九州リースサービス（8596） – Business Report (April 1,2020-March 31,2021)

Reference Documents for the General Meeting of Shareholders Financial Statements, etc. Related to the Last Business Year of the Successor Company Succeeding Business Report (April 1, 2020 – March 31, 2021) to the Company’s Business 1. Overview of the Company (1) Business Progress and Results In the fiscal year under review, the company conducted sales activities mainly of LED lighting rental services and product sales (air-conditioning equipment), aiming to establish stable revenue bases by collaborating with KYUSHU LEASING SERVICE CO., LTD. The company also started rental sales of “environmental equipment for virus inactivation and disinfection” in February, 2021. As a result, the company posted net sales of 581,994 thousand yen (down 22.4% year on year), ordinary profit of 59,114 thousand yen (down 4.0% year on year), and profit of 43,517 thousand yen (down 4.0%). The main factor of the decrease in net sales is the discontinuation of the construction work contracting business except for that of electrical work from the second half of this fiscal year. In the sound-proof panel business (rental and sales), the company sold the panels of Kanto Yard and Kansai Yard, both of which had significantly low operating rates (amount of sales: 46,005 thousand yen) to dispose of unprofitable products. (2) Capital Investments In the fiscal year under review, the company acquired the following four properties of low pressure solar systems in the solar business of the environment department at the end of September, 2020. (In thousands of yen) Power output Number of blocks Land price Equipment price Shintomi-cho 400kw Sueyoshi-cho 240kw Takanabe-cho 200kw Kawaminami-cho 440kw Total 1,280kw 10 6 5 11 32 5,000 3,000 3,000 7,000 18,000 140,000 70,000 65,000 145,000 420,000 This investment is expected to generate net sales of more than approx. 60,000 thousand yen and operating profit of approx. 15,000 thousand yen. (3) Capital Raising The capital raised by the company in this fiscal year is as follows. 1. Procurement of LED rental assets 2. Capital related to acquisition of low pressure solar systems 139,673 thousand yen420,000 thousand yen With respect to the procurement of LED rental assets in 1., the company has accepted an installment sales agreement from KYUSHU LEASING SERVICE CO., LTD. The low pressure solar systems in 2. have been acquired from KYUSHU LEASING SERVICE CO., LTD. through leases that transfer ownership the properties. As a result, the company has outstanding accounts payable – installment purchase from KYUSHU LEASING SERVICE CO., LTD. of 747,140 thousand yen and long-term lease liabilities of 877,787 thousand yen. – 1 – (4) Issues to Be Addressed (5) Trends in Assets and Income While operating activities are limited due to the COVID-19 pandemic, the company aims to make the most of strength as a group of KYUSHU LEASING SERVICE CO., LTD. and secure profits in a stable manner by further enhancing and proactively operating the rental business. Item Net sales Ordinary profit Profit Basic earnings per share (yen) Total assets Net assets Net assets per share (yen) (In thousands of yen, unless otherwise specified.) The 20th fiscal year ended March 31, 2019 The 21st fiscal year ended March 31, 2020 The 22nd fiscal year ended March 31, 2021 684,922 58,423 1,264 790 1,373,413 151,251 94,531 750,021 61,597 45,315 28,321 1,529,432 196,566 122,853 581,994 59,114 43,517 27,198 1,958,066 240,084 150,052 Note: Basic earnings per share is calculated based on the number of shares issued and outstanding at the end of the period (1,600 shares). The company engages in LED lighting rental and sales business, business of selling other mechanical products, electrical work contracting business, electric power sales business using high and low pressure solar systems, and other affairs. Headquarters: 4-4-21 Hakata Ekimae, Hakata-ku, Fukuoka, Japan (6) Principal Business (7) Business Locations (8) Employees Number of employees 8 Year-on-year increase/decrease Decrease of one employee – 2 – 2. Status of Shares of the Company Status of shares (1) Total number of shares authorized to be issued (2) Total number of shares outstanding (3) Number of shareholders at the end of the year (4) Shareholders 6,400 shares 1,600 shares 2 persons Shareholder name Number of shares held Voting rights KYUSHU LEASING SERVICE CO., LTD. 1,440 shares Oishi Planning Co., Ltd. 160 shares 3. Company Officers Status of Directors and Corporate Audit & Supervisory Board Members 90% 10% Position Name Area of responsibility or main profession Representative Director Kazunari Abe Business management in general Director Takashi Minoda In charge of construction Director Shigeru Nakano KYUSHU LEASING SERVICE CO., LTD. Director and Senior Managing Executive Officer Director Takashi Ishihara Director Takeo Kurose Director Kohei Nonaka KYUSHU LEASING SERVICE CO., LTD.. Director and Managing Executive Officer KYUSHU LEASING SERVICE CO., LTD. Director and Managing Executive Officer KYUSHU LEASING SERVICE CO., LTD. Director and Senior Executive Officer Director Kenji Oishi Oishi Planning Co., Ltd. Representative Director Audit & Supervisory Board Member Koichi Abe KYUSHU LEASING SERVICE CO., LTD. Full-time Audit & Supervisory Board Member 4. Significant Subsequent Events Concerning the Compapny’s Status Not applicable – 3 – Non-Consolidated Balance Sheet (As of March 31, 2021) Description Amount Description (Assets) Current assets (Liabilities) 1,219,543,958 Current liabilities Cash and deposits Notes receivable-trade 172,083,518 Accounts payable-trade 6,655,012 Accrued expenses Accounts receivable-trade 47,797,093 Income taxes payable Investments in leases Installment receivables Merchandise Prepaid expenses Other current assets Allowance for doubtful accounts 855,317,753 Other current liabilities 61,341,584 Non-current liabilities 1,629,235,723 5,448,036 Long-term accounts payable – installment purchase 3,240,200 Long-term lease liabilities 75,125,524 Provision for retirement benefits (7,464,762) Total liabilities 1,717,981,664 Non-current assets 738,522,265 (Net assets) Property, plant and equipment 733,001,239 Share capital Buildings 709,170 Retained earnings Facilities attached to buildings 30,213 Other retained earnings Machinery and equipment 388,962 Retained earnings brought forward (In yen) Amount 88,745,941 73,601,072 2,944,816 8,480,400 3,719,653 747,140,824 877,787,899 4,307,000 80,000,000 160,084,559 160,084,559 160,084,559 Total assets 1,958,066,223 Total liabilities and net assets 1,958,066,223 1,000 1,000 Total net assets 240,084,559 Tools, furniture and fixtures Land Leased assets Intangible assets Telephone subscription right Software Investments and other assets Shares of subsidiaries and associates Investments in capital Guarantee deposits 82,828 19,178,933 712,611,133 569,026 153,600 415,426 4,952,000 4,950,000 – 4 – Non-Consolidated Statement of Income (April 1, 2020 – March 31, 2021) Description Amount (In yen) Net sales Lease sales Rental sales Installment sales Net sales of goods Maintenance sales Construction sales Electric power sales Other sales SPC sales Cost of sales Cost of lease sales Cost of rental sales Cost of goods sold Cost of maintenance sales Cost of construction sales Cost of electric power sales Other cost of sales Capital costs Gross profit Operating profit Selling, general and administrative expenses Non-operating income Interest income Miscellaneous income Non-operating expenses Miscellaneous losses Ordinary profit Profit before income taxes Income taxes-current Profit – 5 – 229,281,323 41,489,936 3,345,148 118,485,295 4,372,272 29,527,200 138,960,211 11,248,377 5,284,839 150,208,412 32,753,649 97,435,192 1,793,675 27,274,350 80,253,671 326,000 51,873,724 845 510,358 61,541 581,994,601 441,918,673 140,075,928 81,410,680 58,665,248 511,203 61,541 59,114,910 59,114,910 15,597,100 43,517,810 Statement of Changes in Equity (April 1, 2020 – March 31, 2021) (In yen) Share capital Shareholder’s equity Retained earnings Retained earnings brought forward Shareholders’ equity Net assets 80,000,000 116,566,749 116,566,749 196,566,749 196,566,749 43,517,810 43,517,810 43,517,810 43,517,810 43,517,810 43,517,810 43,517,810 43,517,810 80,000,000 160,084,559 160,084,559 240,084,559 240,084,559 Balance as of April 1, 2020 Changes in items during period Profit Total changes in items during period Balance as of March 31, 2021 – 6 – Notes to the Non-Consolidated Financial Statements (April 1, 2020 – March 31, 2021) I. These financial statemsnts were prepared based on the accounting guidance for SMEs. II. Notes on Significant Accounting Policies 1. Depreciation method of non-current assets Property, plant and equipment Intangible assets Leased assets III. Notes on Balance Sheet Declining-balance method pursuant to the Corporation Tax Act; provided,however, that buildings obtained on April 1, 1998 or later (excluding facilities attached to buildings), facilities attached to buildings obtained onApril 1, 2016 or later and structures shall be depreciated by the straight-line method. Straight-line method pursuant to the Corporation Tax Act Straight-line method over the lease term 1. Estimated uncollectible amount directly reduced from distressed receivables 1,991,316 yen2. Breakdown of lease investment assets Amount of claim Equivalent to interest income Net 1,133,380,090 yen (278,062,337) yen855,317,753 yen Ⅳ. Notes on Statement of Changes in Equity 1. Number of outstanding shares at the end of the year under review 1,600 shares – 7 – Audit Report In regard to the directors’ performance of their duties for the 22th fiscal year from April 1, 2020 to March 31, 2021, I have prepared this Audit Report and reports as follows. 1. Method and Contents of Audit I communicated with Directors and employees to collect information and create an auditing environment. I also attended the Board of Directors meeting and other important meetings, received reports on their execution of business. I requested explanation as necessary, viewed important written approval and other documents and surveyed the status of businesses and properties at the headquarters. Using the methods above, I examined the business report and the supplementary schedules thereto for the fiscal year. I also surveyed accounting books and their related documents, and examined the accounting documents for the fiscal year (balance sheet, statement of income and statement of changes in equity) and supplementary schedules thereto. Audit Results (1) Results of audit of business report, etc. 2. (i) (ii) I find that the business report and the supplementary schedules thereto accurately present the status of the company in accordance with laws, regulations, and the articles of incorporation. I do not find any misconduct nor any material fact constituting a violation of any law, regulation, or the articles of incorporation in relation to the directors’ performance of their duties. (2) Results of audit of accounting documents and supplementary schedules thereto I find that the accounting documents and supplementary schedules thereto properly represent the company’s properties and profit (loss) in terms of all important aspects. May 10, 2021 K.L.I. CO., LTD Koichi Abe Audit & Supervisory Board Member [Seal] – 8 –