Financial Statements March 2017

Millions of Japanese Yen Thousands of U.S. Dollars (Note 1) ASSETS 2017 2016 2017 Current assets: Cash and bank deposits (Note 11) ¥ 28,217 ¥ 39,965 $ 251,945 Notes and accounts receivable, trade (Note 11) 78,288 73,974 699,002 Allowance for doubtful accounts (550) (524) (4,919) Real estate for sale 3,812 4,120 34,041 Cost on construction contracts in progress and other (Note 5) 7,703 12,450 68,777 Advanced money (Note 11) 10,965 12,564 97,910 Deferred tax assets (Note 15) 7,407 3,725 66,138 Other current assets (Note 5) 3,250 4,299 29,020 Total current assets 139,094 150,576 1,241,915 Investments and other assets: Investments in securities (Notes 5,11 and 12) 13,988 12,237 124,893 Long-term loans (Note 5) 337 374 3,017 Deferred tax assets (Note 15) 773 1,808 6,907 Other (Note 5) 1,921 2,007 17,155 Allowance for doubtful accounts (576) (633) (5,143) Total investments and other assets 16,445 15,794 146,831 Property, plant and equipment: Land (Note 5) 18,398 18,653 164,273 Buildings and structures 15,985 16,643 142,725 Machinery, vehicles and equipment 20,017 20,992 178,728 Leased assets 151 151 1,351 Construction in progress 22 121 203 Total property, plant and equipment 54,575 56,562 487,283 Less accumulated depreciation (26,924) (27,078) (240,398) Property, plant and equipment—net 27,651 29,483 246,885 Intangible fixed assets 544 637 4,859 Total assets ¥ 183,735 ¥ 196,491 $ 1,640,491 The accompanying notes are an integral part of these financial statements. CONSOLIDATED BALANCE SHEET TOA CORPORATION and its consolidated subsidiaries As of March 31, 2017 and 2016 Millions of Japanese Yen Thousands of U.S. Dollars (Note 1) LIABILITIES AND NET ASSETS 2017 2016 2017 Current liabilities: Short-term borrowings (Notes 5 and 11) ¥ 8,463 ¥ 8,376 $ 75,566 Current portion of long-term debt (Notes 5 and 11) 5,535 5,744 49,428 Notes and accounts payable, trade (Note 11) 31,012 40,446 276,900 Electoronically recorded obligations, operating (Notes 3 and 11) 8,429 10,660 75,267 Accrued income taxes 482 3,661 4,307 Advances received on construction contracts in progress 7,622 8,756 68,057 Reserve for indemnity on completed contracts 483 527 4,320 Reserve for loss on construction works (Note 5) 2,266 1,850 20,240 Deposits received (Note 11) 11,937 13,309 106,583 Reserve for loss on construction defects 14,100 — 125,892 Other current liabilities (Notes 5 and 11) 5,117 6,890 45,691 Total current liabilities 95,452 100,223 852,255 Long-term liabilities: Long-term debt (Notes 5 and 11) 15,196 15,784 135,679 Liability for retirement benefits (Note 14) 4,436 5,586 39,608 Deferred tax liabilities on revaluation of land (Notes 5 and 15) 2,358 2,397 21,053 Other long-term liabilities (Note 11) 1,333 1,355 11,907 Total long-term liabilities 23,324 25,123 208,250 Total liabilities 118,776 125,347 1,060,505 Net assets (Note 8) : Shareholders' equity: Common stock, Authorized—60,000,000 shares Issued—22,494,629 shares at March 31, 2017 and 2016 18,976 18,976 169,434 Capital surplus 18,115 18,113 161,743 Retained earnings 23,020 31,353 205,539 Treasury stock, at cost 1,593 thousand shares and 1,592 thousand shares at March 31, 2017 and 2016, respectively (2,056) (2,053) (18,364) Total shareholders' equity 58,055 66,389 518,352 Accumulated other comprehensive income: Net unrealized gains (losses) on securities (Note 12) 4,193 2,966 37,441 Net deferred gains (losses) on hedges (Notes 11 and 13) — 2 — Revaluation reserve for land (Note 5) 3,629 3,570 32,402 Retirement benefits liability adjustments (Note 14) (1,452) (2,244) (12,964) Total accumulated other comprehensive income 6,370 4,294 56,879 Non-controlling interests 532 459 4,753 Total net assets 64,958 71,143 579,986 Commitments and contingent liabilities (Note 5): Total liabilities and net assets ¥ 183,735 ¥ 196,491 $ 1,640,491 The accompanying notes are an integral part of these financial statements. CONSOLIDATED STATEMENT OF INCOME TOA CORPORATION and its consolidated subsidiaries For the years ended March 31, 2017 and 2016 Millions of Japanese Yen Thousands of U.S. Dollars (Note 1) 2017 2016 2017 Net sales (Note 6) ¥ 167,200 ¥ 200,282 $ 1,492,865 Cost of sales (Note 6) 150,990 178,543 1,348,131 Gross profit 16,210 21,739 144,733 Selling, general and administrative expenses (Note 6) 10,013 9,949 89,406 Operating income 6,196 11,789 55,326 Other income (expenses): Interest and dividend income 283 303 2,528 Interest expense (388) (423) (3,467) Provision for doubtful accounts, non-trade 33 (36) 298 Loss on impairment of fixed assets (Note 6) (332) (1,438) (2,968) Gain on sale of fixed assets (Note 6) 79 46 713 Guarantee fee (Note 3) (72) (117) (644) Exchange gain (loss), net (88) (921) (788) Loss on sale of fixed assets (Note 6) (184) (35) (1,644) Loss on disposal of fixed assets (Note 6) (13) (427) (120) Loss on construction defects (Note 6) (15,374) — (137,269) Other, net (Note 3) (158) (4) (1,415) (16,215) (3,056) (144,777) Profit (loss) before income taxes (10,018) 8,732 (89,450) Income taxes (Note 15) : Current 884 4,020 7,898 Deferred (3,539) (1,414) (31,598) (2,654) 2,606 (23,700) Profit (loss) (7,364) 6,126 (65,750) Profit (loss) attributable to : Non-controlling interests ¥ 74 ¥ 88 $ 661 Owners of parent ¥ (7,438) ¥ 6,038 $ (66,412) The accompanying notes are an integral part of these financial statements. Millions of Japanese Yen Thousands of U.S. Dollars (Note 1) 2017 2016 2017 Profit (loss) ¥ (7,364) ¥ 6,126 $ (65,750) Other comprehensive income (loss): Net unrealized gains (losses) on securities 1,227 (1,281) 10,958 Net deferred gains (losses) on hedges (2) (49) (23) Revaluation reserve for land (Note 5) — 133 — Retirement benefits liability adjustments (Note 14) 792 (2,370) 7,078 Total other comprehensive income (loss) (Note 7) 2,017 (3,568) 18,013 Comprehensive income (loss) ¥ (5,346) ¥ 2,558 $ (47,736) Total comprehensive income (loss) attributable to: (Note 7) Owners of parent ¥ (5,420) ¥ 2,470 $ (48,398) Non-controlling interests ¥ 74 ¥ 88 $ 661 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME TOA CORPORATION and its consolidated subsidiaries For the years ended March 31, 2017 and 2016 The accompanying notes are an integral part of these financial statements. The accompanying notes are an integral part of these financial statements. The accompanying notes are an integral part of these financial statements. CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS TOA CORPORATION and its consolidated subsidiaries For the years ended March 31, 2017 and 2016 Millions of Japanese Yen Shareholders' equity Accumulated other comprehensive income Non-controlling interests Total net assets Common stock Capital surplus Retained earnings Treasury stock, at cost Net unrealized gains (losses) on securities (Note 12) Net deferred gains (losses) on hedges Revaluation reserve for land (Note 5) Retirement benefits liability adjustments (Note 14) Balance at March 31, 2015 ¥ 18,976 ¥ 18,113 ¥ 26,015 ¥ (2,052) ¥ 4,247 ¥ 51 ¥ 3,154 ¥ 125 ¥ 371 ¥ 69,004 Cash dividends (418) (418) Profit attributable to owners of parent for the period 6,038 6,038 Acquisition of treasury stock (0) (0) Reversal of revaluation reserve for land (282) (282) Net changes in items other than shareholders' equity (1,281) (49) 415 (2,370) 88 (3,197) Balance at March 31, 2016 ¥ 18,976 ¥ 18,113 ¥ 31,353 ¥ (2,053) ¥ 2,966 ¥ 2 ¥ 3,570 ¥ (2,244) ¥ 459 ¥ 71,143 Cash dividends (836) (836) Profit (loss) attributable to owners of parent for the period (7,438) (7,438) Acquisition of treasury stock (2) (2) Increase or decrease of equity interests due to acquisition of shares of subsidiaries 1 1 Reversal of revaluation reserve for land (58) (58) Net changes in items other than shareholders' equity 1,227 (2) 58 792 72 2,148 Balance at March 31, 2017 ¥ 18,976 ¥ 18,115 ¥ 23,020 ¥ (2,056) ¥ 4,193 ¥ — ¥ 3,629 ¥ (1,452) ¥ 532 ¥ 64,958 Thousands of U.S. Dollars (Note 1) Shareholders' equity Accumulated other comprehensive income Non-controlling interests Total net assets Common stock Capital surplus Retained earnings Treasury stock, at cost Net unrealized gains (losses) on securities (Note 12) Net deferred gains (losses) on hedges Revaluation reserve for land (Note 5) Retirement benefits liability adjustments (Note 14) Balance at March 31, 2016 $169,434 $161,730 $279,938 $ (18,338) $ 26,483 $ 23 $ 31,880 $ (20,043) $ 4,105 $635,214 Cash dividends (7,465) (7,465) Profit (loss) attributable to owners of parent for the period (66,412) (66,412) Acquisition of treasury stock (26) (26) Increase or decrease of equity interests due to acquisition of shares of subsidiaries 12 12 Reversal of revaluation reserve for land (521) (521) Net changes in items other than shareholders' equity 10,958 (23) 521 7,078 648 19,184 Balance at March 31, 2017 $169,434 $161,743 $205,539 $ (18,364) $ 37,441 $ — $ 32,402 $ (12,964) $ 4,753 $579,986 The accompanying notes are an integral part of these financial statements. Millions of Japanese Yen Thousands of U.S. Dollars (Note 1) 2017 2016 2017 Cash flows from operating activities: Profit (loss) before income taxes ¥ (10,018) ¥ 8,732 $ (89,450) Adjustments to reconcile income before income taxes and Non-controlling interests to net cash (used in) provided by operating activities: Depreciation and amortization 2,010 2,033 17,953 Loss on impairment of fixed assets 332 1,402 2,968 Exchange (gain) loss, net 35 504 316 (Gain) Loss on sale or disposal of fixed assets 106 143 951 Increase (decrease) in liability for retirement benefits (114) (898) (1,019) Increase (decrease) in allowance for doubtful accounts (30) 9 (272) Increase (decrease) in provision for loss on construction defects 14,100 — 125,892 Changes in: Notes and accounts receivable, trade (4,313) 15,726 (38,512) Real estate for sale 307 (11) 2,744 Cost on construction contracts in progress and other 4,747 (4,053) 42,388 Notes and accounts payable, trade (11,664) (1,660) (104,148) Advances received on construction contracts in progress (1,134) (760) (10,129) Other, net 1,090 950 9,734 Sub-total (4,545) 22,119 (40,581) Interest and dividend income received 297 298 2,654 Interest paid (428) (396) (3,828) Income taxes paid (4,093) (2,170) (36,545) Net cash (used in) provided by operating activities (8,769) 19,850 (78,301) Cash flows from investing activities: Payments for acquisition of investment in securities (23) (44) (212) Proceeds from sale of investment in securities 0 4 0 Payments for acquisition of property, plant and equipment (1,693) (2,928) (15,120) Proceeds from sale of property, plant and equipment 478 234 4,270 Other, net (24) 266 (215) Net cash (used in) provided by investing activities (1,263) (2,467) (11,277) Cash flows from financing activities: Net increase (decrease) in short-term borrowings 87 (14) 781 Proceeds from long-term debt 4,947 6,477 44,171 Repayment of long-term debt (5,744) (5,839) (51,293) Acquisition of treasury stock (2) (0) (26) Cash dividends paid (832) (416) (7,430) Other, net (94) (141) (840) Net cash (used in) provided by financing activities (1,639) 65 (14,637) Effect of exchange rate changes on cash and cash equivalents (37) (461) (330) Net increase (decrease) in cash and cash equivalents (11,709) 16,986 (104,546) Cash and cash equivalents at beginning of year 39,896 22,909 356,220 Cash and cash equivalents at end of year (Note 9) ¥ 28,187 ¥ 39,896 $ 251,673 CONSOLIDATED STATEMENT OF CASH FLOWS TOA CORPORATION and its consolidated subsidiaries For the years ended March 31, 2017 and 2016 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TOA CORPORATION and its consolidated subsidiaries 1.Significant Respects for the Basis of Preparing Consolidated Financial Statements: The accompanying consolidated financial s t a t e m e n t s o f T O A C O R P O R A T I O N ( t h e “Company”) and its consolidated subsidiaries (the “Companies”) are prepared on the basis of accounting principles generally accepted in Japan, which are different in certain respects as to application and disclosure requirements of International Financial Reporting Standards, and are compiled from the consolidated financial statements prepared by the Company as required by the Financial Instruments and Exchange Law of Japan. Certain reclassifications and rearrangements were made for the convenience of readers outside of Japan. As permitted by the Financial Instruments and Exchange Law of Japan, amounts of less than one million yen have been rounded down to the nearest million Japanese yen. Ⅰ . Basis of consolidation T h e C o m p a n y h a s 1 7 m a j o r i t y - o w n e d s u b s i d i a r i e s a s o f M a r c h 3 1 , 2 0 1 7 . T h e consolidated financial statements for the year ended March 31, 2017 include the accounts of the Company and 11 majority-owned subsidiaries. Principal consolidated subsidiaries were TOA Agency Co., Ltd., Shinko Corporation, TOA Kikai Kogyo Co., Ltd. Consolidated subsidiaries have the same financial period as the Company that ends on March 31. Other 6 subsidiaries are not consolidated as they are at small scale and not significant in terms of total assets, net sales, retained earnings or net income in aggregate. Investments in unconsolidated subsidiaries (Human Affair Co., Ltd. and others) and affiliates (Sengenyama Developing Co., Ltd. and others) are excluded from application of the equity method as they are not significant in terms of net income or retained earnings in aggregate. Ⅱ . Basis of accounting treatment (1) Basis of valuation for significant assets a) Securities Securities held by the Companies are classified into two categories; Held-to-maturity debt securities are carried at amortized cost. Other securities for which market quotations are available are stated at fair value. Net Unrealized gains or losses on these securities are treated as directly charged or credited to the net assets and cost of securities sold are computed by the moving average method. Other securities for which market quotation are unavailable are stated at moving average cost method. b) Derivatives With changes in fair value included in net income or loss for the period in which they arise, derivatives are stated at fair value. c) Inventories Cost on construction contracts in progress, PFI projects and real estate for sale are stated at specific cost method for each contract. Materials and supplies are stated at moving average cost method. However, in the case that net selling value falls below the acquisition cost at the end of the period, inventories except for cost on construction contracts in progress are carried at the net selling value on the balance sheet, regarded as decreased profitability of assets. (2) Depreciation for property, plant and equipment and other Except for leased assets, depreciation is principally computed by the declining-balance method at rates based on the estimated useful lives. However, depreciation of buildings which the Companies acquired on or after April 1, 1998, and facilities attached to buildings and other non- building structures acquired on or after April 1, 2016 are computed on a straight-line basis over the estimated period. Useful lives and residual value are in conformity with the provisions of the Corporation Tax Law of Japan. As for intangible fixed assets excluding leased assets and long-term prepaid expenses, amortization is computed by the straight-line method and the useful lives are in conformity with the provisions of the Corporation Tax Law of Japan. As for leased assets related to finance lease, other than those which are deemed to transfer ownership of the leased assets to the lessee, depreciation is principally computed by the straight- line method over the useful lives equivalent to lease term and residual value is equal to zero. (3) Reserve and allowance a) Allowance for doubtful accounts Allowance for general receivables are established in amounts considered to be appropriate based upon credit loss experience. For specific receivables such as doubtful accounts, allowance for these are established in amounts considered to be uncollectible based upon an evaluation of possibility of collection in each outstanding receivable. b) Reserve for indemnity on completed contracts Reserve for indemnity on completed contracts is provided for the future defect expenses based upon the estimated indemnity amount for net sales for the year. c) Reserve for loss on construction works Reserve for loss on construction works is provided for the amount equivalent to cover future loss by evaluating individual construction form which loss is assumed and estimated. d) Reserve for loss on construction defects Reserve for loss on construction defects is provided for the amount equivalent to cover future defect expenses based upon the estimated repair costs for construction defects for soil improvement projects. (4) Retirement benefits Liabilities for retirement benefits has been provided on an accrual basis as of the balance sheet date based on an estimate of the projected benefit obligation and the employees' pension plan assets. To calculate projected benefit obligation, the benefit formula method is used to allocate expected retirement benefit payments to the each period through current fiscal year-end. Actuarial gain or loss is amortized by the straight-line method over a defined period (13 years), not exceeding t h e a v e r a g e r e m a i n i n g service period of the employees from the next fiscal year after the incurrence. Certain consolidated subsidiaries apply the simplified method which assumes retirement benefit obligation to be equal to the benefits payable assuming voluntary retirement of all employees at fiscal year-end. (5) Recognition of contract revenue and cost The Companies adopt the percentage-of- completion method for revenue recognition for the construction-type contracts where the outcome of the construction activities by the end of this year can be reliably estimated. Completion method is adopted otherwise. The percentage of completion is measured by the ratio of the costs incurred to the estimated total costs for each contract. (6) Hedge accounting Gains or losses arising from changes in fair value of the derivatives designated as “hedging instruments” are deferred as a component of net assets and included in net income or loss in the same period during which the gains and losses on the hedged items or transactions are recognized. For interest rate swaps, if certain hedging criteria are met, interest rate swaps are not recognized at their fair values but an alternative (short-cut) method under Japanese accounting standards in applied by which the amounts received or paid for such interest swap arrangements are recognized as interest over the life of each of the arrangements. The derivatives designated as hedging instruments by the Companies are principally interest swaps and forward exchange contracts. The related hedged item is bank loans and foreign currency monetary liabilities and forecasted transactions. The Companies have a policy to utilize the above hedging instruments in order to reduce the Company's exposure to the risk of interest rate fluctuation and foreign exchange fluctuation. Thus, the Company's purchases of the hedging instruments are limited to, at maximum, the amounts of the hedged items. The Companies evaluate effectiveness of its hedging activities by reference to the accumulated gains or losses on the hedging instruments and the related hedged items from the commencement of the hedges. (7) Scope of cash and cash equivalents Cash and cash equivalents in the consolidated statement of cash flows and composed of cash on hand, bank deposits which are able to be withdrawn on demand and short-term investment with an original maturity of three months or less and which represent a minor risk of fluctuation in value. (8) Consumption taxes Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes. (9) U.S. Dollar amounts The dollar amounts included in the financial statements and notes thereto represent the arithmetical results of translating yen to dollars at rate of ¥112=US$1, the approximated rate of exchange prevailing on March 31, 2017. The inclusion of such dollar amounts is solely for the convenience of readers outside of Japan and is not intended to imply that yen and assets and liabilities originating in Yen have been or could be readily converted, realized or settled in dollars at this or any other rates. Amounts less than one thousand have been rounded down to the nearest thousand dollars. 2.Changes in Accounting Policy The Company and its domestic consolidated subsidiaries adopted "Practical Solution on a change in depreciation method due to Tax Reform 2016" (ASBJ PITF No. 32, June 17, 2016) as a result of revisions to the Corporate Tax Act of Japan. Accordingly, the depreciation method for both facilities attached to buildings and other non- building structures acquired on or after April 1, 2016 was changed from the declining-balance method to the straight-line method. This change did not have a material impact on the Companies' consolidated operating income and loss before income taxes in the current year. 3.Changes in Presentation The Companies have changed the presentation of items in the consolidated balance sheet as follows: Electronically recorded obligations, operating included in Notes and accounts payable, trade of Current liabilities in the previous year, is presented separately in the current year. To reflect this change in presentation, the Companies reclassified items of previous year in the consolidated balance sheet for the current year. C o n s e q u e n t l y , E l e c t r o n i c a l l y r e c o r d e d obligations, operating was newly shown in the amount of ¥10,660 million. Also Notes and account payable, trade in the previous year was shown in the amount of ¥40,446 million, compared with ¥51,107 million previously presented. The Companies have changed the presentation of items in the consolidated statement of income as follows: Guarantee fee included in Other, net of Other income (expenses) in the previous year, is presented separately in the current year. To reflect this change in presentation, the Companies reclassified items of previous year in the consolidated statement of income for the current year. Consequently, Guarantee fee was newly shown in the amount of ¥(117) million. Also Other, net of Other income (expenses) in the previous year was shown in the amount of ¥(4) million, compared with ¥(122) million previously presented. 4.Additional information The Company and its consolidated subsidiaries adopted "Revised Implementation Guidance on Recoverability of Deferred Tax Assets" (ASBJ Guidance No. 26, March 28, 2016) from the beginning of the fiscal year ended March 31, 2017. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TOA CORPORATION and its consolidated subsidiaries 5.Notes to Consolidated Balance Sheet Ⅰ .Cost on construction contracts in progress and other Cost on construction contracts in progress and other as of March 31, 2017 and 2016 consisted of: Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 Cost on construction contracts in progress ¥5,605 ¥10,322 $50,049 PFI projects 1,353 1,604 12,080 Other inventories 744 523 6,646 Cost on construction contracts in progress and other ¥7,703 ¥12,450 $68,777 Ⅱ .Reserve for loss on construction works Cost on construction contracts in progress and reserve account in relation to the construction works, which loss is assumed, are represented in current assets and liabilities, respectively without setoff. Among cost on construction contracts in progress, amount in aggregate corresponding to reserve for loss on construction works as of March 31, 2017 and 2016 are as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 ¥625 ¥1,148 $5,588 Ⅲ .Investments in securities Among investments in securities, amount in aggregate corresponding to unconsolidated subsidiaries and affiliates as of March 31, 2017 and 2016 are as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 Investments in affiliates ¥247 ¥247 $2,205 Ⅳ .Revaluation of land In accordance with the "Act on Revaluation of Land" (Act No.34 promulgated on March 31, 1998) and the "Act on Partial Revision of the Act on Revaluation of Land" (Act No.19 promulgated on March 31, 2001), the Company revalued its land held for the business purpose and accounted for the amount equivalent to tax related to this differences on revaluation as "deferred tax liabilities on revaluation of land" in liabilities and accounted for the amount that tax amount were deducted from the differences on revaluation as "revaluation reserve for land" in net assets. Furthermore, reviewing a collectability of "deferred tax assets for land revaluation" individually, among the amount equivalent to tax related to the differences on revaluation of land, the amount that were difficult to anticipate collectability were reduced from "revaluation reserve for land". Revalued method The Company revalued its land held for business purposes based on the value appraised by an appraiser, as regulated by Article No.2-4 of the "Enforcement Ordinance of the Law Concerning Land Revaluation (Article No.119 issued on March 31, 1998) with certain necessary adjustments. Revalued date March 31, 2002 Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 Differences of the land after revaluation exceeded its fair value ¥4,230 ¥4,117 $37,776 Ⅴ .Assets pledged as collateral and secured liabilities Assets pledged as collateral and secured liabilities as of March 31, 2017 and 2016 were as follows: Millions of Japanese Yen Thousands of U.S. Dollars Assets pledged as collateral: 2017 2016 2017 Current assets Other current assets ¥27 ¥27 $247 Investment and other assets Investment in securities 1,996 2,315 17,829 Long-term loans 221 247 1,974 Total ¥2,245 ¥2,590 $20,051 As of March 31, 2017, the assets listed above are pledged as collateral to secure contingent liabilities amounting to ¥1,686 million (US$15,059 thousand) and liabilities based on the loan agreements with credit line between 12 PFI companies and financial institutions. As of March 31, 2016, secured liabilities were in the amount of ¥1,618 million and liabilities were for 12 PFI companies. Ⅵ .Securities lent Among investment in securities, securities were lent to financial institution under the security lending agreement at March 31, 2017 and 2016 were as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 ¥157 ¥161 $1,402 Ⅶ .Commitments and contingent liabilities (a)The Companies are contingently liable for the following as of March 31, 2017 and 2016: Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 Employees (Loan guarantee to bank) ¥18 ¥14 $164 National Federation of Promotion for Fishing Ports and Villages 109 159 977 Fisheries Cooperative Association (Loan guarantee) Others 299 674 2,675 Total ¥427 ¥848 $3,818 (b)The company has been brought a damage suit (totaling 1,206 million yen (US$10,768 thousand)) as the reasons of defect for building construction work (completed in 1997) by said client in the Tokyo District Court and it is currently pending. The trial results are unpredictable at this time. Ⅷ .Short-term borrowings The Company had commitment lines for efficient financial arrangement from 7 banks at March 31, 2017 and 2016 as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 Total amount of contracts of commitment lines ¥20,000 ¥20,000 $178,571 Outstanding borrowings — — — Balance ¥20,000 ¥20,000 $178,571 Ⅸ .Non-recourse debt The following non-recourse debts are included in current portion of long-term debt and long-term debt with PFI business pledged as collateral. The amount of non-recourse debts as of March 31, 2017 and 2016 are as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 Non-recourse debt included in current portion of long term debt ¥606 ¥645 $5,413 Non-recourse debt included in long-term debt 2,314 2,920 20,663 Total ¥2,920 ¥3,565 $26,077 The amount of PFI assets pledged as collateral for non-recourse debt as of March 31, 2017 and 2016 are as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 ¥5,129 ¥5,691 $45,803 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TOA CORPORATION and its consolidated subsidiaries 6.Notes to Consolidated Statement of Income Ⅰ .Net sales The amounts of contract revenue which are accounted for by the percentage-of-completion method were as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 ¥154,130 ¥185,276 $1,376,169 Ⅱ .Loss on valuation of inventory The ending inventory was the carrying value after writing down due to the decreased profitability. Among the cost of sales, amount in aggregate corresponding to loss on valuation of inventory were as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 ¥25 ¥1,404 $228 Ⅲ .Reserve for loss on construction works Among the cost of sales, amount in aggregate corresponding to reserve for loss on construction works were as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 ¥1,771 ¥741 $15,820 Ⅳ .Selling, general and administrative expenses The significant items of selling, general and administrative expenses were as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 Salaries to employees ¥4,285 ¥4,214 $38,260 Expenses for retirement benefits for employees 219 260 1,958 Research expenses 763 763 6,814 Provision for doubtful accounts, trade 2 (25) 26 Ⅴ .Research and development expenses Among the general and administrative expenses and the cost on contract, amount in aggregate corresponding to research and development expenses were as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 ¥896 ¥872 $8,000 Ⅵ .Gain on sale of fixed assets The breakdown of the gain on sale of fixed assets were as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 Tools and fixtures ¥51 ¥ — $462 Vessels 14 15 125 Machinery and equipment 13 2 117 Others 0 29 8 Total ¥79 ¥46 $713 Ⅶ .Loss on sale of fixed assets The breakdown of the loss on disposition of fixed assets were as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 Buildings ¥113 ¥16 $1,013 Land 70 19 $630 Total ¥184 ¥35 $1,644 Ⅷ .Loss on disposal of fixed assets The breakdown of the loss on retirement of fixed assets were as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 Buildings ¥12 ¥182 $114 Vessels 0 237 0 Others 0 7 5 Total ¥13 ¥427 $120 Ⅸ .Impairment of fixed assets For the year ended March 31, 2017, the Companies recognized losses on impairment of the following assets: Use Type of assets Location Number of groups Idle properties Machinery and equipment and others Tokyo and others 3 The construction business assets were grouped by each branch unit, the real estate leasing assets and the idle properties were grouped by each individual objective. The carrying amount of the relevant assets was written down to the recoverable value due to the drop in fair value and ¥332 million (US$2,968 thousand) was accounted for as loss on impairment of fixed assets, which consisted of ¥191 million (US$1,709 thousand) for machinery and equipment, ¥103 million (US$920 thousand) for Tools and Fixtures, ¥23 million (US$212 thousand) for land and ¥13 million (US$124 thousand) for others. Meanwhile, the recoverable value of the relevant assets was based on the anticipated net sale value. Furthermore, the anticipated net sale value of land whose carrying amount was significant was applied to the appraisal value by the licensed real-estate appraiser. For the year ended March 31, 2016, the Companies recognized losses on impairment of the following assets: Use Type of assets Location Number of groups Idle properties Land, buildings and others Osaka and others 8 The construction business assets were grouped by each branch unit, the real estate leasing assets and the idle properties were grouped by each individual objective. The carrying amount of the relevant assets was written down to the recoverable value due to the drop in fair value and ¥1,438 million was accounted for as loss on impairment of fixed assets, which consisted of ¥1,194 million for land, ¥195 million for buildings and ¥48 million for others. Meanwhile, the recoverable value of the relevant assets was based on the anticipated net sale value. Furthermore, the anticipated net sale value of land whose carrying amount was significant was applied to the appraisal value by the licensed real-estate appraiser. X .Loss on construction defects Due to the discovery of a construction defect and false reporting, certain contract specification requirements were determined to be unfulfilled for a soil improvement project at Haneda International Airport in Tokyo and other projects carried out by the Company. As a result, the Company recognized a loss for repair costs and other incurred for these problems. 7.Notes to Consolidated Statement of Comprehensive Income Reclassifications adjustments and tax effects in relation to the other comprehensive income were as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 Unrealized gains (losses) on securities: Amount arising during the year ¥1,738 ¥(1,955) $15,523 Amount of reclassification adjustments 0 — 0 Amount before tax effect 1,738 (1,955) 15,523 Tax effect (511) 673 (4,565) Unrealized gains (losses) on securities 1,227 (1,281) 10,958 Deferred gains (losses) on hedges: Amount arising during the year — (5) — Amount of reclassification adjustments (3) (63) (32) Amount before tax effect (3) (69) (32) Tax effect 1 19 9 Deferred gains (losses) on hedges (2) (49) (23) Revaluation reserve for land: Tax effect — 133 — Revaluation reserve for land — 133 — Retirement benefits liability adjustments: Amount arising during the year 1,035 (3,637) 9,248 Amount of reclassification adjustments 106 217 951 Amount before tax effect 1,142 (3,420) 10,200 Tax effect (349) 1,049 (3,121) Retirement benefits liability adjustments 792 (2,370) 7,078 Total other comprehensive income (loss) ¥2,017 ¥(3,568) $18,013 8.Notes to Consolidated Statement of Changes in Net Assets Ⅰ. Type and number of shares For the year ended March 31, 2017 Thousands of shares Type of shares Number of shares at beginning of year Increase Decrease Number of shares at end of year Issued stock Common stock 224,946 — 202,451 22,494 Treasury stock Common stock 15,923 3 14,332 1,593 Notes: The Company completed a reverse stock split of its common stock, at ratio of 1 share for 10 shares on October 1, 2016. Notes: The major components of decrease in issued stock were as follows: Decrease due to reverse stock split 202,451 thousand shares Notes: The major components of increase and decrease in treasury stock were as follows: Increase due to purchase of odd stock 3 thousand shares Detail) before reverse stock split 2 thousand shares after reverse stock split 1 thousand shares Decrease due to reverse stock split 14,332 thousand shares NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TOA CORPORATION and its consolidated subsidiaries For the year ended March 31, 2016 Thousands of shares Type of shares Number of shares at beginning of year Increase Decrease Number of shares at end of year Issued stock Common stock 224,946 — — 224,946 Treasury stock Common stock 15,919 3 — 15,923 Notes: The major components of increase in treasury stock were as follows: Increase due to purchase of odd stock 3 thousand shares Ⅱ. Dividend payment For the year ended March 31, 2017 Millions of Japanese Yen Thousands of U.S. Dollars Resolution Type of share Dividend resource Total amount of dividends Cash dividends per share (Yen) Total amount of dividends Cash dividends per share (Dollars) Record date Effective date Annual Shareholders' Meeting held on June 29, 2016 Common stock Retaind earnings ¥850 ¥4 $7,590 $0.03 March 31, 2016 June 30, 2016 Notes: Cash dividends per share are based on the dividend before the reverse stock split effective from October 1, 2016. For the year ended March 31, 2016 Millions of Japanese Yen Resolution Type of share Dividend resource Total amount of dividends Cash dividends per share (Yen) Record date Effective date Annual Shareholders' Meeting held on June 26, 2015 Common stock Retaind earnings ¥425 ¥2 March 31, 2015 June 29, 2015 9.Notes to Consolidated Statement of Cash Flows Cash and cash equivalents consisted of: Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 Cash and bank deposits ¥28,217 ¥39,965 $251,945 Time deposits due over three months (30) (68) (271) Cash and cash equivalents ¥28,187 ¥39,896 $251,673 10.Leases Operating lease The scheduled maturities of future operating lease payments, including an interest portion on such lease contracts as of March 31, 2017 and 2016, are as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 Due within one year ¥144 ¥463 $1,292 Due over one year 509 24 4,550 Total ¥654 ¥488 $5,842 11.Financial Instruments Ⅰ. Summary of financial instruments a) Policy for financial instruments The Companies limit its fund management to low-risk financial instruments, such as bank deposits in a short period and have a policy to raise low-interest funds through bank borrowings flexibly. The Companies utilize derivatives in order to reduce the risk of fluctuation in interest rates and foreign exchange rates for debts and credits in foreign currencies. The Companies, furthermore, utilize the hedging instruments for the purpose of stabilizing the cost on contracts and do not enter into derivatives for speculative purpose. b) Contents of financial instruments, related risk and risk management Notes and accounts receivable which categorized into operating receivables are exposed to client's credit risk. These risks are reviewed at entering into contract and the concerned counterparts are managed by the administration headquarters in each case. Investments in securities are exposed to fluctuation risks of market price. Those securities are mainly shares of other companies with which the Company has business relationships and the Company monitors the monthly fair value. Among the debt, short-term borrowings are principally applicable to funds for business activities and long-term debt (maturities are within five years in principle) are funds for capital investments. Long-term debt with variable interest rates are exposed to the risk of interest rate fluctuation. The Company utilizes derivatives which are the interest swaps in each contracts in order to avoid fluctuation risk of interest expenses and stabilize interest cost. In addition, the Company utilizes foreign currency exchange contracts to hedge foreign currency exposure of certain transactions related to construction work denominated in foreign currency. Conducting of derivative transactions is managed by gaining approval by directors and derivatives provided by the highly-rated financial institutions are utilized in order to avoid credit risk. c) Supplemental explanation for fair value of financial instruments Notional amounts of derivatives are not indicative of the actual market risk involved in derivative transactions. Ⅱ. Fair value of financial instruments As of March 31, 2017, carrying amount, fair value and unrealized gain (loss) are as follows: Carrying amount Fair value Unrealized gain (loss) Carrying amount Fair value Unrealized gain (loss) Millions of Japanese Yen Thousands of U.S. Dollars Cash and bank deposits ¥28,217 ¥28,217 ¥— $251,945 $251,945 $— Notes and accounts receivable, trade 78,287 78,287 — 698,995 698,995 — Advanced money 10,965 10,965 — 97,910 97,910 — Investments in securities Held-to-maturity debt securities 15 15 0 133 134 0 Other securities 12,061 12,061 — 107,694 107,694 — Total assets 129,548 129,548 0 1,156,680 1,156,681 0 Notes and accounts payable, trade 31,012 31,012 — 276,900 276,900 — Electronically recorded obligations, operating 8,429 8,429 — 75,267 75,267 — Short-term borrowings 8,463 8,463 — 75,566 75,566 — Deposits received 11,937 11,937 — 106,583 106,583 — Long-term debt ( * ) 20,732 20,927 195 185,108 186,852 1,744 Total liabilities 80,575 80,771 195 719,425 721,170 1,744 Derivative transactions ¥— ¥— ¥— $— $— $— ( * ) Current portion of long-term debt of ¥5,535 million (US$49,428 thousand) is included in long-term debts and carrying amount and fair value are represented. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TOA CORPORATION and its consolidated subsidiaries As of March 31, 2016, carrying amount, fair value and unrealized gain (loss) are as follows: Carrying amount Fair value Unrealized gain (loss) Millions of Japanese Yen Cash and bank deposits ¥39,965 ¥39,965 ¥— Notes and accounts receivable, trade 73,974 73,974 — Advanced money 12,564 12,564 — Investments in securities Held-to-maturity debt securities 15 15 0 Other securities 10,298 10,298 — Total assets 136,818 136,818 0 Notes and accounts payable, trade 40,446 40,446 — Electronically recorded obligations, operating 10,660 10,660 — Short-term borrowings 8,376 8,376 — Deposits received 13,309 13,309 — Long-term debt (*1) 21,529 21,839 310 Total liabilities 94,322 94,632 310 Derivative transactions (*2) ¥3 ¥3 ¥— (*1) Current portion of long-term debt of ¥5,744 million is included in long-term debts and carrying amount and fair value are represented. (*2) The assets and liabilities are reported as net amount. a) Computation of fair value for financial instruments, investment in securities and derivative transactions Assets Cash and bank deposits, and advanced money in other current assets Those accounts are carrying value, since those are settled in a short period and their fair value is equivalent to carrying amount approximately. Notes and accounts receivable, trade The most of its account are carrying value, since those are settled in a short period and their fair value is equivalent to carrying amount approximately. Investments in securities Fair value of investments in securities is based on market price at Stock Exchange or asking price from correspondent financial institution. Liabilities Notes and accounts payable, trade, electronically recorded obligations, operating, short-term borrowings, and deposits received in other current liabilities. Those accounts are carrying value, since those are settled in a short period and their fair value is equivalent to carrying amount approximately. Long-term debt Fair value of long-term debt is based on the present value of the total of principal and interest discounted by the interest rate to be applied, provided that the equivalent loans are newly entered into. Derivative Transactions Please refer to Notes 13, Delivative Transactions, of the notes the consolidated financial statement. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TOA CORPORATION and its consolidated subsidiaries b) Financial instruments for which it is extremely difficult to determine fair value Unlisted stocks are not included in Investments in securities, since those have no market price and it is extremely difficult to determine fair value. Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 Unlisted stocks ¥1,911 ¥1,923 $17,065 c) Projected redemption The projected redemption of monetary claim as of March 31, 2017 were as follows: within one year over one year within five years over five years within ten years over ten years within one year over one year within five years over five years within ten years over ten years Millions of Japanese Yen Thousands of U.S.Dollars Cash and bank deposits ¥28,135 ¥— ¥— ¥— $251,206 $— $— $— Notes and accounts receivable, trade 74,387 3,730 169 — 664,170 33,309 1,515 — Investments in securities Held-to-maturity debt securities (Governmental bonds) — 15 — — — 133 — — Other securities with maturities (Governmental bonds) — — 43 — — — 384 — Total ¥102,522 ¥3,745 ¥212 ¥— $915,377 $33,443 $1,900 $— The projected redemption of monetary claim as of March 31, 2016 were as follows: within one year over one year within five years over five years within ten years over ten years Millions of Japanese Yen Cash and bank deposits ¥39,887 ¥— ¥— ¥— Notes and accounts receivable, trade 68,603 4,911 458 1 Investments in securities Held-to-maturity debt securities (Governmental bonds) — 15 — — Other securities with maturities (Governmental bonds) — — 43 — Total ¥108,490 ¥4,926 ¥501 ¥1 d) The projected repayment of short-term borrowings, long-term debt and lease obligation as of March 31, 2017 were as follows: within one year over one year within two years over two years within three years over three years within four years over four years within five years over five years Millions of Japanese Yen Short-term borrowings ¥8,463 ¥— ¥— ¥— ¥— ¥— Long-term debt 5,535 5,333 3,941 3,572 2,280 68 Lease obligation 19 17 2 — — — Total ¥14,018 ¥5,350 ¥3,944 ¥3,572 ¥2,280 ¥68 within one year over one year within two years over two years within three years over three years within four years over four years within five years over five years Thousands of U.S. Dollars Short-term borrowings $75,566 $— $— $— $— $— Long-term debt 49,428 47,617 35,195 31,893 20,361 611 Lease obligation 171 158 26 — — — Total $125,166 $47,776 $35,221 $31,893 $20,361 $611 The projected repayment of short-term borrowings, long-term debt and lease obligation as of March 31, 2016 were as follows: within one year over one year within two years over two years within three years over three years within four years over four years within five years over five years Millions of Japanese Yen Short-term borrowings ¥8,376 ¥— ¥— ¥— ¥— ¥— Long-term debt 5,744 5,436 4,118 2,727 2,357 1,145 Lease obligation 30 19 17 2 — — Total ¥14,150 ¥5,455 ¥4,136 ¥2,730 ¥2,357 ¥1,145 12.Securities (1) The following is certain information related to the aggregate acquisition costs, carrying amount and fair value of securities. At March 31, 2017 Millions of Japanese Yen Thousands of U.S. Dollars Acquisition cost Fair value (Carrying value) Unrealized gain (loss) Acquisition cost Fair value (Carrying value) Unrealized gain (loss) Held-to-maturity debt securities whose consolidated balance sheet amount exceeds its acquisition cost Government bond ¥15 ¥15 ¥0 $133 $134 $0 Sub total 15 15 0 133 134 0 The securities whose consolidated balance sheet amount does not exceed its acquisition cost Government bond — — — — — — Sub total — — — — — — Total ¥15 ¥15 ¥0 $133 $134 $0 Millions of Japanese Yen Thousands of U.S. Dollars Acquisition cost Fair value (Carrying value) Unrealized gain (loss) Acquisition cost Fair value (Carrying value) Unrealized gain (loss) Other securities whose consolidated balance sheets amount exceeds its acquisition cost Stock ¥5,617 ¥11,622 ¥6,005 $50,155 $103,772 $53,616 Government bond 39 43 3 350 384 33 Sub total 5,656 11,665 6,008 50,506 104,157 53,650 The securities consolidated balance sheets amount does not exceed its acquisition cost Stock 464 396 (68) 4,149 3,537 (611) Government bond — — — — — — Sub total 464 396 (68) 4,149 3,537 (611) Total ¥6,121 ¥12,061 ¥5,940 $54,656 $107,694 $53,038 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TOA CORPORATION and its consolidated subsidiaries At March 31, 2016 Millions of Japanese Yen Acquisition cost Fair value (Carrying value) Unrealized gain (loss) Held-to-maturity debt securities whose consolidated balance sheet amount exceeds its acquisition cost Government bond ¥15 ¥15 ¥0 Sub total 15 15 0 The securities whose consolidated balance sheet amount does not exceed its acquisition cost Government bond — — — Sub total — — — Total ¥15 ¥15 ¥0 Millions of Japanese Yen Acquisition cost Fair value (Carrying value) Unrealized gain (loss) Other securities whose consolidated balance sheets amount exceeds its acquisition cost Stock ¥4,842 ¥9,205 ¥4,362 Government bond 38 43 4 Sub total 4,880 9,248 4,367 The securities consolidated balance sheets amount does not exceed its acquisition cost Stock 1,216 1,050 (165) Government bond — — — Sub total 1,216 1,050 (165) Total ¥6,097 ¥10,298 ¥4,201 (2) Other securities sold during the financial years ended March 31, 2017 and 2016 were as follows: At March 31, 2017 Millions of Japanese Yen Thousands of U.S. Dollars Sales Gain on sales Loss from sales Sales Gain on sales Loss from sales Stock ¥0 ¥— ¥0 $0 $— $0 Other — — — — — — Total ¥0 ¥— ¥0 $0 $— $0 At March 31, 2016 The Companies did not sell other securities during the financial year. 13.Derivative Transactions Derivative transactions for the year ended March 31, 2017 were classified into: a) Hedge accounting unapplied Not applicable b) Hedge accounting applied Notional amounts and fair value conditioned on contracts in each hedge accounting method are as follows: Interest Rate related derivatives Millions of Japanese Yen Thousands of U.S. Dollars Hedge accounting method Types of derivative Hedged item Notional amount Maturing over one year Fair value Notional amount Maturing over one year Fair value Short-cut Interest rate swaps Pay/fixed and receive/ floating Long-term debt ¥8,580 ¥5,504 ( * ) $76,611 $49,147 ( * ) ( * )Fair value based on the short-cut method is included in fair value of these long-term debt, since the derivative transactions are treated with the hedged long-term debts collectively. Derivative transactions for the year ended March 31, 2016 were classified into: a) Hedge accounting unapplied Not applicable b) Hedge accounting applied Notional amounts and fair value conditioned on contracts in each hedge accounting method are as follows: (1)Currency related derivatives Millions of Japanese Yen Hedge accounting method Types of derivative Hedged item Notional amount Maturing over one year Fair value Accounting in principle Forward foreign exchange contracts Buying U.S. Dollars Accounts payable ¥94 ¥— ¥3 ( * ) ( * ) Fair value is calculated based on presented price by correspondent financial institution. (2)Interest Rate related derivatives Millions of Japanese Yen Hedge accounting method Types of derivative Hedged item Notional amount Maturing over one year Fair value Short-cut Interest rate swaps Pay/fixed and receive/ floating Long-term debt ¥10,907 ¥7,225 ( * ) ( * ) Fair value based on the short-cut method is included in fair value of these long-term debt, since the derivative transactions are treated with the hedged long-term debts collectively. 14.Reserve for Retirement Benefits and Pension Plan The Company and some of its consolidated subsidiaries have the funded/unfunded defined benefit retirement plans. The Company has the funded defined benefit plan, the cash balance plan and sets up the retirement benefit trust. Some consolidated subsidiaries have the unfunded retirement lump sum plans. Furthermore, additional severance payment covering substantially all employees. (1)The changes in the retirement benefit obligation during the year ended March 31, 2017 and 2016 are as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 Retirement benefit obligation balance at the beginning of the year ¥22,283 ¥21,445 $198,959 Service cost 797 755 7,119 Interest cost 96 182 858 Actuarial gain (466) 1,655 (4,168) Retirement benefit paid (1,113) (1,754) (9,941) Retirement benefit obligation balance at the end of the year ¥21,596 ¥22,283 $192,827 (2)The changes in plan assets during the year ended March 31, 2017 and 2016 are as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 Plan assets balance at the beginning of the year ¥16,697 ¥18,598 $149,082 Expected return on plan assets 204 200 1,828 Actuarial loss 569 (1,982) 5,080 Contributions by the Company 799 1,602 7,139 Retirement benefits paid (1,110) (1,721) (9,911) Plan assets balance at the end of the year ¥17,160 ¥16,697 $153,219 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TOA CORPORATION and its consolidated subsidiaries (3)The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheet as of March 31, 2017 and 2016 for the Company’s and the consolidated subsidiaries’ defined benefit plans: Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 Funded retirement benefit obligation ¥21,210 ¥21,930 $189,377 Plan assets at fair value (17,160) (16,697) (153,219) 4,049 5,233 36,158 Unfunded retirement benefit obligation 386 353 3,450 Net liability for retirement benefits in the balance sheet 4,436 5,586 39,608 Liability for retirement benefits 4,436 5,586 39,608 Net liability for retirement benefits in the balance sheet ¥4,436 ¥5,586 $39,608 (4)The components of retirement benefit expense for the year ended March 31, 2017 and 2016 are as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 Service cost ¥797 ¥755 $7,119 Interest cost 96 182 858 Expected return on plan assets (204) (200) (1,828) Amortization of actuarial loss 106 217 951 Other 11 11 105 Retirement benefit expense ¥807 ¥966 $7,206 Notes: 1. Service cost does not include the amounts contributed by employees with respect to welfare pension fund plans. 2. Retirement benefit expenses for consolidated subsidiaries adopting the simplified method which assumes retirement benefit obligation to be equal to the benefits payable if all eligible employees voluntarily terminated their employment at fiscal year end are included in “Service cost.” (5)Unrecognized actuarial gain included in other comprehensive income (before tax effect) as of March 31, 2017 and 2016 are as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 Actuarial gain (loss) ¥1,142 (¥3,420) $10,200 (6)Unrecognized actuarial gain (loss) included in accumulated other comprehensive income (before tax effect) as of March 31, 2017 and 2016 are as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 Unrecognized actuarial gain (loss) ¥2,092 ¥3,234 $18,680 (7)The fair value of plan assets, by major category, as a percentage of total plan assets as of March 31, 2017 and 2016 are as follows: 2017 2016 Stocks 42% 39% Bonds 38% 38% General account assets 17% 17% Other 3% 6% Total 100% 100% The expected return on assets has been estimated based on the anticipated allocation to each asset class and the expected long-term returns on assets held in each category. (8)The assumptions used in accounting for the above plans as of March 31, 2017 and 2016 were as follows: (Weighted average) 2017 2016 Discount rate 0.5% 0.4% Expected rate of return on plan assets 2.0% 2.0% Expected rate of future salary increase 2.3%~6.8% 2.2%~6.9% 15.Tax Effect Accounting 1.The significant components of deferred tax assets and liabilities at March 31, 2017 and 2016 were as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 Deferred Tax Assets: Net liability for retirement benefits ¥2,243 ¥2,819 $20,032 Reserve for loss on construction works 689 541 6,155 Accrued bonus to employees 457 709 4,089 Unrealized losses on securities 175 250 1,567 Loss on valuation of utility rights 258 257 2,305 Loss on valuation of investment in securities 169 166 1,517 Loss on impairment of fixed assets 511 452 4,571 Loss on construction defects 4,334 38,703 Other 3,156 3,040 28,179 Valuation allowance (1,878) (1,187) (16,769) Deferred tax assets ¥10,119 ¥7,050 $90,350 Deferred Tax Liabilities: Revaluation reserve for land (¥545) (¥546) ($4,874) Unrealized gains on securities (1,921) (1,494) (17,156) Other (90) (88) (806) Deferred tax liabilities (2,557) (2,129) (22,837) Net Deferred Tax Assets ¥7,561 ¥4,921 $67,512 (Note) Net deferred tax assets were included in the following items. Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 Current assets - Deferred tax assets ¥7,407 ¥3,725 $66,138 Investments and other assets - Deferred tax assets 773 1,808 6,907 Current liabilities - Other current liabilities 67 71 603 Long-term liabilities - Other long-term liabilities 552 541 4,929 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TOA CORPORATION and its consolidated subsidiaries 2. A reconciliation between the normal effective statutory tax rates for the years ended March 31, 2017 and 2016, and the actual effective tax rates reflected in the accompanying consolidated statements of income is as follows: 2017 2016 Normal effective statutory tax rate — 33.0% Expenses not deductible for income tax purposes — 2.1 Non-taxable income — (0.8) Per capita levy of inhabitant taxes — 1.3 Change in valuation allowance — 1.7 Write-down of tax rate change for deferred tax assets — 2.4 Foreign corporation tax — (3.1) Reduction of revaluation reserve for land — (3.7) Other-net — (3.1) Actual effective tax rates — 29.9% Information of a reconciliation between the nomal effective staturtory tax rate and the actual effective tax rate for the years ended March 31, 2017 have been omitted, because the Company reported loss before income taxes in Consolidated Finanancial Statements. 16.Asset Retirement Obligations Because of insignificant amounts in asset retirement obligations, the Companies have omitted notation in the Notes to Consolidated Financial Statements for the years ended March 31, 2017 and 2016. 17.Investment and Rental Property Because of insignificant amounts in investment and rental property, the Companies have omitted notation in the Notes to Consolidated Financial Statements for the year ended March 31, 2017 and 2016. 18.Information on Various Segments Ⅰ. Outline of the reportable segments The reportable segments of the Companies are components for which discrete financial information is available and prepared for the regular review, so that the board of directors can make decisions on the distribution of management resources and evaluate the operating performance. The Company comprises "Civil Engineering General Headquarters" and "Building Construction General Headquarters", which control domestic construction businesses, and "International Division" for overseas businesses. Those Headquarters and International Division develop strategies comprehensively in each line of business and expand business activities. Accordingly, the Company's businesses consist of segments classified by products and services based on the headquarters. The reportable segments are composed of "Domestic Civil Engineering Businesses", "Domestic Architectural Businesses", "Overseas Businesses" and principal activities in each segment are the following: 1) Domestic Civil Engineering Businesses: domestic civil engineering contracts, contracts related to design and others 2) Domestic Architectural Building Businesses: domestic architectural contracts, contracts related to design and others 3) Overseas Businesses: general overseas contracts Ⅱ .Computation for the amount of net sales, profits or losses and other items in each reportable segment The accounting policies of the reportable segments are substantially equivalent to the description in Significant Respects for the Basis of Preparing Consolidated Financial Statements. Intersegment net sales and transfers are based on the current market price. Meanwhile, assets are not allocated to the business segments. Ⅲ .Information on net sales, profits or losses and other items in the reportable segments For the year ended March 31, 2017 Millions of Japanese Yen Reportable Segments Domestic Civil Engineering Domestic Architectural Building Overseas Total Others (Note 1) Total Adjustments (Note 2) Consolidated (Note 3) Net sales: External customers ¥85,437 ¥43,685 ¥28,927 ¥158,050 ¥9,150 ¥167,200 ¥ — ¥167,200 Inter-segment 28 76 — 104 22,130 22,234 (22,234) — Total ¥85,465 ¥43,761 ¥28,927 ¥158,154 ¥31,281 ¥189,435 (¥22,234) ¥167,200 Segment profits or losses 4,898 709 3,080 8,688 663 9,351 (3,154) 6,196 Other items Depreciation and amortization ¥432 ¥1 ¥655 ¥1,088 ¥540 ¥1,629 ¥381 ¥2,010 For the year ended March 31, 2017 Thousands of U.S. Dollars Reportable Segments Domestic Civil Engineering Domestic Architectural Building Overseas Total Others (Note 1) Total Adjustments (Note 2) Consolidated (Note 3) Net sales: External customers $762,838 $390,046 $258,280 $1,411,164 $81,700 $1,492,865 $ — $1,492,865 Inter-segment 250 678 — 928 197,596 198,525 (198,525) — Total $763,088 $390,725 $258,280 $1,412,093 $279,296 $1,691,390 ($198,525) $1,492,865 Segment profits or losses 43,740 6,331 27,500 77,572 5,920 83,493 (28,166) 55,326 Other items Depreciation and amortization $3,862 $10 $5,848 $9,721 $4,826 $14,547 $3,406 $17,953 Notes : 1. "Other" is excluded from the reportable segments and inclusive of Real Estate Business, Manufacture / Sale / Repairing of construction machineries. 2. Adjustment of the segment profits amounting to ¥(3,154) million (US$(28,166) thousand) is inclusive of inter-segment elimination amounting to ¥137 million (US$1,225 thousand) and Selling, General and Administrative Expenses amounting to ¥(3,291) million (US$(29,392) thousand) which are not attributed to any reportable segments. 3. Segment profits or losses are adjusted to the operating income in the consolidated statements of income. 4. Assets are not described due to no allocation to the business segments. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TOA CORPORATION and its consolidated subsidiaries For the year ended March 31, 2016 Millions of Japanese Yen Reportable Segments Domestic Civil Engineering Domestic Architectural Building Overseas Total Others (Note 1) Total Adjustments (Note 2) Consolidated (Note 3) Net sales: External customers ¥99,937 ¥41,925 ¥48,736 ¥190,599 ¥9,682 ¥200,282 ¥ — ¥200,282 Inter-segment 2 1,479 — 1,482 30,963 32,445 (32,445) — Total ¥99,940 ¥43,405 ¥48,736 ¥192,082 ¥40,645 ¥232,728 (¥32,445) ¥200,282 Segment profits or losses 7,178 1,559 5,256 13,994 1,145 15,139 (3,350) 11,789 Other items Depreciation and amortization ¥566 ¥1 ¥617 ¥1,185 ¥547 ¥1,733 ¥299 ¥2,033 Notes : 1. "Other" is excluded from the reportable segments and inclusive of Real Estate Business, Manufacture / Sale / Repairing of construction machineries. 2. Adjustment of the segment profits amounting to ¥(3,350) million is inclusive of inter-segment elimination amounting to ¥1 million and Selling, General and Administrative Expenses amounting to ¥(3,351) million which are not attributed to any reportable segments. 3. Segment profits or losses are adjusted to the operating income in the consolidated statements of income. 4. Assets are not described due to no allocation to the business segments. 19.Related Information Ⅰ .Information on products and services Description is excluded since the similar information is disclosed in the segment information. Ⅱ .Geographical information 1) Net sales For the year ended March 31, 2017 Millions of Japanese Yen Thousands of U.S. Dollars 2017 2017 Japan ¥138,273 $1,234,584 South east asia 20,282 181,095 Other 8,644 77,184 Total ¥167,200 $1,492,865 For the year ended March 31, 2016 Millions of Japanese Yen 2016 Japan ¥151,563 Singapore 26,631 Other 22,087 Total ¥200,282 Note) Net sales are based on the customers' location and categorized into the countries or areas. 2) Tangible fixed assets Description is excluded since the amounts of the tangible fixed assets registered at domestically exceed 90% of those amounts in the consolidated balance sheets. Ⅲ .Information on principal customer For the year ended March 31, 2017 Net sales Name of Customer Related segments Millions of Japanese Yen 2017 Thousands of U.S. Dollars 2017 Japanese Ministry of Land, Infrastructure, Transport and Tourism Domestic Civil Engineering Businesses, Domestic Architectural Businesses, others ¥33,496 $299,073 For the year ended March 31, 2016 Net sales Name of Customer Related segments Millions of Japanese Yen 2016 Japanese Ministry of Land, Infrastructure, Transport and Tourism Domestic Civil Engineering Businesses, Domestic Architectural Businesses, others ¥37,308 Ⅳ . Information on the loss on impairment of fixed assets in each reportable segment The losses on impairment of fixed assets were not allocated to the each reportable segment of the Companies. Description of the amounts and contents is excluded since the similar information is disclosed in the notes related to the consolidated statements of income for the year ended March 31, 2017 and 2016. Ⅴ .Information on the amortization and the unamortized balance of goodwill in each reportable segment The amortization was not applicable for the year ended March 31, 2017 and 2016. Ⅵ .Information on gain on negative goodwill in each reportable segment The Companies did not allocate the gain on negative goodwill to the each reportable segment. The gain was not applicable for the year ended March 31, 2017 and 2016. 20.Per Share Data Japanese Yen U.S. Dollars 2017 2016 2017 Net assets ¥3,082.45 ¥3,381.65 $27.521 Net income (loss) (355.86) 288.88 (3.177) Note 1 Diluted net income per share was not disclosed because there were no dilutive share for the year ended March 31, 2016 Note 2 Diluted net income per share was not disclosed because there were net loss per share although no dilutive share for the year ended March 31, 2017 Note 3 The Company completed a reverse stock split of its common stock, at ratio of 1 share for 10 shares on October 1, 2016. Net assets per share and net income per share as of and for the year ended March 31, 2016 are calculated under the assumption that the reverse stock split took place at the beginning of the year ended March 31, 2016. Notes) The basic information for calculation of per share data were as follows: 1.Per share data on net assets Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 Net assets ¥64,958 ¥71,143 $579,986 Net assets amount for common stocks 64,426 70,684 575,232 Significant breakdown of differences Non-controlling interests ¥532 ¥459 $4,753 Thousands of shares 2017 2016 Numbers of issued shares of common stocks 22,494 22,494 Numbers of treasury stocks of common stocks 1,593 1,592 Numbers of common stocks which were used for calculation for per share data on net assets 20,900 20,902 2.Per share data on net income (loss) Millions of Japanese Yen Thousands of U.S. Dollars 2017 2016 2017 Profit (loss) attributable to owners of parent ¥(7,438) ¥6,038 $(66,412) Profit (loss) attributable to owners of parent which does not belong to common stockholders — — — Profit (loss) attributable to owners of parent for common stocks ¥(7,438) ¥6,038 $(66,412) Thousands of Shares 2017 2016 Average number of shares of common stocks 20,901 20,902 21.Significant Subsequent Events Note applicable Consolidated table for detailed statements Table for borrowing Millions of Japanese Yen Thousands of U.S. Dollars Average rates Beginning balance Closing Balance Beginning balance Closing Balance % Repayment deadline Short-term borrowings ¥8,376 ¥8,463 $74,785 $75,566 0.73% Current portion of Long-term debt 5,099 4,929 45,533 44,014 1.37% Current portion of Non-recourse debt 645 606 5,759 5,413 1.72% Current portion of lease obligations 30 19 269 171 — Long-term debt (excluding current portion) 12,864 12,881 114,859 115,016 1.21% from 2018 to 2022 Non-recourse debt (excluding current portion) 2,920 2,314 26,077 20,663 1.84% from 2018 to 2026 Lease obligation (excluding current portion) 39 20 355 184 from 2018 to 2019 Other debt — — — — Total ¥29,975 ¥29,235 $267,640 $261,031 Notes : 1.The "average rates" are balanced by the weighted average. The average rates of lease obligations are not listed because interests are included in the lease obligation in the consolidated balance sheets. 2.The amount scheduled to be repayment of long-term debt, non-recourse debt and lease obligations (excluding current portions) within 5 years after the consolidated closing date were as follows: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TOA CORPORATION and its consolidated subsidiaries Millions of Japanese Yen Thousands of U.S. Dollars over one year within two years over two years within three years over three years within four years over four years within five years over one year within two years over two years within three years over three years within four years over four years within five years Long-term debt ¥4,765 ¥3,396 ¥3,029 ¥1,690 $42,546 $30,327 $27,048 $15,093 Non-recourse debt 567 545 542 589 5,071 4,867 4,845 5,267 Lease obligations 17 2 — — 158 26 — — Table for asset retirement obligation The indication omitted due to the beginning balance and closing balance of asset retirement obligation were less than or equal to hundredth part of the beginning balance and closing balance of the liabilities and net assets.