Financial Report 2025

Kamigumi Co., Ltd. and Consolidated Subsidiaries March 31, 2025 and 2024

Thousands of

U.S. dollars

         Millions of yen                    (Note 1)    

Kamigumi Co., Ltd. and Consolidated Subsidiaries March 31, 2025 and 2024

Thousands of

U.S. dollars

         Millions of yen                     (Note 1)    

Capital stock

Authorized – 250,000,000 shares in 2025 and 2024 Issued – 106,576,837 shares in 2025 and

Thousands of

U.S. dollars

         Millions of yen                     (Note 1)    

The accompanying notes are an integral part of these statements.

Kamigumi Co., Ltd. and Consolidated Subsidiaries Years ended March 31, 2025 and 2024

Thousands of

U.S. dollars

         Millions of yen               (Note 1)

The accompanying notes are an integral part of these statements.

Kamigumi Co., Ltd. and Consolidated Subsidiaries Years ended March 31, 2025 and 2024

Millions of yen

                       Shareholders’ equity                              Accumulated other comprehensive income

Thousands of U.S. dollars (Note 1)

                       Shareholders’ equity                              Accumulated other comprehensive income

Millions of yen

                       Shareholders’ equity                              Accumulated other comprehensive income

The accompanying notes are an integral part of these statements.

         Millions of yen      

Thousands of

U.S. dollars

     (Note 1)    

1. BASIC OF CONSOLIDATED FINANCIAL STATEMENTS

   The accompanying consolidated financial statements are stated in Japanese yen, the currency of the country in which the Kamigumi Co., Ltd. (the “Company”) and most of its consolidated subsidiaries are incorporated and operated. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of non-Japanese readers and have been made at the rate of ¥149.52 = U.S.$1, the approximate rate of exchange prevailing on March 31, 2025.

   The accompanying consolidated financial statements have been translated from the consolidated financial statements that are prepared in accordance with the provisions set forth in the Financial Instruments and Exchange Act of Japan and in conformity with accounting principles generally accepted in Japan. Certain reclassifications have been made in the 2024 financial statements to conform to the classifications used in 2025.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
   1. Basic of consolidation

      1. The consolidated financial statements include the accounts of the Company and 12 of its consolidated subsidiaries (collectively, the “Companies”) for the years ended March 31, 2025 and 2024.

      2. The equity method of accounting has been applied to one unconsolidated subsidiary and four affiliates for the years ended March 31, 2025 and 2024.

      3. All significant intercompany transactions and accounts have been eliminated.

      4. The year-end of one domestic consolidated subsidiary and overseas consolidated subsidiaries is December 31 which differs from that of the Company. As a result, adjustments have been made for any significant transactions which took place during the period between the year-end of these subsidiaries and that of the Company. Beginning from the year ended March 31, 2025, Japan Port Industry co., ltd. changed its year-end from the end of February to March 31. Due to this change, this company’s financial statements for the 13 months from March 1, 2024 to March 31, 2025 have been included in the consolidated financial statements. The impact of this change on the consolidated financial statements is immaterial.

      5. The balance sheet accounts of the overseas consolidated subsidiaries are translated into Japanese yen at the rate of exchange in effect at the balance sheet date except for net assets, which are translated at the historical rate. Revenue and expense accounts are translated at the average rates of exchange in effect during the year. Adjustments resulting from translation of foreign currency financial statements are not included in the determination of profit and are reported as foreign currency translation adjustment in the accompanying consolidated balance sheets.

   2. Statements of cash flows

      Cash and cash equivalents include cash on hand, readily available deposits and highly liquid short-term investments with original maturities of three months or less which are readily convertible to known amounts of cash and are exposed to insignificant risk of changes in value.

   3. Short-term investment securities and investment securities

      Short-term investment securities and investment securities of the Companies consist of held-to-maturity debt securities and available-for-sale securities. Held-to-maturity debt securities are stated at amortized cost, adjusted for the amortization of premium or accretion of discounts to maturity. Available-for-sale securities represent those securities that are not classified as trading securities or held-to-maturity debt securities. Available-for-sale securities other than equity securities without market prices are stated at market value. Unrealized gains and losses are reported as a separate component of net assets, and costs of securities sold are determined mainly by the moving-average method. Available-for-sale equity securities without market prices are stated at cost based on the moving-average method.

   4. Inventories

      Merchandise, finished goods and raw materials are stated at cost mainly based on the first-in first-out method and gross average method. Work in process is stated at gross average cost. Supplies are stated at cost mainly based on the last purchase price method. The carrying amount of inventories stated in the balance sheets is written down based on the decreased profitability.

   5. Property, plant and equipment

      Property, plant and equipment are stated at cost. Depreciation is computed principally by the declining-balance method over estimated useful lives of the respective assets, while the straight-line method is applied to buildings (excluding building facilities), assets for real estate business of the Company, and building facilities and structures acquired on or after April 1, 2016.

   6. Leased assets

      Leased assets under finance lease transactions which do not transfer ownership of the leased assets to the lessee are depreciated to a residual value of zero by the straight-line method over the lease period used as the useful life.

   7. Software costs

      The Companies include internal use software in intangible assets and amortize it using the straight-line method over the estimated useful lives (five years).

   8. Allowance for doubtful accounts

      The Companies provide for allowance for doubtful accounts principally at the amount computed based on the actual ratio of bad debts in the past plus the estimated uncollectible amounts based on the analysis of certain individual receivables.

   9. Bonuses

      Consolidated subsidiaries of the Company follow the Japanese practice of paying bonuses to all employees in July and December. Provision for bonuses is stated at the estimated amount of payment at the balance sheet date.

   10. Provision for loss on business of subsidiaries and affiliates

       In preparation for losses related to subsidiaries and affiliates, provision for loss on business of subsidiaries and affiliates is stated at the estimated amount, taking into consideration the financial position of the subsidiaries and affiliates and the prospects for future recovery.

   11. Retirement benefits

       1. Method of attributing expected benefit to periods

          The benefit formula basis is used to attribute expected benefit to the period through the end of the year in calculating retirement benefit obligation.

       2. Accounting treatment of actuarial gains and losses and past service costs

          Past service costs are amortized over a certain period (10 years), which is within the average remaining years of service of the employees at the time of the occurrence, using the straight-line method.

          An actuarial gain or loss is amortized from the year following the year in which the gain or loss occurs over a certain period (10 years), which is within the average remaining years of service of the employees at the time of the occurrence, using the straight-line method.

   12. Income taxes

       Income taxes payable are computed based on the pretax income included in the consolidated financial statements. The asset and liability method is used to recognize deferred tax assets and liabilities for 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.

   13. Earnings per share

       The computations of earnings per share of capital stock are based on the weighted average number of shares of capital stock outstanding during each year.

       Cash dividends per share are applicable to the respective years and include dividends to be paid after the end of the year.

   14. Revenue recognition

       The Companies’ major performance obligations and the usual time at which such performance obligations are satisfied (the usual time when recognizing revenues) in principal services relating to revenues from contracts with customers are as follows.

       1. General harbor transportation, cargo road transportation, warehouse and factory cargo handling, and international transportation The main services of the Companies in this category are 1) general harbor transportation, including port cargo handling, container

          terminal operation and sheds storage; 2) cargo road transportation, including consignment and brokerage of this service; 3) warehouse and factory cargo handling; and 4) international transportation such as multimodal transportation and transportation at overseas. The Companies are obligated to perform these services mainly based on contractual agreements with customers.

          In principle, revenue is recognized at the time performance obligation is satisfied, because the performance obligation is satisfied by the provision of these services. However, for performance obligations to be satisfied over a certain period of time, such as international maritime transportation, except for transportation services with a very short period of time, the Companies estimate the degree of progress toward satisfying performance obligations and recognize revenue over a certain period of time based on the degree of progress. The degree of progress toward satisfying performance obligations is calculated based on the ratio of the number of days elapsed to the estimated total number of days of transportation (output method). For transportation services for which a reasonable estimate of the progress toward satisfying performance obligations cannot be made and for which it is probable that the costs incurred in satisfying such performance obligations will be recovered, the cost recovery method is applied.

       2. Warehousing

          The main services of the Companies in this category are cargo storage and distribution processing of stored cargo. The Companies are obligated to perform these services based on deposit agreements with customers.

          For cargo storage services, the Companies recognize revenue over a period of time, as the performance obligation is satisfied over a certain period of time. For distribution processing of stored cargo, the Companies recognize revenue when the performance obligation is satisfied, since the performance obligation is satisfied by the provision of each service.

       3. Heavy cargo and construction machinery

   The main services of the Companies in this category are transportation of heavy and oversized cargo, design and construction, and demolition and removal of factories and warehouses, and installation work associated with the manufacture and installation of various industrial facilities and equipment and transportation. The Companies are obligated to perform these services based on contractual agreements with customers.

   With respect to construction contracts, the Companies estimate the degree of progress toward satisfying performance obligations over a certain period of time and recognize revenue over a certain period of time based on the progress, except for very short-term construction contracts. For performance obligations to be satisfied at a point in time, revenue is recognized at the completion of the construction project. The degree of progress toward satisfying performance obligations is calculated based on the ratio of the cost incurred to the estimated total cost (input method). For construction contracts for which a reasonable estimate of the progress toward satisfying performance obligations cannot be made and for which it is probable that the costs incurred in satisfying such performance obligations will be recovered, the cost recovery method is applied.

   When the Companies are involved in the provision of services as an agent, revenue is recognized on a net basis. Revenue is measured at the amount of consideration promised in the contract with the customer, less any consideration paid to the customer.

   Consideration for performance obligations is received generally within one year after the performance obligation is satisfied, based on payment terms determined separately, and does not include a significant financial component.

3. SIGNIFICANT ACCOUNTING ESTIMATESValuation of stocks of and investments in an unconsolidated subsidiary and affiliates

   1. The amounts in the accompanying balance sheets as of March 31, 2025 and 2024 were as follows:

                 Millions of yen        

      Thousands of

        U.S. dollars (Note 1)  

      	2025	2024	2025
      Stocks of subsidiaries and affiliates1	¥12,018	¥12,118	$80,379
      Investments in subsidiaries and affiliates2	175	175	1,168
      Securities in other associated companies1	0	-	0
      Provision for loss on business of subsidiaries and affiliates	268	268	1,789
      1. Included in investment securities in investments and long-term loans receivable.
      2. Included in other in investments and long-term loans receivable.

      The amounts in the accompanying statements of income for the years ended March 31, 2025 and 2024 were as follows:

      Thousands of

             Millions of yen               U.S. dollars (Note 1)  

      2025 2024 2025

      Loss on valuation of stocks of subsidiaries and affiliates ¥99 ¥ - $665

   2. Information about the content of significant accounting estimates for the identified item

      The Companies’ stocks of and investments in an unconsolidated subsidiary and affiliates, and securities in other associated companies are equity securities without market prices, investments and securities, respectively. When the real value of such stocks, investments and securities based on net asset value declines significantly compared to the acquisition cost, the Company determines whether recognition of impairment loss is necessary by assessing the recoverability of such stocks, investments and securities. For equity securities acquired in consideration of the investee’s excess earning power and management rights, the real value is the discounted present value of the investee’s future cash flows, and if such real value declines significantly compared to the acquisition cost, impairment loss is recognized. When it is determined that recognition of impairment loss is necessary for a subsidiary or an affiliate with excess liabilities, the Company recognizes impairment loss on equity securities, and provision for loss on business of subsidiaries and affiliates are recorded with the amount of loss expected to be borne by the Company out of the amount of excess liabilities.

      Therefore, if the financial position and operating results of a subsidiary or an affiliate deteriorate in the year ending March 31, 2026, or if the assumptions change on which budgets and other estimates are based, it may be necessary to record additional losses on stocks and investments in subsidiaries and affiliates and securities in other associated companies, or it may be necessary to make an additional provision or reversal of the provision for loss on business of subsidiaries and affiliates.

4. ACCOUNTING STANDARDS ISSUED BUT NOT YET APPLIED
   • “Accounting Standard for Leases” (Accounting Standards Board of Japan (“ASBJ”) Statement No. 34, September 13, 2024)
   • “Implementation Guidance on Accounting Standard for Leases” (ASBJ Guidance No. 33, September 13, 2024), etc.
   1. Overview

      As part of its efforts to ensure consistency between Japanese GAAP and international accounting standards, the ASBJ conducted a review to develop accounting standards for leases to recognize assets and liabilities for all leases held by a lessee, with international accounting standards taken into consideration. Accordingly, the ASBJ issued the Accounting Standard for Leases, etc. that are based on the single accounting model of IFRS 16 as the basic policy, but adopt only the key provisions of IFRS 16, instead of adopting all the provisions. The revision aims to be simple and highly convenient, and to make it unnecessary to revise non-consolidated financial statements that apply IFRS 16 in the Accounting Standard for Leases, etc.

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

   2. Effective date

      The Company will adopt the standard and guidance from the beginning of the year ending March 31, 2028.

   3. Effect of adopting the standard and guidance

   The Company is in the process of assessing the effects of adopting the standard and guidance on the consolidated financial statements.

5. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURESConditions of financial instruments
   1. Policy for financial instruments

      The Companies have a policy to invest in secure financial assets and raise funds by bank borrowings and bond issuance. The Companies use derivatives for the purpose of reducing foreign currency risk related to trading receivables and payables denominated in foreign currencies. The Companies have a policy to enter into derivative transactions limited to those associated with actual demand, in general, and not to enter into them for speculative or trading purposes.

   2. Types of financial instruments and related risk and risk management

      Trade receivables - Notes and accounts receivable-trade, and contract assets and electronically recorded monetary claims - are exposed to credit risk in relation to customers. In accordance with the internal policies for managing credit risk of the Companies, the Companies try to reduce bad debt risk due to deterioration of financial condition of the customers by monitoring credit worthiness of their main customers periodically and managing due dates and outstanding balances of receivables by customer. In addition, the Companies are exposed to foreign currency risk arising from trade receivables denominated in foreign currencies resulting from trade with overseas customers. In order to reduce the risk, the Companies execute and manage foreign exchange forward contracts to the extent necessary in accordance with the internal policies.

      Short-term investment securities and investment securities are mainly held-to-maturity debt securities, equity securities issued by companies which have business relationships with the Companies and capital investments in investment limited liability partnerships. The capital investments in investment limited liability partnerships are exposed to issuers’ credit risk. In order to reduce the risk, financial condition of the investees are periodically monitored. Debt securities and equity securities are exposed to market fluctuation and other risks. In order to reduce the risks, fair value of the securities and financial condition of the issuers are periodically monitored. In addition, credit risk of debt securities is insignificant since the Companies invest only in debt securities with high ratings.

      Trade payables - Notes and accounts payable-trade - are due within one year. Certain notes and accounts payable-trade denominated in foreign currencies are exposed to foreign currency risk. In order to reduce the risk, the Companies execute and manage foreign exchange forward contracts to the extent necessary, except for the payables within the range of the balance of accounts receivable denominated in the same currencies.

      The Companies utilize foreign exchange forward contracts to hedge foreign currency risk of trade receivables and payables denominated in foreign currencies.

   3. Supplementary explanation of the fair value of financial instruments

   Since calculation of fair values of financial instruments includes variable factors, those prices may vary if different assumptions are used.

   Fair value of financial instruments

   Financial instruments whose fair value is readily determinable as of March 31, 2025 and 2024 were as follows:

   Millions of yen

   March 31, 2025	Carrying amount	Fair      value	Unrealized   gain/(loss)
   Assets: (1) Investment securities	¥38,930	¥38,704	¥(226)
   Total	¥38,930	¥38,704	¥(226)
   Liabilities: (1) Long-term borrowings	¥40,000	¥39,555	¥(445)
   Total	¥40,000	¥39,555	¥(445)

   Thousands of U.S. dollars

   			(Note 1)
   March 31, 2025	Carrying amount		Fair value		Unrealized gain/(loss)
   Assets: (1) Investment securities	$260,365		$258,855		$(1,510)
   Total	$260,365		$258,855		$(1,510)
   Liabilities: (1) Long-term borrowings	$267,523		$264,546		$(2,977)
   Total	$267,523		$264,546		$(2,977)

                            Millions of yen              

   March 31, 2024	Carrying amount	Fair      value	Unrealized   gain/(loss)
   Assets: (1) Investment securities	¥43,771	¥43,637	¥(134)
   (2) Long-term loans receivable	13	13	(0)
   Total	¥43,784	¥43,650	¥(134)
   Liabilities: (1) Long-term borrowings	¥30,000	¥29,871	¥(129)
   Total	¥30,000	¥29,871	¥(129)

   Notes to cash have been omitted, and notes to deposits, notes and accounts receivable-trade, and contract assets, electronically recorded monetary claims, short-term investment securities, notes and accounts payable-trade and short-term borrowings have been omitted since their carrying value approximates fair value because these items are settled in a short period of time.

   Equity securities without market prices are not included in (1) investment securities in the preceding tables. The carrying amounts of these financial instruments are as follows. As for capital investments in investment limited liability partnerships, notes as stipulated in Paragraph 4

   (1) of Implementation Guidance on Disclosures about Fair Value of Financial Instruments are not disclosed by applying Paragraph 24-16 of Implementation Guidance on Accounting Standard for Fair Value Measurement.

              Millions of yen        

   Thousands of

     U.S. dollars (Note 1)  

   	2025	2024	2025
   Unlisted equity securities	¥47,835	¥48,260	$319,924
   Equity interests of limited liability company	99	99	664
   Capital investments in investment limited liability partnerships	9,999	10,000	66,875

   Redemption schedule for monetary receivables and securities with maturities at March 31, 2025 and 2024

                                              Millions of yen                        

   March 31, 2025	Due in one year or less	Due after one year through five years	Due after five years through ten years	Due after ten years
   Deposits	¥75,080	¥ -	¥ -	¥ -
   Notes and accounts receivable-trade, and contract assets	48,512	-	-	-
   Electronically recorded monetary claims	1,095	-	-	-
   Short-term investment securities and investment securities
   Held-to-maturity debt securities
   (1) Corporate bonds	300	300	200	1,000
   Available-for-sale securities with maturities
   (1) Negotiable certificate of deposits	15,000	-	-	-
   (2) Commercial papers	10,000	-	-	-
   (3) Jointly-managed money trusts	1,500	-	-	-
   Total	¥151,487	¥300	¥200	¥1,000

                                  Thousands of U.S. dollars (Note 1)                  

   March 31, 2025	Due in one year or less	Due after one year through five years	Due after five years through ten years	Due after ten years
   Deposits	$502,138	$ -	$ -	$ -
   Notes and accounts receivable-trade, and contract assets	324,453	-	-	-
   Electronically recorded monetary claims	7,321	-	-	-
   Short-term investment securities and investment securities
   Held-to-maturity debt securities
   (1) Corporate bonds	2,006	2,006	1,338	6,688
   Available-for-sale securities with maturities
   (1) Negotiable certificate of deposits	100,321	-	-	-
   (2) Commercial papers	66,881	-	-	-
   (3) Jointly-managed money trusts	10,032	-	-	-
   Total	$1,013,152	$2,006	$1,338	$6,688

                                              Millions of yen                        

   March 31, 2024	Due in one year or less	Due after one year through five years	Due after five years through ten years	Due after ten years
   Deposits	¥79,614	¥ -	¥ -	¥ -
   Notes and accounts receivable-trade, and contract assets	48,073	-	-	-
   Electronically recorded monetary claims	862	-	-	-
   Short-term investment securities and investment securities
   Held-to-maturity debt securities
   (1) Corporate bonds	300	600	100	1,000
   Available-for-sale securities with maturities
   (1) Negotiable certificate of deposits	10,000	-	-	-
   (2) Jointly-managed money trusts	500	-	-	-
   Long-term loans receivable	-	13	-	-
   Total	¥139,349	¥613	¥100	¥1,000

   Repayment schedule for long-term borrowings at March 31, 2025 and 2024

                                                        Millions of yen                            

   March 31, 2025	Due in one year or less	Due after one year through two years	Due after two years through three years	Due after three years through four years	Due after four years through five years	Due after five years
   Short-term borrowings	¥486	¥ -	¥ -	¥ -	¥ -		¥ -
   Long-term borrowings	-	20,000	10,000	-	10,000		-
   Total	¥486	¥20,000	¥10,000	¥ -	¥10,000		¥ -

                                            Thousands of U.S. dollars (Note 1)                        

   March 31, 2025	Due in one year or less	Due after one year through two years	Due after two years through three years	Due after three years through four years	Due after four years through five years	Due after five years
   Short--term borrowings	$3,252	$ -	$ -	$ -	$ -		$ -
   Long-term borrowings	-	133,761	66,881	-	66,881		-
   Total	$3,252	$133,761	$66,881	$ -	$ 66,881		$ -

                                                        Millions of yen                            

   March 31, 2024	Due in one year or less	Due after one year through two years	Due after two years through three years	Due after three years through four years	Due after four years through five years	Due after five years
   Long-term borrowings	¥ -	¥ -	¥20,000	¥10,000	¥ -		¥ -
   Total	¥ -	¥ -	¥20,000	¥10,000	¥ -		¥ -

   Fair value information of financial instruments by level

   The fair values of financial instruments are categorized into the following three levels based on the observability and the significance of inputs used to determine fair values:

   Level 1 fair value: Of the observable inputs used in measuring fair values, the fair value measured based on quoted prices of identical assets or liabilities in active markets

   Level 2 fair value: Of the observable inputs used in measuring fair values, the fair value measured using inputs other than those used for Level 1

   Level 3 fair value: Fair value measured using unobservable inputs

   When multiple inputs that have a significant effect on the fair value measurement are used and the inputs are within different levels of the fair value hierarchy, the fair value is categorized as the lowest level of those inputs in the fair value hierarchy.

   1. Financial instruments measured at fair values in the consolidated balance sheets

                                                 Millions of yen                        

      March 31, 2025 Level 1 Level 2 Level 3 Total Assets:

      Investment securities

      Available-for-sale securities
      Equity securities	¥37,230	¥ -	¥ -	¥37,230
      Total	¥37,230	¥ -	¥ -	¥37,230

                                     Thousands of U.S. dollars (Note 1)                  

      March 31, 2025 Level 1 Level 2 Level 3 Total Assets:

      Investment securities

      Available-for-sale securities

      Equity securities	$248,995	$ -	$ -	$248,995
      Total	$248,995	$ -	$ -	$248,995

                                                 Millions of yen                        

      March 31, 2024 Level 1 Level 2 Level 3 Total Assets:

      Investment securities

      Available-for-sale securities
      Equity securities	¥42,072	¥ -	¥ -	¥42,072
      Total	¥42,072	¥ -	¥ -	¥42,072

   2. Financial instruments other than those measured at fair values in the consolidated balance sheets

                                              Millions of yen                        

   March 31, 2025 Level 1 Level 2 Level 3 Total Assets:

   Investment securities

   Held-to-maturity debt securities Corporate bonds	¥ -	¥1,275	¥ -	¥1,275
   Available-for-sale securities Corporate bonds	-	199	-	199
   Total	¥ -	¥1,474	¥ -	¥1,474
   Liabilities: Long-term borrowings	¥ -	¥39,555	¥ -	¥39,555
   Total	¥ -	¥39,555	¥ -	¥39,555

                                  Thousands of U.S. dollars (Note 1)                  

   March 31, 2025 Level 1 Level 2 Level 3 Total Assets:

   Investment securities

   Held-to-maturity debt securities Corporate bonds	$ -	$8,529	$ -	$8,529
   Available-for-sale securities Corporate bonds	-	1,331	-	1,331
   Total	$ -	$9,860	$ -	$9,860
   Liabilities: Long-term borrowings	$ -	$264,546	$ -	$264,546
   Total	$ -	$264,546	$ -	$264,546

                                              Millions of yen                        

   March 31, 2024 Level 1 Level 2 Level 3 Total Assets:

   Investment securities

   Held-to-maturity debt securities Corporate bonds	¥ -	¥1,566	¥ -	¥1,566
   Long-term loans receivable	-	13	-	13
   Total	¥ -	¥1,579	¥ -	¥1,579
   Liabilities: Long-term borrowings	¥ -	¥29,871	¥ -	¥29,871
   Total	¥ -	¥29,871	¥ -	¥29,871

   Note: Valuation techniques and inputs used in measuring fair values Investment securities

   Listed equity securities are valued using quoted market prices. Because listed equity securities are traded in active markets, their fair value is categorized as Level 1. Corporate bonds are valued using prices provided by the counterparty financial institutions, but the prices are not considered to be quoted market prices in active markets. Accordingly, their fair value is categorized as Level 2.

   Long-term loans receivable

   The fair value of long-term loans receivable is classified by a certain period, and calculated using the discounted present value method based on the interest rate obtained by adding a credit spread to the future cash flow and an appropriate index such as the yield of Japanese government bonds, for each credit risk category under credit management. Their fair value is categorized as Level 2.

   Long-term borrowings

   The fair value of long-term borrowings is calculated using the discounted present value method based on the total amount of principal and interest and the interest rate obtained by taking into account the remaining term of the liability and credit risk. Their fair value is categorized as Level 2.

6. SECURITIES
   1. Held-to-maturity debt securities

               Millions of yen                     Thousands of U.S. dollars (Note 1)    

      March 31, 2025 Securities whose fair value exceeds their carrying amount:	Carrying amount	Fair value	Difference		Carrying amount	Fair value	Difference
      (1) Corporate bonds	¥300	¥300	¥0		$2,006	$2,006	$0
      	¥300	¥300	¥0		$2,006	$2,006	$0
      Securities whose fair value does not exceed their carrying amount: (1) Corporate bonds	¥1,500	¥1,275	¥(225)		$10,032	$8,529	$(1,503)
      	¥1,500	¥1,275	¥(225)		$10,032	$8,529	$(1,503)
      Total	¥1,800	¥1,575	¥(225)		$12,038	$10,535	$(1,503)

                     Millions of yen          

      March 31, 2024	Carrying amount	Fair value	Difference
      Securities whose fair value exceeds their carrying amount: (1) Corporate bonds	¥800	¥803	¥3
      	¥800	¥803	¥3
      Securities whose fair value does not exceed their carrying amount: (1) Corporate bonds	¥1,200	¥1,063	¥(137)
      	¥1,200	¥1,063	¥(137)
      Total	¥2,000	¥1,866	¥(134)

   2. Available-for-sale securities

               Millions of yen                 Thousands of U.S. dollars (Note 1)

      March 31, 2025 Securities whose carrying amount exceeds their acquisition cost:	Carrying amount	Acquisition cost	Difference		Carrying amount	Acquisition cost	Difference
      (1) Equity securities	¥35,305	¥8,791	¥26,514		$236,124	$58,792	$177,332
      	¥35,305	¥8,791	¥26,514		$236,124	$58,792	$177,332
      Securities whose carrying amount does not exceed their
      acquisition cost:
      (1) Equity securities	¥1,924	¥2,460	¥(536)		$12,870	$16,456	$(3,586)
      (2) Corporate bonds	200	200	-		1,338	1,338	-
      (3) Negotiable certificate of deposits	15,000	15,000	-		100,321	100,321	-
      (4) Commercial papers	9,991	9,991	-		66,819	66,819	-
      (5) Jointly-managed money trusts	1,500	1,500	-		10,032	10,032	-
      	¥28,615	¥29,151	¥(536)		$191,380	$194,966	$(3,586)
      Total	¥63,920	¥37,942	¥25,978		$427,504	$253,758	$173,746

      Note: The acquisition cost of securities for which impairment loss was recognized is determined as the amount after deducting the impairment loss.

                     Millions of yen          

      March 31, 2024	Carrying amount	Acquisition cost	Difference
      Securities whose carrying amount exceeds their acquisition cost: (1) Equity securities	¥40,115	¥9,428	¥30,687
      	¥40,115	¥9,428	¥30,687
      Securities whose carrying amount does not exceed their acquisition cost: (1) Equity securities	¥1,957	¥2,328	¥(371)
      (2) Negotiable certificate of deposits	10,000	10,000	-
      (3) Jointly-managed money trusts	500	500	-
      	¥12,457	¥12,828	¥(371)
      Total	¥52,572	¥22,256	¥30,316

   3. Available-for-sale securities sold for the years ended March 31, 2025 and 2024

               Millions of yen                      Thousands of U.S. dollars (Note 1)    

      Profit on

      Loss on

      Profit on

      Loss on

      Year ended March 31, 2025 Sales value

      sale

      sale   Sales value      sale        sale    

      (1) Equity securities	¥1,761	¥1,225	¥4	$11,778	$8,196	$25
      (2) Negotiable certificate of deposits	10,000	-	-	66,881            -            -
      Total	¥11,761	¥1,225	¥4	$78,659      $8,196        $25

                     Millions of yen          

      Year ended March 31, 2024	Sales value	Profit on sale	Loss on sale
      (1) Equity securities	¥2,631	¥1,148	¥-
      (2) Negotiable certificate of deposits	30,000	-	-
      Total	¥32,631	¥1,148	¥-

   4. Securities for which impairment losses were recognized

   Impairment loss of ¥99 million ($665 thousand) (¥99 million ($665 thousand) for stocks of subsidiaries and affiliates) was recognized for investment securities for the year ended March 31, 2025. No impairment loss was recognized for the year ended March 31, 2024. Impairment is recognized, in principle, in case the fair market value decreases by 50% or more compared with the acquisition cost. Impairment is also recognized, in principle, if the fair value decreases by 30% or more but less than 50% and the recoverability is not expected. For unlisted equity securities, impairment is recognized in an amount deemed necessary considering collectability, in case the fair value decreases significantly due to the deteriorated financial condition.

7. RETIREMENT BENEFITS

1. Overview of retirement benefit plan

   The Companies have established unfunded lump-sum retirement plans. Certain consolidated subsidiaries have established funded defined benefit plans. In April 2023, the lump-sum retirement plans were changed in accordance with extension of retirement age from 60 to 65 and implementation of a point system. As a result of this change, retirement benefit obligation decreased by ¥868 million and past service costs incurred by the same amount. The Company has established defined contribution pension plans, and in addition, participates in unfunded Dock Workers Pension Funds. Certain consolidated subsidiaries have participated in smaller enterprise retirement allowance mutual aid system. The Companies may pay additional retirement benefits to certain employees at their retirement.

   The consolidated subsidiaries apply the simplified method in computing net defined benefit liability and net periodic pension cost.

2. Defined benefit plans

   1. The changes in retirement benefit obligation for the years ended March 31, 2025 and 2024 (excluding plans applying the simplified method) were as follows:

                     Millions of yen          

      Thousands of

        U.S. dollars (Note 1)  

      	2025	2024	2025
      Balance at beginning of year	¥16,490	¥17,746	$110,287
      Service cost	830	902	5,548
      Interest cost	232	170	1,553
      Actuarial gain or loss	(1,537)	(1,097)	(10,278)
      Retirement benefits paid	(420)	(363)	(2,812)
      Past service costs	-	(868)	-
      Balance at end of year	¥15,595	¥16,490	$104,298

   2. The changes in net defined benefit liability of plans applying the simplified method for the years ended March 31, 2025 and 2024 were as follows:

      Thousands of

      	Millions of yen	U.S. dollars (Note 1)
      	2025 2024	2025
      Balance at beginning of year	¥569 ¥566	$3,807
      Net periodic pension cost	85 64	571
      Retirement benefits paid	(28) (61)	(186)
      Balance at end of year	¥626 ¥569	$4,192

   3. The reconciliation between the ending balances of retirement benefit obligation and plan assets and net defined benefit liability and net defined benefit asset recorded in the consolidated balance sheets as of March 31, 2025 and 2024 was as follows:

                     Millions of yen          

      Thousands of

        U.S. dollars (Note 1)  

      	2025	2024	2025
      Funded retirement benefit obligation	¥242	¥226	$1,620
      Plan assets	(208)	(198)	(1,394)
      	34	28	226
      Unfunded retirement benefit obligation	16,187	17,031	108,264
      Net liability and asset recorded in the consolidated balance sheets	¥16,221	¥17,059	$108,490
      Net defined benefit liability	¥16,221	¥17,059	$108,490
      Net liability and asset recorded in the consolidated balance sheets	¥16,221	¥17,059	$108,490

      The above table includes retirement benefit plans applying the simplified method.

   4. The components of net periodic pension cost for the years ended March 31, 2025 and 2024 were as follows:

                     Millions of yen          

      Thousands of

        U.S. dollars (Note 1)  

      	2025	2024	2025
      Service cost	¥830	¥902	$5,548
      Interest cost	232	170	1,553
      Amortization of actuarial gain or loss	(10)	71	(66)
      Amortization of past service costs	(87)	(87)	(580)
      Net periodic pension cost calculated applying the simplified method	85	64	571
      Net periodic pension cost	¥1,050	¥1,120	$7,026

   5. The components of remeasurements of defined benefit plans in other comprehensive income (before income taxes and income tax effect) for the years ended March 31, 2025 and 2024 were as follows:

      Thousands of

      	Millions of yen	U.S. dollars (Note 1)
      	2025 2024	2025
      Past service costs	¥(87) ¥780	$(580)
      Actuarial gain or loss	1,527 1,169	10,211
      Total	¥1,440 ¥1,949	$9,631

   6. The components of remeasurements of defined benefit plans in accumulated other comprehensive income (before income taxes and income tax effect) as of March 31, 2025 and 2024 were as follows:

      Thousands of

      	Millions of yen	U.S. dollars (Note 1)
      	2025 2024	2025
      Unrecognized past service costs	¥694 ¥781	$4,642
      Unrecognized actuarial gain or loss	2,981 1,454	19,937
      Total	¥3,675 ¥2,235	$24,579

      The above table represents unrealized items related to the Company and its consolidated subsidiaries. Remeasurements of defined benefit plans in accumulated other comprehensive income include unrecognized items (amounts equivalent to the equity interest) at associates accounted for using equity method in addition to the above items.

   7. The principal assumption used for the actuarial calculation for the years ended March 31, 2025 and 2024 was as follows:

      	2025	2024
      Discount rate	2.1 - 2.3%	1.4 - 1.6%
      Expected salary increase rate	1.1 - 2.2%	1.1 - 2.4%

      Expected salary increase rates for regular staffs and general staffs, for which a point system has been implemented, are not disclosed. Expected salary increase rate only for field workers is disclosed.

3. Defined contribution plans

The required contribution amount to the defined contribution plans was ¥101 million ($673 thousand) and ¥100 million as of March 31, 2025 and 2024, respectively.

1. INCOME TAXES

   The Companies are subject to a number of income taxes which, in the aggregate, indicate statutory tax rates of approximately 30.6% for the years ended March 31, 2025 and 2024.

   The income tax reflected in the accompanying statements of income for the years ended March 31, 2025 and 2024 consisted of the following:

   		Millions of yen	Thousands of U.S. dollars (Note 1)
   		2025 2024	2025
   Current		¥11,744 ¥10,576	$78,546
   Deferred		(640) (132)	(4,277)
   	Total	¥11,104 ¥10,444	$74,269

   Significant components of deferred tax assets and liabilities as of March 31, 2025 and 2024 were as follows:

                Millions of yen        

   Thousands of

   U.S. dollars (Note 1)  

   	2025	2024	2025
   Deferred tax assets
   Net defined benefit liability	¥6,229	¥5,906	$41,657
   Accrued bonuses	755	721	5,049
   Accrued enterprise taxes	464	421	3,102
   Loss on valuation of investment securities	360	350	2,407
   Loss on valuation of stocks of subsidiaries and affiliates	238	237	1,595
   Tax loss carried forward	435	424	2,909
   Loss on valuation of golf club memberships	83	81	555
   Allowance for doubtful accounts	241	117	1,610
   Other	664	664	4,447
   Total deferred tax assets	9,469	8,921	63,331
   Valuation allowance	(1,130)	(1,272)	(7,558)
   Total deferred tax assets, net	8,339	7,649	55,773
   Deferred tax liabilities
   Valuation difference on available-for-sale securities	(7,924)	(9,031)	(52,999)
   Reserve for advanced depreciation of non-current assets	(1,169)	(1,082)	(7,818)
   Other	(1,453)	(997)	(9,716)
   Total deferred tax liabilities	(10,546)	(11,110)	(70,533)
   Net deferred tax assets (liabilities)	¥(2,207)	¥(3,461)	$(14,760)

   Information on reconciliation of the statutory tax rate to the effective tax rate for the years ended March 31, 2025 and 2024 was omitted since the difference between the statutory tax rate and the effective tax rate is less than 5% of the statutory tax rate.

   The “Act for Partial Revision of the Income Tax Act, etc.” (Act No. 13 of 2025) was enacted by the Diet on March 31, 2025, and the “Special Defense Corporation Tax” will be imposed from the fiscal years beginning on or after April 1, 2026.

   Accordingly, the statutory tax rate used to calculate deferred tax assets and deferred tax liabilities has been changed from the previous 30.58% to 31.47% for temporary differences that are expected to be eliminated in the fiscal years beginning on or after April 1, 2026.

   The impact of this tax rate change on the consolidated financial statements is immaterial.

2. COMPREHENSIVE INCOME

   Reclassification adjustments and income taxes and income tax effect on components of other comprehensive income for the years ended March 31, 2025 and 2024 were as follows:

                Millions of yen        

   Thousands of

   U.S. dollars

          (Note 1)      

   	2025	2024	2025
   Valuation difference on available-for-sale securities:
   Gains (losses) arising during the year	¥(3,122)	¥14,499	$(20,877)
   Reclassification adjustments	(1,222)	(1,089)	(8,171)
   Pre-tax amount	(4,344)	13,410	(29,048)
   Income taxes and income tax effect	1,107	(4,062)	7,401
   Valuation difference on available-for-sale securities	¥(3,237)	¥9,348	$(21,647)
   Foreign currency translation adjustment:
   Gains (losses) arising during the year	¥500	¥168	$3,340
   Remeasurements of defined benefit plans:
   Gains (losses) arising during the year	¥1,537	¥1,965	$10,278
   Reclassification adjustments	(97)	(15)	(647)
   Pre-tax amount	1,440	1,950	9,631
   Income taxes and income tax effect	(473)	(596)	(3,164)
   Remeasurements of defined benefit plans	¥967	¥1,354	$6,467
   Share of other comprehensive income of associates accounted for using equity method: Gains (losses) arising during the year	¥210	¥493	$1,405
   Reclassification adjustments	(47)	(23)	(312)
   Pre-tax amount	163	470	1,093
   Income taxes and income tax effect	-	-	-
   Share of other comprehensive income of associates accounted for using equity method	¥163	¥470	$1,093
   Total other comprehensive income	¥(1,607)	¥11,340	$(10,747)

3. LEASESLease transactions as lessee

   Future minimum lease payments under non-cancelable operating leases as of March 31, 2025 and 2024 were as follows:

   Thousands of

          Millions of yen               U.S. dollars (Note 1)  

   2025 2024 2025

   Due in one year or less ¥2,298 ¥2,459 $15,372

   Due after one year 8,137 10,435 54,419

   Total ¥10,435 ¥12,894 $69,791

   Lease transactions as lessor

   Future minimum lease payments under non-cancelable operating leases as of March 31, 2025 and 2024 were as follows:

   Thousands of

          Millions of yen               U.S. dollars (Note 1)  

   2025 2024 2025

   Due in one year or less ¥308 ¥460 $2,059

   Due after one year 838 1,146 5,606

   Total ¥1,146 ¥1,606 $7,665

4. SHORT-TERM AND LONG-TERM BORROWINGS

   Short-term and long-term borrowings as of March 31, 2025 and 2024 were as follows:

   	Millions of yen	Thousands of U.S. dollars (Note 1)
   	2025 2024	2025
   Short-term borrowings	¥486 ¥ -	$3,252
   Long-term borrowings (excluding current portion)	40,000 30,000	267,523
   Total	¥40,486 ¥30,000	$270,775

   Annual maturities of long-term borrowings as of March 31, 2025 were as follows:

   Year ending March 31          Millions of yen      

   Thousands of

        U.S. dollars (Note 1)    

   2026	¥ -	$ -
   2027	20,000	133,761
   2028	10,000	66,881
   2029	-	-
   2030	10,000	66,881
   Total	¥40,000	$267,523

5. REVENUE RECOGNITION
   1. Information about the breakdown of revenues from contracts with customers

                               Millions of yen                

                             Reportable segment              

      Year ended March 31, 2025	Distribution Business	Other Business	Total
      General harbor transportation	¥130,711	¥ -	¥130,711
      Warehousing	39,178	-	39,178
      Domestic transportation	32,032	-	32,032
      Factory cargo handling	28,595	-	28,595
      International transportation	11,106	-	11,106
      Heavy cargo and construction	-	13,172	13,172
      Other	1,323	18,363	19,686
      Revenues from contracts with customers	¥242,945	¥31,535	¥274,480
      Other revenues	¥ -	¥4,703	¥4,703
      Sales to external customers	¥242,945	¥36,238	¥279,183

                     Thousands of U.S. dollars (Note 1)          

                             Reportable segment              

      Year ended March 31, 2025	Distribution Business	Other Business	Total
      General harbor transportation	$874,203	$ -	$ 874,203
      Warehousing	262,023	-	262,023
      Domestic transportation	214,231	-	214,231
      Factory cargo handling	191,246	-	191,246
      International transportation	74,280	-	74,280
      Heavy cargo and construction	-	88,097	88,097
      Other	8,847	122,816	131,663
      Revenues from contracts with customers	$1,624,830	$210,913	$1,835,743
      Other revenues	$ -	$31,449	$31,449
      Sales to external customers	$1,624,830	$242,362	$1,867,192

                               Millions of yen                

                             Reportable segment              

      Year ended March 31, 2024	Distribution Business	Other Business	Total
      General harbor transportation	¥124,497	¥ -	¥124,497
      Warehousing	37,494	-	37,494
      Domestic transportation	29,728	-	29,728
      Factory cargo handling	27,916	-	27,916
      International transportation	10,435	-	10,435
      Heavy cargo and construction	-	12,491	12,491
      Other	1,244	18,485	19,729
      Revenues from contracts with customers	¥231,314	¥30,976	¥262,290
      Other revenues	¥ -	¥4,496	¥4,496
      Sales to external customers	¥231,314	¥35,472	¥266,786

   2. Information that provides a basis for understanding revenues from contracts with customers

      Information that provides a basis for understanding revenues from contracts with customers is as described in Note 2, Summary of Significant Accounting Policies (14) Revenue recognition.

   3. Information about the relationship between the satisfaction of performance obligations under contracts with customers and cash flows generated from the contracts, and the amount and timing of revenues from contracts with customers that existed as of March 31, 2025 expected to be recognized after March 31, 2025

      1. The balance of receivables from contracts with customers, contract assets and contract liabilities as of March 31, 2025 and 2024 were as follows.

         Thousands of U.S.

         Millions of yen			dollars (Note 1)
         2025 2024			2025
         Receivables from contracts with customers: Balance at beginning of year ¥48,215 ¥48,260			$322,462
         Balance at end of year 48,429 48,215			323,899
         Contract assets: Balance at beginning of year	¥582	¥989	$3,894
         Balance at end of year	1,016	582	6,797
         Contract liabilities:
         Balance at beginning of year	¥63	¥174	$419
         Balance at end of year	145	63	969

         In the accompanying consolidated balance sheets, receivables from contracts with customers and contract assets are included in notes and accounts receivable-trade, and contract assets and electronically recorded monetary claims, and contract liabilities are included in other in current liabilities. In addition, of the contract liabilities as of April 1, 2024 and 2023, ¥63 million ($419 thousand) and ¥173 million were recorded as revenue for the years ended March 31, 2025 and 2024, respectively.

      2. Transaction prices allocated to remaining performance obligations

   Because the Companies have no material transactions with an initial expected contract period exceeding one year, the practical expedient method is applied and information on remaining performance obligations is omitted. In addition, there are no material amounts of consideration arising from contracts with customers that are not included in the transaction prices.

6. SEGMENT INFORMATION

1. Description of reportable segments

   The reportable segments of the Companies are those for which separate financial information is available and regular evaluation by the Company’s management is performed in order to decide how resources are allocated among segments and assess their performance. The Companies engage in various services centering on distribution and have two reportable segments: Distribution Business for distribution services and Other Business for other several services. Distribution Business mainly consists of services such as general harbor transportation, warehousing, road transportation and international transportation. Other Business consists of heavy cargo transportation and installation, construction, and real estate leasing.

2. Methods of measurement for the amounts of sales, income, assets and other items for each reportable segment

   The accounting policies of each reportable segment are consistent with those disclosed in Note 2, Summary of Significant Accounting Policies

   (14) Revenue recognition.

   Intersegment sales or transfers are based on actual market prices.

3. Information about sales, income, assets and other items for each reportable segment

Reportable segment information for the years ended March 31, 2025 and 2024 was follows:

                                           Millions of yen                        

                 Reportable segment            

                                 Thousands of U.S. dollars (Note 1)                  

                 Reportable segment            

                                           Millions of yen                        

                 Reportable segment            

English Translation of the Independent Auditor’s Report Originally issued in the Japanese

Language (Excluding the section on Audit of Internal Control)

To the Board of Directors of Kamigumi Co., Ltd.

Independent Auditor’s Report

Nexus Audit Corporation Osaka, Japan

June 27, 2025

Representative Partner Engagement Partner Representative Partner Engagement Partner Representative Partner Engagement Partner

Certified Public Accountant Tomoyuki Morita Certified Public Accountant Masao Okamoto Certified Public Accountant Kyohei Kawamoto

Pursuant to Article 193-2, Paragraph 1 of the Financial Instruments and Exchange Act, we

have audited the accompanying consolidated financial statements, which comprise the consolidated balance sheets, the consolidated statements of income, consolidated statement of comprehensive income, consolidated statement of changes in net assets and consolidated statement of cash flows, and the notes to significant matters that form the basis for preparation of consolidated financial statements and other notes and the consolidated supplementary schedules of Kamigumi Co., Ltd. (the Company) and its consolidated subsidiaries (the Group) applicable to the fiscal year from April 1, 2024 to March 31, 2025 in the “Financial Information” section in the Company’s Annual Securities Report.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of 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.

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 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

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 our 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.

Other Matters

The consolidated financial statements of the Group for the year ended March 31, 2024, were audited by other auditors whose report dated June 27, 2024, expressed an unmodified opinion on those statements.

Other Information

The other information comprises the information included in the Annual Securities Report but does not include the consolidated financial statements, the non-consolidated financial statements and our audit report thereon. Management is responsible for the preparation and disclosure of the other information. Audit & Supervisory Board Members and the Audit & Supervisory Board are responsible for overseeing Group’s reporting process of the other

information.

Our opinion on the consolidated financial statements does not cover the other information, and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report the fact.

We have nothing to report in this regard.

Responsibilities of Management and Audit & Supervisory Board Members and the Audit & Supervisory Board 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 the 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 the going concern.

Audit & Supervisory Board Members and the Audit & Supervisory Board are responsible for overseeing the execution of duties by Directors in the design and operation 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’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. The selection and application of audit procedures depends on the auditor’s judgement.

• 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.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business 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 remain solely responsible for our audit opinion.

We communicate with Audit & Supervisory Board Members and the Audit & Supervisory Board 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 and other matters required under audit standards.

We also provide the Audit & Supervisory Board Members and the Audit & Supervisory Board 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 Audit & Supervisory Board Members and the Audit & Supervisory Board, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current fiscal year as 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.