兼松エレクトロニクス（8096） – [Delayed]Consolidated Financial Results for the Fiscal Year Ended March 31,2022[Japanese GAAP]

Disclaimer: This document is an English translation of the original document in Japanese and has been prepared solely for reference purposes. In the event of any discrepancy between this English translation and the original in Japanese, the original shall prevail in all respects. Consolidated Financial Results for the Fiscal Year Ended March 31, 2022 [Japanese GAAP] April 28, 2022 Company name: KANEMATSU ELECTRONICS LTD. Stock exchange listing: Tokyo Stock Exchange Code number: 8096 URL: https://www.kel.co.jp/english/ Representative: Akira Watanabe, Representative Director, President & CEO Contact: Yasuhiro Okazaki, Executive Officer, Manager of Accounting Department Phone: +81-3-5250-6823 Scheduled date of annual general shareholders’ meeting: June 21, 2022 Scheduled date of commencing dividend payments: May 31, 2022 Scheduled date of filing securities report: June 21, 2022 Availability of supplementary explanatory materials on annual financial results: Available Schedule of annual financial results briefing session: Scheduled (for institutional investors and securities analysts) 1. Consolidated Financial Results for the Fiscal Year Ended March 31, 2022 (April 1, 2021 – March 31, 2022) (1) Consolidated Operating Results (% indicates changes from the previous corresponding period.) Profit attributable to owners of parent Ordinary profit Operating profit Net sales (Amounts of less than one million yen are rounded down.) Million yen 71,331 65,542 Fiscal year ended March 31, 2022 March 31, 2021 Note: Comprehensive income: Fiscal year ended March 31, 2022: ¥9,634 million [31.4 %] Fiscal year ended March 31, 2021: ¥7,329 million [(0.3) %] Ratio of ordinary profit to total assets % Million yen 12,784 11,041 % Million yen 12,687 10,870 Basic earnings per share Diluted earnings per share Return on equity 16.7 (0.6) 8.8 (8.9) 15.8 0.4 Fiscal year ended March 31, 2022 March 31, 2021 Yen 307.07 258.11 (2) Consolidated Financial Position Yen – – % 14.9 13.5 Net assets Equity ratio Total assets As of March 31, 2022 As of March 31, 2021 Reference: Equity: As of March 31, 2022: ¥61,885 million As of March 31, 2021: ¥56,361 million Million yen 82,446 75,164 Million yen 61,928 56,415 (3) Consolidated Cash Flows % Million yen 8,785 7,382 % 19.0 (0.1) Ratio of operating profit to net sales % 17.8 16.6 % 16.2 15.0 Net assets per share Yen 2,162.83 1,970.26 % 75.1 75.0 Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Fiscal year ended March 31, 2022 March 31, 2021 Million yen 7,999 8,610 Million yen (1,074) (884) Million yen (4,149) (3,863) Cash and cash equivalents at end of period Million yen 49,668 46,877 2. Dividends Fiscal year ended March 31, 2021 Fiscal year ended March 31, 2022 Fiscal year ending March 31, 2023 (Forecast) 31, 2023) First half Full year 1st quarter-end Annual dividends 3rd quarter-end 2nd quarter-end Year-end Total dividends (annual) Payout ratio (consolidated) Total Yen Yen Yen Yen Yen Million yen – – – 65.00 75.00 75.00 – – – 70.00 135.00 80.00 155.00 80.00 155.00 3,861 4,435 Ratio of dividends to net assets (consolidated) % 7.1 7.5 % 52.3 50.5 51.6 3. Consolidated Financial Results Forecast for the Fiscal Year Ending March 31, 2023 (April 1, 2022 – March Net sales Operating profit Ordinary profit (% indicates changes from the previous corresponding period.) Profit attributable to owners of parent Basic earnings per share Million yen 35,000 72,000 % Million yen 5,950 12,750 2.7 0.9 % Million yen 6,000 12,800 (2.1) 0.5 % Million yen 4,000 8,600 (2.1) 0.1 % (4.5) (2.1) Yen 139.81 300.58 * Notes: (1) Changes in significant subsidiaries during the period under review: No (Changes in specified subsidiaries resulting in changes in scope of consolidation) Newly included: – ( ) Excluded: – ( ) (2) Changes in accounting policies, changes in accounting estimates and retrospective restatement 1) Changes in accounting policies due to the revision of accounting standards: Yes 2) Changes in accounting policies other than 1) above: None 3) Changes in accounting estimates: None 4) Retrospective restatement: None (3) Total number of shares issued and outstanding (common shares) 1) Total number of shares issued and outstanding at the end of the period (including treasury shares): March 31, 2022: March 31, 2021: March 31, 2022: March 31, 2021: 28,633,952 shares 28,633,952 shares 20,992 shares 28,039 shares 2) Total number of treasury shares at the end of the period: 3) Average number of shares during the period: Fiscal year ended March 31, 2022: Fiscal year ended March 31, 2021: 28,610,883 shares 28,603,596 shares (Reference) Summary of Non-consolidated Financial Results 1. Non-consolidated Financial Results for the Fiscal Year Ended March 31, 2022. (April 1, 2021 – March 31, (1) Non-consolidated Operating Results Net sales (% indicates changes from the previous corresponding period.) Operating profit Ordinary profit Profit Million yen 61,367 57,005 % Million yen 8,380 7,328 7.7 (8.7) % Million yen 9,657 8,775 14.4 3.6 % Million yen 7,131 6,345 10.1 5.4 % 12.4 5.0 2022) Fiscal year ended March 31, 2022 March 31, 2021 Basic earnings per share Diluted earnings per share Fiscal year ended March 31, 2022 March 31, 2021 Yen 249.25 221.83 (2) Non-consolidated Financial Position Yen – – Total assets As of March 31, 2022 As of March 31, 2021 Reference: Equity: As of March 31, 2022: ¥50,632 million As of March 31, 2021: ¥46,664 million Million yen 67,287 62,278 Million yen 50,632 46,664 Net assets Equity ratio Net assets per share Yen 1,769.57 1,631.28 % 75.2 74.9 * These consolidated financial results are outside the scope of audit by certified public accountants or an audit firm. * Explanation on the proper use of financial results forecasts and other notes The financial results forecasts and other forward-looking statements herein are based on information currently available to the Company and certain assumptions deemed reasonable, and are not intended to be a promise by the Company to achieve them. As such, actual results may differ significantly from these forecasts due to a wide range of factors. For the assumptions used as the basis for the financial results forecast and notes on their use, please refer to “1. Overview of Operating Results, etc. (4) Future Outlook” on page 4 of the Attachments. Table of Contents – Attachments 1. Overview of Operating Results, etc. ………………………………………………………………………………………. 2 (1) Overview of Operating Results for the Fiscal Year under Review ………………………………………….. 2 (2) Overview of Financial Position for the Fiscal Year under Review …………………………………………. 3 (3) Overview of Cash Flows for the Fiscal Year under Review …………………………………………………… 3 (4) Future Outlook ……………………………………………………………………………………………………………….. 4 (5) Basic Dividend Policy and Dividends for the Fiscal Year under Review and the Following Fiscal Year ………………………. 5 2. Basic Policy on Selection of Accounting Standards …………………………………………………………………. 5 3. Consolidated Financial Statements and Principal Notes …………………………………………………………… 6 (1) Consolidated Balance Sheets ……………………………………………………………………………………………. 6 (2) Consolidated Statements of Income and Comprehensive Income ………………………………………….. 8 (3) Consolidated Statements of Changes in Equity …………………………………………………………………. 10 (4) Consolidated Statements of Cash Flows …………………………………………………………………………… 12 (5) Notes to Consolidated Financial Statements ……………………………………………………………………… 13 (Notes on going concern assumption) ………………………………………………………………………….. 13 (Changes in accounting policies) …………………………………………………………………………………. 13 (Changes in presentation) …………………………………………………………………………………………… 13 (Segment information, etc.) ………………………………………………………………………………………… 14 (Per share information) ………………………………………………………………………………………………. 17 (Significant subsequent events) …………………………………………………………………………………… 17 1 1. Overview of Operating Results, etc. (1) Overview of Operating Results for the Fiscal Year under Review During the fiscal year ended March 31, 2022 (the “fiscal year under review”), the outlook of the Japanese economy remains uncertain amid the persisting impact of COVID-19 pandemic. While there are some trends toward recovery supported by the rollout of vaccinations and various policies implemented nationwide, new and more contagious variants are spurring the resurgence of COVID-19. In addition, resource prices are rising, with the added impact of Russia’s invasion of Ukraine stimulating global unrest. In the Japanese IT industry, amid the sense of increasing uncertainty due to the restrictions on supply brought on by the disrupted supply chain and the effects of shortages of semiconductors and other components, the new normal under the COVID-19 pandemic has firmly established itself facilitating changes in lifestyles and work styles, which, in turn, has accelerated corporate efforts toward digital transformation (DX). Furthermore, in addition to the rising demand for security measures to combat increasingly sophisticated and varied cyberattacks, such as those by ransomware, strategic IT investments have also been robust for promoting operational efficiency and automation amid manpower shortages. In such an environment, KANEMATSU ELECTRONICS LTD. (the “Company”) and its consolidated subsidiaries (collectively, the “Group”) continued to focus on developing its infrastructure construction business pivoting on the technological capability it has accumulated, as well as its solutions business mainly in the areas of virtualization, security, and network, which are the foundation of its business. The Group also worked on building remote working environments for its customers, among others. Specifically, the Group worked on workstyle reform and COVID-19 countermeasures through the construction of robust environments for virtual desktop infrastructure (VDI) and security solutions in line with the era of zero trust networks. At the same time, the Group further expanded sales of its service-oriented businesses centered on the 3Ks*. Furthermore, in May 2021, the Company entered into a capital and business alliance agreement with Keyware Solutions Inc. The agreement aims to expand and deepen the Company’s customer base and business domains for the sake of its medium- to long-term growth. As a result of the above, in the fiscal year under review, net sales increased by 5,788 million yen year on year to 71,331 million yen (up 8.8% year on year). Operating profit increased by 1,817 million yen year on year to 12,687 million yen (up 16.7% year on year), and ordinary profit increased by 1,742 million yen year on year to 12,784 million yen (up 15.8% year on year), while profit attributable to owners of parent increased by 1,402 million yen year on year to 8,785 million yen (up 19.0% year on year), as a result of proceeds from a settlement reached in a pending litigation. *3Ks: The service business cluster comprising KEL Briefing Center (KBC); KEL Custom Cloud (KCC); and KEL Managed Service (KMS). The status of reportable segments were as follows: (IT Systems Business) Net sales in the IT Systems Business increased by 4,395 million yen year on year to 50,800 million yen (up 9.5% year on year), mainly due to strong performances in the storage-related and network security-related businesses. (Services and Support Business) Net sales in the Services and Support Business increased by 1,392 million yen year on year to 20,530 million yen (up 7.3% year on year), mainly due to an increase in sales related to the system operation business and cloud services. 2 (2) Overview of Financial Position for the Fiscal Year under Review (Assets) Current assets increased by 8.8% from the end of the previous fiscal year to 75,031 million yen. This was mainly attributable to increases in cash and deposits of 2,790 million yen and notes and accounts receivable – trade of 1,590 million yen. Non-current assets increased by 19.9% from the end of the previous fiscal year to 7,415 million yen. This was mainly attributable to an increase in investment securities of 1,857 million yen. (Liabilities) Current liabilities increased by 10.2% from the end of the previous fiscal year, to 17,966 million yen. This was mainly attributable to increases in income taxes payable of 746 million yen and notes and accounts payable – trade of 465 million yen. Non-current liabilities increased by 4.3% from the end of the previous fiscal year to 2,551 million yen. This was mainly attributable to an increase in retirement benefit liability of 109 million yen. (Net assets) Net assets increased by 9.8% from the end of the previous fiscal year, to 61,928 million yen. This was mainly attributable to an increase in retained earnings by 4,637 million yen due to the recording of profit attributable to owners of parent of 8,785 million yen and the payment of dividends of 4,148 million yen. As a result, equity ratio rose to 75.1% from 75.0% at the end of the previous fiscal year. (3) Overview of Cash Flows for the Fiscal Year under Review Cash and cash equivalents (hereinafter, “cash”) at the end of the fiscal year under review increased by 2,790 million yen (6.0%) from the end of the previous fiscal year, to 49,668 million yen. The status of cash flows and underlying factors were as follows. (Cash flows from operating activities) Net cash provided by operating activities amounted to 7,999 million yen (an inflow of 8,610 million yen in the previous fiscal year), mainly due to accumulated operating revenue and the collection of trade receivables. (Cash flows from investing activities) Net cash used in investing activities amounted to 1,074 million yen (an outflow of 884 million yen in the previous fiscal year), mainly due to purchase of investment securities, as well as purchase of property, plant and equipment and intangible assets. (Cash flows from financing activities) Net cash used in financing activities amounted to 4,149 million yen (an outflow of 3,863 million yen in the previous fiscal year), mainly due to dividends paid. 3 Reference: Trends in Cash Flow Indicators Equity ratio (%) Equity ratio based on fair value (%) Ratio of interest-bearing debt to cash flow (%) Interest coverage ratio (times) 50th term Fiscal year ended March 31, 2018 51st term Fiscal year ended March 31, 2019 52nd term Fiscal year ended March 31, 2020 53rd term Fiscal year ended March 31, 2021 54th term Fiscal year ended March 31, 2022 71.9 139.7 72.4 140.3 73.6 135.4 75.0 142.0 75.1 133.1 0.2 – – – – 13,760.0 16,089.3 18,122.4 171,985.3 3,482,484.1 Equity ratio: Equity / Total assets Equity ratio based on fair value: Market capitalization / Total assets Ratio of interest-bearing debt to cash flow: Interest-bearing debt / Operating cash flows Interest coverage ratio: Operating cash flows / Interest paid Notes: 1. The indicators are calculated on a consolidated basis. 2. Market capitalization is calculated by multiplying the share price at the year-end by the total number of shares issued and outstanding at the end of the year (excluding treasury shares). 3. Operating cash flows represent the cash flows from operating activities stated on the consolidated statements of cash flows. interest is paid. (4) Future Outlook 4. Interest-bearing debt represents all liabilities posted on the consolidated balance sheets for which 5. Interest paid represents the amount of interest paid in the consolidated statements of cash flows. The economy in Japan is expected to continue to be subjected to some levels of restriction over social and economic activities, as there is no clear outlook on when COVID-19 will be contained, despite the nationwide rollout of vaccinations. Additionally, Russia’s invasion of Ukraine is bringing about inflation worldwide and increased geopolitical risk, as well as restrictions on supply reflecting disruption in the supply chain and soaring resource prices, raising concerns of a downturn in consumption. In the IT market, while caution is required regarding the risk of delivery delays stemming from restrictions on supply, corporations are faced by the rising need for DX, and the role of IT is expected to expand, as a means to solve social issues such as SDGs as well as further expanding existing businesses and creating new businesses. The Group intends to meet such growing demand by leveraging the strength of its multi-vendor approach backed by a solid customer base and technological prowess to continue offering optimal IT environments to customers through one-stop services ranging from design, creation to maintenance and operation of IT infrastructure. Moreover, in addition to further expanding sales of service-oriented businesses centered on the 3Ks, the Group plans to make aggressive investments to ensure its sustainable growth, such as through capital and business alliances that co-create added value and the development of new businesses. As a result of the above, the financial results forecast for the fiscal year ending March 31, 2023 is as follows. The Company does not disclose non-consolidated financial results forecasts. 4 Net sales Operating profit Ordinary profit Profit attributable to owners of parent Financial results forecast for the fiscal year ending March 31, 2023 First half Full year Forecast (Million yen) YoY change (%) YoY change (%) Forecast (Million yen) 35,000 5,950 6,000 4,000 2.7 (2.1) (2.1) (4.5) 72,000 12,750 12,800 8,600 0.9 0.5 0.1 (2.1) (5) Basic Dividend Policy and Dividends for the Fiscal Year under Review and the Following Fiscal Year Our basic policy on the return of profits to shareholders is to provide stable and continuous dividends while striving to strengthen the foundation for long-term corporate growth. For the fiscal year ended March 31, 2022, the Company plans to raise the year-end dividend by 10 yen per share to 80 yen per share to repay shareholders for their ongoing support taking into consideration the fact that business performance for the fiscal year under review outperformed that for the previous fiscal year, in addition to the policy mentioned above. Together with the interim dividend of 75 yen per share paid in December 2021, the annual dividend for the fiscal year under review will be 155 yen (consolidated dividend payout ratio of 50.5%). The year-end dividend will be officially decided at the Board of Directors meeting scheduled to be held on May 13, 2022. For the fiscal year ending March 31, 2023, the Company plans to pay an interim dividend of 75 yen and a year-end dividend of 80 yen (annual dividend of 155 yen). Dividend forecast for the fiscal year ending March 31, 2023 Record date Fiscal year ending March 31, 2023 Fiscal year ended March 31, 2022 2nd quarter-end Dividends per share (Yen) Year-end 75 75 80 80 Annual 155 155 2. Basic Policy on Selection of Accounting Standards The Group currently operates its business mainly in Japan, and intends to prepare financial statements based on Japanese GAAP for the time being. However, the Group’s policy is to continue verifying whether to adopt International Financial Reporting Standards (IFRS) taking into account future trends in the ratio of foreign shareholders and the adoption of IFRS by other companies in Japan. 5 3. Consolidated Financial Statements and Principal Notes (1) Consolidated Balance Sheets As of March 31, 2021 As of March 31, 2022 Assets Current assets Cash and deposits Notes and accounts receivable – trade Inventories Other Total current assets Non-current assets Property, plant and equipment Buildings and structures, net Other, net Total property, plant and equipment Intangible assets Other Total intangible assets Investments and other assets Investment securities Deferred tax assets Other Allowance for doubtful accounts Total investments and other assets Total non-current assets Total assets (Thousand yen) 49,668,376 17,808,143 3,146,103 4,409,190 75,031,813 1,089,297 749,512 1,838,810 758,842 758,842 2,770,787 1,035,525 1,018,745 (7,644) 4,817,413 7,415,067 82,446,880 46,877,658 16,218,110 1,997,085 3,888,224 68,981,078 1,098,688 962,834 2,061,523 843,991 843,991 913,538 1,342,731 1,029,677 (7,644) 3,278,303 6,183,817 75,164,896 6 As of March 31, 2021 As of March 31, 2022 Liabilities Current liabilities Notes and accounts payable – trade Income taxes payable Unearned revenue Contract liabilities Provision for bonuses Provision for bonuses for directors (and other officers) Other Total current liabilities Non-current liabilities Retirement benefit liability Asset retirement obligations Other Total non-current liabilities Total liabilities Net assets Shareholders’ equity Share capital Capital surplus Retained earnings Treasury shares Total shareholders’ equity Accumulated other comprehensive income Valuation difference on available-for-sale securities Deferred gains or losses on hedges Foreign currency translation adjustment Remeasurements of defined benefit plans Total accumulated other comprehensive income Non-controlling interests Total net assets Total liabilities and net assets (Thousand yen) 8,198,715 2,576,420 － 3,463,319 1,235,705 144,200 2,348,371 17,966,731 1,947,931 585,572 17,887 2,551,390 20,518,122 9,031,257 7,159,524 44,439,446 (20,208) 60,610,020 1,179,326 (512) 94,998 1,222 1,275,035 43,702 61,928,758 82,446,880 7,732,807 1,829,831 3,224,808 － 1,125,714 142,700 2,247,526 16,303,388 1,837,932 589,330 18,867 2,446,130 18,749,518 9,031,257 7,138,453 39,802,387 (26,170) 55,945,928 220,455 (15) 79,125 115,552 415,116 54,332 56,415,378 75,164,896 7 (2) Consolidated Statements of Income and Comprehensive Income Consolidated Statements of Income For the fiscal year ended March 31, 2021 For the fiscal year ended March 31, 2022 (Thousand yen) Net sales Cost of sales Gross profit Selling, general and administrative expenses Operating profit Non-operating income Interest income Dividend income Insurance claim income Subsidy income Compensation for forced relocation Miscellaneous income Total non-operating income Non-operating expenses Interest expenses Miscellaneous expenses Total non-operating expenses Ordinary profit Extraordinary income Gain on sale of non-current assets Settlement income Gain on sale of golfclub membership Total extraordinary income Extraordinary losses Loss on retirement of non-current assets Loss on sale of investment securities Loss on valuation of golfclub membership Loss on valuation of investment securities Total extraordinary losses Profit before income taxes Income taxes – current Income taxes – deferred Total income taxes Profit Profit (loss) attributable to non-controlling interests Profit attributable to owners of parent 65,542,459 45,596,364 19,946,094 9,075,426 10,870,667 5,329 14,813 100,000 13,513 － 38,610 172,267 50 1,007 1,057 11,041,878 － － 2,170 2,170 107,062 450 － － 107,513 10,936,535 3,481,442 71,906 3,553,349 7,383,185 272 7,382,913 71,331,366 49,241,677 22,089,689 9,401,735 12,687,953 5,415 18,958 － 22,069 15,649 35,753 97,845 2 1,294 1,296 12,784,502 1,571 180,000 4,417 185,989 11,162 1,113 4,300 2,445 19,022 12,951,469 4,242,499 (64,525) 4,177,973 8,773,495 (11,955) 8,785,451 8 Consolidated Statements of Comprehensive Income Profit Other comprehensive income Valuation difference on available-for-sale securities Deferred gains or losses on hedges Foreign currency translation adjustment Remeasurements of defined benefit plans, net of tax Total other comprehensive income Comprehensive income Comprehensive income attributable to Comprehensive income attributable to owners of parent Comprehensive income attributable to non-controlling interests For the fiscal year ended March 31, 2021 For the fiscal year ended March 31, 2022 (Thousand yen) 7,383,185 41,053 318 7,425 (102,308) (53,511) 7,329,674 7,326,338 3,335 8,773,495 958,871 (496) 17,198 (114,329) 861,244 9,634,740 9,645,370 (10,630) 9 (3) Consolidated Statements of Changes in Equity Fiscal year ended March 31, 2021 Share capital Capital surplus Treasury shares Shareholders’ equity Retained earnings 36,280,689 (3,861,214) 7,382,913 9,031,257 7,112,350 26,102 (Thousand yen) Total shareholders’ equity 52,392,252 (3,861,214) 7,382,913 (2,041) 34,019 (32,045) (2,041) 7,917 9,031,257 26,102 7,138,453 3,521,698 39,802,387 5,875 (26,170) 3,553,676 55,945,928 Balance at beginning of period Changes during period Dividends of surplus Profit attributable to owners of parent Purchase of treasury shares Disposal of treasury shares Net changes in items other than shareholders’ equity Total changes during period Balance at end of period Accumulated other comprehensive income Valuation difference on available-for-sale securities Deferred gains or losses on hedges Foreign currency translation adjustment Remeasurements of defined benefit plans Total accumulated other comprehensive income Non-controlling interests Total net assets 179,401 (334) 74,762 217,861 471,691 50,996 52,914,939 Balance at beginning of period Changes during period Dividends of surplus Profit attributable to owners of parent Purchase of treasury shares Disposal of treasury shares Net changes in items other than shareholders’ equity Total changes during period Balance at end of period 41,053 41,053 220,455 318 318 (15) (3,861,214) 7,382,913 (2,041) 34,019 4,362 (102,308) (56,574) 3,335 (53,238) 4,362 79,125 (102,308) 115,552 (56,574) 415,116 3,335 54,332 3,500,438 56,415,378 10 Fiscal year ended March 31, 2022 Balance at beginning of period Changes during period Dividends of surplus Profit attributable to owners of parent Purchase of treasury shares Disposal of treasury shares Net changes in items other than shareholders’ equity Total changes during period Balance at end of period Share capital Capital surplus Treasury shares Shareholders’ equity Retained earnings 39,802,387 (4,148,393) 8,785,451 9,031,257 7,138,453 21,071 (Thousand yen) Total shareholders’ equity 55,945,928 (4,148,393) 8,785,451 (1,225) 28,258 (26,170) (1,225) 7,187 9,031,257 21,071 7,159,524 4,637,058 44,439,446 5,962 (20,208) 4,664,091 60,610,020 Accumulated other comprehensive income Valuation difference on available-for-sale securities Deferred gains or losses on hedges Foreign currency translation adjustment Remeasurements of defined benefit plans Total accumulated other comprehensive income Non-controlling interests Total net assets 220,455 (15) 79,125 115,552 415,116 54,332 56,415,378 (4,148,393) 8,785,451 (1,225) 28,258 958,871 958,871 1,179,326 (496) (496) (512) 15,873 (114,329) 859,918 (10,630) 849,288 15,873 94,998 (114,329) 1,222 859,918 1,275,035 (10,630) 43,702 5,513,380 61,928,758 Balance at beginning of period Changes during period Dividends of surplus Profit attributable to owners of parent Purchase of treasury shares Disposal of treasury shares Net changes in items other than shareholders’ equity Total changes during period Balance at end of period 11 (4) Consolidated Statements of Cash Flows For the fiscal year ended March 31, 2021 For the fiscal year ended March 31, 2022 (Thousand yen) Cash flows from operating activities Profit before income taxes Depreciation Increase (decrease) in provision for bonuses Increase (decrease) in retirement benefit liability Interest and dividend income Interest expenses Loss (gain) on sale of non-current assets Loss on retirement of non-current assets Loss (gain) on sale golfclub membership Loss on valuation of golfclub membership Loss (gain) on sale of investment securities Loss (gain) on valuation of investment securities Settlement income Decrease (increase) in trade receivables Decrease (increase) in inventories Decrease (increase) in other current assets Increase (decrease) in trade payables Increase (decrease) in other current liabilities Other Subtotal Interest and dividend received Interest paid Proceeds from insurance income Income taxes paid Net cash provided by (used in) operating activities Cash flows from investing activities Purchase of investment securities Proceeds from sale of investment securities Purchase of property, plant and equipment and intangible Proceeds from sale of property, plant and equipment and assets intangible assets Payments of guarantee deposits Proceeds from refund of guarantee deposits Payments for asset retirement obligations Decrease (increase) in investments and other assets Other Net cash provided by (used in) investing activities Cash flows from financing activities Dividends paid Other Net cash provided by (used in) financing activities Effect of exchange rate change on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period 12 10,936,535 616,859 (55,219) 64,993 (20,142) 50 － 107,062 (2,170) － 450 － － 620,226 120,478 (103,272) 216,271 (302,026) (137,093) 12,063,002 20,189 (50) 100,000 (3,573,041) 8,610,100 (5,218) 10 (807,007) － (85,217) 9,623 － 3,250 (250) (884,808) (3,861,214) (2,041) (3,863,256) 5,301 3,867,336 43,010,322 46,877,658 12,951,469 761,070 109,990 54,066 (24,374) 2 (1,571) 11,162 (4,417) 4,300 1,113 2,445 (180,000) (1,589,190) (1,147,632) (197,604) 481,750 344,088 (81,099) 11,495,569 24,373 (2) － (3,520,675) 7,999,265 (480,387) 1,636 (415,364) 1,711 (137,273) 14,249 (42,424) (16,103) (975) (1,074,932) (4,148,393) (1,225) (4,149,618) 16,002 2,790,717 46,877,658 49,668,376 (5) Notes to Consolidated Financial Statements (Notes on going concern assumption) Not applicable. (Changes in accounting policies) (Application of accounting standard for revenue recognition, etc.) The Company applied “Accounting Standard for Revenue Recognition” (Accounting Standards Board of Japan (ASBJ) Statement No. 29, March 31, 2020; the “Revenue Recognition Standard”) and related guidelines from the beginning of the fiscal year under review. Accordingly, the Company recognizes revenue when control of the promised goods or services is transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods and services. The Company has applied the transitional treatment set forth in the proviso to Paragraph 84 of the Revenue Recognition Standard in adopting the Revenue Recognition Standard. The cumulative impact of retrospectively applying the standards to prior periods have been adjusted in the beginning balance of retained earnings, and the new accounting policies have been applied prospectively from the beginning of the fiscal year under review. This change has no impact on the consolidated financial statements for the fiscal year under review. As a result of the adoption of the Revenue Recognition Standard, unearned revenue, which was presented under current liabilities in the consolidated balance sheets for the previous fiscal year, is presented as contract liabilities from the fiscal year under review. In accordance with the transitional treatment set forth in Paragraph 89-2 of the Revenue Recognition Standard, consolidated financial statements for the previous fiscal year have not been reclassified using the new presentation method. (Application of accounting standard for fair value measurement) The Company applied “Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30, July 4, 2019; the “Fair Value Measurement Standard”) and other standards from the beginning of the fiscal year under review. In accordance with the transitional treatment set forth in Paragraph 19 of the Fair Value Measurement Standard and Paragraph 44-2 of “Accounting Standard for Financial Instruments” (ASBJ Statement No. 10, July 4, 2019), the Company will prospectively apply the new accounting policies prescribed by the Fair Value Measurement Standard and other standards. This change has no impact on the consolidated financial statements for the fiscal year under review. (Changes in presentation) (Assets) Investments in leases, which had been presented separately under current assets in the previous fiscal year, has been included in “Other” from the fiscal year under review, due to a decline in significance. The consolidated financial statements for the previous fiscal year have been reclassified in order to reflect this change in presentation. As a result, investments in leases and “Other” presented under current assets in the consolidated balance sheets for the previous fiscal year of 9,251 thousand yen and 3,878,972 thousand yen, respectively, have been reclassified as “Other” of 3,888,224 thousand yen. 13 (Segment information, etc.) [Segment information] 1. Overview of reportable segments The Group’s reportable segments are components of the Group for which separate financial information is available and that are subject to periodic review by the Board of Directors for the purpose of determining the allocation of management resources and evaluating performance. The Group’s two reportable segments are the IT Systems Business, which mainly offers comprehensive information system proposals, system integration, network integration, and software development; and the Services and Support Business, which provides operation and management services, outsourcing services, and system maintenance services. 2. Calculation method of net sales, profit or loss, assets, liabilities and other items by reportable segment The accounting method for reportable segments is generally the same as that described in “Basis for Preparing Consolidated Financial Statements.” Inter-segment sales or transfers are based on market prices. For internal management purposes, the Group does not allocate assets to reportable segments, but does allocate depreciation. 3. Information on net sales, profit or loss, assets, liabilities and other items by reportable segment For the fiscal year ended March 31, 2021 (Thousand yen) Total IT Systems Business Services and Support Business Net sales Net sales to external customers Inter-segment sales or transfers Total Segment profit Other items Depreciation 46,404,746 19,137,712 65,542,459 292,398 46,697,144 7,103,418 398,833 478,314 19,616,026 3,739,506 217,807 770,712 66,313,171 10,842,924 616,641 Note: Assets are not stated as there are no assets allocated to the reportable segments. 14 For the fiscal year ended March 31, 2022 (Thousand yen) Total IT Systems Business Services and Support Business Net sales Net sales to external customers Intersegment sales or transfers Total Segment profit Other items Depreciation 50,800,688 20,530,677 71,331,366 113,658 50,914,347 8,530,157 451,339 369,025 20,899,703 4,032,164 309,730 482,684 71,814,050 12,562,321 761,070 Note: Assets are not stated as there are no assets allocated to the reportable segments. 4. Reconciliation between the total amount of reportable segments and the amount recorded in the consolidated financial statements and the main details of adjustments Net Sales Fiscal year ended March 31, 2021 Fiscal year ended March 31, 2022 Total of reportable segments Elimination of inter-segment transactions Net sales in the consolidated financial statements 66,313,171 (770,712) 65,542,459 (Thousand yen) 71,814,050 (482,684) 71,331,366 (Thousand yen) Profit Fiscal year ended March 31, 2021 Fiscal year ended March 31, 2022 10,842,924 27,743 10,870,667 12,562,321 125,632 12,687,953 Total of reportable segments Elimination of inter-segment transactions Operating profit in the consolidated financial statements 15 [Related Information] For the fiscal year ended March 31, 2021 1. Information by product and service 2. Information by region (1) Net sales Information is not presented because the same information is stated in “Segment information.” Information is not presented because net sales to external customers in Japan exceeds 90% of those stated in the consolidated statements of income. (2) Property, plant and equipment Information is not presented because the amount of property, plant and equipment located in Japan exceeds 90% of those stated in the consolidated statements of income. Information is not presented because there are no external customers accounting for 10% or more of net sales in the consolidated statements of income. 3. Information by major customer For the fiscal year ended March 31, 2022 1. Information by product and service 2. Information by region (1) Net sales Information is not presented because the same information is stated in “Segment information.” Information is not presented because net sales to external customers in Japan exceeds 90% of those stated in the consolidated statements of income. (2) Property, plant and equipment Information is not presented because the amount of property, plant and equipment located in Japan exceeds 90% of those stated in the consolidated statements of income. 3. Information by major customer Information is not presented because there are no external customers accounting for 10% or more of net sales in the consolidated statements of income. [Information on losses on impairment of non-current assets by reportable segment] [Information on amortization and unamortized balance of goodwill by reportable segment] [Information on gain on bargain purchase by reportable segment] Not applicable. Not applicable. Not applicable. 16 (Per share information) Item Net assets per share Basic earnings per share For the fiscal year ended March 31, 2021 For the fiscal year ended March 31, 2022 ¥1,970.26 ¥258.11 ¥2,162.83 ¥307.07 Notes: 1. Diluted earnings per share is not shown because there are no potential shares. 2. The basis for calculating basic earnings per share is as follows: Item Basic earnings per share Profit attributable to owners of parent (Thousand yen) Amount not attributable to common shareholders (Thousand yen) Profit attributable to owners of parent relating to common shares (Thousand yen) Average number of common shares during the period (Thousand shares) For the fiscal year ended March 31, 2021 For the fiscal year ended March 31, 2022 7,382,913 8,785,451 – – 7,382,913 8,785,451 28,603 28,610 3. The basis for calculating net assets per share is as follows Item As of March 31, 2021 As of March 31, 2022 Total net assets (Thousand yen) Amount deducted from total net assets (Thousand yen) [Of which, non-controlling interests (Thousand yen)] Net assets attributable to common shares at the end of the period (Thousand yen) Number of common shares used to calculate net assets per share at the end of the period (Thousand shares) (Significant subsequent events) Not applicable. 56,415,378 54,332 [54,332] 56,361,045 28,605 61,928,758 43,702 [43,702] 61,885,056 28,612 17 Highlights of Consolidated Financial Results for the Fiscal Year Ended March 31, 2022 [Japanese GAAP]April 28, 2022 Kanematsu Electronics, Ltd.[Supplementary Materials]increased. Net sales, operating profit, ordinary profit, and profit attributable to owners of parent allStatus of assets, liabilities and net assets Net salesOrdinary profitProfit attributable to owners of parentROE (Return on equity)million yenmillion yenmillion yen71,33112,7848,78514.98.815.819.01.4%%%pt(% indicates change from the previous corresponding period) Current liabilities 17,966 16,303 1,663As of March31, 2022As of March31, 2021Year-on-yearchange(Million yen) AssetsPercentagechange (%)Total Assets Current assets 82,446 75,164 7,281 75,031 68,981 6,050 Non-current assets 7,415 6,183 1,231Liabilities Liabilities 20,518 18,749 1,768 Non-current liabilities 2,551 2,446 105Net assets 61,928 56,415 5,513Net assets Equity (Note 1) 61,885 56,361 5,524 Equity ratio (Note 2)75.1%75.0%0.1pt(Note 1) Equity = “Total shareholders’ equity” + “Total accumulated other comprehensive income” of net assets(Note 2) Equity ratio = Equity capital / Total assetsCurrent assets increased ¥6,050 million (8.8%) from the end of theprevious fiscal year, mainly due to increases of ¥2,790 million in cashand deposits and ¥1,590 million in notes and accounts receivable-trade.Non-current assets increased ¥1,231 million (19.9%) from the end of theprevious fiscal year, mainly due to an increase of ¥1,857 million ininvestment securities.Current liabilities increased ¥1,663 million (10.2%) from the end of theprevious fiscal year, mainly due to increases of ¥746 million in incometaxes payable and ¥465 million in notes and accounts payable-trade.Non-current liabilities increased ¥105 million (4.3%) from the end ofthe previous fiscal year, mainly due to an increase of ¥109 million inretirement benefit liability.Net assets increased ¥5,513 million (9.8%) from the end of the previousfiscal year, mainly due to an increase from recording ¥8,785 million inprofit attributable to owners of parent and a decrease from thepayment of ¥4,148 million in dividends.As a result, the equity ratio stood at 75.1%.9.78.819.99.410.24.39.89.8-Cash flowsFY Mar 2022FY Mar 2022Full yearFull-yearFY Mar 2021FY Mar 2021Full yearFull-year(Million yen))(CF from operating activitiesCF from investing activitiesCFCFFree cash flowsCF from financing activitiesCFNet increase (decrease) in cash and cashequivalentsCash and cash equivalents at end ofperiod7,9997999-1,074(1074)6,9246924-4,149(4149)2,790CF from operating activitiesCash inflow of ¥7,999 million,mainly due to an increase inoperating revenue and the collectionof trade receivables.CF from investing activitiesCash outflow of ¥1,074 million,mainly due to the purchase ofinvestment securities, property, plantand equipment, and intangible assets.8,6108610-884(884)7,7257725-3,863(3863)3,867CF from financing activitiesCash outflow of ¥4,149 million,mainly due to payment of dividends.DividendsFY March 2022FY March202175.0080.0065.0070.00155.00135.00Interim dividend(Yen)Year-end dividend(Yen)Annual dividend(Yen)4966849,6684687746,877Equity (Million yen)Payout ratio (%)61,88550.556,36152.3Million yenTrends in ordinary profit and ordinary profit to total assetsTrends in Profit and ROE30.0%Million yen10,0009,00025.0%8,0007,0006,0005,0004,0003,0002,0001,000020.0%15.0%10.0%5.0%0.0%30.0%25.0%20.0%15.0%10.0%5.0%0.0%Status of IncomeFY Mar2022Full-yearFY Mar 2021Full-yearYear-on-year changePercentagechange (%)FY Mar 2023 full-yearforecastPercentagechange fromprevious year(%)(Million yen) 71,331 65,542 5,7888.8 72,0000.9Net salesGross profitSelling, general and administrativeexpenses 22,089 19,946 2,143 (9,401) (9,075) (326)10.73.6Operating profit 12,687 10,870 1,81716.7 12,7500.5Non-operating income 97 172 (74)(43.2)Non-operating expenses (1) (1)022.7Ordinary profit 12,784 11,041 1,74215.8 12,8000.1Net salesNet sales increased ¥5,788 million to ¥71,331million (up 8.8% year-on-year) as a result ofefforts to further expand the robust sales ofin addition to the construction of environmentsfor virtual desktop infrastructure (VDI), aspart of measures taken to reform work stylesand preventing COVID-19, and securitysolutions in line with the era of Zero TrustNetwork.ProfitOperating profit increased ¥1,817 million to ¥12,687 million (up 16.7% year-on-year).Ordinary profit increased ¥1,742 million to ¥12,784 million (up 15.8% year-on-year). Profitattributable to owners of parent increased ¥1,402 million to ¥ 8,785 million (up 19.0%year-on-year).Extraordinary income 185 2 1838467.3Extraordinary loss (19) (107) 88(82.3)Profit before income taxes 12,951 10,936 2,014 (4,177) (3,553) (624) 8,773 7,383 1,39018.417.618.8Income taxesProfit Profit attributable toowners of parentBasic earnings per share (yen)307.07258.1148.9619.0 8,785 7,382 1,40219.0 8,600(2.1)——————Segment InformationNet salesSegment profitIT Systems BusinessFY Mar2022Full-year(Million yen)FY Mar 2021Full-yearYear-on-year changeFY Mar 2021Full-yearYear-on-year changeFY Mar2022Full-yearIT Systems Business 50,914 46,697 4,217 8,530 7,103 1,426Services and Support Business 20,899 19,616 1,283 4,032 3,739 292 71,814 66,313 5,500 12,562 10,842 1,719 Other (including adjustments) (482) (770) 288 125 27 97Net sales increased 4,217 million year-on-year (up 9.0% year-on-year), mainly due tostrong performance in the storage-relatedbusiness and the network security-relatedbusiness.Services and Support BusinessNet sales increased ¥1,283 million year-on-year (up 6.5% year-on-year), mainly due toincreases in sales related to the systemoperation business and cloud services.TotalTotal14,00012,00010,0008,0006,0004,0002,0000 71,331 65,542 5,788 12,687 10,870 1,817*The financial results outlook and other forward-looking statements herein are based on information currently available to the Company and on certain assumptions deemed reasonable, and do notrepresent a promise by the Company to achieve them. Actual results may differ significantly from these forecasts due to a wide range of factors.FY Mar 2019 FY Mar 2020 FY Mar 2021 FY Mar 2022Ordinary profitRatio of ordinary profit to total assetsFY Mar 2019 FY Mar 2020 FY Mar 2021 FY Mar 2022Profit (Full year)ROE (Full year)