreciation related to right-of-use assets and the amount equivalent to the interest on lease liabilities for all leases regardless of whether a lease is a finance lease or an operating lease. This is the same as under IFRS 16.

  2. Scheduled date of application

     The standard and guidance will be applied at the beginning of the fiscal year ending on March 31, 2028.

  3. Effects of application of the accounting standards, etc.

The impact from the application of the "Accounting Standard for Leases," and other relevant ASBJ regulations on the consolidated financial statements is currently under evaluation.

(Significant Accounting Estimates)

1. Impairment losses on non-current assets

   1. Amounts recorded on the consolidated financial statements for the fiscal year ended March 31, 2025

      (Millions of yen)

      	Fiscal year ended March 31, 2024	Fiscal year ended March 31, 2025
      Impairment losses	-	-
      Non-current assets	1,964	1,953

      As for the asset group consisting of land (¥1,782 million) and manufacturing facilities (¥171 million) used by Kobe Paints, Ltd., a consolidated subsidiary engaged in manufacturing and selling marine paints, an indicator of impairment due to declines in market prices was identified. However, since the total amount of undiscounted future cash flows arising from operating activities exceeded the carrying amount of the asset group, no impairment losses were recorded in the fiscal year ended March 31, 2025.

   2. Information on details of significant accounting estimates for identified items

      1. Method of calculation

         Assets are grouped as a minimum unit that generates substantially independent cash flows. For an asset group of which future cash flows have decreased considerably, the carrying amount of non-current assets is reduced and the decrease is recognized as an impairment loss.

      2. Major assumptions

         Major assumptions used to calculate future cash flows arising from operating activities of Kobe Paints, Ltd. are predictions of sales volume and gross profit margin, and growth rate after period covered by a business plan. Sales volume and gross profit margin are estimated based on the repair cycle of relevant vessels and past performance, respectively, whereas growth rate is determined in consideration of long-term growth rate of the vessel repair market.

      3. Effects on the consolidated financial statements for the next fiscal year

         Because the major assumptions are highly uncertain and affected by future economic conditions and the company's business conditions, an impairment loss might be recognized in the next fiscal year if revision of the assumptions is required.

2. Recoverability of deferred tax assets

   1. Amounts recorded on the consolidated financial statements for the fiscal year ended March 31, 2025

      (Millions of yen)

      	Fiscal year ended March 31, 2024	Fiscal year ended March 31, 2025
      Deferred tax assets	860	1,316

      Deferred tax assets before offsetting with deferred tax liabilities were ¥1,155 million in the fiscal year ended March 31, 2024 and ¥1,785 million in the fiscal year ended March 31, 2025.

      For details of deferred tax assets, refer to the note "Tax Effect Accounting."

   2. Information on details of significant accounting estimates for identified items

      1. Method of calculation

         Deferred tax assets are recognized to the extent that the recovery is deemed certain, based on consideration of future recoverability. Recoverability is judged based on future information currently available such as forecast of taxable income of the Company and subsidiaries, tax law and tax rates.

      2. Major assumption

         The major assumption used to formulate the business plan, which is the basis of estimates of taxable income, is sales volume.

      3. Effects on the consolidated financial statements for the next fiscal year

         Because the major assumption is highly uncertain and affected by future economic conditions and the company's business conditions, the amount of deferred tax assets recorded in the next fiscal year might be significantly affected if revision of the assumptions is required.

         (Changes in Presentation)

         Consolidated balance sheet

         In the previous fiscal year, "notes receivable - trade" and "accounts receivable - trade" were included under "notes and accounts receivable - trade" in "current assets." However, to enhance clarity, the method of presentation has been revised, and from the fiscal year ended March 31, 2025, they are listed separately. To reflect this change in presentation, the consolidated financial statements for the fiscal year ended March 31, 2024 have been reclassified.

         As a result, ¥36,828 million that was presented as "notes and accounts receivable - trade" in "current assets" in the consolidated balance sheet as of March 31, 2024 has been reclassified as "notes receivable - trade" of

         ¥4,434 million and "accounts receivable - trade" of ¥32,393 million.

         Consolidated statement of income

         In the previous fiscal year, "loss on retirement of non-current assets" was included under "other" in "non-operating expenses." However, since it exceeded 10% of the total non-operating expenses, it is listed separately from the fiscal year ended March 31, 2025. To reflect this change in presentation, the consolidated financial statements for the fiscal year ended March 31, 2024 have been reclassified.

         As a result, ¥187 million that was presented as "other" in "non-operating expenses" in the consolidated statement of income for the fiscal year ended March 31, 2024 has been reclassified as "loss on retirement of non-current assets" of ¥51 million and "other" of ¥135 million.

         (Consolidated Balance Sheet)

         1. Guarantee obligations

            Guarantees provided to a specified agent for the collection of accounts receivable are as follows: Debt guarantees

            (Millions of yen)

            As of March 31, 2024 As of March 31, 2025

            Mitsubishi Shoji Chemical Corporation 513 449

            *2. Revaluation of land

            The land for business use owned by the Company was revaluated under the "Act on Revaluation of Land" (Act No. 34 of March 31, 1998) and the "Act for Partial Revision of the Act on Revaluation of Land" (amended on March 31, 1999). As for the revaluation method, the value is determined by the method where the revaluation is calculated by making reasonable adjustments to the assessed value of non-current assets stipulated in Article 2, item 3 of the Order for Enforcement of the Act on Revaluation of Land (Cabinet Order No. 119, promulgated on March 31, 1998). Of revaluation difference, the amount equivalent to tax effects is recorded as "Deferred tax liabilities for land revaluation" in non-current liabilities, and the other amount is as "Revaluation reserve for land" in net assets.

            • Date of revaluation: March 31, 2000

            Difference between the fair value of the revalued land and the book value after the revaluation at the fiscal year end:

            (Millions of yen)

            As of March 31, 2024 As of March 31, 2025

            (5,492) (4,570)

3. Trade notes receivable transferred by endorsement

(Millions of yen)

Trade notes receivable transferred by endorsement

As of March 31, 2024 As of March 31, 2025

343 1,267

*4. Notes maturing at the fiscal year end, etc.

Notes maturing at the fiscal year end, etc. are accounted for on the clearing dates or settlement dates. Since the last day of the fiscal year ended March 31, 2024 was a holiday of financial institutions, the following notes maturing at the fiscal year end are included in the balances at the previous fiscal year end.

(Millions of yen)

As of March 31, 2024 As of March 31, 2025

Notes receivable - trade 303 -

Electronically recorded monetary claims -operating

223 -

Electronically recorded obligations - operating 241 -

(Consolidated Statement of Income)

*1. Revenue from contracts with customers

Revenue from contracts with customers is not stated separately from other revenues and is included in net sales. The amount of revenue from contracts with customers has been provided in "Notes to Consolidated Financial Statements, (Revenue Recognition), 1. Information on disaggregation of revenue from contracts with customers."

*2. The book value write-down of inventories held for ordinary sale due to their decreased profitability (a figure in parentheses represents reversal) is as follows:

Fiscal year ended March 31, 2024

(Millions of yen) Fiscal year ended

March 31, 2025

Cost of sales (128) 147

*3. The main components of selling, general and administrative expenses are as follows:

(Millions of yen)

Fiscal year ended March 31, 2024

Fiscal year ended March 31, 2025

Depreciation 645 663

Provision of allowance for doubtful accounts 82 77

Provision for bonuses 105 143

Provision for product warranties (6) 36

Retirement benefit expenses 419 421

*4. Research and development expenses included in general and administrative expenses and manufacturing costs for period are as follows:

(Millions of yen)

*5. The breakdown of gain on sale of non-current assets is as follows:

(Millions of yen)

*7. Impairment losses

Fiscal year ended March 31, 2024

The Group recognized impairment losses on the following asset groups:

Asset grouping is made based on a minimum unit that generates cash flows that are substantially independent from cash flows of other assets or asset groups. Idle assets that are not used for business are grouped according to each individual item.

As the profitability of the above assets decreased considerably, the carrying amounts of the above items were reduced to their recoverable amounts, recognizing such reduction as impairment losses (¥644 million) included in extraordinary losses. The impairment losses consisted of ¥435 million for buildings and structures, ¥60 million for machinery, equipment and vehicles, ¥0 million for tools, furniture and fixtures, and ¥148 million for leased assets.

Recoverable amounts are measured at value in use.

Fiscal year ended March 31, 2025

The Group recognized impairment losses on the following asset groups:

Asset grouping is made based on a minimum unit that generates cash flows that are substantially independent from cash flows of other assets or asset groups. Idle assets that are not used for business are grouped according to each individual item.

As the profitability of the above assets decreased considerably, the carrying amounts of the above items were reduced to their recoverable amounts, recognizing such reduction as impairment losses (¥928 million) included in extraordinary losses. The impairment losses consisted of ¥2 million for buildings and structures, ¥0 million for machinery, equipment and vehicles, ¥2 million for tools, furniture and fixtures, ¥922 million for land and ¥0 million for leased assets.

Recoverable amounts are measured at net realizable values.

(Consolidated Statement of Comprehensive Income)

* Reclassification adjustments, income taxes and tax effects relating to other comprehensive income

(Millions of yen)

Valuation difference on available-for-sale securities:

Fiscal year ended March 31, 2024

Fiscal year ended March 31, 2025

Amount arising during the year 2,902 178

Reclassification adjustments (143) (5)

Valuation difference on available-for-sale securities

Revaluation reserve for land:

1,925 72

Income taxes and tax effects - (32) Foreign currency translation adjustment:

Amount arising during the year 3,168 4,248

Remeasurements of defined benefit plans:

Remeasurements of defined benefit plans, net of tax

252 (140)

Total other comprehensive income 5,346 4,147

(Consolidated Statement of Changes in Net Assets) Fiscal year ended March 31, 2024

1. Type and total number of issued shares, and type and number of treasury shares

   (Thousands of shares)

   	Number of shares as of April 1, 2023	Increase	Decrease	Number of shares as of March 31, 2024
   Issued shares
   Ordinary shares	55,000	-	-	55,000
   Total	55,000	-	-	55,000
   Treasury shares
   Ordinary shares (Notes) 1, 2	5,446	3	18	5,431
   Total	5,446	3	18	5,431

   Notes: 1. The increase of 3 thousand shares in the number of treasury shares of ordinary shares reflects an increase of 3 thousand shares resulting from the acquisition of restricted shares without contribution and an increase of 0 thousand shares resulting from the purchase of shares less than one unit.

2. The decrease of 18 thousand shares in the number of treasury shares of ordinary shares reflects a decrease of 18 thousand shares resulting from the disposal of treasury shares used for restricted share-based remuneration.

1. Dividends

   1. Dividends paid

      Resolution	Type of shares	Total amount of dividends (Millions of yen)	Dividends per share (Yen)	Cut-off date	Effective date
      Annual General Meeting of Shareholders on June 22, 2023	Ordinary shares	891	18.00	March 31, 2023	June 23, 2023
      Board of Directors meeting on October 31, 2023	Ordinary shares	1,685	34.00	September 30, 2023	December 4, 2023

   2. Dividends for which cut-off date is in the current fiscal year with effective date in the following fiscal year

Fiscal year ended March 31, 2025

1. Type and total number of issued shares, and type and number of treasury shares

   (Thousands of shares)

   	Number of shares as of April 1, 2024	Increase	Decrease	Number of shares as of March 31, 2025
   Issued shares
   Ordinary shares	55,000	-	-	55,000
   Total	55,000	-	-	55,000
   Treasury shares
   Ordinary shares (Notes) 1, 2	5,431	2	12	5,421
   Total	5,431	2	12	5,421

   Notes: 1. The increase of 2 thousand shares in the number of treasury shares of ordinary shares reflects an increase of 2 thousand shares resulting from the acquisition of restricted shares without contribution and an increase of 0 thousand shares resulting from the purchase of shares less than one unit.

2. The decrease of 12 thousand shares in the number of treasury shares of ordinary shares reflects a decrease of 12 thousand shares resulting from the disposal of treasury shares used for restricted share-based remuneration.

1. Dividends

   1. Dividends paid

      Resolution	Type of shares	Total amount of dividends (Millions of yen)	Dividends per share (Yen)	Cut-off date	Effective date
      Annual General Meeting of Shareholders on June 26, 2024	Ordinary shares	2,280	46.00	March 31, 2024	June 27, 2024
      Board of Directors meeting on October 31, 2024	Ordinary shares	1,983	40.00	September 30, 2024	December 3, 2024

   2. Dividends for which cut-off date is in the current fiscal year with effective date in the following fiscal year

(Consolidated Statement of Cash Flows)

* Reconciliation of ending balance of cash and cash equivalents and account items on the consolidated balance sheet

Fiscal year ended March 31, 2024

(Millions of yen) Fiscal year ended

March 31, 2025

Cash and deposits 32,890 36,768

(Leases)

Lessees' accounting

1. Finance lease transactions

   Finance lease transactions that do not transfer ownership

   1. Details of leased assets Property, plant and equipment

      Principally, land and other assets used in the paint-related business.

   2. Accounting policy for depreciation of leased assets

      As described in "4. Accounting policies, (2) Accounting policy for depreciation of significant assets" of Significant Accounting Policies for Preparation of Consolidated Financial Statements.

2. Operating lease transactions

Future minimum lease payments under non-cancelable operating leases

(Millions of yen)

Note: IFRS 16 "Leases" has been applied, and the above does not include lease transactions that have been recorded as assets and liabilities on the consolidated balance sheet.

(Financial Instruments)

1. Overview of financial instruments

   1. Policy for financial instruments

      The Group mainly operates funds through highly liquid financial assets and finance short-term operating capital with bank loans. Derivative transactions are used to hedge the risks described below, and the Group does not enter into derivatives transactions for speculative purposes.

   2. The nature and risk of financial instruments

      Notes receivable - trade, accounts receivable - trade and electronically recorded monetary claims -operating, which are operating receivables, are exposed to customer credit risk. Although operating receivables denominated in foreign currencies that arise in conducting business overseas are exposed to foreign exchange fluctuation risk, the risk is hedged by employing forward exchange contracts to the amount of sales contracts. Securities and investment securities are mainly shares of companies with which the Group has business relationships and exposed to the risk of fluctuations in their market prices.

      Notes and accounts payable - trade and electronically recorded obligations - operating, which are operating payables, are mostly due within one year. Although some related to the import of raw materials are denominated in foreign currencies and exposed to foreign exchange fluctuation risk, the risk is hedged by employing forward exchange contracts to the amount of purchase contracts. Short-term borrowings are mainly for the purpose of procuring funds for operating funds.

      Derivative transactions are forward exchange contracts to hedge against foreign exchange fluctuation risk from operating receivables and payables denominated in foreign currencies. For the hedging instruments and hedged items under the hedge accounting, hedging policy, and the method of assessing the hedge effectiveness, please refer to "4. Accounting policies, (7) Significant hedge accounting method" of Significant Accounting Policies for Preparation of Consolidated Financial Statements prescribed above.

   3. Risk management structure regarding financial instruments

      1. Management of credit risk (customers' default risk, etc.)

         For operating receivables, in accordance with the Company's internal rules, Global Marketing & Planning Div. regularly monitors the financial positions of its main customers and manages the due dates and balances of each customer so as to perceive at an early stage and reduce the risk of uncollectable amounts due to declining financial position or other reasons. The Company's consolidated subsidiaries also manage operating receivables in the same manner in accordance with the Company's internal rules.

         With regard to derivatives, the Company perceives very little credit risk as it enters into transactions solely with financial institutions with high ratings.

      2. Management of market risk (fluctuation risks of foreign exchange and interest rates, etc.)

         For operating receivables and payables denominated in foreign currencies, the Group uses forward exchange contracts to hedge its exposure to the amount of actual contracts.

         The Group regularly reviews the fair value of securities and investment securities as well as the financial position of investees (customer entities), and continuously reviews the holding status in view of market conditions and relationships with customer entities.

         Execution and management of derivatives for the Group are managed in accordance with the Company's internal rules.

      3. Management of liquidity risk associated with fund raising (risk of inability to pay on due date)

         The Company manages liquidity risk by having Finance Dept. timely develop and update the funding plan based on reports from each of the departments and by maintaining short-term liquidity. The Company's consolidated subsidiaries also manage liquidity risk in the same manner.

   4. Supplementary explanation concerning fair values of financial instruments, etc.

      Fair value of financial instruments comprises of values based on market prices and reasonably determined values where market prices are unavailable. As variable factors are incorporated in determining the fair value, the resulting amount may vary depending on the different preconditions employed. The contract or notional amounts of derivative transactions in notes "Derivatives" do not, in themselves, indicate the market risk associated with the derivative transactions.

2. Fair value of financial instruments

The carrying amounts of financial instruments and their fair values, as well as their differences are as follows:

As of March 31, 2024

(Millions of yen)

(*1) Information about "cash and deposits" is omitted, because part of them is cash, and deposits are settled in a short term and their fair value is thus close to the carrying amount.

(*2) The deducted amount is allowance for doubtful accounts relating to notes receivable - trade, accounts receivable - trade and electronically recorded monetary claims - operating.

(*3) Equity securities, etc. whose market prices are not available are not included in "(4) Securities and investment securities." The carrying amounts of the financial instruments are as follows:

(Millions of yen)

(*4) Assets and liabilities arising from derivative transactions are stated in the net amount. The figures in parentheses indicate net liabilities.

As of March 31, 2025

(Millions of yen)

(*1) Information about "cash and deposits" is omitted, because part of them is cash, and deposits are settled in a short term and their fair value is thus close to the carrying amount.

(*2) The deducted amount is allowance for doubtful accounts relating to notes receivable - trade, accounts receivable - trade and electronically recorded monetary claims - operating.

(*3) Equity securities, etc. whose market prices are not available are not included in "(4) Securities and investment securities." The carrying amounts of the financial instruments are as follows:

(Millions of yen)

(*4) Assets and liabilities arising from derivative transactions are stated in the net amount. The figures in parentheses indicate net liabilities.

Notes: 1. Redemption schedule for monetary receivables and securities with maturity after the consolidated balance sheet date

As of March 31, 2024

(Millions of yen)

As of March 31, 2025

(Millions of yen)